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With support of:

Project implementation:

onsulting company Bauman Innovation/Strategy Partners, part of the group of companies of OAO Sberbank Russia

Translation:

Eric Hacke, Vladimir Konstantinov, Christopher Doss, Andrea Grenadier

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CONTENTS

Preface Introduction: Description of the Project

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1. Competing for the Future:


The Competitiveness of National Systems of Innovation

2. Strengths and Weaknesses of Russias


National Innovation System

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3. Opportunities and Threats


for Developing the National Innovation System of Russia

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4. The History of the Development


of the Russias Innovation System

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5. International Experience of Development


of National Innovation Systems and Policy in the Area of Science, Technologies, and Innovations

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6. Competing for the Future Today:


Areas of a New Innovation Policy

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In our projects, we always try to rely on objective indicators and the opinions of key groups, which in the case of this research area are the opinions of the participants and consumers of the innovation system. First and foremost I would like to immediately direct attention to the fact that in this work, we have tried to present a systematic view of the problems and a complimentary system of complex solutions. Therefore, we have taken into account many solutions and ideas that have been published before in various works dedicated to the problems of Russia's innovation system. These previous works have, to a large extent, been oriented towards improving the current system and were focused on examining individual factors and aspects of innovation policy. With this in mind, it was important for us to have a wider look at the situation and, after combining this look with international experience, use the results to propose ambitious but realistic recommendations on the creation of new elements of the innovation system.

I would also like to emphasize that the general point of view, the opinions expressed, the conclusions drawn, and the recommendations made in this report are not the official positions and/or opinions of the sponsors and partners of this project. I hope that today we will not focus so much on complaining about the imperfections within the Russias current innovation system, and instead concentrate on the realization of a new and ambitious innovation policy. And I also hope that after getting acquainted with our report, it will show that innovation policy is not a mysterious and obscure concept that is not worth trying to apply in practice. It is worth investigating and improving as soon as possible, as the Future begins today!

Sergei Borisov, President, OPORA RUSSIA

Preface
Dear Friends,
The goal of this project, Competing for the Future Today: A New Policy of Innovation for Russia, is to form recommendations on the development of a new innovation policy. This policy and the innovation development it is intended to foster are not really goals in and of themselves. Instead they are intended to serve as the valuable instruments we need to attain larger goals that concern the entire nation, such as a better quality of life, a competitive economy, and the rational use of natural resources to preserve a beneficial ecological environment now, and for future generations.

Before we get into the details, I would like to give my special thanks to the sponsors of the project, who gave us invaluable support: The Russian Corporation of Nanotechnologies; The U.S.-Russia Foundation for Economic Advancement and the Rule of Law; The OAO Russian Bank of Development; The Foundation of Assistance in Development of Small Forms of Enterprises in the ScientificTechnical Sphere; The OOO Center of Entrepreneurship; and Ernst and Young (CIS), Moscow office.

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Introduction Description of the Project


This report is part of the research project Competing for the Future Today: A New Strategy for Development of Russia's National System of Innovation. Several goals were set within the scope of this project: first, to evaluate the competitiveness of Russia's national system of innovation; second, to carry out an analysis of international experience in the development of systems of innovation and the implementation of policies of innovation; and, third, to work out recommendations for a new Russian system of innovation. A special instrument was developed for the evaluation of Russia's system of innovation: the Index of Competitiveness of National Systems of Innovation. A multilevel structure was developed for the Index combining individual factors into groups and addenda based on an analysis of international expe-

riences in encouraging the development of innovations. The statistical data used in this analysis includes factors such as the amount expended on Research & Development (R&D) and education; the quantity of scientific publications and the number of times they were cited; the number of certificates formulated according to ISO 9001:2000; and the results of large-scale global polls given to heads of leading companies, including polls of the World Economic Forum (WEF), the results of comparisons of scientific education (PISA), international ratings of universities, and other data, the reliability of which has been recognized by world expert opinion. The next stage was to conduct a multipurpose survey to collect important data regarding Russia's system of innovation in order to feed a more detailed analysis of the current situation.

In order to discuss the state of affairs in different areas in 2010, a structured meeting was held with leading Russian experts specializing in different aspects and mechanisms of the development of systems of innovation, such as: Infrastructure for commercial application; Financing of companies involved in innovative work; The role of standards and technical regulation in innovation policy; The system of scientific research, universities, and NII; Intellectual property; and State purchases and innovations. One of the key elements of the project was an annual forum of OPORA RUSSIA, the forum for innovation of small and mid-sized enterprises Competing for the Future Today (held on March 23, 2010), which included the first public discussion of the basic conclusions and recommendations of the project. Participants in this forum included a representative of the Russian government; representatives from federal and regional governmental departments, the business community, and international organizations; and leading Russian and foreign experts. In the course of the project, a series of interviews were conducted with leading international experts and representatives of state ministries responsible for the realization of separate vectors of state policy in the fields of science, technology, and innovation, including: The Organization for Economic Development and Cooperation (OECD); The World Bank; The United Nations Conference on Trade and Development (UNCTD); The United Nations European Commission (UNICE); The International Organization for Standardization (ISO); The World Intellectual Property Organization (WIPO); The U.S. Council on Competitiveness.

The project was implemented by the consulting company Bauman Innovation / Strategy Partners, part of the group of companies of OAO Sberbank Russia, on request by OPORA RUSSIA. Alexei Prazdnichnykh (the project head), Dmitrii Adov, Sergei Lozinskii, Ekaterina Marandi, Nikita Popov, Georgii Rybalchenko, and Olga Rybalchenko composed the team of Bauman Innovation. Sergei Borisov, Natalia Zolotykh, Viktor Klimov (the project coordinator), Ekaterina Reut, Irina Gaiduk, and Svetlana Nugumanova of OPORA RUSSIA participated in the project.

Figure 1 The Innovation System Participants Surveys Carried out within the Scope of the Project The main objectives of surveys
survey of leading Russian scientists working in Russia (203 respondents) assessment of the effectiveness of the systems of government scientific research in Russia identification of the possibilities of and barriers to scientific work and commercial application assessment of the climate for innovation in Russia and the priorities of the state's policies for stimulating innovation assessment of companies' work in innovative areas identification of barriers to development of companies working in innovative areas assessment of the climate for innovation in Russia and the priorities of the state's policies for stimulating innovation assessment of companies' work ininnovative areas identification of barriers to development of companies working in innovative areas assessment of innovative behavior (population as a consumer) assessment of interest in science and a scientific career (population as a source of useful people) assessment of the importance of science and technology as a budgetary priority (population as electorate)

survey of heads of small Russian companies working in innovative areas (200 companies)

survey of heads of mid-sized and large Russian companies (250 companies)

survey of the Russian population (2,000 respondents)

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ing existing processes, as they already exist elsewhere. However, some other products, as well as other new technologies or business models, are new for both a sector within a coun-

owe a great deal of their progress to companys increased activity in innovative areas and overall technological level improvement. In addition to increasing productivity, innovations can enhance a societys well-being by improving the quality of life, level of safety, and reducing the negative ecological consequences of economic activity. Multiple innovations in the area of sorting and recycling different forms of waste have decreased our footprint on the environment and have made city streets, water, and air cleaner. New medicines and medical treatments increase life expectancy and treat or cure an ever-greater number of diseases. New means of transportation reduce travel times, while new construction methods improve building safety and resistance to earthquakes. Faster economic development occurs in countries that are innovation leaders because of the ability of their systems to leverage technological achievements for the creation of value added. These leading countries have achieved a high level of economic success to a large extent because of their successes in the organization and execution of effective innovation processes. The concept of the competitiveness of national systems of innovation can explain why some countries achieve good results in bringing innovations to market. We define competitiveness of a national system of innovation as the presence of abundant resources, institutes, and policies capable of supporting processes of innovation and channeling those innovations into economic and societal successes.

Components of Competitiveness of Systems of Innovation


Research into the innovation policies of various countries and regions supports the assertion that no single main factor exists to determine the competitiveness of system of innovation. Each success story the United States, Japan, Switzerland, Finland and Israel has become reality, thanks to the simultaneous action of a unique set of factors. Talented inventors and great scientific discoveries alone do not guarantee innovative results. Engineering education, financial resources, interaction between clusters and technological infrastructure, the attractiveness of the country to foreign scientists and engineers, appropriate government policies, the sphere of commercialization, and the demand for novelty as well as many other factors, all directly impact a countrys competitiveness. We distinguish six categories, or components of competitiveness for systems of innovation.

1. Competing for the Future: The Competitiveness of National Systems of Innovation


Well, in our country, said Alice, still panting a little, youd generally get to somewhere else if you run very fast for a long time, as weve been doing. A slow sort of country! said the Queen. Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that! Lewis Carroll, Through the Looking-Glass

try and for the entire national market as a whole. And in rare cases, some innovations are new for the world as a whole; they are on the cutting edge of technology and represent significant technological achievements or completely new business models. Innovations are differentiated on the basis of the consequences they have for the development of their sector and the companies competing within that sector. Every new model of a Nokia cell phone, Ford car, or Microsoft Office software product represents an incremental innovation, which has minimal influence on both the structure of their sector and competition with other companies. Conversely, historically revolutionary products such as cassette players, or new technologies such as digital animation fundamentally change the sector that they operate in, as well as the state of competition within that sec-

1. Talented People and Investment in Ideas


The educational and scientific sectors saturate the labor market with technologically oriented, talented people, feeding the entire system of innovation with ideas. Thus talented people and the ideas they produce are the main sources of innovation. And, in turn, the educational system is the source of these talented and innovative people. Although the qualifications of engineers and scientists of a country depend primarily on the quality of higher education, true preparation begins in earlier schooling. Education in the natural sciences and mathematics in primary

What Innovation Is
Innovation can be defined as the development and adoption of new or improved products and services, processes, systems, organized structures, or business models directed at creating a new consumer value, improving financial results, and increasing productivity. Such a definition immediately emphasizes several key features of this multifaceted understanding, each of which merits separate attention. Innovations are realized by both commercial and noncommercial organizations, and may have various goals. For companies, the final goal of the great majority of innovations is to improve financial earnings, while in the areas of healthcare, education, and defense the primary goal of innovation is the creation of value for the public good (for instance, prevention of fires or reduction of mortality from specific diseases) and reduction of expenses. New or improved products, processes, or business models are possible results of innovation. The iPhone a revolutionary new means of mobile communication is a contemporary example of innovation in a product. The production of bio-fuels is a well-known example of innovation in a process. The appearance on the market of low cost airlines is a famous example of innovation in a business model. The results of innovation may be distinguished at the level of their novelty. Many new and improved products can be considered novel only for the specific companies that are putting them into production or are improv-

tor. We call such innovations transforming. Digital animation and motion capture technology significantly widened the production possibilities available to film companies and eventually lead to the now-wide dissemination of 3D movie theaters. These technologies are now transforming the film sector, allowing for the creation of films such as Avatar. Finally, some products and technologies are genuine breakthroughs and lead to the creation of completely new sectors. The personal computer led to revolutionary changes in the production sector computing technology and the creation of a completely new sector personal computer hardware. The technology of plastics manufacturing can be classified as a breakthrough process. Innovations in the scale of an individual sector lead to an increase in productive capability. There are a multitude of examples of such innovation that allowed companies to reduce costs, including the Bessemer process of producing steel, the chemical synthesis of rubber, digital ATS, self-service stores, and electronic payment systems. Other innovations provide a heightened productive capability to the consumers of these products outside the source sector, as with cellular telephony, liquid crystal displays, and automobiles with automatic transmission. As a whole, innovations are an important element of economic growth. The development of China, South Korea, and other developing countries with high economic growth rates

Figure 2 Additional Features of Competitiveness of National Systems of Innovation and Results for the Economy and Society

factors of the competitiveness of systems of innovation


1 talented people and investment in ideas 2 commercial application 3 conditions of demand 4 technological infrastructure and clusters 5 innovation on companies 6 institutes and effectiveness of state policy

Achieving the goals of socioeconomic development


high quality of life ecology and safety

3 2 5 4 1 6
Productive capacity and competitiveness of the economy

Source: Bauman Innovation

Compet ing for the Future: The Compet it iveness of Nat ional Systems of Innovat ion

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school and high school provides a springboard for entry into higher education. It also helps to form technology-oriented skills and values. The ability of an educational system to nurture future talents and create conditions for their development fulfills the functions of a social elevator, and is critical for innovation. Talented people are included in processes of innovation via the labor market. For development of innovations, a market must be supplied with well-trained specialists and offer opportunities for realization of their research, while taking advantage of their inventive capabilities. Education also increases opportunity and mobility, and so countries that do not offer attractive working conditions will waste part of the potential of their educational systems as a result of an outflow of engineers and researchers. Conversely, countries that provide the best working conditions attract the best specialists from all over the world. The openness and attractiveness of a country for foreign specialists are important constituent parts of the competitiveness of its system of innovation. Low visa barriers, ease of obtaining work permits, and general societal readiness to accept foreigners are factors of attractiveness and accessibility. Investments in new ideas are the starting-point of the process of innovation. If cutting-edge scientific research is being conducted in a country, the results of that research can be used for the creation of technologies and products, which will have the potential to be the best in the world. On the other hand, an insufficiently high-quality of research will result in a deficit of innovative ideas and move the country away from the technological leading edge. Global-level research is impossible if proper resources are not provided, and financial input alone will not guarantee results. Presence of a critical mass of research is an important factor in the development of innovations. Isolated breakthroughs in narrow areas cannot have a meaningful influence on technological development as compared to large-scale research in related areas of knowledge.

Centers of technology transfer and business incubators are necessary services for burgeoning enterprises and companies. Project financing depends on programs of technological grants, the work of venture funds, and the general level of development of the countrys financial sector, which guarantees access to financial resources at all stages of innovation from the initial idea to initial public offering.

4. Technological Infrastructure and Sector Clusters


Multiple organizations are involved in the process of creating innovations. The system of innovation itself is a complicated network of interaction between small and large companies, research institutes, educational organizations, consumers, associations, the government, and other organizations. These interactions prove fruitful if they are based on a widely accessible technological infrastructure, contemporary technical standards, and a developed system of intellectual property. Innovations on the frontier of technology are possible only when use of modern technology is widespread across the economy. The level of companies manufacturing equipment, population access to electrical energy, developed transport infrastructure, and open access to computer technology and communications networks determine whether modern inventions can be used in the economy and stimulate innovation in all areas. The extent of dispersal of a new general use technology, such as an information technology, opens opportunities to companies to create new products and transforms entire sectors. For instance, modern information technologies allow a radical increase in the productivity of the trade sector and financial services in developed countries. Technical standards and certification have a large influence on the innovative activity of companies. Obligatory standards can create economic stimuli for companies to use more refined technologies and eliminate obsolete ones. Outdated standards present a threat for development, as they reduce these stimuli, create needless losses during the adoption of new productive processes, or possibly even make such adoption illegal. Voluntary certification serves as a signal of quality and a confirmation of meeting international standards, while making it easier for companies to obtain access to the world market. In addition, the propagation of systems of international certification enables technological exchange and refinement, reduces the general level of expenses in the economy, and accelerates diffusion of technological achievements through the development of new products. Countries differ on the extent to which intellectual property rights are protected, and a balance is observed between the rights of the creator and user. Without an advanced legal system and regulation in this area, a market of technology will not be able to function, and if the law does not safeguard the results of the work of researchers, innovations will be not be possible. Companies will not invest in the creation of knowledge if the results of their efforts may be openly replicated by competitors.

At the regional level, clusters play an important role in a countrys system of innovation. The development of clusters makes the creation of new companies easier, while enabling the exchange of technological knowledge and accelerating the dispersion of innovations. Clusters in traditional sectors make large-scale technological improvement easier, and competitive innovation clusters are centers, in which completely new sectors the locomotives of future development are created.

3. The Innovative Potential of Companies


Although new breakthroughs in knowledge are created largely in the course of scientific research, the companies, which commercialize these breakthroughs, are the key players in the process of innovation. The majority of innovative potential and technological capability in many developed countries is concentrated primarily within corporations. And in many sectors, a special role is played by small and mid-sized business. The motivation for a given company to engage in innovative activity depends in large part on how much that innovative activity will help them to compete and succeed in a given market. In conditions, in which the profit of a company depends solely upon the degree of access to natural resources, or to the market, innovations are not in demand. On the other hand, companies whose profits depend on new products being continually produced are strongly enticed to technological renewal. They actively finance applied scientific research, the search for outside ideas, and all the work connected to appropriating the results. A companies potential for creating something new depends on the capability of their productive processes. If this level is far from world standards, that company will be unable to move the technological frontier forward, and their innovations will hardly be the most ground-breaking. Foreign investors can be an important financial source to provide the funding necessary to increase the technological level of production. Although innovations are based on knowledge and ideas that find their use in companies, it is not necessary that companies come up with all these ideas by themselves. Both capability to create new knowledge and implement one, developed by other companies technological leaders in the area, are equally beneficial for innovations.

2. Commercial Application
The transformation of scientific ideas and inventions into new products and technologies does not occur on its own. The risks and difficulties connected with the creation of a new product or technology are so great that they demand a thorough analysis of commercial potential, and close interaction between scientists, inventors, and business representatives. Developed specialized infrastructure for commercial application enables selection of the best projects and the unhindered realization thereof.

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The Development of Innovation Clusters Is an Important Factor of Competitiveness of Innovation Systems


Source: Bauman Innovation

The Development of Innovation Clusters Is an Important Factor of Competitiveness of Innovation Systems

In the second half of the 20th century, the appearance and development of the majority of enterprises in high-technology sectors took place on a limited quantity of territories. These enterprises were overgrown by differently related and supporting organizations, specialized suppliers, and infrastructure. Corresponding concentrations of companies oriented toward the production of high-technology final products received the name innovation clusters. One of the best examples of development of the high-technology sector based on the principle of clusters is the development of the world biotechnology sector in the last few decades. The first biotechnological clusters appeared 30 years ago in the U.S. and, as time has shown, became the key source of the formation of the American biotechnology sector in the mid- and long-term. To date, the most highly developed biotechnological clusters are found in the U.S.; there are around 70 of them worldwide in different stages of development.

The Basic Stages of the Development of Biotechnological Clusters


Biotechnological clusters began to develop most actively in the last few decades; however, even the most advanced of them have not managed to pass through all the stages of cluster development from creation to transformation. Therefore, in the framework of the project, we conducted an analysis of biotechnological innovation clusters, and other, more mature ones. This has allowed us to make some suggestions regarding the potential transformation of clusters of biotechnology. Any cluster, as an economic organism, proceeds through several stages of development. A complete representation of the processes taking place in an innovation cluster from creation to transformation allows us to carry out an analysis of these clusters in the computer and information technologies sectors. The international experience studied within the framework of the project showed that, in the development of innovation clusters, and in particulars biotechnological clusters, it is possible to distinguish four stages*. Understanding these stages may prove to be useful for state agencies, as each stage possesses its own set of barriers and possibilities for accelerating the development of high-technology sectors and regions.

Four stages of development of innovation clusters: 1. Origination 2. Development 3. Organic Growth 4. Transformation

frameworks of universities and SRIs play a large role. The basic sources of financing of beginning companies are venture funds, individuals, and programs of state support. The presence of a necessary infrastructure, so-called incubators in the form of office, laboratory, or production facilities, has great significance for development. Access to administrative services in questions of accounting, law, taxation, and other subjects is

The First Stage: Origination Biotechnological clusters, as a rule, arise on the basis of existing powerful scientific centers, whether they are leading universities or scientific research institutes (SRIs), which implement Fundamental and Applied Scientific Research (R&D) in the biotechnological or related sectors. In the majority of situations, this R&D is financed by the state. Three forces initiate the creation of innovation clusters in the biotechnological sector: (1) Commercialization of technology and the appearance of young biotechnology companies; (2) The arrival of a large company from another region; and (3) An active role on the part of local leaders. For example, the origin of the creation of an innovation cluster in the computer and informational technologies sector in Silicon Valley (California, U.S.) was Stanford University. The dean of the university, Frederick

a fundamental issue for young companies.

The Second Stage: Development During the stage of development of biotechnological clusters, more and more companies locate divisions in the cluster. The reason for this is the availability of qualified staff and/or advantages regarding expenses. Companies that arose in the first stage begin to grow. The first success stories appear which signal the existence of new uncovered possibilities. The desire and hope to repeat the success reinforce the inflow of talented people and financial resources. More new companies appear. The rapid economic dynamics enable the attraction of financial resources, as well as suppliers of necessary products and services oriented towards servicing arising and growing companies and arriving branches of large companies. During the development stage, demand for infrastructure increases, especially for laboratory and production facilities. Companies appear and develop that provide specific services, for instance, companies that engage in research to order (so-called contract research organizations, or CROs) and production to order (contract manufacturing organizations, or CMOs). In the course of a clusters growth, the labor market becomes more developed and specialized and a horizontal mobility of human resources arises; that is, the movement of specialists from company to company and from universities and SRIs to companies and vice versa. This leads to a fundamental increase in the intensity of exchange of knowledge and experience in the cluster. In the process of development, the cluster becomes a source of specialized managerial personnel. At the second stage, various networked organizations appear in the cluster. Their efficient work is a distinguishing characteristic of developed biotechnological clusters. Contacts arise with clusters in other countries and regions.

Figure 3 Stages of Development of Innovational Clusters

Terman, played a large role in the creation of this cluster, as did the company Hewlett-Packard, which was founded there in 1937. In Boston, the bases for the appearance of innovation clusters were the Massachusetts Institute of Technology (MIT) and Harvard University. In the region of Sophia-Antipolis (France), the arrival of outside companies, such as Texas Instruments or IBM, which created R&D centers, stimulated the development of clusters. It is of interest to note that, in Israel, military R&D and state support programs had a significant influence on the development of innovation clusters. The most developed biotechnological cluster in the Bay Area, in San

Origination
Strong scientific centers (universities, SRIs)

Development
More attractive companies Growth of new companies First success stories More new companies Attraction of suppliers Formation of networked organizations

Organic Growth
Movement of companies from other regions Attraction of leading specialists Development of a supportive infrastructure and systems of suppliers Increase of concentration of local and global connections

Transformation
Influence of technological and market factors on the appearance of new clusters (for instance, the role of nanotechnology) The birth of new clusters from the intersection of existing clusters (for instance, bioinformatics)

Francisco, California, came into being about 30 years ago. This occurred after Herbert Boyer, a biochemist at the University of California at San Francisco, set up a company that began to develop and produce new medicines, based on the technology of DNA recombination. Through the support of the venture financier Robert Swanson, Genentech, the world's first biotechnology company was formed. Through the support of the Stanford

Development of clusters

First new companies (Start-Up) Outside companies Social enterprises

The Third Stage: Organic Growth At this stage, local universities and SRIs develop educational and research programs oriented toward increasing the clusters competitiveness. In addition, there occurs development and growth of specialized infrastructure and the system of suppliers. A critical mass arises in the cluster of organizations and infrastructure that leads to a growth in productivity, and stimulates innovative work both in the companies and in the

1978

Boston (Massachusetts, United States) Cambridge (Great Britain) Munich (Germany) Singapore

Universitys center of technology exchange, Boyer and his Stanford colleague Stanley Cohen were able to patent the results of their research, and it played a large role in the creation of Genentech. In this way, the companies in their initial stages appeared near uni-

Examples of Biotechnological Clusters

1988 1994 1999

*This model does not contain an exhaustive presentation of the processes of the appearance and development of innovational clusters Source: Bauman Innovation

versities and SRIs, supporting tight links and often using a common infrastructure. Effective centers of technology exchange acting within the

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This model does not contain an exhaustive presentation of the processes of the appearance and development of innovation clusters.

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The Development of Innovation Clusters Is an Important Factor of Competitiveness of Innovation Systems

The Development of Innovation Clusters Is an Important Factor of Competitiveness of Innovation Systems

cluster itself. At the third stage of development, biotechnological clusters become attractive to scientists and business in the scientific, economic, and cultural senses. And so the effect of attraction due to achievements in clusters of a critical mass fundamental strengthens. Even large companies that are already entrenched in the market frequently decide to locate scientific-research divisions and/or productive power in regions where developed biotechnological clusters are located. Thus, for example, the American biotechnological cluster in the city of San Diego possesses an ideal environment for the appearance of biomedical discoveries and therefore, like a magnet, pulls in international pharmaceutical companies. The Swiss company Novartis has recently located two scientific centers in San Diego: the Novartis Agricultural Discovery Institute, which will engage in research in the area of agricultural biotechnology, and the Novartis Institute of Functional Genomics, which specializes in studying the functional peculiarities of human genes for predicting various ailments.

Six key factors of success for development of biotechnological clusters are: 1. Intensity of R&D; 2. Availability and quality of human resources; 3. Effectiveness of the process of commercialization and exchange of technology; 4. Availability of adequate financial resources; 5. Availability and quality of infrastructure; and 6. Availability and quality of the network.

clinical trials; specialists in the sphere of biotechnological productive processes; and administrative specialists in the area of marketing, finance, and economics, including those with MBA degrees. Managerial personnel with experience of working in the biopharmaceutical sector is an especially important resource for the development of clusters. Such specialists also play a large role in the process of the creation and development of biotechnology companies. They may also enable the appearance of effective networked organizations (i.e., a multifaceted group of associations) and stimulate the appearance and development of international links. The availability of qualified managerial per-

elements of this process. Such centers provide support to scientific workers in the patenting of developments, evaluation of possibilities, and finding financing for revision of technologies and the creation of enterprises, as well as other questions connected with commercialization of the findings of R&D. As was mentioned above, the activity of the center of technological exchange at Stanford University gave the first push to the creation of the first biotechnological company, Genentech. The set of tasks that centers of technology exchange handle varies from country to country. Sometimes, such centers are concerned with a large number of tasks. For example, the innovation center at the Helsinki University of Technology concerns itself with informational support to researchers as they look for financing for research projects and legal support in the process of drawing up contracts with enterprises in carrying out R&D, as well as supporting and enhancing contacts with university graduates.

The First Factor: Intensity of R&D The development of the biotechnology sector relies on the results of fundamental and applied research carried out in universities, SRIs, clinics, and companies. The biotechnological sector is one of the highesttechnology sectors in the world. One of the key factors in the development of biotechnological clusters is the intensity of fundamental and applied research in the biotechnological and related areas. The most successful

sonnel depends on many factors, such as the presence of divisions of large international companies, and cultural and sector factors influencing the mobility of such specialists between companies, the general level of development of the labor market, and the presence of opportunities to increase the level of qualification

The Third Factor: Effectiveness of the Process of Commercialization and Exchange of Technology The presence of an effective process of commercialization (including investigation, evaluation, revision of technologies, and other stages) is an important factor in the success of biotechnological clusters. The centers of technological exchange that exist in universities and SRIs, or are organized on the basis of several organizations engaging in R&D, are one of the

The Fourth Factor: Availability of Adequate Financial Resources A developed infrastructure of financing commercialization of promising partners and creation and development of biotechnological companies is also an important factor for the evolution of biotechnological clusters. It is composed of both individuals angel investors and specialized private venture capital funds, state foundations, the banking sector, and the fund market for high-technology companies. Specialized venture

The Fourth Stage: Transformation Following on the appearance of new technologies and/or the intersection of several clusters and the resulting development of new products and services, structural changes begin. These structural changes create the fourth stage of development of a cluster transformation. So, for example, progress in the area of technologies can essentially transform the medical services and biopharmaceuticals sectors and, in the final account, lead to transformation of biotechnological clusters. It is predicted that, in the first half of the 21st century, technologies connected with the human genome, proteins, antibodies, and cellular structures that are used for curing and replacing damaged cells may become transformative ones. It is expected that, in the second half of the century, structures comparable in size to an atom (nanotechnologies) will be used for improving and curing illnesses of the human body. These and other technologies may also create a transformation of biotechnological clusters.

examples of biotechnological clusters that have appeared and rely on the strength of R&D are those in California and Massachusetts (U.S.). Three types of R&D can be distinguished within biotechnological clusters: (1) R&D in universities and SRIs; (2) Corporate R&D; and (3) Clinical trials and research. The scale and quality of R&D in universities, SRIs, companies, and clinics and the interaction between them is one of the key competitive advantages of biotechnological clusters. Flexibility in the formation and development of interdisciplinary scientific-research groups has great significance for strengthening the dynamics in R&D. For instance, in Boston, leading research universities such as Harvard University, MIT, and the University of Massachusetts play a large role, as do leading clinics, for Massachusetts General Hospital. These universities attract qualified scientists from all over the world. In Germany,

Figure 4 Key Factors for the Development of Regional Innovational Clusters


supporting service CRO, CMO Network of suppliers fundamental and applied research clinical R&D

R&D

Key Factors of Success in the Development of Innovation Biotechnological Clusters


According to the findings of analysis of the evolution of biotechnological clusters, six key factors of success (KFSs) appeared that accelerated the development of these clusters. With the help of these factors, it is possible to estimate the competitiveness of biotechnological clusters and carry out a comparative analysis of clusters at the level of a single country or on a world scale.

in the newer biotechnological cluster in Munich, there also exists a strong technological base that includes state-financed SRIs, such as the Max Planck Institute, and several leading research universities and clinics.

incubators laboratory and productive facilities transport infrastructure real estate general quality of life

Infrastructure

Human resources

researchers technical personnel management

The Second Factor: Availability and Quality of Human Resources The availability and quality of qualified personnel and necessary specialists of various types have great significance for the development of biotechnological clusters. These are researchers with an academic degree specializing in biochemistry, molecular biology, and other branches of science; technical personnel; specialists in executing preclinical and
risk (venture) capital state financial support

The Development of Biotechnological Clusters


investigating and evaluating revision patenting service support

Financial resources

Commercialization of technology

Source: Bauman Innovation

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The Development of Innovation Clusters Is an Important Factor of Competitiveness of Innovation Systems

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5. Conditions of Demand
funds, angel investors, and state foundations play a critical role in the creation and growth of biotechnology companies. They are concentrated in the most developed biotechnological clusters, as for successful work knowledge of the key players in the cluster and personal contacts are obligatory. State foundations and programs are also often an important source of capital for the development of a cluster and are usually created in order to guarantee the financing of those stages of commercialization in which alternative market sources of financing are absent. rying out and assessing clinical trials, specialized marketing services and managerial services, and so forth, play an even greater role in the development of biotechnological clusters. Often, biotechnology companies use distribution networks of large pharmaceutical companies to distribute their products. The formation of such an ecosystem (network) lowers constant costs, reduces the time it takes to release new products and services onto the market, and increases the flexibility of biotechnological companies.

ment attempt to achieve more intense innovation activity. And so the ability of all participants within an innovation system to make decisions and plan long-term investments relies on high quality institutes. In the absence of a guarantee of property rights, investors will strive to select projects that will issue an immediate high level of return. Dependence of courts on the executive government or influential groups does not allow inventors and investors to use them for defense of their rights and resolution of conflict situations. Widespread corruption lowers the effectiveness of expenses on R&D and resources designated for support of commercialization. Running a business based on a new technology in such circumstances is extraordinarily difficult. As with institutes, the quality of government decisions directly contributes to conditions for development, and if this quality drops below a certain level, insurmountable barriers arise on the path to innovations. An inability of the government to spend the budget in accordance with priorities, modify policy in accordance with the economic situation, make informed decisions and put them into action, leads to an ineffective administration and a general lowering of the competitiveness of the national innovation system.

The ability and inclination of national companies towards innovative activities depends in many respects on external stimuli, first and foremost, on the demands of the internal market. It is extremely difficult to develop innovations if consumers, the government, and the state sector are oriented only toward the price of goods and services, or if access of companies to the market is limited. The scale of the internal market is an obvious advantage of, and stimulus for the development of innovations. Large countries such as the U.S., China, and Russia, have been able to use this factor to fuel innovative product development. Not only the extent, but also the quality, of demand has significance for competitiveness. How early the consumers prefer new technologies, compared to less perfected alternatives, is determined by the level of consumer sophistication. Not all innovations result in products with mass demand. In many sectors, such as manufacturing of machinery and tools, most of the production goes into the industrial markets. For such innovations, beneficial conditions arise when access to these markets is not the subject to limitation and regulation by the government, and the business of companies potential buyers of new technologies is based to a larger extent on unique products and processes than on exclusive rights to access to resources. The government has a large influence on the development of innovations through participation in the formation of demand through civil and military purchases. The precursor of the Internet arose as a result of a U.S. Department of Defense project, and energy-saving technologies became widespread in Europe as a result of deliberate purchases by governments. The more the government prioritizes and support technological innovation when considering the purchase of new items or tools, the stronger the stimuli will be for innovations in these areas. The medical and aerospace industries are good examples of this sort of government support for innovation.

The Fifth Factor: Availability and Quality of Infrastructure The infrastructure for development of biotechnological clusters consists of the following elements: incubators for beginning companies, facilities for laboratory research and organization of production, and a developed road network inside the cluster and developed means of transportation between the cluster and key transport centers; i.e., an airport. A developed state of telecommunications infrastructure (mobile telecoms, high-speed access to the Internet) also has great importance. Incubators basically represent necessary facilities for a cost reasonable for a beginning enterprise and basic administrative services (accounting, legal services, etc.). Some of them also offer beginning companies and researchers a more developed set of strategic and operational services, such as access to financing, functional service, and support from experienced enterprises. Effective infrastructure is also characterized by a high availability and quality of real estate for employees of companies, universities, SRIs, and other cluster participants. An essential role in successful development of regional innovation clusters is played by the general quality of life in the given region. This is characterized by a number of indicators, each of which contributes to the creation of beneficial conditions for life in the region, for instance, availability of quality housing, excellent schools, natural conditions and the ecological situation, a safe and congenial working atmosphere, the presence of possibilities for leisure and recreation, etc. As a result of an increased quality of life, talented, active people who are the key resource for the development of innovation clusters are attracted to and remain in the region.

Components as a System
The six components of competitiveness directly influence the development of innovations, but each is connected with a separate portion of the innovation system and a separate stage of the innovation process. Talented people and ideas reflect the condition of the R&D and educational systems. The second component is linked to the sphere of transformation of scientific and technical ideas into new products and businesses through commercialization. The third describes the innovative capabilities of companies. The fourth concerns the potential of cooperation, stimuli, and infrastructure. The fifth concerns the demand and diffusion of innovations. And finally, institutes and state administration are factors with an immediate effect; they influence all the constituent parts of the innovation system and determine the likelihood of an increase in competitiveness, while considering all the other factors. No single component of competitiveness is the main or basic one. Successful innovations are founded on the harmonious action of all parties, and the development of each is obligatory. However, depending on the situation, some of them

6. Institutes and Government Administration


The Sixth Factor: Availability and Quality of the Network of Suppliers In the process of development of biotechnological clusters, a developed level of the system of suppliers of needed materials, reagents, equipment, and specialized services acquires even greater significance. Suppliers of specialized services, such as carrying out research to order, organizing biotechnological production to order (CMO), implementing planning, car-

The milieu in which the participants of an innovation system interact is under the influence of the state policy and institutional peculiarities of a country. Although institutes may create the general conditions for interaction between different participants in innovation, low quality institute-facilitated services may impose major difficulties, thereby hindering any govern-

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Compet ing for the Future: The Compet it iveness of Nat ional Systems of Innovat ion

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may become more important. For instance, the relative importance of supplementary and separate factors depends on the level of development of the countrys innovation system.

Use of technology; Adaptation of technology; and Creation of technology. Use of technology involves companies buying finished

Figure 6 Rating of the Competitiveness of National Innovative Systems


1 2 3 4 5 6 7 8 9 United States Sweden Switzerland Singapore Finland Germany Israel Japan United Kingdom 11 Norway 12 South Korea 13 Austria 14 Canada 15 Australia 16 France 17 Ireland 18 Hong Kong (China) 19 Taiwan 20 New Zealand 21 Spain 22 Czech Republic 23 Italy 24 Estonia 25 Slovenia 26 Portugal 27 Hungary 28 India 29 China 30 South Africa 31 Brazil 32 Lithuania 33 Greece 34 Slovakia 35 Thailand 36 Turkey 37 Poland 38 Russia 39 Latvia 40 Mexico 41 Columbia 42 Romania 43 Philippines 44 Argentina 45 Kazakhstan 46 Bulgaria 47 Peru 48 Venezuela 49 Bangladesh 50 Bolivia

Stages of Development of Innovation Systems


Only a small number of countries are able to really influence the movement of todays technological frontier. In many countries, their innovation systems allow them only to master the achievements of other lead countries, and not foster any of their own. It could be said that they are located at different stage of development. Our analysis of national innovation systems also us to distinguish three stages of development:

products, components, technologies, and equipment in leading countries with the purpose of modernizing their own production. Products and technologies that are new to that country are the most important for competitiveness. Countries at this stage show technological standards and infrastructure far from the international level, sector clusters which are undeveloped, access to suppliers and productive equipment is in general low, and many elements of the innovation system, such as R&D institutions, may be completely absent. Export of high-technology products is absent.

10 Netherlands
Source: Bauman Innovation

Figure 5 System of Indicators for Evaluating the Competitiveness of National Innovational Systems
Index of competitiveness of NISs

83*
supplements

Figure 7
20 %
innovational potential of a company

25 %
talented people and ideas

10 %
commercialization

15 %
conditions of demand

20 %
technological infrastructure and clusters

10 %
institutes and effectiveness of government administration institutes

Profile of the Competitiveness of Russia's National System of Innovation OECD


better
6 9 7

29
talented people financial resources for innovation

8
access to the market and conditions of demand

5
intellectual property

22
technological and innovative potential of a company

11

Brazil, India, China Russia

groups of factors

20
natural-science education in school quality of higher education availability of talented people on the labor market mobility on the labor market state sector of R&D

6
availability of traditional financing mobility of venture financing infrastructure for commercialization

5
defense of intellectual property standards and regulation

7
protection of property rights independence of courts freedom from corruption government administration
21 22 19 33 44 49 36 48 49 16 30

access to the consumer market government nonmilitary purchases military purchases

factors

technological level of production capability of taking knowledge from others capability of generating new knowledge

2
availability of infrastructure for commercialization

7
worse obligatory standards and regulation voluntary standards technological infrastructure

27

23 31 45 42 48 40 37 43 34

4
quality of government administration supplements

34

38

35 45

9
resources for scientific research critical mass quality of scientific research

talented people and ideas

commercialization

innovational potential of company technological level of production capability of generating new knowledge capability of taking knowledge from others obligatory standards and regulation

clusters and technological infrastructure

conditions of demand

6
level of equipment production availability of electrical energy level of development of IT level of development of clusters

institutes and effectiveness of government administration protection of property rights freedom from corruption independence of courts quality of government administration

level of development of innovational clusters

defense of intellectual property

level of development of traditional clusters

critical mass

level of development of IT

government purchases

voluntary standards

resources for scientific research

availability of traditional financing

quality of scientific research

availability of venture financing

availability of electrical energy

83*

the number of separate indicators used for the rating is indicated

25 % ** the weight of a supplement is indicated

7
level of development of traditional clusters level of development of innovational clusters

Source: Bauman Innovation

Source: Bauman Innovation

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availability of talented people on the labor market

availability of infrastructure for commercialization

quality of higher education

access to the consumer market

factors

mobility on the labor market

natural-science education in school

military purchases

level of equipment production

Compet ing for the Future: The Compet it iveness of Nat ional Systems of Innovat ion

Countries at the adaptation of technologies stage have companies, which buy licenses abroad or try to copy the final products, relying on the potential of their engineers. They are able to modify imported production equipment according to their own needs and independently produce a number of components. Technological standards and regulation are being improved. Sector clusters, including suppliers, receive a powerful impetus for development. Products and productive technologies that are new to the country remain, as before, important for competitiveness. But at the same time they are not new to the world in general. Increasing the effectiveness of productive processes and services is the basic strategic priority of companies innovative work. They may actively develop high-tech production while exporting high-technology products produced according to license with the use of imported technologies. At the creation of technology stage, companies engage in competition, creating and applying innovations, many of which are novel by international standards. They develop capabilities for fundamental scientific research, the sphere of commercialization acquires significance, and innovation clusters evolve. Infrastructure and regulation in various technological areas reaches international standards. Sector clusters, and interaction in the system of suppliers reach a high level of development. Not only final products, but also the technologies themselves are exported. Countries can and do improve their innovation systems and evolve from one stage to another. The history of technological progress in the 20th century shows many countries that passed through all three stages in their development. Japan, South Korea, Israel, Finland, and others, now contribute greatly to the creation of tomorrows technologies. They have joined the group of leaders as theyve moved through the path of catch-up development. Some countries, like Chile and China, are closing with the leaders in the development of their innovation system. Only countries such as the United Kingdom, Germany, or the U.S. have managed to remain leaders in the sphere of science and technology throughout the entire 20th century. As far as our country is concerned, the innovation system was rather strongly segmented during Soviet times, with all three stages in existence at the same time; in some areas, it was only able to use foreign technologies; in others, it could adapt imported technologies; and in some fields the Soviet innovation system was able to create new, world-class tech-

nologies. The current national innovation system of Russia has somewhat reduced capabilities in comparison with the Soviet period. The number of areas in which new technologies may be created has significantly dropped, and the segment oriented toward simple use of imported technologies has grown. Simultaneously, the general segmentation and uneven rate of growth of the Russian innovation system has remained the same.

2. Strengths and Weaknesses of Russias National Innovation System


In this section, we discuss the strengths and weaknesses of each component of competitiveness within the Russias innovation system. This evaluation consists of two parts: a brief synopsis and then the analytical section what the facts say, in which we present statistical indicators or polls that most clearly illustrate the examined strengths and weaknesses of the Russian innovation system.

Educational Opportunities for Talented Young People from the Provinces (Social Elevators)
The social structure of Russian society was established in the Soviet period and the basic social mechanisms are such that free higher education still exists, and egalitarian principles of access to a high quality of higher education still dominate in public opinion. As a result, applicants from different social layers and different regions still have the opportunity to enroll in the leading universities. Such principles are often accepted without question in developed countries and do not need to be debated, just as in the case of the Soviet Union. However, the situation is different in developing countries and the majority of countries of the Third World. In these countries, higher, especially firstclass, education is available only to the privileged classes, and thus education is one of the means of social segregation, as was the case in pre-Revolutionary Russia. Fortunately this is not the case in modern Russia, where talented young people from the provinces have access to quality higher education. This represents a strong positive side of the Russia's National Innovation System (NIS).

Rating of the Competitiveness of the National Innovation System and Position of Russia
The following three illustrations show the factors used for calculating the Index of Competitiveness of National Innovation Systems, the rating achieved, and a profile of the Russian innovation system. The US, Sweden, and Switzerland occupy the top rungs of the ratings, with Finland and Israel being in the top ten. In this rating, Russia only occupies the 38th place out of 50 countries, yielding not only to its BRIC neighbors China, India, and Brazil but even Turkey and Thailand. In the profile of Russias innovation system, its position according to different factors in comparison with the OECD (the average for all the countries) and B(R)IC countries is shown. As can be seen in the profile, only a few factors are Russias strong suit, and in the majority (more than half) of the factors, Russia occupies lower positions.

Talented People and Ideas: Strengths and Weaknesses


Potential of the Educational System (Large Coverage by Secondary and Higher Education, Significant Share of Engineering and Scientific degrees, High Basic Level)
The system of professional education in Russia still has a rather high potential if you compare it, perhaps not with the leading countries, but with the world average level or with the real level of other so-called BRIC countries (i.e., Brazil, India, and China). This potential comes from a few sources. First, the share of the Russian population possessing secondary or higher education is rather large, with this share increasing among the younger generation. Second, the share of engineering or natural-science specializations is still rather high within this demographic, although it is continually decreasing. Third, the basic level of university education is also rather high relative to the average world level. Finally, the highest-quality educational resources and programs have traditionally been concentrated in leading universities, which allow the preparation of high-level personnel. As a result, in certain areas (for example, in mathematics, physics, chemistry, and certain engineering sciences), Russian universities are still capable of training high-level, competitive specialists that are in demand throughout the world labor market. The potential is there for the Russian educational system to be leveraged for creation of an innovation economy, given large-scale support and development of education.

Retained Scientific Schools


Leading Russian universities have preserved certain educational programs from the Soviet era. These programs are dedicated to preparing specialists of high quality that continue to be in demand at the international level. In a series of cases, these educational programs are integrated with scientific groups carrying out leadingedge research. In such a way, self-supporting scientific schools are formed. Their very presence is an example of the extremely important intellectual capital necessary for any programs that seek to modernize the economy and stimulate innovation. The number of these schools is already small, but they do exist.

A Critical Mass of Resources for R&D


Scientific activity, especially fundamental science, demands significant resources; primarily of the monetary variety. Therefore, only a few countries have the possibility of carrying out R&D in a wide range of areas, so the majority of countries concentrate on a rather narrow spectrum of research. However, ensuring a broad range of scientific research has the beneficial effect

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of creating a synergy between disparate disciplines, and helps the search for new discoveries at junctures between those disciplines. In this way, size is important: to have an NIS and competitiveness on the world level, a country needs to have a critical mass of resources used for carrying out R&D. Russia still has such a critical mass, having inherited it from the Soviet Union.

Low Level of Results of State R&D


The results the Russias national innovation system has been producing in recent years have been rather poor. Despite a marked increase in the funding of state R&D compared to the 1990s and the beginning of the 2000s, the results of this R&D as expressed in the number of publications in international scientific journals and quantity of registered patents have improved relatively little. The poor results from state funded R&D is connected to a whole series of factors. In addition to the low level of financing, the problems include insufficient replacement of personnel and a poor quality of infrastructure for research, as well as an improper distribution of the funds that are available. A continuous supply of well-trained, employable, and ambitious personnel is necessary to carry out competitive and productive research. However, in the majority of Russias scientific centers, the bulk of potential employees are persons of retirement age or approaching retirement age. In addition, many of the most qualified researchers have left Russia for scientific centers in other countries, or have moved to other sectors of the economy that ensure a higher level of income. For young people, work in the area of science has not seemed either prestigious or attractive, and so, adequate replacement of personnel in scientific centers has

been lacking. As a result, those groups of personnel that do still remain in the scientific sector are already unable to carry out full-scale research without taking specific steps to attract new specialists, and the means to do so are not being allocated to scientific centers. Moreover, to carry out truly groundbreaking research and obtain meaningful results, modern high-quality research infrastructure is required, including specialized facilities, equipment, and materials. Existing infrastructure is poorly maintained and in the majority of organizations it has not been upgraded since the Soviet period, on top of degrading during 1990s. Insofar as the resources allocated to R&D are insufficient for upgrading infrastructure, research takes place that is not often beneficial in obtaining new results. Due to these challenges, no steps to improve the effectiveness of R&D will provide results without a genuine increase in the scale of financing. And if funding was provided, it must be accompanied by a corresponding improvement in the manner it was applied and distributed in order for it to be truly effective. State financing is, in general, poorly allocated. Instead of supporting those areas and scientific schools in which Russia is still competitive, the financing is smeared in a thin layer over all still existing scientific organizations. Therefore the volume of financing making it to a final research group is not sufficient for solving existing scientific problems. As a result, it is used only to maintain the current state of an organization, or to modernize old results from Soviet research projects. Given this, the allocation of resources among scientific groups to a large extent depends on the personal preferences of individuals who implement disbursement of financing. Corruption, favoritism, and simple support of unproductive organizations and groups make a large part of the problem.

Talented People and Ideas: What the Facts Say


Russian education funding is not very high relative to GDP. Even though education funding was increased to 0.9% of GDP between 2000 and 2006, today it is less than 4%, which is less than both Turkey and Brazil, not to mention developed countries. As far as an analysis of Russias position in world higher education is concerned, it is enough to look at international rankings of universities to be persuaded of the serious backwardness of leading Russian universities compared to those of developed countries, which may have admired Russian education until recently. The leading positions in these rankings are occupied by universities in the U.S. and the United Kingdom, including Harvard University, MIT, Cambridge University, Oxford University, and others. The Russias leading university, Moscow Lomonosov State University, does not always even make it into the top hundred of these rankings. Other Russian universities that feature in some international ratings, including St. Petersburg, Kazan, Novosibirsk, and Tomsk universities, cannot boast of even such modest achievements. The highest position (77th place in 2009) obtained by Moscow Lomonosov State University in any ranking occurred in one complied by specialists from China. The Center of World-Class Universities of Shanghai Jiao Tong University rates it higher than Chinese universities. However, it is worth noting that specialists from the United Kingdom and Taiwan use a different method of evaluating todays scientific services, one oriented to a large extent on level of teaching quality, and thus give much higher rankings to Chinese universities. In this framework, Moscow Lomonosov State University appears in the second or even the third hundred, next to Czech or South African universities. This analysis shows that Russia is losing the advantages in higher education acquired in the past, and by certain indications is beginning to yield even to China and Brazil. What do people think about the quality of higher education in Russia? Business sees many gaps in the preparation of graduates from the technical and natural-science departments of Russian universities. Thirty percent of the top managers of small innovation companies consider the level of training to be low, as do 35% of the top managers of midsized and large companies in traditional sectors. The number

Deterioration of the Situation in the Sphere of Education (Mathematical and Natural-Science Education in School, Secondary Professional and Higher, Scientific and Engineering)
The corruption in institutes of higher education, the outflow of the most qualified personnel abroad or into commercial sectors of the economy, the reduction of education funding, the absence of any sort of control on the quality of education, and a lack of prestige in natural-science and mathematical disciplines in Russia all result in consistently negative effect on the sphere of higher education, especially in the natural sciences, engineering, and mathematics. As a result, the quality of university graduates declines. And worse yet, this process has acquired a self-sustaining character. So, without special action being taken this process may lead to a significant deterioration of the Russias educational system in the midterm.

Low Level of State Expenses on R&D


Today the level of state funding for R&D, despite its dramatic increase in recent years, is far from the level necessary to maintain the Russias NIS, much less improve it. International comparisons show that the amount of financing for R&D coming from the Russian budget does not correspond to the ambitious goals set before the scientific system, and does not allow Russia to compete with the leading countries in the sphere of cuttingedge research. A certain level of financing is required to support a critical mass of scientific research and ensure the continued development of the scientific and educational system. However, not every increase in financing is capable of leading to a corresponding increase in results. Furthermore, if the process of degradation of the national innovation system takes on an irreversible character, as it will after a certain critical point, even a substantial increase in financing will be unable to provide positive results. The presence of a focus is an important element of innovation policy. It should not be selected proceeding from the attractiveness in the media of this or that area of innovation, but from the interests of business, that is, potential profitability. One of our problems is that we are trying to attack the innovation economy on all fronts simultaneously. It is impossible, though, to develop and incorporate innovations immediately in all areas. It surprised me that Russia was in only 38th place out of 50 in the ranking of competitiveness of national innovation systems. I am sure that there are areas in which we occupy a higher position, and it follows that we should direct out attention to them. Opinion Sergei Belousov, General Director, Parallels

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of managers, who are satisfied with the current university education, whether in innovative or traditional business, is only 47% and 41% respectively (less than half). The chart shows middle professional and school education as especially poor. More than half of company managers assess the level of training of graduates from institutions of intermediate professional education as low, and not corresponding to the needs of business. Only around 20% of respondents rate their training positively. The level of teaching of mathematics and natural sciences in secondary schools is assessed highly by only 36% of top-managers of small innovation companies and by only 45% of leaders of mid-sized and large businesses in traditional sectors. The populations assessment of the quality of Russian school education in the areas of mathematics and natural sciences can be described as reserved. Extreme assess-

ments, such as Russian education is the best in the world and Russian education is far behind the world level are unpopular: they received only 4% and 3% support, respectively. The largest number of people questioned believe that Russian education occupies a middle level (43% of respondents); the amount of those who believe the quality of Russian education to be rather high is half this (21%), but it in turn exceeds by twofold the amount of those who consider the quality of Russian education to be rather low. Unfortunately, those respondents who assessed Russian school education as poor cannot be accused of unnecessary pessimism. The facts show that the harsh respondents are right and that Russia is in fact yielding its previous positions in the area of school education. According to data from PISA (Programme for International Student Assessment) 1 an international investigation of the quality of preparation

Figure 9 Positions of Leading Universities of the World's Countries in International Ratings Position of the leading university of a country in a rating by Shanghai Jiao Tong University ARWU, 2009
1 United States 4 United Kingdom 20 Japan 27 Canada 40 France 55 Germany 59 Australia 64 Israel 72 Finland 77 Russia 115 Brazil 158 South Korea 209 China 219 South Africa 259 Czech Republic 318 India 339 Hungary

of schoolchildren Russian schoolchildren are firmly in the lower half of the ratings in all areas of knowledge. For example, out schoolchildren occupy the 34th to 35th positions in a rating of 57 countries in the areas of mathematics and natural sciences. As far as the ability to apply knowledge in practice is concerned (i.e., give scientific explanations for different phenomena) Russian schoolchildren also enter only into the fourth decile of countries. This would not seem so dire, if young people were able to obtain the knowledge and skills

Position of the leading university of a country in a rating by Times Higher Education QS, 2009
1 United States 2 United Kingdom 17 Australia 18 Canada 22 Japan 28 France 47 South Korea 49 China 55 Germany 67 Sweden 102 Israel 108 Finland 146 South Africa 155 Russia 163 India 207 Brazil 229 Czech Republic 277 Chile 302 Poland 360 Turkey

Position of the leading university of a country in a rating of the results of scientific work by HEEACT, 2009
1 United States 11 Canada 14 Japan 15 United Kingdom 34 Sweden 42 Germany 45 South Korea 48 Finland 50 France 51 Australia 78 Brazil 117 Israel 144 China 226 Czech Republic 227 Russia 306 South Africa 353 Poland 362 India 413 Chile 431 Hungary

Figure 11 Human Resources: Opinions of Mid-Sized and Large Russian Companies

Level of preparation of graduates of institutions of middle professional education


8% low 17% 26% 25% 16% 6% high

Figure 8 State Expenses on Education in Countries of the World Amount (%) of state expenses on education in terms of GDP in 2007
Israel Finland United States France Poland Hungary South Africa Ukraine Belarus Australia Brazil Canada Czech Republic Germany South Korea Turkey Russia Japan Chile India China Kazakhstan
0% 2% 4% 6%

Level of preparation of graduates of university technical and natural-science departments


4% low 13% 18% 24% 18% 19% 4% high

Change in share of state expenses on education with respect to GDP in 20002007


Ukraine Brazil China Russia, 20002004 Poland Hungary South Korea Czech Republic United States Australia Turkey Finland Germany Japan France Chile South Africa Israel Canada Belarus Kazakhstan India
8% 2%

347 Poland 423 Chile 1.7 % 1.2 % 1.0 % 0.9 % 0.8 % 0.8 % 0.7 % 0.6 % 0.6 % 0.1 % 0.1 % 0.0 % 424 Turkey

6.2 % 6.1 % 5.7 % 5.6 % 5.5 % 5.4 % 5.4 % 5.4 % 5.2 % 5.2 % 5.1 % 4.9 % 4.6 % 4.4 % 4.4 % 4.0 % 3.9 % 3.5 % 3.4 % 3.2 % 2.9 % 2.9 %

Source: Center for World-Class Education of Shanghai Jiao Tong University, Times Higher Education, Quacquarelly Symonds Ltd.,Higher Education Evaluation and Accreditation Council of Taiwan, analysis by Bauman Innovation

Level of teaching in schools of mathematics and natural sciences


6% low 11% 14% 24% 23% 18% 5% high

Figure 10 Human Resources: Opinions of Small Innovational Companies

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Figure 12

Level of preparation of graduates of institutions of middle professional education


9% low 21% 24% 29% 15% 3% high

School Education: Opinion of the Population The Russian population's assessment of the quality of school education in the areas of mathematics and the natural sciences (physics, chemistry, biology)
Very high: Russian education is one of the best in the world Relatively high Average level Relatively low Extremely low: Russian education is falling behind the world's Hard to answer 4% 21% 43% 10% 3% 19%
0% 10% 20% 30% 40% 50%

0.0 % -0.1 % -0.2 % -0.4 % -0.6 % -0.7 % -0.8 % -0.8 % -1.0 % -1.2 %
1% 0% 1% 2%

Level of preparation of graduates of university technical and natural-science departments


9% low 21% 23% 28% 13% 6% high

Level of teaching in schools of mathematics and natural sciences


10% low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

17%

13%

24%

21%

14% 1% high

Source: UNESCO Institute for Statistics, World Bank, analysis by Bauman Innovation

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

The PISA program is carried out by the OECD (in 2006, for 57 countries), and in each country from 4,500 to 10,000 15-year-old schoolchildren participate in the testing in different population centers.

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Figure 13 Level of Education of Schoolchildren in Different Countries Knowledge of mathematics


Finland South Korea Switzerland Canada Japan Estonia Czech Republic Austria Slovenia Ireland Poland 34 of 57 Russia Turkey Chile Brazil
300 400 500

in the following stages of education. For example, the U.S. cannot boast of the successes of its schoolchildren either, but they compensate for this loss through their strong sysAbility to work with a text
548.4 547.5 529.7 527.0 523.1 514.6 509.9 505.5 504.5 501.5 495.4 475.7 474.4 423.9 411.4 369.5
600

surveys, a middling level of correct answers by our population (48%) places Russia in 32nd place out of 38 countries. The countries of Northern Europe lead in this rating with the average amount of correct answers exceeding 70% for those countries. And in the case of Sweden, which is in first place, it is close to 80%. Russian citizens received their only distinguished position, ninth, for knowledge of atomic theory when 49% of respondents in Russia asserted that the electron is smaller than the atom. In the other six questions, Russia was in 29th to 37th place. While 32nd position (52% correct) on the thesis the ancestors of human beings arose from animals might be considered stricken on religious bases, the 34th position (only 18%[!] of correct answers) on the statement antibiotics kill not only bacteria, but also viruses, can only be explained by a serious deficiency of education in biology an area of knowledge that is vitally important. As an aside, an additional important question was posed to respondents in Russia in the area of biology on the content of genes in plants. The data are as follows: 36% of Russian citizens assert that normal plants do not contain genes, while genetically modified ones do. Thus, while there is an imbalance in competency across various disciplines, there is a lack of attention to fostering scientific thought in schools overall.

Knowledge of precise sciences


556.0 546.9 527.0 517.3 507.6 500.7 499.3 498.0 494.4 490.2 482.7 447.1 442.1 439.9 392.9 Finland Canada Japan Estonia South Korea Slovenia Czech Republic Switzerland Austria Ireland Poland United States 35 of 57 Russia Chile Turkey Brazil
300 400 500

tem of university education. This system involves a significant component of active research work by students and instructors, in addition to their lectures and teaching respectively. In Russia, only a limited number of universities offer students the opportunity to use their knowledge in practice and participate in scientific investigation. As a whole, it can be said that the Russian system of education is weakly oriented toward fostering scientific thinking in its students. A low level of scientific literacy on the part of the Russian population is a significant problem, as well as an indirect confirmation of the ineffectiveness of the educational system. According to the findings of a study involving 38 countries assessing different aspects of scientific literacy in the population, Russia appears only in the fourth decile of countries in practically every indicator. To define the level of scientific literacy, respondents were given a series of statements, each of which reflected the essence of a particular theory from different branches of science. The statements could either be true or false, and

South Korea Finland Canada Ireland Poland Estonia Switzerland Japan Slovenia Austria Czech Republic Turkey Chile 39 of 56 Russia Brazil
300 400 500

563.3 534.5 531.4 531.4 522.1 518.8 512.9 511.5 510.8 508.3 497.8 488.9 479.5 438.2 423.8 390.3
600

United States

600

Source: OECD, Programme for International Student Assessment (PISA) 2006

Figure 14 Abilities of Schoolchildren to Explain Phenomena Scientifically

respondents were asked to agree with or deny each. The picture for Russia was depressing. Following an analysis2 of the

The Earth and space


Finland Estonia Canada Slovenia South Korea Japan Czech Republic Ireland United States Austria Switzerland Poland 33 of 57 Russia Chile Turkey Brazil
300 400 500

Living systems
Finland Estonia Canada Japan Czech Republic Austria Slovenia Switzerland Poland Ireland South Korea 31 of 57 Russia 573.8 539.8 530.5 526.2 524.7 522.1 516.7 512.4 509.1 505.6 498.2 489.9 486.8 434.4 425.3 402.9
400 500 600

Physical systems Figure 15


Finland Estonia Czech Republic Slovenia Japan South Korea Canada Austria Switzerland Ireland Poland United States 33 of 57 Russia Chile Turkey Brazil
300 400 500

554.3 540.4 540.3 533.5 533.0 530.3 526.0 508.1 504.0 502.5 502.3 501.3 481.5 428.2 425.1 374.9
600

559.7 535.0 534.0 530.9 530.4 529.8 529.0 517.7 506.4 504.5 497.1 585.2 479.2 433.2 416.1 384.8
600

Scientific Literacy of the Russian Population Relative to Other Countries Average amount of correct answers on seven test questions
Finland Czech Republic France Germany Hungary South Korea United States Estonia Poland Japan Russia Turkey China 72 % 69 % 68 % 65 % 65 % 60 % 59 % 58 % 54 % 54 % 46 % 41 % 37 % The continents on which we live move The center of the Earth is very hot The ancestors of human beings arose animals The electron is smaller than the atom All radiation is created by human beings Lasers work by focusing sound waves Antibiotics kill not only bacteria, but also viruses
Percentage of correct answers (Russian population)

Assessments of Respondents from Russia of the Truth of a Judgment (Seven Test Questions)
72 % 69 % 52 % 49 % 34 % 31 % 18 %

Russia's Place in 38 32 37 32 9 34 29 34

United States Chile Turkey Brazil


300

Source: OECD, Programme for International Student Assessment (PISA) 2006

Source: O. Shuvalova "The results of scientific activities in the eyes of population", Journal "Forsight", 2007, issue 2

The content of surveys in different countries varied, and therefore seven questions that appeared in all surveys with the same formulation can be used for comparison of countries.

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It is worth paying attention to another problem that has become greater in the last few years, the deterioration of the basic level of knowledge of the population. This is made worse by pseudoscience and the stream of pseudoscientific information that is aimed at the population by the mass media. The combination of both poor scientific literacy and an absence of critical thinking culminates in our population believing many pseudoscientific ideas, including (which is particularly dangerous) incorrect ideas about medicine. As a result, we observe not just a lack of knowledge in the population, but also the dissemination of errors in many spheres of knowledge. The surveys show that, insofar as understanding of science is concerned, the population of Russia is falling behind many countries. Thus, to the question, is astrology a science? only 18% of Russian respondents answered, it is not. Such a low amount of correct answers is what allowed Russia to occupy only the 29th place out of 34 in this study. For comparison, 77% of the population in Finland believes that astrology is not a science, and 66% in the U.S. Now we turn to the state of affairs that has developed in scientific research. If the system of education and scientific literacy of the population we spoke about above has a direct influence on the innovation system of a country, then scientific research represents a very important component of that innovation system. In terms of expenditures on R&D relative to GDP, Russia is positioned in the company of such countries as Estonia, Belarus, South Africa, and Ukraine; only slightly exceeding India, Turkey, and Chile; and behind China and the Czech Republic. The average expenditure on R&D in the group of countries to which Russia belongs is less than half that of countries such as the U.S., Germany, France, and Canada, and less than a third of Japan, Finland, and South Korea. From the graph it is also clear that the achievements of Israel in R&D have not come cheap, as they allocate 5% of their GDP to research and development, and this amount is continually increasing. At the same time, the share of Russias GDP spent on education has increased only mildly in the last 10 years, which is partly explainable by the rapid growth rate of GDP itself. What position the Russias innovation system occupies in the set of the worlds innovation systems is eloquently attested to by the diagram showing the countrys percentage

of expenditure relative to the world expenditure on R&D. In this indicator, Russia lags behind South Korea by twofold (let us note that here the question concerns gross, and not relative, expenditure). The levels of the leaders the U.S. and Japan appear completely unattainable. Even countries such as Germany, France, and China already contribute incomparably greater shares to R&D than Russia. Moreover, if the existing rates of growth of expenditures on R&D continue in the midterm, countries such as Finland and Israel, and possibly Turkey, will catch up to Russia, as their share of world expenditure on R&D rose greatly from 19972007. In this period, Russia lost 5% of its share, while that of China more

than doubled. Developed countries such as the U.S. and France saw their share diminish, but this did not affect their leading positions. In the quantity of international publications, Russian scientists seriously lag behind the average world level, this being weakly connected with the specifics of the scientific areas in which publications are generated. The greatest amount of publications by Russian scientists is in the fields of physics, chemistry, and engineering. The highest level of Russian specialization (i.e., the relationship of the share of publications on Russia to the global amount of publications in a specific branch of knowledge) can similarly be

observed in physics, space and earth sciences, mathematics, chemistry, and engineering. At the same time, the quality (evaluated according to number of publications cited) of Russian publications is falling behind the world average in all disciplines, with the highest quality of publications of Russian scientists is in physics, pharmacology and toxicology, and engineering. The widespread belief that Russian scientists work in specific areas in which the quantity of cited publications a priori falls behind other, more-cited branches is not supported by objective facts. As a whole, the level of citations per article for Russian publications is 4.1, while the world

Figure 16 Scientific Literacy of the Russian Population Relative to Other Countries

Figure 17 General Expenditures on R&D in Countries of the World

Understanding of what a science is in different countries (percentage of respondents)


77% Finland 12% 11%

Share of expenditure on R&D percentage of GDP in 2007 and change (p.p.) in 19972007 (size of circle reflects volume of expenditure on R&D in US$ 1 million)
high

Share (%) of country in world expenditure on R&D in 2007


United States Israel Japan Germany France China 34.13 % 14.04 % 7.88 % 5.06 % 4.43 % 3.13 % 1.35 % 0.88 % 0.79 % 0.72 % 0.43 % 0.25 %
10 % 20 % 30 % 40 %

5%

United States 53% France 41% Germany Czech Republic 24% 19% 57% 21% 38% 20% 27%

Expenditure on R&D as percentage of GDP in 2007

66%

28%

6%

4%

Japan

Finland South Korea

South Korea Russia India Finland Israel Turkey South Africa

United States
3%

Germany France
2%

Canada Czech Republic China

23% Turkey 23% Hungary 22% Estonia 18% Russia 18% Poland 14% 24%

36%

41%

0%

32%

45%

54%

Hungary Estonia Belarus 1 % Ukraine South Africa India Turkey Poland Chile Russia
low

Change in country share in world expenditure on R&D between 1997 and 2007
China Turkey South Africa Israel 103 % 79 % 40 % 38 % 23 % 13 % 5% 1% 0% -5 % -9 %

Kazakhstan
0% 0.5 % 0.0 % 0.5 % 1.0 % 1.5 % 2.0 %

34%

48%

South Korea Finland Japan

Change of expense on R&D as percentage of GDP in 19972007


low high

68%

India Germany Russia United States

do not consider astrology a science

do consider astrology a science

Data for Russia from 2007; for European countries 2005, for United States 2006 Source: O.R. Shuvalova, Does the Population Need Knowledge? Alma Mater: Journal of Higher Schools, 2009, no. 3. Source: UNESCO Institute for Statistics, World Bank, analysis by Bauman Innovation

France -16 %
40 % 0% 40 % 80 % 120 %

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average is 10.4. When this gap is examined on the basis of the specifics of the field of publications in scientific disciplines, it is only one citation per article; when this gap is determined on the basis of the level of publications, i.e., the difference in frequency of citation in a single branch of scientific knowledge, it is more than five citations per article. Despite this, it is important to note also that the publication of Russian scientists has somewhat improved in the last few years. It is interesting that, after a decline in the beginning of the 1990s, the amount of indexed publications grew until 2000, after which a new sharp decline occurred, and the situation began to rectify itself again only in 2006.

The small quantity of publications by Russian scientists is to a large extent because of the low level of science financing. In the amount of publications per researcher, Russian researchers occupy one of the very last places, falling behind even Brazil. Despite that, if the quantity of publications is compared to the amount of expenditure on R&D, Russia is already on the level of strong middle contenders outpacing many developed countries. Unfortunately, the problem concerns not only the quantity, but also quality of publications. Articles by scientists from the RAS (Russian Academy of Science) system are usually published in journals of a lower rank than the works of their colleagues from other academies of sciences, including Polish and Chinese ones. This is also reflected

in the mediocre level of citation of publications written by RAS scientists. Today, the area of scientific research in Russia has a full spectrum of problems. The situation regarding personnel looks unhealthy with the lack of scientists being rather prominent. But the most discouraging thing is that there are no efforts made for preserving those still present. To the

contrary, judging by trends, the insufficiency of personnel is only increasing. Scientists evaluate the quality of Russian higher education and preparation of personnel for scientific work rather highly. 64% of responding scientists believe that Russian higher education approximates the worlds best in one degree or another. While 17% of scientists provide negative

Figure 19 Indicators of Production of Scientific Research in Countries of the World: Science As a Whole and Leading Scientific Organizations Ratio of number of articles in int. journals to number of researchers in the public sector in 2007.
United States 1.14 1.11 0.55 0.47 0.45 0.44 0.44 0.40 0.34 0.28 0.27 0.25 0.24 0.23 0.21 0.18 0.13 0.13 0.04 0.0 0.5 1.0 1.5 China Poland Hungary Czech Republic Belarus Israel Turkey South Africa Russia Australia Canada South Korea Finland Chile Germany France United States Japan Kazakhstan 0 5 10 15 Canada Chile

Number of articles in int. journals per US$ million expenditure on R&D in 2007
15.0 11.7 9.8 9.5 8.4 8.0 7.8 6.4 5.9 5.2 5.2 5.2 5.0 4.9 3.8 3.5 3.3 2.9 2.5 20

Average level of journals in which works are published by members of academies and scientific societies from 20032007
Max Plank Society, Germany Higher Council on Scientific Research, Spain Council on Scientific and Industrial Research, India National Research Center, France Agency on Science and Technology, Japan National Research Council, Italy Czech Academy of Sciences Polish Academy of Sciences Chinese Academy of Sciences Russian Academy of Sciences National Academy of Sciences of Ukraine

1.06 1.05 1.03 1.03 1.02 1.02 1.01 1.01 0.99 0.98 0.96

Figure 18 Publications by Russian Scientists According to Scientific Disciplines

Germany India

Portfolio of international publications by Russian scientists in different scientific disciplines from 19992009: specialization and quality
high

Composition of the level of citations of Russian articles in scientific disciplines from 19992009
12 10 relation of number of citations to number of publications 8 6 4 2 0 World portfolio as a whole level Russia
4.1 10.4 -1.0 -5.2

China Finland South Korea Czech Republic Japan Hungary Turkey Estonia Poland Brazil Russia Belarus Ukraine Kazakhstan

0.90 0.95 1,00 1,05 1,10

Quality of publications

Average level of citations of publications by academies of sciences and scientific societies from 2003-2007
Max Plank Society, Germany Agency on Science and Technology, Japan Higher Council on Scientific Research, Spain National Research Center, France National Research Council, Italy Czech Academy of Sciences Council on Scientific and Industrial Research, India Polish Academy of Sciences Chinese Academy of Sciences Russian Academy of Sciences National Academy of Sciences of Ukraine

Physics Pharmacology and toxicology Engineering sciences Ecology Botany and ecology Clinical medicine Biology and biochemistry Information science Materials science Molecular biology and genetics Chemistry Mathematics Space sciences

12.0 9.1 7.8 7.5 5.2 5.6 5.3 4.1 3.8 2.7 2.0 0 2 4 6 8 10 12 14

Publications by Russian scientists, ISI indexed, from 19992009


32,000
Earth sciences

30,000 28,000 26,000 24,000 22,000

Social sciences (general)


low

Specialization
low
Source: ISI, NSF, analysis by Bauman Innovation

high

20,000
1994 1996 1998 2000 2002 2004 2006 2008
Source: SCOPUS, SCImago, UNESCO Institute for Statistics, analysis by Bauman Innovation

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assessments, their opinion being that the quality of higher education is low, worse than in other countries. In this way, scientists show that have much greater optimism regarding this question than do the heads of many companies. Postgraduate education was also highly appraised by scientists. More than 70% of survey respondents give a high assessment of the quality of preparation in postgraduate school and the level of contemporary candidates dissertations. Negative assessments in this case are fewer in comparison to those regarding higher education. Only 6% of respondents expressed dissatisfaction with post-graduate education, and only 10% with the quality of dissertations. These high appraisals of the quality of preparation of colleagues notwithstanding, the situation with respect to personnel in Russian science is not simple. The results of a survey of scientists show that a third (33%) of researcher respondents experience a lack of personnel in their group, and 12% consider the current situation regarding personnel to be critical. For 49% of scientific groups, the situation regarding necessary personnel looks comparatively better, however the diversity of answers to the other questions in the given set forces us to consider this state of optimism to be shaky. First, the current labor market is extremely poor for both qualified and young specialists. Sixty percent of respondents say that finding a qualified specialist in their area of scientific work is either very difficult or impossible (18% of respondents picked the impossible option), and only 16% of scientists believe that it would be relatively easy to attract a specialist to their group. Science is being poorly replenished with young scientists. 11% of scientists see no inflow of young people at all, and another 47% consider this inflow to be extremely weak. Only about one-fifth of scientists (19%) observe young people coming into science. Moreover, scientific groups are in great need of qualified young people in order to pass on existing knowledge. 57% of participants in the survey speak of a severe lack of colleagues younger than 35. And speaking of a lack of personnel, it is also important to note the lack of auxiliary technical staff with 28% of respondents saying that a lack of such specialists is a critical issue for their scientific group. Second, scientists are leaving both Russian science and science in general. While 47% of respondents report an active outflow of Russian scientists abroad, 29% of respon-

dents do not see the phenomenon of a brain drain to other countries (or consider this to be a minor problem). Also, people are leaving science for other fields of work unrelated to science. 38% of participants in the survey assert that there is an active departure of colleagues to other areas. Less than a third (32%) of respondents do not observe people actively leaving science. The situation concerning infrastructure for carrying out scientific research is comparable to the problems surrounding personnel. More than a third of respondents (37%) experience a deficit of laboratory equipment, and 31% of scientists say that the equipment they use is either fundamentally or nearly obsolete. There are slightly more positive answers, although their share does not reach half: only 44% of participants in the survey think that equipment for carrying out scientific research is more or less adequate, and only 45% of scientists rate the quality of laboratory equipment as corresponding to or approaching world standards. As far as laboratory materials are concerned, 36% of researchers experience a lack of them (14% of respondents said that this lack is systematic). Again, only fewer than half of scientists (45%) say that there are enough laboratory materials for their scientific work. The situation concerning provision of computer and office machinery looks better. Seventy-three percent of respon-

dents say that provision is good and enables effective work. Nevertheless, a big question remains about if it is acceptable for 12% of leading scientists to attempt to conduct scientific research, the most forward-most sphere of economic activity, while saying that there was poor provision of computers and office machinery with a negative effect on their work. In addition to this, 21% of scientists note a poor availability of specialized software. As far as ones place of work and facilities are concerned, 33% of respondents assess their quality as poor (9% as extremely poor). And the percentage of scientists satisfied with their workplaces is only 8%.

Scientists assess the process of financing scientific work as extremely poor. The problem of meagerness of financing is worsened due to the ineffectiveness of resource distribution and a series of barriers in the system of competitive financing. The aggregate volume of financing is extremely low. Fifty-six percent of scientists consider it insufficient, and to be holding back scientific work to one degree or another. 19% of leading scientists called current financing extremely meager. Only 29% of researchers consider the volume of financing to be more or less sufficient, and only 2% believe that financing is sufficient for productive scientific work. Another 24% of those surveyed assess the current volume of financing with a rating of satisfactory.

Figure 21 Personnel in Russian Science: Opinions of Scientists

Figure 22 Infrastructure for Carrying Out Scientific Research: Opinions of Scientists

Current situation regarding personnel


12% 8% 13% 19% 16% 13% 20%

lack of personnel

adequate personnel

Adequacy of laboratory equipment


11% 13% 13% 19% 20% 19% 5%

Availability of qualified specialists on the labor market


18% low 23% 19% 24% 11% 4%1% high

inadequate

adequate

Quality of laboratory equipment


10% 5% 16% 25% 18% 16% 11%

Inflow of young people into science in the last 3 years


11% 18% 29% 23% 14% 4%1% active

fundamentally obsolete

corresponds to world standards

Figure 20 Quality of Higher Education and Graduate School: Opinions of Scientists

weak

Adequacy of laboratory materials


14% 10% 12% 19% 20% 17% 8%

Outflow of scientists abroad in the last 3 years


16% active 13% 18% 25% 13% 9% 7% weak inadequate adequate

Quality of higher education


6% 10% 20% 27% 23% 14%

Departure of scientists to other areas in the last 3 years


low: behind other countries high: better than world level 10% active 22% high: better than world level 11% 17% 31% 14% 14% 4% weak

Provision of computer and office machinery


1% 4% 7% bad 15% 22% 30% 21% good

Quality of preparation in graduate school


3% 2% 21% 22% 29%

Availability of specialized software Severity of lack of specialists


Scientific colleagues younger than 35 Auxiliary technical personnel Scientific colleagues older than 35 58 %* 28 % 18 % 7% low high 5% 7% 9% 19% 15% 23% 23%

low: behind other countries

Level of contemporary candidate's dissertations


2% 7% low
Source: Russian Innovation Survey 19992009, Bauman Innovation, OPORA RUSSIA

Quality of workplace and facilities


9% low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

18%

26%

19%

29% high

Project leaders

11%

13%

31%

20%

13%

4% high

* Share of respondents (of the general number) experiencing a lack of the indicated specialists (the number of answers exceeds 100%: two variants of an answer were admitted) Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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The developing system of competitive financing of scientific research is highly competitive. In the opinions of 34% of those surveyed, competition is extremely strong and there are very many requests; another 45% consider the level of competition to be more or less high, and only 4% of partici-

pants in the survey consider the level of competition for competitive financing to be more or less low. However, the real conditions in which this competition takes place are far from perfect. The requirements for applications presented in the frameworks for financing of R&D are not always adequate. In the opinions of scientists, very often it is needed to include

a quarter of respondents (23%) say that the accounting is relatively reasonable and that the time that they use to do it is reasonable as well. More than half the surveyed scientists note the second problem, related to unreasonable requirements for articles of expenditure. 52% of respondents say that the inadequate rules for the resources of a grant, to one degree or another, hinder normal work. Only a little more than a quarter give positive assessments, with only 28% of respondents considering the articles of expenditure to be more or less reasonable. In characterizing the effectiveness of administration of scientific work, respondents use negative assessments. Thus, when discussing the effectiveness with which budget resources allocated to scientific work were used in Russia, 45% of respondents called it poor, while 12% chose

extremely poor. In their view, the resources expended do not lead to the appearance of new knowledge to a large extent. Only 22% of surveyed scientists think that budget money is being translated into new knowledge. Ineffective use of budget resources is the result of a whole series of problems in the system of administrating scientific work. This includes issues such as support of unproductive scientific organizations, a very problematic approach to choosing priorities for dispersing grant resources, and poor conditions for developing new scientific areas. Thus, 55% of participants in the survey of scientists think that the current disbursement of direct budget financing among scientific organizations is ineffective and hinders the progress of science (only 11% of respondents say that it is effective), 41% of scientists criticize the choice of priority

Figure 23 The System of Financing Scientific Work: Opinions of Scientists

in an application a great deal of superfluous information that is in no way connected to the work planned. Thirty-seven percent of scientists consider requirements for the contents of applications in their area of work to be inadequate (10%
24% 13% 5%2%

Current volume of financing


19% 16% 21%

of those surveyed selected the answer completely inadequate). Exactly the same amount of respondents, 37%, considers the requirements for applications to be reasonable. The state of affairs in accounting in competitive financing is even worse: 58% of respondents consider requirements for reports to be unreasonable and state that they are often

meager, holds back scientific work

sufficient for productive scientific work

Competition for obtaining competitive financing


2%2% 16% weak 20% 25% 34% strong

required to present cumbersome accounts that are overloaded with superfluous information, the writing of which takes much time away from the real work. A mere less than

Figure 25 Barriers to Conducting Scientific Research: Opinions of Scientists

Figure 26
Leadership in Science and Technology: Opinions of Small Innovational Companies, Mid-Sized and Large Companies, and the Population

Adequateness of demands for contents of requests


10% 14% 13% 25% 14% 12% 11%

inadequate, much superfluousness

adequateness

Basic barriers to conducting scientific research


more important problems

Quality of scientific-research organizations in the opinions of companies


Quality of research in the opinions of small innovational companies
3% 14% 14% 19% 22% 18% 10% high

Competency of competitive commissions


8% low 15% 17% 29% 18% 8% 5% high

Figure 24 Effectiveness of Management of Scientific Work: Opinions of Scientists


Lack of financing

82 %*

poor: behind the world level

Objectivity of distributing competitive financing


5% 7% unobjective and unfair 18% 39% 18% 12% 2% objective and fair

Effectiveness of use of budget resources for creation of new knowledge


12% poor 20% 15% 31% 9% 10% 3% high

Lack of equipment and infrastructure Ineffectiveness of the system of state administration of the area of scientific research (this concerns the work of relevant ministries and divisions) Lack of scientific personnel

52 %

Quality of research in the opinions of mid-sized and large companies


17% 17% 15% 22% 20% 6%3% high

poor: behind the world level 35 %

Correspondence of sizes of grants to tasks


18% 18% 23% 19% 16% 3% 3%

15% poor

14%

26%

34%

7% 3% high

34 %

The importance of the problem is increasing

Effectiveness of distribution of direct budget financing among scientific organizations

Assessment of the Russian population of the leadership of countries in the area of science and technology
Japan Germany United States China Russia
less important problems

66 %* 33 % 32 % 30 % 27 % 7% 3% 2% 1% 1%
0% 10% 20% 30% 40% 50% 60% 70%

resources insufficient

resources sufficient

Ineffectiveness of administrative direction in scientific organizations

21 %

Rules for distributing resources in grants


18% illogical, hindering work 16% 18% 20% 8% 12% 8% logical

Correctness of the choice of priority areas for financing


6% 13% 22% 41% 12% 5%2% correct
Ineffectiveness of the work of the Russian Academy of Sciences
0% 20% 40% 60% 80%

Poor quality of preparation of scientific personnel

16 %

United Kingdom France India Brazil Other


* percentage of respondents identifying a country as one of three world leaders in the area of science and technology Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

incorrect

Adequacy of accounting in competitive financing


22% 25% 11% 19% 7% 8% 8%

Flexibility of the system of scientific organizations in Russia


16% 16% 19% 34% 10% 3%2% high

12 %

needlessly cumbersome and inadequate

adequate, takes up reasonable time

poor, a barrier to development of new areas


Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

*The sum of answers exceeds 100%: three variants of an answer were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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areas for allocation of competitive budgetary financing (19% of survey participants support the choice of priorities), and 51% of those surveyed say that there is an inflexibility in the system of scientific organizations in Russia, which is unable to develop new areas (only 15% said that it was flexible). The problem of ineffectiveness within government administration of scientific research came in the third place in the list of barriers to carrying out scientific research, being noted by 35%3 of scientists. The problem of inadequacy of equipment and infrastructure, which was noted by 52% of those surveyed, came in second. Practically all participants in the survey (82%) are of the opinion that the main barrier to carrying out scientific research in Russia is inadequate financing. More than a third of scientists (34%) consider one of the main barriers to be lack of scientific personnel, 21% of scientists have serious concerns about administration on the level of scientific organizations, and 12% think that the Russian Academy of Sciences is a serious barrier. In the opinions of business and the population, Russias positions in science and technology are rather weak. Many business representatives give negative assessments to the quality of Russian scientific-research organizations (NROs). Thus, about half (49%) of top managers of mid-sized and large companies in traditional sectors of the economy think that Russian NROs lag behind foreign ones. The opposing point of view is supported by 29% of those surveyed. Top managers of small companies, many of whom themselves have worked in the area of scientific research in the past, give a more positive assessment on the whole, but even in this case 31% of respondents think that the quality of Russian NROs is beneath the world level. Fifty percent of managers of small innovation companies say that Russian NROs correspond to the world level. In the opinion of two-thirds of Russias inhabitants, Japan is one of the three leaders in the area of science and technology (66%4 of those surveyed). Germany gathered half as many votes (33% of those surveyed), with the U.S. (32%) coming in slightly behind it, and China (30%) following them. The idea that Russia is the world leader in science and technology (Russia being one of the trio of leaders) is shared by 27% of those surveyed. Such trust on the part of the Russian population in Russian science is not, unfortunately, due to facts.

Instead it is due to the patriotism of the surveyed citizens and lingering stereotypes from the Soviet period (which were completely accurate at the time of the Soviet Union) that our science is one of the worlds best. The United Kingdom (7%) and France (3%), which in fact substantially surpass Russia in the scientific sphere at the present time, come in far behind Russia.

Commercialization: Strengths and Weaknesses


Poor effectiveness of infrastructure for commercialization (poor availability of financing, bad work on the level of micro-instruments: technology-exchange centers, specialized services, and real estate for scientific companies)
Despite the significant financial resources that Russia has acquired in the last few years during the period of economic growth, obtaining of financing is extremely complicated even for those who are successfully engaged in commercial enterprises, especially considering long-term financing. The problem of low availability of financing worsened in 2009 during the world economic crisis. For start-ups that are working in innovative, high-risk sectors, financing is an even greater problem. The Fund for Cooperation in the Development of Small Enterprises is practically the only real source of financial resources for innovative teams, but its resources are not sufficient for

Figure 27 Possibilities for Commercialization of the Results of Scientific Work and Entrepreneurial Moods: Opinions of Scientists

Entrepreneurial moods among Russian scientists


12% 22% 19% 28% 12% 6%

not widespread

widespread

Possibility of creating new products or processes


15% poor 14% 13% 18% 14% 16% 10% high

Market potential for commercialization (demand)


18% poor 13% 16% 18% 12% 15% 8% high

Scientists' understanding of steps needed for commercialization


21% weak 11% 22% 18% 6% 5% 16% complete

Sources: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Figure 28 Experience in Commercialization of Results of Scientific Work: Opinions of Scientists

Attracting financing for commercialization of research


25% complicated 34% 19% 18% 3% 1% easy

Attempts at commercialization of results of scientific research

Sources of financing for commercialization


One's own resources or those of acquaintances Investments by Russian companies 39 %*

yes, successful none 3.8 % 4.9 % yes, but unsuccessful

32 %

Investments by foreign companies The Fund for Cooperation in the Development of Small Enterprises

29 %

74.2 % 17.0 % Yes, but it is too early to talk about results

26 % 8%

Venture fund

Bank credit

0%

Other

0%

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

* The total number of answers exceeds 100%: several different answers were allowed

Respondents could note no more than three barriers to carrying out scientific research. Respondents could note no more than three countries that are the leaders in the area of science and technology.

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everyone, and the conditions of the Fund are far from suitable for all starting groups. In addition to lack of financing, poor availability of real estate and infrastructure for starting small innovation companies is a large problem. There are few business incubators, and it is not a rarity that the conditions for use of facilities are unacceptable for new small enterprises. Services for new small innovative companies in the existing incubators often consist of offering real estate on advantageous conditions. Free consulting services on selection and training of personnel, creation of finance and marketing plans, legal consultation, and training of entrepreneurs themselves practically do not exist; that is, the entire sector of services that forms the basis of the success of business incubators in developed countries is absent. It is an additional problem that institutes dedicated to realizing commercialization of technology (for instance, centers of technology exchange in universities, venture funds, etc.), although officially designated and active, often work extremely ineffectively.

that scientists seriously aim for commercialization of their developments) or do not know how the process of commercialization takes place (only 27% of scientists say that they have some knowledge of the steps needed to create a business).

But even if, through happy circumstance, scientific talent, entrepreneurial abilities, and inclination are all united in one person, he or she will more than likely confront enormous difficulties in trying to find money for commercialization. Seventyeight percent of surveyed scientists say that in Russia, it is extremely difficult (25% chose the option impossible) to find

ment of Small Enterprises in the Scientific-Technical Sphere. Venture funds play practically no role. The results of a survey of small innovative companies reinforce the pessimism of scientists. In the great majority of cases, financial problems constantly accompany innovative work. In the opinion of 84% of respondents, finding means for development of a product (preparation of a prototype, patenting) is impossible or extremely difficult. 86% of company top managers say that venture financing is almost unavailable at the stage of putting a product on the market or development of a beginning company. The data regarding how, and with what resources, small innovative companies come into being is interesting. In the majority of cases, enterprises were created by colleagues at scientific institutes or universities who decided to commercialize their area of research (61%). This is the route that is generally taken worldwide, and in this way Russia is fully in the mainstream of international tendencies. The share of those, who went into innovative business from a state company or commercial organization (17% and 11%, respectively) is significant. Concerning financing of the start-up, in the majority of cases, the resources of the founders served as the source (75%), and additional Opinion

Figure 29 Availability of Financing in the Early Stages: Opinions of Small Innovational Companies

resources for commercialization of their own research. Almost three-quarters of surveyed scientists and researchers have no experience at all in commercialization of the findings of scientific work. Less than 4% of those sur14% high

Availability of financing for a beginning company for development of a product


6% 10% low 20% 27% 23%

veyed can boast of successful attempts at commercialization, while almost 5% have undertaken attempts that turned out unsuccessful. Another 17% are trying to commercialize the results of their work at the present time and still cannot say that they have been successful. The source of financing for commercialization is often researchers own resources

Availability of venture financing for a beginning company


3% 2% low 21% 22% 29% 22% high

or those of their relatives (39%), or investments by either private Russian companies or foreign companies (29%). The only organization among all Russian governmental organizations that plays a meaningful role in the financing of commercialization of developments is the Fund for Cooperation in the Develop-

History of companies' beginnings


Before the creation of the firm, its founders worked in a university or SRI and used their accumulated experience The founders worked in a state company and used their accumulated experience The founders worked in a private commercial firm, but decided to split off The firm's creation was in no way connected with previous experience and abilities Other

61 %

Low Level of Entrepreneurial Activity of Researchers, and the Population as a Whole


The general level of entrepreneurial activity among the population of Russia is extremely low. This is brought about by many factors, including the absence of real positive examples of entrepreneurship in popular knowledge. There are practically no examples of people who began with a small business and then, year after year, increased their turnover, finally becoming rich as a result of developing the same area in which they began, such as Steve Jobs or Bill Gates. Moreover, society knows well, that people engaging in small business often experience constant interference in their work, and are victimized by negative actions on the part of state departments and crime.

17 %

11 %

Figure 30
6% 6%

Aleksandr Galitskii, Managing partner, Almaz Capital Partners Innovation is transformation of knowledge into
8% 7% 1% high

Innovational Infrastructure: Opinions of Small Innovational Companies

Availability of facilities in a business incubator for a beginning company


12% 30% 20% 23%

Sources for starting capital


The founders' own resources Resources of a state venture fund or fund for support of commercialization Resources of private investors private persons (inc. relatives) Resources of a specialized non-state fund Bank credit Other forms of state support

something that can bring profit. We need to learn to work on profit, not loss. When we learn to do this, we will change Russia into an innovative country. We need to get used to the brand Developed in Russia, and not just Made in Russia. In our country, there is a very large gap between fundamental scientific research and production. To overcome this, we need knowledge that has never been developed in Russia. It takes ten years to train a specialist in the area of product management. What distinguishes us from other countries in our approach to innovations can be analyzed for a long time, but the basic problem, in my view, consists in the lack of systematic approach in our actions. The government serves as the ground for development, but it needs to create this ground systematically.

75 %*

low

27 %

Availability of specialized services (IS, business planning, marketing)


3% 25% 23% 25% 13% 8% 3% high

16 %

low

Commercialization: What the Facts Say


There exists a definite potential for commercialization of the results of the scientific work of Russian scientists. 43% of surveyed scientists say that new products or processes can be created on the basis of their work, and 35% of respondents believe that the results of their scientific work would meet with market demand. However, those scientists who say that their scientific research has potential are, with great likelihood, not interested in the creation of a business (only 18% of those surveyed believe

9%

Availability of specialized educational programs on business development


3% 12% 20% 28% 18% 16% 4% high

7% low 6%

Quality of specialized educational programs on business development


9% low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Other

3%

13%

22%

30%

16%

7% 2% high

* The total number of answers exceeds 100%: several different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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resources were often obtained from private persons, including friends and relatives (16%). In a relatively large amount of cases, state support resources of specialized funds (27%) or other forms (6%) was the main source. Private institutional resources bank credit (7%) or resources of specialized nongovernmental funds (9%) were used only in rare cases. Heads of small innovative companies express a lack of satisfaction with other aspects of the innovative infrastructure in addition to the poor availability of financing. For example, 62% of those surveyed say that the availability of facilities in business incubators is poor (this concerns offices and laboratories that a new company can use at an advantageous cost). Only 16% of survey participants consider facilities in business incubators to be more or less available.

It is often difficult for new small innovative companies to find specialized services in the areas of intellectual property, business planning, and marketing research. Fifty-one percent of respondents say that the availability of such services is poor, while 24% disagree with them. The state of affairs regarding the availability of specialized educational programs to increase qualifications in the area of business management is better (concerning such subjects as business plans, quality control, marketing and promotion, exports, finances, and the productive process). In this case, there are fewer unsatisfied (35%) and more satisfied (38%) heads of companies. It is true, however, that the quality of such programs is rated poorly. In the opinion of 44% of participants in the survey, such programs do not match the demands of their business. Twenty-five percent of respondents are satisfied with the quality of educational programs.

Conditions of Demand: Strengths and Weaknesses


Ineffectiveness and indifference to innovation is common in government procurement, including procurement in infrastructural sectors and the sectors of defense, security, and space
Government purchases may be divided into three levels from the point of view of their orientation to innovation: Government procurement of standard products or services for which standard criteria of selection can be formulated (for instance, automobiles or office equipment); Government procurement of complex, high-technology, or science-intensive products or services for which it is difficult to formulate criteria of selection (for instance, complex systems of fire safety for complex industrial facilities, large-scale architectural projects, etc); and

Figure 32 Consumer Interest in Innovations

Readiness of consumers to use innovational goods instead of those they already use
7% Sweden 7% Slovenia 7% Netherlands 12% Italy 7% United Kingdom 10% Romania 5% Czech Republic 8% Denmark 7% Estonia 4% Finland 5% EU25 7% Spain 4% France 4% Ireland 5% Latvia 4% Hungary 12% Turkey 6% Greece 4% Germany 4% Poland 4% Lithuania 3% Russia 5% Bulgaria 2% 15% Portugal 56% 13% 14% 20% 49% 9% 18% 23% 36% 26% 13% 23% 53% 9% 11% 26% 50% 12% 7% 27% 51% 13% 5% 26% 47% 16% 4% 23% 47% 6% 10% 31% 51% 5% 9% 30% 46% 13% 7% 32% 42% 8% 14% 32% 47% 12% 4% 29% 38% 12% 15% 31% 45% 11% 7% 37% 47% 11% 1% 34% 43% 7% 8% 34% 41% 11% 7% 38% 48% 4% 5% 34% 34% 4% 19% 38% 40% 9% 6% 33% 41% 9% 6% 41% 42% 7% 3% 44% 40% 6% 4% 48% 32% 7% 6%

Figure 31 Size of the Internal Market of Countries in the Area of Military Purchases Size of the internal market (GDP + import export) in 2007, US$ million, according to purchasing power parity
United States China Japan India Germany France Russia Brazil Canada South Korea Turkey Australia Poland South Africa Ukraine Czech Republic Chile Israel Hungary Finland Kazakhstan Estonia
0 5,000 10,000 15,000

State procurement of R&D, for which it is even harder to standardize criteria of selection. Here, two types of R&D are possible: (1) the search for a solution to an existing Share (%) of military R&D of GDP in 2007
United States 14,549.9 6,410.8 4,212.0 3,081.5 2,613.0 2,085.8 1,912.4 1,806.3 1,240.5 1,191.3 932.4 773.7 631.4 481.6 332.9 237.5 199.2 188.5 186.9 176.8 153.8 30.8
20,000

problem (for example, working out methods for managing


0.53 % 0.37 % 0.17 % 0.05 % 0.02 % 0.02 % 0.01 % 0.01 % 0.00 %

and preventing technogenic disasters in hydro energy); and (2) fundamental research oriented toward understanding some sphere of knowledge (for example, determining the causes of illness). Government procurement stimulates innovation to a greater degree at each successive level. The currently existing policy of government procurement uses the short-term cost as the main criterion, not taking into account the factors of quality and innovativeness. There is another problem in the area of procurement of weapons and military technologies. Alongside demand for unique nonstandard products and services, a significant volume of procurement is of standard products and services. However, the norms of the law on government purchases do not extend to the areas of defense and security, and as a result, a significant space arises for abuse in the form of purchases of standard, cheap products at elevated prices. This problem is not unique to Russia. It is well known that at one time, analysis uncovered a severalfold elevation of the price of standard parts in the case of government purchases of military hardware in the U.S. Therefore it is necessary to create a thorough system of criteria for purchases of standard goods in the areas of defense and security. However, even a systematization of criteria of government purchases on the first level cannot produce the desired effect

Russia France Germany Finland Poland Czech Republic Estonia Hungary


0.0 % 0.2 % 0.04 % 0.06 % 0.08 %

1.0 %

Share (%) of expenditure on purchase of arms of GDP in 2007


United States Russia Poland France Finland Estonia Hungary Germany Czech Republic
0.0 % 0.2 % 0.04 % 0.06 % 0.08 %

0.85 % 0.68 % 0.42 % 0.34 % 0.33 % 0.29 % 0.15 % 0.15 % 0.15 %


1.0 %

YES, even if the innovational good is SIGNIFICANTLY MORE EXPENSIVE YES, if the innovational good DOES NOT DIFFER IN PRICE

YES, if the innovational good is SLIGHTLY MORE EXPENSIVE NO Hard to answer

Source: World Bank, European Defence Agency, US DOD, SIPRI, analysis by Bauman Innovation

Source: Special EUROBAROMETER 236 Population Innovation Readiness, Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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of stimulation of innovation. With increasing orientation to innovation, the significance of economic criteria for selection of a supplier inevitably diminishes. While simultaneously, the significance of qualified criteria and the effectiveness of the process for making purchases needs to grow. For these reasons, on the second and third levels of government purchases, it is practically impossible to regulate all selection criteria with one law. Thus, for example, in world practice of government procurement of R&D related to technological policy, a set of exclusively internal experts is utilized due to the need to keep certain information confidential. While in case of science policy, external (including international) experts are invited in order to ensure that the selection is independent.

meaning here. The shares of Russian citizens that are less likely to buy new items are consistently lower compared to EU countries, regardless of the new items price relative to a conventional item. The share of those who unequivocally do not want to use innovative goods is almost 2.5 times higher in Russia than in Europe (26% vs. 11%). The consumption conservatism of the inhabitants of Russia is even more clearly distinguished when a comparison is done on a country-by-country basis. It is clear that there is no country in Europe with such a significant share of consumers who strongly have no desire to buy innovative goods in place of tested and traditional ones. Even in Greece, which has the most conservative consumers in the European Union, this figure is only 16%. So, in comparison with Europe, the consumption preferences of the population of Russia stimulate companies to adopt fewer innovative products/services.

innovation development. The existing technical regulation is either based on the already-outdated standards of the 1980s and holds back the adoption of new technologies, or has no demands on enterprises whatsoever. This creates favorable conditions for unethical manufacturers and gives to impetus to innovators.

are not interested in this, as they see no material benefits for themselves. For organizations this also makes no sense due to the small perceived value of IP. And the government is simply not physically in a condition to manage all the objects of IP that it possesses. It is also necessary to note the poor legal literacy of researchers and administrative personnel in the area of protection of IP, as the legislation itself is relatively difficult to understand. There are simply not enough qualified specialists in this sphere (for instance, competent patent lawyers) for the scale of the country. Another significant problem is the general ineffectiveness of the court system, including in defense and protection of IP.

Barriers in the Area of Protection of Intellectual Property


In itself, the legislation in the area of intellectual property in Russia does not have significant failings. The problems lie in several other areas. To date, the question of the rights to intellectual property created in the course of carrying out research on budgetary resources has not been conclusively regulated. There is no sharp division between intellectual property rights between its immediate creators (physical persons) and the organizations in which the staff worked during the process of creation of the intellectual property (legal persons). In addition, the existing system of assessing the cost of IP and assignment of property rights to IP between the government and physical and legal persons does not create stimuli for introducing IP into economic activity. Developers (physical persons)

Conditions of Demand: What the Facts Say


A large size of the internal market can be considered one of the small number of advantages present in of the Russian innovation system. Russian innovative companies can rely on a large-scale and accessible market for purchases of new products, thus achieving effective economies of scale. South African, Chilean, and Israeli companies, for example, do not possess such advantages. The volumes of Russian military purchases are relatively high in both absolute and relative terms (according to estimates by international experts at the Stockholm Institute SIPRI). As share of GDP, expenditure on procurement of weapons and scientific research and experiments in the interests of national defense in Russia lags only behind the U.S. The Russian MIC (military-industrial complex) remains an important element of the national innovation system. Both, the volume of the market, and the inclination of local consumers to use new products are important for development of innovations. Another equally important factor is government priorities in the area of the stare procurement (how important is the innovativeness of the products purchased). The attitude of residents of Russia to using innovative consumer goods differs from the mood of consumers in the European Union. According to the findings of surveys in Russia, 62% of the population is ready to exchange their customary goods for innovative ones. While in the EU countries, this figure is 82%. In this respect, the inhabitants of Russia are more conservative in their use of consumer goods. At the same time, it is important to note that questions of a goods price do not have a fundamental

Low Level of Development of Key Regional Innovative Clusters


The presence of developed, competitive innovative clusters on the regional level is a key factor in innovative development in the leading countries. The most famous examples of such clusters are Silicon Valley, California; biotechnological clusters in Boston, San Francisco, and Munich; and the aerospace cluster in Toulouse. On the basis of such clusters, demand for scientific research and development builds up in universities and scientific centers, new companies appear, specialized financial

Technological Infrastructure and Sector Clusters: Weak and Strong Sides


The Presence of Fundamental Technologies
During the Soviet era of large-scale infrastructure projects and programs, preference was given to working with our own resources, from development of technology to domestic industrial production. And so today we have a rather high level (again in comparison to world average indicators, and not with those of the leading countries) of fundamental production technologies and exploitation of resources in the areas of energy, railways, air transport, etc. For instance, the results of the accident on the Sayano-Shushensk GES (hydroelectric power station) were overcome using internal Russian resources. The replacement equipment was also manufactured in Russia. Russian companies still win international competitions for construction of nuclear power stations and installation of equipment for energy and other infrastructure complexes and facilities. This potential is continually diminishing and may be completely exhausted in the short term. However, it still exists, and is an extremely important positive factor for innovation development.

Figure 33 Intellectual Property: Opinions of Scientists

instruments for commercialization of technology are created, etc. In Russia, there are very few such clusters and the level of their competitiveness is too low in comparison with the world leaders. There are separate elements of innovative clusters in Moscow, Moscow Region, St. Petersburg, and Novosibirsk, and to some extent in Tomsk, Nizhny Novgorod, and Kazan. However, in the conditions of a poorly developed real sector of the
28% 13% 11% 5%

Availability of patenting in Russia


15% unavailable 13% 13% 28% 6% 9% 17% available

Availability of patenting abroad


23% unavailable 16% 4%

economy first and foremost in manufacturing, and without corresponding government support, these clusters cannot effectively develop and compete with their foreign analogs.

available

Legislation in protection of IP
25% undeveloped: IP not protected 21% 22% 24% 3%3%1% developed

Technological Infrastructure and Sectoral Clusters: What the Facts Say


As survey results show, the existing state of affairs in the sphere of protection and defense of intellectual property is a source of many barriers for the innovation system. Some reasons for the poor involvement of Russian scientists in commercialization were cited, as the low interest of scientists in entrepreneurship and their weak competency in questions

Rights to the findings of scientific work

Ineffectiveness of Infrastructure for Technical Regulation (Outdated Standards, System of Metrology and Accreditation)
The system of standardization and regulation is one of the most problematic, both for the development of industry and for

27% do not belong to the scientists

17%

11%

21%

7% 5%

12%

belong to the scientist

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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of commercialization, as well as a poor availability of resources, primarily financial ones. However, there is a colossal problem in the fact that often a scientist simply has nothing to commercialize, as in many cases he or she does not own the rights to his or her scientific work. If a scientist works in a laboratory of an organization and receives a salary, both the scientific organization and the government, that finances this scientific research, are entitled to own the rights to the scientists work. As a result, an enormous numbers of ideas simply cannot be trans-

formed into innovations, because neither scientific organizations nor the government will try to commercialize them. Fifty-five percent of surveyed scientists say, that in the majority of cases, they cannot register intellectual property and use it according to their discretion, because the rights to the findings of their scientific work partially or fully belong to either the organization in which they work or to the grantmaking organization. Only a quarter of participants in the survey (24%) say, that they can obtain rights to their scientific findings.

The cost of patenting is another problem. Thirty-one percent of surveyed scientists say that patenting availability in Russia is poor due to costs. In the opinion of 43% of the surveys participants, the expense of abroad patenting is unacceptable. Protection of intellectual property is an even greater source of censure. Only 7% of those surveyed consider the Russian legislation in this sphere to be more or less adequate, and intellectual property to be protected. The amount of those who say that there is inadequate development of legislation and weak defense of intellectual property is 68%. Business is in solidarity with the scientific community

69% of heads of mid-size and large companies in traditional sectors believe that intellectual property is poorly protected. The state of affairs in the area of defense of authors rights and patent rights for inventions and industrial designs arouses the most condemnation. The state of affairs in regulation of exports of high-technology products also does not satisfy business. Forty-five percent of heads of small innovative companies believe that the current regulations are a barrier to business (39% of heads of mid-sized and large companies support this point of view). Twenty-five percent of heads in innovative business and 29% in traditional business disagree with them. The technical standards, regulation, system of quality certification, and metrology also are not part of the strong side of

Figure 34 Intellectual Property, Standards, Regulation: Opinions of Small Innovational Companies

Figure 35 Intellectual Property, Standards, Regulation: Opinions of Mid-Sized and Large Russian Companies

regarding the quality of protection of intellectual property. Fifty-six percent of heads of small innovative companies and

Defense of IP in general
21% weak 19% 16% 25% 15% 2%2% strong

Defense of IP in general
31% weak 24% 14% 14% 10% 4%3% strong

Figure 36 Assessment of Technological Regulation: Obligatory Standards and Voluntary Certificates of Quality Assessment by companies of the level of perfection of national technological standards as a result of a survey of the World Economic Forum in 2009
Germany Japan Finland 6.34 5.97 5.93 5.91 5.89 5.84 5.63 5.62 5.13 5.07 4.97 4.90 4.69 4.61 4.55 4.35 4.27 4.14 3.93 3.80 3.76 3.48
1 2 3 4 5 6 7

Defense of IP: patents for inventions, industrial models


11% weak 15% 17% 26% 14% 8% 9% strong

Defense of IP: patents for inventions, industrial models


21% weak 15% 18% 24% 13% 7% 3% strong

Number of ISO 9001:2000 active certificates per 1000 people in the population in 2007
Israel Hungary Czech Republic Japan Germany Estonia France Australia Finland South Korea Chile Poland Canada Turkey China Belarus Russia Brazil South Africa Kazakhstan Ukraine India
0.00 0.50 1.00 1.50

1.51 1.04 1.01 0.57 0.55 0.47 0.37 0.35 0.34 0.33 0.24 0.24 0.23 0.17 0.16 0.13 0.08 0.08 0.07 0.05 0.05 0.04
2.00

Defense of IP: trademark registration


7% 7% weak 16% 25% 17% 15% 13% strong

Defense of IP: trademark registration


8% weak 10% 16% 22% 18% 18% 7% strong

France Canada Australia Czech Republic

Defense of IP: author's rights


10% weak 17% 18% 28% 13% 9% 5% strong

Defense of IP: author's rights


13% weak 18% 19% 27% 12% 10% 2% strong

United States Estonia Hungary South Africa

Defense of IP: commercial secrets, know-how


3% 13% weak 19% 27% 16% 15% 7% strong

Defense of IP: commercial secrets, know-how


12% weak 11% 18% 27% 13% 13% 4%

Chile Brazil South Korea Poland

strong

Adoption by companies of international standards (ISO, GMP)


21% weak 11% 13% 19% 12% 11% 12% active

Adoption by companies of international standards (ISO, GMP)


13% weak 10% 11% 13% 13% 18% 22% active

India China Israel Turkey Kazakhstan

Quality of regulation of export of high-technology production


17% 11% 17% 31% 5% 5% high

Quality of regulation of export of high-technology production


12% 12% 15% 31% 10% 8% 11% high

Russia Ukraine

low: regulation is a barrier


Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

low: regulation is a barrier


Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: International Standards Organization, World Economic Forum, analysis by Bauman Innovation

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the Russian innovation system. If we look at statistics, Russia is behind the majority of countries in allocation of international certificates of quality. For example, it is a rare Russian company that can boast of having an ISO 9001:2000 certificate. Data on the per capita number of these certificates are provided in the illustration, and analogous results are obtained if we use the number of companies or volume of GDP as an indicator. It is also possible to carry out international comparisons of the quality of technical standards in various countries using the findings of a survey by the World Economic Forum. In 2009, in the opinion of the heads of many companies, Russian technical standards are quite far from perfect, both in an absolute sense and in comparison with other countries. Not just the quality of regulation and the general level of infrastructure are important factors in the competitiveness of an innovation system, the level of development of sector and innovative clusters are as well. The Russian scientific and innovation system has always been characterized by a super-concentration of resources

in the capitals, Moscow and St. Petersburg. This was the case before the Revolution and during the Soviet period, and the situation persists today. However, if earlier this super-concentration gave at least adequate results, at the present time Moscow (along with Moscow Region) and St. Petersburg (along with Leningrad Region) have practically lost their status as international scientific centers. The diagram shows the scales of innovative activity in the worlds leading agglomerations and the successfulness of their scientific activity. Moscow and St. Petersburg are behind in both indicators. The diagram shows that Moscow and St. Petersburg are still not competing not only with the clear leaders (Tokyo, Silicon Valley, Seoul, Eindhoven, Osaka, Rochester, San Diego), but also with yesterdays middle-performers (Helsinki, Tel-Aviv). In terms of scale of innovation activity, Moscow and St. Petersburg are comparable with leading regions of countries of the Third World (Johannesburg and Pretoria, Bangalore), but at the same time are behind them in successfulness.

the service sector. In these sectors, product innovations are not a key factor for a business success, and it is considered easier and cheaper for companies to buy technologies and equipment from leading manufacturers (mainly foreign ones). The share of innovatively active sectors in the Russian economy is extremely small and limited to sectors such as information-communications technologies, biopharmaceuticals, machine and equipment production, production of new materials, and aerospace. It is important to clarify that this concerns market share in terms of value added, and not the share of people employed in those sectors. A significant share of work force is still employed in old industrial sectors in which innovations are actively being adopted, including machine building, the defense industry, and tool construction.

Second, even in the dominant sectors of the Russian economy, the level of innovative activity is lower than in analogous sectors of other countries. On the one hand, there are often no benefits for exploring the refinement and adoption of innovations. Companies have no need to outpace their competitors through new refinements, as the level of competition in the Russian economy is low, and victory in the competitive struggle is achieved to a large extent through use of administrative resources and limiting competitors access to the market, not through adoption of innovations. Consumers in Russia, especially in the state sector, are also inexperienced and undemanding regarding quality of products, and the innovative nature of new products has little meaning for state purchases. On the other hand, there are also insufficient resources avail-

Figure 38 Technological Level of Production, Ability of Companies to Adopt Technology and Expenditure on R&D Share (%) of companies' expenditure on R&D in terms of GDP in 2007
Israel Japan South Korea Finland United States Germany Australia Canada China Czech Republic Russia Belarus South Africa Estonia Hungary Brazil Ukraine Turkey Poland India Chile Kazakhstan
0% 1% 2% 3%

Figure 37 Innovational Activity in Leading Innovational Centers of the World Scales and successfulness of innovational activity in leading innovational centers on the basis of evaluations of the number of triadic patent families in 20052007
high

Innovative Potential of Companies: Weak and Strong Sides


Poor innovative activity in sectors of the economy through adaptation of foreign and development of domestic technology
It is important to distinguish between technological level and innovative activity. The level of technologies and producEindhoven Rochester (agglomeration) Tampere Cambridge (region) Munich Agglomeration of the city of Tokyo Silicon Valley (agglomeration)

Ability of companies to adopt and adapt technology, findings of a WEF survey, 2009
3.73 % 2.68 % 2.65 % 2.51 % 1.92 % 1.79 % 1.33 % 1.24 % 1.07 % 1.01 % 0.72 % 0.60 % 0.57 % 0.53 % 0.49 % 0.48 % 0.48 % 0.29 % 0.17 % 0.16 % 0.14 % 0.09 %
4%

Perfection of the production process of companies, findings of a WEF survey, 2009


6.4 6.2 6.1 6.1 6.0 6.0 5.9 5.7 5.5 5.5 5.5 5.5 5.4 5.4 5.4 5.1 5.1 4.8 4.7 4.5 4.4 4.2
Japan Germany Finland United States France Canada South Korea Israel Australia Czech Republic Brazil Chile Estonia South Africa India Poland Turkey China Hungary Kazakhstan Ukraine Russia
1 2 3 4 5 6

Japan United States Finland Israel Germany South Korea Australia Canada France Estonia India Chile South Africa Czech Republic Brazil China Turkey Poland Hungary Kazakhstan Ukraine Russia
1 2 3 4 5 6

6.4 6.4 6.0 5.9 5.7 5.3 5.1 5.1 5.1 4.7 4.6 4.5 4.4 4.3 4.3 4.1 4.1 3.9 3.8 3.7 3.5 3.4
7

tion equipment used by companies may be high, but at the same time, adoption of new products and perfected technologies only rarely takes place. And a high level of innovation activity in itself does not signify a companys high technological level. Frequent upgrading of a product line is not an indicator of a high level of productive technologies or high performance products. The low level of innovative activity within Russian companies can be explained as the result of two key factors: the specific characteristics of the sectoral structure of the economy (or, in other words, the effect of the portfolio of clusters), and poor stimuli and insufficiency of resources for such activity and its basic sectors. First, the structure of the Russian economy is such that
large

Successfulness of innovational activity

San Diego (agglomeration) Agglomeration Frankfurt-am-Main of the city of Osaka (agglomeration) Agglomeration Ottawa of the city of Seoul Rein-Ruhr (region) Tel-Aviv (agglomeration) Paris (agglomeration) Singapore Perth Beijing Montreal Vancouver (agglomeration) Vilnius Prague Warsaw Johannesburg and Pretoria (Gauteng province) Shanghai Huanshi Bangalore Moscow and Moscow Region

Oulu Haifa (agglomeration) Helsinki (agglomeration)

Kiev

St. Petersburg and Leningrad Region

low

Scale of innovational activity


small
Source: OECD Triadic Patent Families Database (July 2009), OECD, EUROSTAT, national statistical organizations, analysis by Bauman Innovation

sectors that are dominant tend to have a lower level of innovative activity. These would include extraction and refinement of natural resources, metallurgy, agriculture, infrastructure, and

Source: World Economic Forum, World Bank, UNESCO Institute for Statistics, analysis by Bauman Innovation

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able to active enterprises for carrying out innovative activity. They do not receive tax benefits for carrying out innovative work and do not have access to long-term credit for refinement and adoption of new technologies. On top of this, a number of other problems exits, such as lack of qualified sector researchers, who in the Soviet times were concentrated in the sectors of Research Institutes; low technological level of suppliers of parts (for example, in machine building and automobile production); and a lack of qualified engineers and workers.

Low Level of Foreign Investment in Russia in the R&D Sector (Foreign companies do not carry out R&D in Russia)
In a number of countries, the innovative activity of foreign investors is an important factor in the innovation process. Foreign investors conduct specific research and development in a given country based on the competitive advantages offered by that country, considering the presence of unique researchers, low cost of a qualified work force, significant internal demand for innovative products. The most attractive countries for carrying out R&D are the U.S., Germany, the United Kingdom, India, France, Japan, and China. Unfortunately, foreign investors, with some rare exceptions (Intel, Boeing), practically do not carry out any research and development in Russia. This is because foreign investors regard Russia only as either

Opinion Andrei Korkunov, Representative, Board of Directors of OAO Ankor Bank In Russia today, there is not enough knowledge and technology, as well as a culture of using them, and therefore we need the possibility to import them and attract foreign specialists. If we have new technologies, it is possible on this basis to create something new with the help of our scientists. But in the beginning, it is necessary to learn to do something. Therefore, for us each new technology, even one that is already widely used abroad, is an innovation. In addition, foreign experience will help Russia to overcome the problem of extremely poor labor productivity: specialists that have been brought in will teach our colleagues to work effectively by example.

almost one-and-a-half times less than in China. As far as the ability to assimilate knowledge and technological level of production is concerned, according to the findings of an annual survey by the World Economic Forum of the heads of leading companies in more than 100 countries, it is extremely low in comparison with the talents and abilities of companies in other countries. If the expert opinion of the heads of leading Russian companies is to be believed, in 2009 even Ukrainian and Kazakh firms outpaced them in this respect. The comparatively low innovative activity of companies and sectors is explained by negative external factors: poor sector stimuli and low resource availability. The sector stimuli for innovation are intensity of competition, the significance of innovations as a factor of success in the competitive struggle, level of sophistication of major consumers in the internal

Figure 39 Stimuli and Resources for Innovational Activity in Sectors a significant market for sales of their products or as a source of natural resources. The quality of the conditions for carrying out innovative work in Russia is extremely poor, and therefore practically no investors oriented toward the production of innovations with
pharmaceuticals, medical equipment telecommunications equipment, information technologies food and drink products

Figure 40 Barriers to Innovational Activity: Opinions of Small Innovational Companies Basic barriers to innovational activity of innovational companies
Lack of available resources within the company Poor availability of financing from outside sources Overly large expenses needed for innovational activity Non-definability of demand for a new product or service Lack of qualified personnel Lack of marketing information Limited nature of standards and sector regulation Difficulty of looking for suppliers Lack of information connected with technologies No reason for innovation: demand for new products or services is absent Unclear priorities of innovation by shareholders and the board of directors Ineffective innovational management inside the company
0% 20 % 40 % 60 %

Dispersion of sectors
high

Stimuli for innovations in sectors


intensity of competition consumer demand for high quality of goods defense of intellectual property

60 %* 50 % 40 % 24 % 18 % 8% 7% 6% 6% 5% 2% 2%

the goal of exporting them to other countries have come to Russia in the past few years. The above-mentioned exceptions are connected to the fact, that our country still has strong programs of preparing specialists in a number of areas of engineering and the natural sciences and for some companies in certain sectors, it is advantageous to have a research center

aerospace, defense

Stimuli for innovations in sector

oil and gas extraction electronics automobiles, transport equipment textiles, clothing other production

wholesale and retail trade

in Russia, the results of the work of which are then used in production divisions situated in other countries. However, such cases are rare.

Resources for innovations in sectors


availability of financial resources for innovational activity availability of human resources availability and technological level of parts/equipment outside possibilities for R&D

construction

Innovative Potential of Companies: What the Facts Say


The innovative abilities of companies are divided into three factors: (1) their abilities to create new knowledge, (2) their abilities to adapt and adopt knowledge (technologies) from outside for use in their own innovative processes, and (3) their technological level. As far as the ability to create new knowledge is concerned, Russian companies are not in last place:
high

electrical energy, gas, water supply

low

Guaranteed resources for innovations in sector


low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA Commentary: Based only on the findings of a survey of heads of large and mid-sized companies in the represented sectors

their share of expenditure on R&D as percentage of GDP in 2007 was 0.72%. This is greater than in neighboring Ukraine and Belarus, as well as Turkey, Chile, or Brazil; however, it is

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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market and their demands for innovations in products and services, the importance of the factor of their innovativeness in state procurement, access to export markets, and quality of regulation in the area of intellectual property. Insofar as resources are concerned, financial and human resources, the services of scientific-research organizations and suppliers of components, and the quality of preparation of technical specialists in higher educational institutions are important for innovation. Surveys of large and mid-sized Russian companies operating in traditional sectors show that there are rather serious problems from the point of view of both stimuli and resources for innovation. However as far as stimuli for innovation are concerned, the various branches of the Russian economy are in completely different situations. Stimuli are relatively large

in sectors such as pharmaceuticals and production of medical equipment. There are relatively large stimuli for innovation in the aerospace, defense, and oil-and-gas sectors. However, the availability of resources for innovation in these branches, in the opinions of the leaders of the enterprises, is a little lower than the average level. A very high level of availability of resources for innovation is noted by top management of surveyed companies in such sectors as trade and construction. Despite this, these sectors do not have great stimuli for innovative activity. In the opinion of top management, the only sectors in Russia which have both the stimuli and resources for innovation are the food industry, the manufacturing of telecommunications equipment, and the information technology sector. At the same time, in the majority of sectors, including production of electronics, light industry, automobile production, and infrastructure, there are neither sufficient stimuli nor resources for innovation. It is interesting

surveyed companies, is close to this group, insofar as the level of stimuli for innovation in the oil-and-gas sector is only a little higher than average. In many sectors, the basic driver of innovation is small innovative companies. Therefore, it is very important for development of innovations in these sectors to overcome the barriers hindering their activity. In a survey of Russian technological companies, respondents were asked to name up to three barriers limiting the innovative work of their companies. According to the surveys findings, the basic barrier is a lack of available resources for investing in innovations (60%), (this being especially critical when the existence of the next-largest barriers are taken into account), poor availability of financing from outside sources (50%) and high cost of innovation projects in Russia (40%). Other problems are less significant, for example, that it is hard to forecast demand for innovation products on the consumer market (24% of those surveyed) and there are not enough qualified personnel (18%). Other barriers are still less significant.

Figure 44 Barriers to Development of Business: Opinions of Small Innovational Companies

Basic problems for development of innovational companies


Low availability of financial resources Fall of demand in the sector Administrative barriers/ sector regulation Tax regulation Corruption Poor access to contemporary technologies and equipment Weak protection of intellectual property High cost of personnel on the labor market Poor availability of manufacturing and office real estate Low qualifications of personnel

56 %* 49 % 23 % 19 % 18 % 16 % 15 % 12 % 11 % 6% 6% 2% 0%
0% 20 % 40 % 60 %

Figure 41 Barriers to Innovational Activity: Opinions of Mid-Sized and Large Russian Companies Basic barriers to innovational activity of mid-sized and large companies
Lack of available resources within the company Overly large expenses needed for innovational activity Poor availability of financing from outside sources Non-definability of demand for a new product or service Lack of qualified personnel Lack of marketing information Limited nature of standards and sector regulation Difficulty of looking for suppliers Lack of information connected with technologies No reason for innovation: demand for new products or services is absent Ineffective innovational management inside the company Unclear priorities of innovation by shareholders and the board of directors
0% 20 % 40 % 60 %

that the oil-and-gas sector, in the opinions of management of

Figure 42 Human Resources: Opinions of Small Innovational Companies

Figure 43
External trade regulation

62 %* 33 % 33 % 23 % 19 %

Human Resources: Opinions of Mid-Sized and Large Russian Companies

Poor infrastructure (transport, energy) Inadequate decisions by shareholders and/or the board of directors

Availability of engineers and technical specialists


9% low 18% 20% 17% 18% 13% 4% high

Availability of engineers and technical specialists


8% low 21% 18% 23% 17% 10% 3% high

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Cost of engineers and technical specialists


2% 11% 18% 21% 26% 14% 8%

Cost of engineers and technical specialists


2% 8% 12% 32% 20% 14% 13% acceptable

unacceptable 12 % 8% 6% 6% 5% 5% 4% low

acceptable

unacceptable

Figure 45 Attractiveness of Countries for Relocation of R&D Divisions

Availability of qualified workers


11% low 18% 20% 23% 14% 9% 5% high

Availability of qualified workers


15% low 21% 16% 19% 13% 11% 5% high

Countries that are most attractive for relocation of R&D divisions, %


United States 19% 15 % 8% 5% 4% 4% 4% 3%

Availability of specialists for nonmanufacturing divisions


3% 6% low 15% 23% 27% 17% 10% high

Availability of specialists for nonmanufacturing divisions


1% 6% low 12% 24% 26% 21% 10% high

Germany United Kingdom India France Japan

Availability of high-level managers with work experience


17% 22% 22% 19% 12% 6% 2% high

Availability of high-level managers with work experience


18% low
Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

20%

19%

18%

14%

7% 4% high

China Netherlands
Source: E&Y 2008, data from a survey of 800 European companies

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

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The barriers to innovative activity of large and mid-sized companies in traditional sectors of the economy, in the opinions of the surveyed managers, are on the whole identical to the barriers that were named by small innovative companies. The differences being the problem of lack of available financial means received somewhat greater support from those surveyed (62%) and the problems of high cost of innovative activity and lack of resources on the financial market received somewhat less support (about 33%). This is logical, as it is easier for large companies to attract financial resources and, due to their scale, engage in the realization of innovative projects more cheaply. It is interesting to note that mid-sized and large companies more frequently experience lack of technology related information 12% of respondents noted this as one of the three barriers to their innovative activity. As shown above, top managers of companies (both innovative and traditional) often name lack of qualified personnel as a serious barrier. If this problem is examined in greater detail, the following picture emerges. About half of companies (47% from innovation business and 47% from traditional large and mid-sized business) say that it is difficult to look for qualified engineers and technical specialists. It should be emphasized that for many companies this is a question of availability, not a question of cost. Only 31% of top managers of small innovative companies and 22% of top managers of mid-sized and large companies said that engineers expectations for high salaries were problematic. The problem of looking for qualified workers is reversed. 49% of small innovation companies and 52% of traditional companies experience difficulties. The most inaccessible for companies are high-level managers with work experience. 61% of representatives of innovation business and 57% of heads of mid-sized and large companies experience many difficulties in seeking specialists. There is one positive note, it is more or less easy to find specialists for non-manufacturing divisions, such as financial services, supply, and sales, with less than a quarter of companies running into problems in this area. If the development of innovative business as a whole is discussed, it must be known that small companies encounter an entire bouquet of problems that coincide in many ways with the problems of Russian business in general. At the present day, the greatest problem for Russian small innovative companies is poor availability of financial resources (noted by 56%5 of

managers), decline in demand in the sector is in second place (49%), and administrative barriers and sector regulation are in third (23%). Nineteen percent of managers named tax regulation as one of the basic problems, and 18% corruption. For 16% of companies, poor access to modern technologies and equipment is critical. Fifteen percent of companies suffer from a weak protection of intellectual property. There are other, less significant problems that limit the development of small innovation companies. These include high cost and poor qualifications of personnel, low availability of manufacturing and office real estate, and a number of others. Judging by the results of a survey of international companies, the state of the Russian innovation climate does not attract foreign investment into the R&D sector. Thus, according to the results of a survey of international companies with headquarters in Europe, Russia is not present in the list of countries that are attractive for relocation of R&D divisions. In this way, the Russian innovation system is giving up the fight (it might be more accurate to say giving up without a fight) for the small amounts of foreign investment that traditionally enable a countrys innovative potential to be increased. It is interesting to note that India and China have entered the list of most attractive countries, their positions being comparable to those of France and Japan.

Institutes and Effectiveness of Governmental Administration: Weak and Strong Sides


Poor effectiveness of government policy in the area of science, technologies, and innovations
As indicated above, specific aspects of government policy in the area of science, technologies, and innovations are limiting factors for the development of Russias NIS. The reason for this is that government policy in this area is ineffective. Each ministry and department acts primarily based on its own considerations, and does not want to coordinate the budgeting

of expenditures and priorities with other departments, with the result that government resources are fragmented. Modern effective instruments for stimulating innovative activity, that have shown their worth in many countries (such as an established national science fund or a department oriented toward supporting technological upgrading of industrial enterprises), are not yet used. Corruptions, favoritism, and the absence of personal responsibility on the part of heads of departments or subdivisions for the negative effects of their work are all big problems in government agencies.

Figure 47 Effectiveness of Policy: Opinions of Small Innovational Companies

Figure 48 Effectiveness of Policy: Opinions of Mid-Sized and Large Russian Companies

Effectiveness of government policy in the area of science, technology, and innovations


20% low 28% 15% 22% 8% 5% 2% high

Effectiveness of government policy in the area of science, technology, and innovations


24% low 21% 20% 24% 5%3%3% high

Measures to stimulate innovation from the side of the government


Financial support of R&D in companies (for example, through tax stimuli and co-financing of R&D) Increasing financing of research carried out in scientific research organizations and universities Development of engineering and natural-science education

Measures to stimulate innovation from the side of the government


60 %*
Financial support of R&D in companies (for example, through tax stimuli and co-financing of R&D) Development of engineering and natural-science education

57 %*

50 %

41 %

Figure 46 Corruption in the System of Competitive Financing: Opinions of Scientists

50 %

Increasing financing of research carried out in scientific research organizations and universities Increasing the effectiveness of the existing system of state Scientific research organizations (through reform)

35 %

Practice of holding competitions under particular people


19% widespread 15% 17% 32% 6% 7% 4% not widespread

Financial support of commercialization for example, grants for development of a prototype and patenting) Increasing the effectiveness of the existing system of state Scientific research organizations (through reform)

41 %

25 %

29 %

Financial support of commercialization (for example, grants for development of a prototype and patenting) Development of infrastructure for commercialization (business incubators, CTT, venture financing) Increasing the effectiveness of standards and sector regulation

22 %

Practice of informal payment (kickbacks), Russian organizations


8% 6% widespread 12% 32% 8% 7% 26% not widespread

Strengthening protection of IP

15 %

20 %

Development of infrastructure for commercialization (business incubators, CTT, venture financing)

11 %

18 %

Practice of informal payment (kickbacks), foreign organizations


4% 3% 8% widespread 15% 5% 6% 58% not widespread

Increasing the effectiveness of standards and sector regulation


0% 20 % 40 % 60 %

8%

Strengthening protection of IP
0% 20 % 40 % 60 %

18 %

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

Respondents were asked to identify no more then three problems for development of their companies.

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Institutes and Effectiveness: What the Facts Say


The results of a survey of scientists show that corruption in the system of competitive financing of scientific research is widespread. More than half (51%) of scientists report that the practice of carrying out competitions with the winner known beforehand is widespread (19% use the formulation extremely widespread). Only 17% of those surveyed say that there is no or little presence of such practice. Another manifestation of corruption is informal payments or kickbacks that must be paid to the organizers to win a competition. In correspondence with the results of surveys, such informal payments exist both when competitions are held by Russian organizations and when grants are distributed by foreign organizations. The state of affairs appears worse in the case of Russian organizations: 26% of participants in the survey say that kickbacks are widespread, and only 17% think that Russian grant-giving organizations work more or less honestly. Twenty percent of respondents reported that there are kickbacks when competitions are held by foreign organizations, while 69% of scientists disagreed with them. Business is inclined to poorly evaluate the effectiveness of government policy in the area of science, technologies, and innovations. Thus, 63% of top managers of small innovative companies and 65% in case of mid-sized and large companies in traditional sectors see no or almost no positive results from the work of the government in this area. The quantity of those who more or less believe that there have been positive results is extremely small: 15% of small innovative companies and 11% of traditional ones. Businesses have suggested that a key government measure for stimulating innovation would be financial support of R&D in companies through tax stimuli and co-financing (60%6 of top managers of small innovative companies and 57% of top managers of traditional companies vote for such a measure). In the opinion of 50% of heads in innovative and 41% in traditional business, development of engineering and natural-science education is capable of stimulating innovations. Increasing financing of research carried out in scientific-research organizations and universities is the thirdmost-popular measure (50% and 35%). Moreover, companies propose that the state actively support commercialization through; support of a system of grants, reform of the existing

system of state scientific research with the aim of increasing its effectiveness, attend to questions connected with intellectual property, standards and regulation, and development of infrastructure for commercialization. Leading scientists gave their opinions on the development of the system of scientific research in Russia. From the point of view of the surveyed representatives of key interest groups, increasing financing of fundamental scientific research (72%7) and applied scientific research (48%) are very important measures. While these highly desired measures are the most difficult ones to realize due to limited resources, fulfillment of the measures described below depends exclusively on political will and the professionalism

of the people who manage the system of scientific research. More than a quarter of scientists (28%) are in favor of redistribution of financing in favor of leading scientific organizations and abstaining from supporting weak ones. Such measures as changing the sector priorities of financing of scientific research (23%), the development of scientific research in universities (23%), and improving the system of preparing scientific personnel (22%) are equally supported by scientists. Eighteen percent of surveyed scientists name reform of the RAS as one of the key measures, 17% believe that scientific organizations engaging in fundamental research need to be integrated with universities, and 16% want the government to strengthen their results to the results of scientific work. In this way, representatives of such key interest groups

taneously increasing both government financing of the scientific-research sector and raising the effectiveness of the work of the existing system of financing and administration of scientific research. This increased financing needs to be directed not only at support of fundamental and applied scientific research, but also at co-financing of R&D in companies through tax advantages and direct co-financing from the budget. These measures must concern not only small and mid-sized technological companies, but also large and mid-sized companies in traditional sectors of the economy (for example, in automobile construction, the chemicals industry, the food industry, production of building materials, etc.). These companies may also be interested in the realization of applied science and the adoption of those findings in their business.

Figure 49 Priorities for Government Policy in the Area of Scientific Research: Opinions of Scientists

as business and the scientific community recommend simul-

Priority actions for developing the system of scientific research in Russia


Increasing expenditures on fundamental research

Figure 50 Priorities for Financing by the Government: Opinions of the Population


77 %*

Assessment by the population of Russia of spheres demanding first-priority increase in financing


Health 73 %*

The European Union and some other countries: portion of the population believing that financing of scientific research should be increased at the expense of other spheres
Italy France Spain Turkey Croatia Portugal Germany Romania Hungary Slovenia EU25 Poland Greece Austria Norway Bulgaria Slovakia Denmark Czech Republic Lithuania Sweden Iceland Latvia United Kingdom Estonia Switzerland Ireland Finland Netherlands Russia
0% 20 % 40 % 60 %

Increasing expenditures on applied research and development Increasing financing of strong scientific organizations through ceasing to support weak ones

48 %

28 %

Education Security (crime reduction) Ecology and protection of the environment

52 %

Changing priorities of financing scientific research

23 %

43 %

Development of scientific work in universities

23 %

29 %

Improving the system of preparing personnel

Defense capability 22 % Science and technology

28 %

18 %

Reform of the RAS system

18 %

Entrepreneurship and small business


0% 20 % 40 % 60 %

10 %
80 %

Integration of scientific organizations carrying out fundamental research with leading universities Strengthening the rights of scientists to the results of their scientific work
0% 20 % 40 % 60 %

17 %

16 %
80 %

* Portion of respondents indicating the sphere as one of three priorities for increasing financing

69 % 68 % 68 % 66 % 60 % 60 % 59 % 58 % 58 % 57 % 56 % 54 % 52 % 51 % 50 % 50 % 49 % 48 % 46 % 46 % 45 % 44 % 41 % 40 % 39 % 35 % 30 % 25 % 18 %
80 %

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20091010, Bauman Innovation, OPORA RUSSIA

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: EUROBAROMETER 224 Europeans, Science & Technology, 2005

Respondents were asked to identify no more than three most effective measures.

Respondents were asked to identify no more than three most effective measures.

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Raising the effectiveness of the existing system of financing and administration of scientific research should include changes in the prioritization of R&D financing (including changes in the system of formulating and choice of priorities itself), as well as moving to a more effective distribution of resources between organizations, as the strongest and most competitive scientific organizations should be the first to receive financing. In addition, it is important to form a system for preparing new scientific personnel and guarantee the effectiveness of interaction between the sectors of scientific organizations, higher education, and industry/agriculture, while the basic focus needs to be on developing the sector of fundamental and applied scientific research in universities. The population, for its part, will not soon be ready to support the idea of increasing financing of science and technology. From the point of view of those surveyed, health (73%) and education (52%) are the first priorities for government financing; as well, more attention needs to be directed to order, security, and reducing crime (43%). Protection of the environment (29%) and defense (28%) are markedly lower priorities. The attitude of the population to budget priorities is rather rational from the point of view of the real situation in Russia. Science and technology, in the opinion of the population, are not clear priorities, with only 18% of those surveyed saying otherwise. The widespread myth is that the Russian population is most concerned with the defense shield or national prestige. But as the results show, it has little basis. For comparison, data provided on the attitudes of the inhabitants of various European countries show the priorities for financing of science and technology relative to other areas. It is interesting that the populations of countries which have achieved significant success in the sphere of science and technology are not inclined to demand an increase in financing of this sphere, and believe it to be a lesser priority (the Netherlands, Finland, Switzerland, the United Kingdom, and Sweden). To the contrary, the populations of countries in which science and technology are at present insufficiently developed and insufficiently financed are to the greatest degree inclined to consider the area of science and technology to be a priority and to the greatest degree demand increasing financing for these sectors, including at the expense of other areas (Italy, Spain, Turkey, Croatia, Portugal). France and Germany are exceptions to this trend: the populations

of these countries, despite their part great successes in science and technology, demand a further increase in financing of this sphere at the expense of others.

3. Opportunities and Threats for Developing the National Innovation System of Russia
Possibilities for Development of Innovation System
Demand for Innovations in Infrastructural and Social Sectors in Russia
The level of obsolescence of the physical infrastructure (motor vehicles and railroads, airports, etc.) in Russia is very high. According to Rosstats data, the wear and tear of the capital assets of companies, producing and distributing electrical energy, gas, and water exceeds 50%. And 12.7% of the total volume of the capital assets was completely worn out at the beginning of 2009. In addition, the current condition of infrastructure often leads to significant losses of resources, including energy, water, time, and transportation. As a consequence, the potential competitiveness of the Russian economy and the potential size of gross domestic product is decreased. Simple renovation of the physical infrastructure demands significant financial expenditures and an extensive time frame. In addition, the planning of the current infrastructure took place in a different period of time and with different social order. As a result, the criteria upon which the infrastructure systems were developed were very different from contemporary needs. In such a situation, innovative solutions are extremely important in infrastructure planning, technological solutions, and the process of reconstruction, repair, and control of infrastructure. For example, the housing and utilities sector in Russia requires a spectrum of innovative solutions. From new technologies for thermal power plants and boiler rooms, to new methods of purifying water and controlling the demands for these utilities. There is also a potential demand for innovation in social sectors, specifically in education (including preschool, secondary school, and professional), healthcare, and social protection of the population. The social card technologies are a good example and are already used in some regions. These provide a whole package of different benefits to a resident, all integrated within a single electronic plastic card, which at the same time can fulfill the function of an electronic wallet.

Potential Demand in the Defense, Security, and Space Sectors in Russia


Considering the territorial dimensions, historical context, and political ambitions of the countrys leadership and population, it is extremely important for Russia to have a strong and well-supplied army. This ensures security and order on all the countrys territory, and allows Russia to occupy leading positions in space projects and use of the World Ocean. These requirements traditionally create increased demand for the results of both fundamental and applied science, as well as high-technology production. There are few countries in the world that are capable of creating such stimuli, and the experience of these countries shows the importance of such stimuli for development of science and innovative activity. The U.S., China, and Israel are such examples, in which a large amount of new technologies have come from the defense sector.

Russias Large Internal Consumer Market


The combination of a large population and a rather large (by world standards) level of per capita income make Russias consumer market one of the largest in the world (one of the top ten countries). This inevitably leads to significant localization of production of consumer goods in Russia, that could be further increased if business development conditions were more favorable. In turn, this production will constantly demand for new technologies, processes, and innovations related to the production of consumer goods. The potential demand for innovation within the agriculture and food industries is rather high right now, and with improved conditions for business and more readily available investment resources, rapid growth of research and development in the agri-food sphere could be stimulated.

Availability of Knowledge and Technologies


Towards the end of the 20th century, innovation within companies ceased to be based exclusively on internal sources. From 19902000, the technology market significantly changed. Exchanges of technology upon absorption of small high-tech companies, and purchases and sales of technologies themselves became a widespread phenome-

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non. Today this trend gives Russian companies an opportunity to accelerate their innovation development through external sources. External sources of innovations are becoming increasingly available to companies in Russia. During the Soviet era there existed significant limitations for Soviet enterprises in the area of purchasing equipment. At the time the sources of new technologies and the main possessors of current technology were the U.S. and its close allies the United Kingdom, Japan, the Federal Republic of Germany. Now the number of countries that have their own unique technologies has fundamentally increased and no political limitations akin to the JacksonVanik amendment can keep Russian companies from buying new technologies from companies in Singapore, Taiwan, or Israel. Moreover, competition has also strongly increased between manufacturers of new products and new equipment, which means that potential Russian orders may have great importance for them, and companies from different countries will be prepared to compete for these orders.

Increasing the Quantity and Raising the Mobility of Researchers through Growth in Developing Countries
If there are not enough researchers in the Russian science community today, and it is impossible to generate them in the short-term, the solution may be attracting researchers with the necessary qualifications from other countries. While in the past (in the time of Peter I or in the early Soviet Union) the sole source of such people was the Western developed countries (Europe and the U.S.), today more and more countries have their own quality universities to prepare competitive researchers. Russia is fully able to attract talented scientists from such countries as Iran, India, Vietnam, and countries in Latin America, and Central and Eastern Europe. A thoroughly prepared policy for attracting talented people from other countries is needed.

or scientific centers near the TNC, but in research centers scattered across the whole world. The general expenditures of American TNCs on scientific research and development taking place in affiliated divisions in different countries doubled from 19972006, and is today over $30 billion. Although foreign investors rarely fund the creation of R&D divisions in our country, this practice does exist. For instance, the Boeing engineering center in Moscow was a very active participant in developing the new model of the Boeing 787 Dreamliner aircraft. International competition for carrying out R&D and for provision of areas for relocation of a TNCs R&D divisions in various countries is continuously increasing. However, the opportunities that appear due to increase of the share of TNC R&D divided between foreign scientific centers are also increasing. This trend opens up new opportunities for development of scientific research and development in Russia in areas where Russia still has competitive scientific schools.

Expansion and Increase of Access to Foreign Markets for Russian Companies


Globalization and general economic development result in a continuous expansion of the sales market for innovative products. At the present time, China is entering into the ranks of the largest markets for innovative products alongside the U.S., EU, and Japan. The markets of the other BRIC countries (Brazil, Russia, and India) are gradually growing, and the markets of such countries as Mexico, Turkey, South Africa, Pakistan, Indonesia, Malaysia, and Vietnam will likely have increasingly greater significance. In addition, previously closed national markets for example, the Japanese are gradually becoming more open. This all creates new opportunities for the export of innovative Russian products.

Administrative and Political Potential for Realizing an Ambitious and Comprehensive Program of Increasing the Competitiveness of the Russias Innovation System
The population of Russia has rather large demands for government regarding modernization of the economy and the ability to improve peoples lives. For the inhabitants of Russia, it is important that their country be as much as possible a leader in a very large number of areas, from sports and the economy, to military power and science. This creates tremendous potential support of public opinion to realize an ambitious and comprehensive program for increasing the competitiveness of the Russias innovation system. At the same time, the centralization of public administration that has taken place in the last ten years creates beneficial conditions for realizing such a program, as well as broad opportunities for using control mechanisms and for increasing the responsibility of authorized government officers for achieved or unachieved results.

Availability and Opportunities for Using and Adapting the Highest International Standards and Systems of Technical Regulations
Despite the significant problems and barriers for innovative activity regarding standards and technical regulation, given the political will, these problems can be solved rather quickly. The world has many positive examples of solving similar problems, and corresponding measures can be used successfully in Russian practice. The experience of other countries, innovative government policies regarding industry standards are relatively easy to enact when compared to policies affecting educational programs, production technologies, etc. There are a number of successful examples from Russian commercial companies for this as well, including adoption of ISO standards, the HASSP American voluntary standard for food production, and the GMP standard of pharmaceuticals production.

Figure 51 Dynamics of Number of Researchers in 19952007

Amount of researchers in 19952007 (thousands of full positions)


1,500

Amount of researchers in 19962006 (thousands of full positions)


United States
200 150 India

1,250

100

China
50 1,000 0 750

Hungary, Poland, Slovakia, and Czech Republic

Brazil Turkey

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Japan

Awards of PhDs in the areas of natural and technical sciences in 1998-2007


8,000 6,000 Hungary, Poland, Slovakia, and Czech Republic Brazil Turkey 0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

500

Russia

Increasing the Share of R&D of Transnational Companies in Different Countries


Globalization of the economy has lead to an increasingly greater share of scientific research and development being controlled by transnational corporations, and taking place not in a TNCs own research divisions, not even in universities

250

other countries*

India 4,000 2,000

South Korea
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

* Other countries include four Eastern European countries (Hungary, Poland, Slovakia, and the Czech Republic), as well as Brazil, India, and Turkey Source: UNESCO Institute for Statistics, EUROSTAT, OECD, NDF, analysis by Bauman Innovation

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Threats to Development of the Innovation System


Strengthening Competition between Innovation Systems and Increasing Mobility of Factors
The competition between the innovation systems of various countries is constantly increasing, while new countries are entering the ranks of our competitors. Previously the Soviet Union competed in the scientific sphere with the U.S. and, partially, with the United Kingdom, France, the Federal Republic of Germany, and Japan. Today, not only are China, India, and the countries of Southeast Asia becoming potential competitors, so are Brazil, Mexico, Spain, and even Romania, Bulgaria, and Turkey and, possibly, Ukraine, Belarus, and Kazakhstan. The factors that determine the competitiveness of innovation systems are becoming more mobile; key researchers can be enticed to a new place of work, and leading companies are able to offer more advantageous conditions for relocation of business. Even in the U.S., where traditionally direct support of business by the government is considered impermissible, the governments of states and cities provide interestOpinion David Yan, Representative, Board of Directors of ABBYY You cant forget that the whole world is an enormous market. It is incorrect to focus only inside the country. There is the successful example of Israel, a small country with a large number of immigrant scientists (including from Russia): every Israeli innovation company is created with its eye on the world market. This is a brilliant approach that Russia does not have enough of. Alas, it is much harder to change something in our country than it is to start from scratch, but we need to formulate an innovative environment such that it will attract the worlds best minds and not reject even its own scientists, half of whom currently work abroad. Thirty million people in 130 countries are using our solutions. We need to achieve dominating positions in specific technologies on the world level.

free conditions to the most important investors, all the way up to construction of manufacturing facilities at the expense of the individual state, tax advantages, etc. The living conditions for researchers have great significance; in particular, the environmental conditions. In such circumstances, a continuation of the existing unfriendly policy in relation to researchers and small innovative companies may lead to a complete loss of Russias scientific and technological potential.

with the level of the 1980s. The situation has not improved, even during the more favorable conditions of economic growth in the 2000s. This means that, in the midterm perspective, Russia may lose its NIS, not as a result of competition with other countries, but simply as a consequence of full degradation of innovative potential.

sector, metallurgy, etc.). Unfortunately, trends in recent years have been such that this non-beneficial structure of the economy is freezing in place; that is, there are no factors that would allow the portfolio of branch sectors to be changed in a natural way to the benefit of those that are high-technology and innovative.

Freezing in Place the Current Structure of the Economy


As was mentioned above in the description of the weak points of Russias NIS, the current structure of the economy (portfolio of branch sectors) does not enable innovative development, as the majority of the branch sectors that currently dominate the Russian economy have a low level of innovative activity (extraction and refinement of oil and gas, the service

Loss of Basic Technologies (Construction, Infrastructure and Transportation, Healthcare)


In the description of the possibilities lying before Russias NIS, it was noted that the wear and tear of the physical and social infrastructure in Russia offers an important opportunity for adopting innovative solutions during upgrading. Unfortunately, if measures to upgrade key infrastructure on the basis

Russia is the Only Country Where the Innovation System is Degrading


Analysis of statistical data and comparisons of different countries shows that Russia has a certain uniqueness relative to other countries. This uniqueness, unfortunately, is negative. While in all other countries, even poor and backward ones, the level of development and competitiveness of the innovation system has grown, in Russia it has decreased in comparison

Figure 53 Development of the Market of Products of High-Technology Sectors in 1995-2005

Figure 52 US Companies Expenditures on R&G in other countries of the world in 1997-2006

Yearly rates of growth of volume of the internal market and imports of products of high-technology sectors in 19952005,* %
high

Imports of products of high-technology sectors in 19952005, US $ million, in 2000 prices


50,000 40,000 30,000 20,000 India Turkey Iran
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

30 %

world average rate of growth of imports

US Companies Expenditures on R&G in foreign affiliate branches in 19972006, US $million


1,000 900 800 700

China
25 %

Hungary, Poland, Slovakia, and Czech Republic

Rate of growth of the internal market of products of high-technology sectors in 19952005, %

Israel

20 %

10,000 0

15 %

China
600 500 400 300 200 100

United States Iran


10 %

Czech Republic Poland India Turkey Mexico

Hungary

Share of imports in the volume of the internal market of products of high-technology sectors in 19952005, %
100 % 80 % Hungary, Poland, Slovakia, and Czech Republic Iran Turkey India

Brazil Australia India

5%

Indonesia Canada United Kingdom Egypt Brazil Argentina

Russia Germany Malaysia Thailand Japan


10 % 15 %

world average rate of growth of market

Philippines

60 % 40 %

low

South Korea Russia

0% 0%

5%

20 %

25 %

30 %

Rate of growth of imports of products of high-technology sectors in 1995-2005, % of points


2006 low
Source: NSF, Global Insight, analysis by Bauman Innovation

20 % 0%

0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: NSF, analysis by Bauman Innovation

high

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

* The size of the circle reflects the volume of the internal market of products of high-technology sectors of industry (according to OECD classifications)

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of modern technology are not taken in the midterm, we will run into real risk of complete loss of this infrastructure, both in the basic technologies for using it and the production of equipment to build it. At that point, restoring the current level will cost the country a great deal more than necessary and be accomplished with greater risks.

cover of innovations. This degradation of the educational system and decrease in the populations scientific literacy (which the surveys also attest to), all may lead to the transformation of Russia into a typical Third World country.

and engineers in Russia will be restored. And correspondingly, it is worthwhile for young people to obtain a scientific or engineering specialization if they are inclined to such work. However, in the midterm perspective, the action of inertia may cease, and engineering schools and naturalscience departments may lose their students. This is especially dangerous in conditions of a demographic pit, in which the overall number of young people is expected to fall in the midterm.

lower than in many other countries, both more and less developed ones, with this state of affairs having persisted over the course of last several years. In the last few years, the federal government and regional state ministries have engaged in great initiatives to support small business; however, in key areas, such as availability of real estate and financial resources, these initiatives have not been able to bring about serious changes for the better. Trends are such that the unattractiveness of entrepreneurial activity is getting even stronger in crisis conditions, and this low level is becoming frozen in place, as the quality of conditions for conducting small business are only getting worse and the risks of entrepreneurial activity (administrative pressure, being squeezed by criminal elements, etc.) are growing. This may lead to the populations interest in entrepreneurial

Low Level of Attractiveness of Scientific and Engineering Careers


A trend toward diminishing of the attractiveness of scientific and engineering careers is characteristic of many countries. In the 19th and 20th centuries, the status of a scientist or engineer was extremely high, and therefore such a career was extremely prestigious for young people. At the present time, humanitarian, creative, and media professions (musician, actor, stylist, designer, journalist, etc.) are more attractive to young people. There was formerly a widespread opinion in society that an engineer or scientist is a person who through his or her work is making life better, guaranteeing scientific progress, working toward the fight against disease, conquering space, and so forth. However, in the last several decades the successes of science and engineering have reached a definite ceiling and serious breakthroughs that would be significant for the population are no longer taking place. At the same time, life in the developed countries has become higher quality and better-protected, and in such conditions people prefer entertainment and to look for fame and success, and avoid labor in the name of progress. Unfortunately, in Russia this trend is expressed much more strongly and is at the same time reinforced by the general degradation of the national innovation system. In developed countries, people understand that at very least, by choosing a career in science or engineering, they will be able to provide for their family. But in Russia, the profession of scientist or engineer means being poor and lacking a serious career. As a result, the portion of university graduates specializing in engineering and natural science is dropping, although it is still rather high compared to other countries. Because of this, only people who are passionate about being a scientist or engineer will make that career choice. Another variant in which young people enter a scientific or engineering specialization in the hope of obtaining qualifications that are recognized abroad and then leaving the country also does not offer a positive outlook for the Russian NIS. At the present day, the force of inertia is still strong and many families retain the hope that demand for researchers

Expanding the Opportunities for Immigration of Russian Professionals and Strengthening Competition for Human Resources
The development of education and science sectors in various countries that do not have strong NISs leads to the appearance of a greater number of qualified researchers, which creates new opportunities for the development of the Russias innovation system through attracting these talented people from other countries. However, this development also leads to the appearance of new openings for researchers and teachers in the source countries. For example, there is an increasingly great demand for scientists, university instructors, and researchers not only in China and India, but also in Indonesia, Malaysia, Pakistan, and the countries of the Middle East. Furthermore, the living conditions offered in these countries to foreign specialists are fully competitive by world standards. So, while earlier the threat of brain drain used to come only from the U.S. and Western Europe, today practically any of the worlds countries, with the exception of the most under-developed ones, are able to offer talented researchers and teachers advantageous working conditions and living standards.

Freezing of the Low Level of Entrepreneurial Activity of the Population (Including Scientists)
Entrepreneurial activity is generally unattractive for the Russian population. The level of this activity in our country is

Figure 54 Preparation of Scientists and Engineers Portion of university graduates in natural-science and engineering-technical specializations in 2006, %
China South Korea Finland Germany France Belarus Russia Japan Ukraine Czech Republic Israel Australia Chile Estonia Canada South Africa Turkey Poland United States Hungary Brazil
0% 10 % 20 % 30 % 40 %
natural-science specializations engineering-technical specializations

47.1 % 36.9 % 28.7 % 27.2 % 25.7 % 25.7 % 24.5 % 24.1 % 24.0 % 23.5 % 22.3 % 20.9 % 20.9 % 19.3 % 18.0 % 17.7 % 17.4 % 16.8 % 14.7 % 12.4 % 11.3 %
50 %

Change in portion of university graduates in natural-science and engineering specializations between 1999 and 2006, pp
Australia Estonia Finland Japan United States Germany Czech Republic Russia China Canada France Hungary South Korea -0.2 % -0.4 % -1.0 % -1.0 % -1.5 % -2.3 % -2.9 % -3.3 % -3.6 % -4.8 % -6.1 %
-6 % -4 % -2 % 0% 2%

0.9 % 0.9 %

Loss of the Populations Scientific Literacy and Expansion of Pseudosciencee


At the end of the 1980s, the propaganda of various pseudoscientific and occult ideas began to fill the mass media and penetrate even into respected scientific and educational centers. Astrology, various psychological and religious cults, and wide dissemination of charlatanism and pseudoscientific ideas are able to appeal to the imaginations of poorly educated people and recruit fanatical followers, while calling forth a lack of trust in the whole system of Russian science and education among more rationally thinking, pragmatic people. The lack of trust in innovative products observed in surveys of the population is in many ways explained precisely by a fear of charlatanism and confidence schemes under the

-8 %

Source: UNESCO Institute for Statistics, OECD, analysis by Bauman Innovation

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activity dropping even more, despite its importance in a financial downturn. In turn, this could lead to a widespread psychology of social freeloading, which greatly frightens governmental economic ministries. However, when it can be seen that engaging in entrepreneurial activity is very risky from the point of view of material success, such a psychology is completely justified.

Relocation of Procurement of Systems in the Areas of Security and Defense Abroad


At the present time, the trend toward procuring arms, military equipment, and other systems in the area of security abroad is becoming increasingly constant and consistent. This is because analogous Russian products do not correspond to contemporary demands, and carrying out development of new machinery for national defense goals takes a rather long time, but we may need to go to war now. Although such explanations appear rational, the habit of finding easier, simpler solutions and acting on short-term interest always leads to negative results. Purchasing arms and military equipment abroad will lead to a fundamental shrinking of the market. The Russian government not purchasing their own military hardware would be seen as a negative signal to the main consumers of Russian military products, both internally and externally. There is a large risk that a significant portion of the technology for defense production could be lost, and those opportunities that

Russias NIS has as a result of the significant defense market for innovative products will be wasted.

Risks of Technological Disasters


The gradual loss of competency in development of large infrastructure and production of equipment for this infrastructure will lead to an increase in the amount of technogenic disasters akin to the fire at the Sayano-Shushensk hydro-electric power station in 20092010. In addition to the negative consequences for the population, these disasters will mean a loss of more technological opportunities for the economy. Including, in this example, a reduction in the amount of electrical energy produced. Once that competency has been lost, and technological degradation has set in, it will not be as easy to repair infrastructure, as it was to overcome the results of the fire. *** In summing up the results of the analysis of the opportunities and threats, it can be noted that these lists, in general, do not contradict each other and do not hinder reciprocal realization. The opportunities are connected with the attraction to

Fall of Prices for Oil and Reduction of Possibilities for Investment in Development of the Innovation System
When the primary source of cash flow into the federal budget is profits from the export of oil and gas, likely drops of price for energy resources are a key threat to that budget. Accordingly, the governments options for investing in the innovation system, of government purchases of innovative products, and carrying out R&D by means of budget resources, would be impacted by such a drop in energy prices.

Figure 55 Entrepreneurial Activity Participation of the population in creating new business (data for 2009 or the last available year*), %, and level of GDP per capita in 2008, US dollars, purchasing power parity compared
high

Russia of new researchers and small innovative companies, the expansion of sales markets, the use of instruments and standards that have been approbated in other countries, etc. The threats are mostly that the scientific, educational, and innovative potential still existing in Russia will be wasted, and the absence of political will and stimuli for government
China

20 % 18 % 16 %

ministries will lead to a lack of any steps being taken for real upgrading, and development of the existing potential. The
Brazil Chile

overall threat is that, despite the widening window of opportunity, Russia simply will not be able to use it.
Australia

Entrepreneurial activity of the population

14 % 12 %
India

10 % 8% 6% 4% 2%
low

Kazakhstan

Hungary Czech Republic South Korea Israel Canada

United States

South Africa

Turkey France Russia Finland Germany Japan

0%
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

Level of GDP per capita


low
*Data on entrepreneurial activity in India and Turkey from 2008; Kazakhstan from 2007; Australia, Canada, and Czech Republic from 2006 Source: Global Entrepreneurship Monitor, World Bank, analysis by Bauman Innovation

high

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Analysis of Strong and Weak Positions, Opportunities, and Threats to Development of the Russias National Innovation System
Strengths
Potential of the system of education (extent of middle and higher education, share of engineering and scientific specializations); Retained scientific schools; Social elevators in the educational sector; Critical mass of resources for R&D; and Level of basic technologies (construction, infrastructure and transportation, defense and security, health).

Weaknesses
Low level of government expenditures on R&D and low level of successfulness of government R&D (due to ineffective allocation of government financing, infrastructure, availability of human resources, and the system of administration of NII); Worsening situation in the sector of education (mathematics and natural science in school, middle professional and higher engineering and scientific); Infrastructure for commercialization (micro-instruments: centers technology transfer, availability and quality of services for beginning companies, real estate, availability of financing) is poor; Low level of entrepreneurial activity of researchers and the population in general; Poor effectiveness and lack of innovative potential in government purchases, including the social sectors and defense, security, and space sectors; Low innovative activity in sectors of the economy through adaptation of foreign technologies and the development of domestic technologies (structure of the economy: effect of the sector portfolio on income, low relative sector level due to barriers on the level of stimuli [competition, sophistication of consumers] and resources [suppliers, human resources, and others] for innovation); Low level of foreign investment in Russia in the R&D sector; Ineffectiveness of infrastructure for the regulation of technology (outmoded standards, system of metrology and accreditation); Barriers relating to the circulation of intellectual property; Low level of development of key regional innovation clusters; and Low effectiveness of government policy in the area of science, technologies, and innovations (adequacy and effectiveness of allocating resources, coordination of different areas, assessment and orientation toward a result, use of modern instruments).

Opportunities
Demand for innovation in infrastructure and social sectors in Russia; Potential demand for innovation in the sectors of defense, security and space in Russia; Russias large internal consumer market; Availability of knowledge and technologies; Administrative and political opportunities for the realization of an ambitious and comprehensive program for increasing the competitiveness of Russias innovation system; The increasing quality and mobility of researchers (through growth in developing countries); Availability and opportunities for using and adapting the best international standards and systems of technical regulation; Increasing amounts of R&D in various countries; Expanding and increasing the accessibility of foreign markets to Russian companies, also through developing countries.

Threats
Intensification of competition between innovation systems (increase in the mobility of factors of innovation systems: researchers, companies); Russia is the only country in the world where the innovation system is degrading; Freezing of the current structure of the economy (current sector portfolio); Loss of fundamental technologies (construction, infrastructure and transportation, health); Expansion of opportunities of emigration of Russian professionals and intensification of competition for human resources (increase in the quantity of universities in developing countries, increase in expenditures on R&D in developed and developing countries); Loss of the populations scientific literacy due to pseudoscience (loss of a rational way of thinking); Low level of attractiveness of the careers of scientist and engineer; Freezing of the low level of entrepreneurial activity of the population (including scientists); Drop in prices for oil and reduction of possibilities for investment in development of the innovation system; Relocation of orders for purchases of systems in the area of security and defense abroad; Risks of technogenic disasters.

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4. The History of the Development of the Russias Innovation System


Then the divine sciences Stretched their hands into Russia Through mountains, rivers and seas, Saying to the monarch: We are ready to add to the Russian race new fruits of the purest mind. The monarch calls them to him. Russia waits already To see their useful works. M.V. Lomonosov

Stage 1. The Birth of Science in Russia (16871750). Copying European Experience


Up to the era of Peter I, there was no science or scientific sector in the Muscovite state as such, and the future Russian Empire fundamentally lagged behind the leading European states. The problem consisted primarily of the absence of factories of scientific thought of the time universities. There were not enough resources for the development of the sciences and arts in the 17th century Muscovite state, and, in addition, ideological limitations and the general conservatism and inclination to reservation of the ruling lite played an important role. It was only in 1687 that the first prototype of a higher school appeared in Moscow the Slavic-Greek-Latin Academy, which did indeed strongly recall European universities, although in the form in which they had existed in the 14th and 15th centuries. The rulers of the Muscovite state in the first half of the 17th century obviously had already deeply esteemed the advantages of Western European civilization and began attempts to borrow elements of military science, culture, education, and the arts from the West. However, there was a lack of thoroughness and persistence in the adoption of this borrowed culture, and given the presence of rather strong opposition from a wide range of social groups, it did not lead to real, large-scale changes. The situation completely changed during the reign of Peter I. Much better conditions for meaningful reform had taken hold an understanding of the impossibility of the old way of development and an appreciation for the necessity of learning from Europe penetrated deeply into Russian society. The key factor of success was the personality of Peter himself, who exhibited thoroughness and persistence in adopting changes in the everyday life of the state. It is sufficient to say that Peters primary influence in carrying out a series of vital transformations in Russia was Gottfried Leibniz the greatest European scientist of that period. It was Leibniz who suggested the creation of an Academy of Sciences in Russia. He worked out a detailed plan for the construction of the Petersburg Academy of Sciences, participated in inviting leading European scientists to teach at the academy, and attracted the brothers Nicolai and Daniil Bernulli and Leonid Eiler. In addition to the academy, Peter created a series of professional educational institutes, including the Sea and Navigation School in Moscow and the Sea Academy in St. Petersburg. Attempts were made to create generally accessible public schools that taught mathematics and national sci-

ences in all Russian provinces (gubernias). However, after Peters death, this project was eliminated as it had aroused serious opposition from the nobility. On the whole, the Petrine era was characterized by extremely rapid development of an innovation system practically from nothing, through colossal will and a thorough-going effort of the government. The basic instrument used by Peter I were the attraction of leading foreign scientists, accelerated training of Russias young and talented people abroad, and later on transfer of training approaches to Russian higher schools. In his construction of a scientific and educational system, Peter used Switzerland, the Netherlands, and various German princedoms as his models, and the regions from where he recruited most of his scientists. After Peters death, the period of growth ceased and a period of stagnation began in which the academy lost its best foreign scientists. Development stopped, and the mechanism of passing on the knowledge of foreign academics to talented Russian scientists practically came to a halt. Nevertheless, the knowledge obtained during Peters life continued to disperse through wider and wider layers of society, all the way to the provincial bourgeoisie and peasantry, with the result that, finally, a stratum of people appeared in Russia that became the basic national scientific system the intelligentsia, or the educated class. For this reason, we can combine the phase of Petrine reforms and the phase of subsequent stagnation into a single stage the stage of the appearance of the scientific system of the Russian Empire, unfolding in the period from 1700 to 1750.

Despite all the successes of the Russian science and education during the second stage, the opening of Moscow University was almost singular exemplary achievement. However, it was at this time when the general orientation of government policy towards enlightenment of large masses of people had the greatest significance. There were reforms of government administration, including the system of territorial governance; opening of hospitals, schools, and cultural centers and theaters); support of national industry; and development of the practice of sending promising talented young people to Europe (as a result, this practice became a routine procedure, not requiring specific intervention by higher authorities) all this enabled broader layers of society to enter into scientific and engineering work. In the period of Catherine IIs rule, a whole class of autodidact mechanics appeared in Russia inventors, often from among the common people, who engaged in the creation of machines and adopted the results of their work in production and daily life. The clearest example here is the work of famous Kulibin, but the real scale of the phenomenon was much larger people appeared in practically every city and factory, often with no formal education, but nevertheless creating innovative products. One of the important factors leading to the autodidact movement was the successful example of Lomonosov. People were persuaded that a commoner might, thanks to his knowledge, reach the greatest social heights and successfully bring his plans and ideas to life.

As a whole, the history of the development of the scientific and innovation sphere in Russia, as our analysis shows, has seven basic stages:

Stage 1. The birth of science in Russia (16871750).


Copying European experience.

Stage 2. The appearance of Russias own scientific


system (17501800). The epoch of Lomonosov and the first Russian university.

Stage 3. The development of the Russian scientific


system (18001840). Formation of strong universities and technical institutes.

Stage 4. Competition of scientific systems (18401917).


Russia falls behind its competitors in the struggle for industrial development.

Stage 2. The Appearance of Russias Own Scientific System (17501800). The Epoch of Lomonosov and the First Russian University
The coming to power of Peters daughter Elizaveta has become a symbol of the beginning of a new stage of development of Russian science the formation of a stable system of specifically Russian science and higher education. This includes the reforms of education and science during the rule of Elizaveta, and then Catherine II. It is also, to a significant degree, linked with the name of Mikhail Lomonosov, the greatest Russian scientist of the 18th century. The opening in Moscow of Russias first full-fledged university in 1755 was a key event. The work of the Academy of Sciences became more effective, and more and more talented Russian scientists, on top of foreign ones, began to join it.

Stage 3. The Development of the Russian Scientific System (18001840). The Formation of Strong Universities and Technical Institutes
The next stage of development of Russian science was initiated by the reforms of Alexander I, and led to a real qualitative leap in Russian education and science. The Russian scientific system became one of the worlds finest in quality, but not in scale, and obtained relatively solid, stable foundations for development. The first phase of this stage was connected to the reforms in the beginning of the reign of Alexander I. In the framework of educational reform, a whole system of enlightenment, and later on, a system of the preparation of personnel, was created. Church schools were created at the village level; district schools at the level of district cities; and gymnasia, which provided a classical education, at the province (gubernia) level. In addition, a whole series of provincial universities were created in Kharkov and Kazan, and

Stage 5. Mobilization and preparation for war (19171945).


Science in the conditions of communism.

Stage 6. Leadership and self-assurance (19451990).


A superpowers science gradually decreases its rate of development.

Stage 7. Collapse of the old system and unclear


perspectives (1991present). Is science needed in conditions of economic reform?

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in Vilno, Warsaw, and Tartu on the basis of already-existing educational establishments of a European style. The already existing university at the Academy of Sciences in St. Petersburg was also modernized. The crown of the whole educational system was the Tsarkoselsky Lycee, which was to prepare the ruling elite of the Russian Empire. However, the example of this reform shows that any institutional project demands the presence of a system of monitoring and corrective actions. Otherwise, changes may have only a nominal effect, and any institutions being created may perform inefficiently. An example of this is Kazan University, which from the moment of its establishment in 1804 to 1827 was inadequate because it operated under the control of a group of incompetent and corrupt bureaucrats and professors. Essential review and correction of the operation of the university had to take place complete replacement of its leadership, significant investments in infrastructure for the university to reach a new level and become one of Europes leading scientific centers. In the 1820s, a new phase began in the development of the Russian scientific system. It was a phase of increasing attention to real sectors, and practical results provided by the educational system. The Technological Institute, designed to prepare engineers for the growing Russian economy, was created in St. Petersburg in 1828. The Moscow Artisan Study Center was founded in Moscow 1830 on the basis of the former Education House, and the Imperial Moscow Technical School became one of the main centers for engineers training in the Russian Empire and Soviet Union. In 1839, the Russian provinces (gubernias) created a system of non-classical classes for temporary teaching of technical sciences that were transformed into non-classical secondary schools. This was a very useful acquisition from the German experience that not only widened the educational opportunities for unprivileged classes by comparison with the system of gymnasia for the privileged, but also provided the possibility of preparing technical specialists in the provinces. In the same year, the largest scientific institute in Russia in the pre-Revolutionary period was created, called the Pulkov Observatory. During the second phase of this stage Russian government was utilizing the wide French experience of creating engineering schools, as well as the above-mentioned examples of German experience in creating wide-scale elementary professional schools and overall layout of scientific system (including universities). Russian reliance on France and Germany as models

in developing educational institutions continued practically up to the Revolution.

of generally accessible schools and professional academies had a significantly negative effect. The government was acting in overall right direction, but the efforts did not have sufficient scale. Another problem was the still inadequate development of domestic industry, mainly manufacturing, metallurgy, and machine building. State support was weak and ineffective, as the government believed that it should not interfere in private industry, thereby leading to the purchase of the most complicated and expensive machines and mechanisms from abroad. However, the task of modernizing the economy and science demanded large scale and high intensity support of the development of contemporary production. Without this it would be impossible to catch up to the high rate of the economies and innovation systems of the United Kingdom, Germany, and the U.S. The second phase of the fourth stage of the development of Russias NIS (approximately from 1880 to 1917) was propelled by the following factors. First, the industrial development of the Russian Empire demanded an increasingly large amount of highly qualified personnel, which resulted in the creation of technical schools, technical institutes, and universities, both in the capital cities (i.e., the Imperial Electrotechnical Institute in St. Petersburg) and in the distant provinces, such as the Tomsk University. At the end of the 19th century, there were 16 technical higher academies in Russia. At the same time, basic scientific and educational potential was concentrated in St. Petersburg and in Moscow, which fundamentally limited the possibility of using this potential in the economy to disperse scientific knowledge throughout wide strata of the Russian population. Second, the previous estate system of education was increasingly coming into contradiction with not only the demands of the Russian economy, but also with the values of Russian society and different groups therein. The opportunity to obtain a quality, multifaceted education for all layers of society was becoming an important demand of sociopolitical movements. Third, the first arms race in history has become a basic motivational force of scientific-technical progress in various countries. In the second half of the 19th century, it became clear that the work of scientists was not merely a hallmark of civilized states, but a critical factor in the national armys success in war. As a result, expenditures on financing of scientific development in the interest of the army significantly increased, and special ministries that coordinated work on developing new armaments

were created. In Russia, which traditionally attaches a meaningful importance to artillery, the significant role in coordinating scientific development was played by the Main Artillery Administration (MAA). Second to the MAA was the Sea Ministry, which included the Technical (later the Engineering) Academy of the Sea Ministry an important center of scientific-technical activity that was located in Kronstadt and also the Mine Officer Class, which at the time had the best electro-technical laboratory in Russia. Also, the General Staff held the Military-Science Committee, which, in addition to its own military science, taught and widely distributed the military knowledge of various engineering and technical developments and methods. The Sea Ministry possessed a Sea Science Committee. These organizations arose in the beginning of the 19th century, but did not begin to play a serious role in the use of scientific knowledge in military affairs until the second half of the century. Various voluntary scientific and scientific-technical societies became an important factor in the development of science in Russia. At the start of the 20th century, there were nearly 350, the largest of which was the Russian Technical Society. This social initiative was somewhat hindered by lack of attention to scientific and scientific-technical activity from the government, and the inability to sponsor scientific research and development by business, that is, the bourgeoisie. The gross indicators did not look bad as a whole: in Russia in 1916, there were 105 higher educational institutes, including, in addition to universities, 17 technical, ten agricultural and forestry, and six medical institutes and higher establishments, as well as a series of veterinary, commercial, and military academies. On the eve of the Revolution, 127,000 students were enrolled in these institutions. This figure is often adduced as the main proof of the high level of development in pre-Revolutionary Russia. In fact, Russia exceeded France in this indicator. However, it did not produce concrete results in the scientific sphere. In terms of number of scientists, Russia was far behind the U.S. and Europes developed countries. For example, on the eve of the Revolution, there were 15 times fewer chemists in Russia than in the U.S., even though Russia boasted world-class scientific schools. Russia also lagged in terms of the number of specialized scientific-research institutes. State support of the scientific sector was fragmentary, and a unified policy practically did not exist. In a situation where Russian industry was unable to create significant demand for the

Stage 4. Competition of Scientific Systems (18401917). Russia Falls Behind Its Competitors in the Struggle for Industrial Development
A fourth, new stage began in approximately 1840 in the development of Russias national innovation system, which had already formed, but still had not accumulated the necessary critical mass proportional to the scale of the country. The primary factors that allowed the Russian scientific system to develop at that time included; the positive effect achieved through the creation of universities, which became centers of scientific research at a European level not only in capitals, but in provinces as well; public opinion regarding the Academy of Sciences, which was requesting a strengthening of the institution, an increase in its status, and allocation more resources to scientific research; and the development of high technology industry in Russia. There were also other driving factors from the efforts of private entrepreneurs. For example, a phosphorous factory in Perm was created by the merchant Tupitsyn without bringing in foreign partners, thus greatly decreasing Russias dependence on imports of phosphorous from the United Kingdom. Lyubimov created Lyubimov, Solvier and Co. the Perm soda factory in partnership with the Belgian engineer Solvier, and in time, the factory ended Russias need to import soda. Despite the earlier successes in creating scientific schools, laboratories, and industrial enterprises, it was in the forth stage at where the Russian scientific system began a chronic lagging behind those of the most developed countries. The development of Russian science was catching up from the very beginning since it started much later than in the leading countries. By the mid 19th century, the innovative systems of the worlds leading countries (the United Kingdom, Germany, France, and then the U.S.) were already working at full force and had acquired a critical mass. Highly developed industries of these countries were making invaluable contributions to the creation of innovations. In Russia, particular universities and scientific schools were at a high level even by European standards, but they were few in number for the scale of the country. The estate systems barriers to development of education, limitations on obtaining an education at gymnasia and universities by the lower classes, and lack

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Cooperation and Competition: RussianAmerican Relationship in Scientific and Technical Sphere


Source: Bauman Innovation

results of scientific research, there were practically no conditions for development of the scientific sector. On the whole, the reforms and reorganizations of the fourth stage of the development of Russian science had an indecisive character; many of them were not successfully completed, and those that were completed were insufficient for a country such as Russia. The general results of the pre-Revolutionary state of development of Russian science were relatively indecisive and contradictory. The scientific system of the Russian Empire was in general weak in comparison with the scientific systems of the leading countries of Europe, and was unable to compete with them in a whole spectrum of areas. Worst of all, it was unable to provide domestic industry with the technologies necessary for successful competition with the multinational corporations that were then appearing in the Western countries, such as Siemens, ABB, General Electric, and General Motors. On the other hand, in certain areas and schools, Russian science was of first-class international caliber. It can be said that in 1917, Russia had the necessary elements of a full-fledged national innovation system. However, to compete with the countries of the West in the areas of industry, science, and technology, it needed to carry out colossal modernization of Russias whole economic system, and add significant human and financial resources into the elements of that system in order to transform it into an effective working mechanism.

structure of Soviet science had a clearly expressed defense orientation, which has been preserved up to our time. On the whole, the fifth period of development of the RussianSoviet scientific system was characterized by two opposite tendencies. The increase in attention by the Soviet government and readiness to render all possible support, with unprecedented measures, to industrialization and development of domestic high-technology industrial production gave the scientists of Soviet Russia meaningful opportunities for research and development. Albeit, within the framework of the very limited possibilities of the state budget of those years. The continuing cold phase of the Civil War and the struggle between different political groups, which reached its apogee in the mass repressions of 19371938, made scientists hostages to political intrigues and very often victims of repressions organized by groups against their opponents. Despite all the problems, science in the early Soviet Union continued to develop under the action of these two contradictory forces. For example, as early as 1918, in an extremely indefinite political and extremely impoverished economic situation, the Central Aerohydrodynamic Institute (TsAGI) opened in Moscow on the initiative of N.E. Zhukovsky. Despite all of Zhukovskys efforts, such an organization had not been created in the way more trouble-free pre-Revolutionary period. It is unsurprising that the majority of scientists from naturalscience and technical spheres, having earlier been in opposition to the Tsarist government, now supported the Soviet state and began to participate very actively in the creation of a new Soviet science. The first phase of this stage, continuing up to the mid1930s, consisted of old regime scientists engaging in new opportunities for realizing their most adventurous ideas and plans. The TsAGI was not the only example of this. In 1918, on the initiative of V.I. Vernadsky, the First Division was formed in the Commission of the Academy of Sciences on Studying the Natural and Productive Forces of Russia, which was intended to research rare and radioactive materials. And in 1921, the State Scientific Council of the Peoples Commissariat of Enlightenment founded the Radio Laboratory (in 1922, the Radio Institute) under the auspices of the Academy of Sciences.
The Russian Empire began to lag behind the U.S. in the scientifictechnical sphere in the middle of the 19th century. Although at the time the U.S. was not one of the most developed and leading states, it had a number of important advantages relative to the Russian Empire. First, the U.S. had started earlier. Harvard University appeared more than 100 years before the first full-fledged Russian university MSU and almost 100 years earlier than the university at the St. Petersburg Academy of Sciences. Other universities, for instance Yale and Princeton, were created in the first half of the 18th century. The colonists who founded the U.S. possessed all the cultural and scientific potential of the Europe of that time. Second, a key factor in the development of science and technology in the U.S. was the existence of entrepreneurship. In the Russian Empire autodidact mechanics tried to find patrons from the ruling class or among the merchants to realize their ideas and, even if successful in doing so, were dependent on the will of these patrons. Whereas in the U.S., inventors engaged in entrepreneurial activity and obtained commercial profit from their ideas, which gave them greater independence and opportunities for further development of their inventions, and strongly motivated capable people to create innovations as an alternative to the standard career of hired worker. Also, the U.S. was meaningfully richer in terms of natural resources than the Russian Empire. The confluence of beneficial conditions for development of the U.S. economy was unique in world history. As a result, there was simply more capital in the U.S. than in Tsarist Russia, and some of this capital was devoted to the creation of inventions and new technologies. As a result, in the middle of the 19th century the scientific system of the U.S. exceeded in many parameters that of the Russian Empire. And at the same time, the U.S. was actively replicating the positive examples of other countries, including Russia, and putting them to practical use. Up to the 1917 October Revolution, there was practically no cooperation in the scientific, technological, or industrial spheres between Russia and the U.S. Although the Russian Empire had been actively buying equipment and technology abroad; attracting investment in industry; and cooperating with foreign universities, institutes, and individual scientists since the time of Peter I, this cooperation took place basically with the countries of Europe the United Kingdom, Switzerland, France, Germany, the Netherlands, and Belgium. The U.S. occupied a very modest position in the list of partner countries in technical and economy cooperation, despite the traditionally good relations between the countries. The character of the relations between the U.S. and Soviet Russia quickly changed after the Revolution. Formal relations between Soviet Russia and the U.S. were strained in the beginning. For example, the U.S. was one of the last countries to formally recognize the Soviet Union and establish diplomatic relations with it (this took place only in 1933), as a result of internal politics. However, the ruling circles and big business of the U.S. were more pragmatically inclined. Economic (including humanitarian) links and technological cooperation began almost as soon as the Civil War had ended, and it became clear that the Bolshevik government controlled the situation in Russia as a whole. The organization AMTORG (Amtorg Trading Corporation) began to operate as early as in 1924. AMTORG was a trade organization operating as a commissioner-middleman for exports of Soviet goods to the U.S. and imports of goods from the U.S. to the Soviet Union. It was created in New York as a private shareholders organization between the U.S. and Soviet Union; shareholder buy-in was $1 million. This organization was formed through the merger of two organizations that already existed in the U.S., Arcos America Inc. and the Products Exchange Corporation, which carried out export-import operations. The stock holders representing the Soviet Union were Vneshtorgbank and Tsentrosoyuz. The organization processed a large amount of orders coming from Soviet external trade with organizations in the U.S. Later, cooperation was significantly expanded. Soviet engineers and designers (for example, M. Yangel) spent time in the U.S. and studied the American experience, and American engineers and construction specialists helped to plan large industrial and infrastructure objects. In addition, although there was rich experience in the U.S. in the projection and construction of industrial enterprises and infrastructure, the U.S. was lacking in experience with administrating a system of scientific organizations and the development of education. Although American universities at the time were among the best in the world, this leadership had taken place organically from the ground up as the result of a long process of development with large-scale support of capitalist magnates. The innovation sphere in the U.S. had also been developing over a long time on the basis of private entrepreneurship, and at that time, a system of supporting institutes was already beginning to organically form around it. The Soviet Union did not have enough time to wait until science and university education developed in a natural manner, and there was also no experience in developing science and education in conditions of a socialist economy. When discussing the interaction between Russia/the Soviet Union and the U.S. in the scientific sphere, a very important factor needs to be mentioned that influenced the development of the scientific and technological spheres in the U.S. This was the emigration to America of a number of Russian scientists

Stage 5. Mobilization and Preparation for War (19171945). Science in the Conditions of Communism
The Soviet government did not have to start from scratch, it had a good basis for development of science and education, but it was necessary to increase it to a scale appropriate to the worlds largest country. At the same time, the Soviet government had limited opportunities to use the experience of other countries in the scientific sphere, and it was necessary to invent many things in system administration and organization. The fifth stage of development of the Russian national innovation system, the first Soviet stage, began in 1917 and concluded with the victory in the Great Patriotic War in 1945. For understandable reasons, this stage, beginning in a wartime economy and concluding during a war, had an extremely pronounced mobilizing character, which left a significant stamp on the scientific system both in this period and in the following stage, as the

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It is clear that the attention of the Bolsheviks to science had


and engineers in the years after the Revolution. Some of them, for instance, I. Sikorskii and V. Zvorykin, obtained clear and large-scale success; others are less well-known, but their contributions to the science and innovations of the U.S. were significant. During WWII, cooperation between the Soviet Union and U.S. was the most intense and friendly in their entire history. However, after the end of the war, cooperation was replaced by harsh and unfriendly competition between the two new superpowers for global domination. In the new conditions, the development of science in the Soviet Union and the U.S. was based on the following factors. First, the arms race began. It was extremely important for both countries that their military forces be supplied with armaments that were, as a minimum, no worse, and preferably better, than those of its competitor. Second, competition between the countries increased in (formally) nonmilitary spheres. The Soviet and American space programs are the clearest examples of such competition. Competition took place in other scientific areas as well medicine, biology, astrophysics, etc. and was the result of defense concerns. It was necessary to show the whole worlds scientific community that either the American or Soviet system had achieved greater successes in the scientific sphere than its competitor. Despite the rivalry, societal interest arose in Soviet Union-U.S. cooperation, including in the scientific sphere. This factor began to operate later than others, and it obtained its greatest significance at the end of the 1960s and the 1970s, in the period of dtente. It was believed that contacts between scientists would allow the two sides to better understand one another, moving competition from the military to the scientific plane, and finally move from rivalry to partnership. The joint Soviet-American space program Soyuz-Apollo became a symbol of this idea. It is worthwhile looking more closely at the Soyuz-Apollo program, as it established an extremely important precedent. Countries that had before and during the war been allies and after the war began an intense struggle of two systems, returned to cooperation, and in a very complicated sphere that was closely tied to military interests. The program of the mutual experimental flight of the Soviet spacecraft Soyuz-19 and the American spacecraft Apollo was formalized on May 24, 1972, by an agreement that established cooperation in the research and use of outer space for peaceful goals. In 1975, this program was realized and on June 17, docking was completed between the two spacecraft. The ships crews even carried out several scientific experiments together. The realization of the program demanded a series of special efforts and solutions; for example, the life-support systems of the ships, such as the air supply, were initially incompatible. As a result, it was necessary to bring a special adapting module into space. Moreover, it was believed that the flight would be the first experience of larger-scale mutual programs of space research. But international, including Soviet-American, cooperation in research was not limited to one space program. An important role in this cooperation was played by the Academy of Sciences, which had great authority abroad, not only through the strength of the scientific research it conducted, but also through the strength of its (formal) independence and separation from political issues. By 1957, the National Academy of the Soviet Union had become a member of 69 international scientific organizations, with Soviet scientists beginning to be elected into the leadership of such organizations. Soviet scientific journals began to be published in the U.S. translated into English, which allowed Soviet scientists to compete in terms of publications cited.

as was possible, while increasing the overall number of researchers and improving the conditions of their work and daily lives. Later, after strengthening itself and beginning to cross over to a planned and relatively totally controlled economy, the Soviet government began to incorporate planning in the area of scientific research. This initiative met with much opposition from the scientific community, which believed that non-specialists would not be able to understand the difficulties of the scientific process and the pressing tasks facing scientists and, accordingly, no plan of work can be filtered down to scientists from a higher authority. Nevertheless, in 1928, general tasks for the science sector were included in the schedule for the First Five-Year Plan, and in 1931, the first detailed yearly plan of work for the Academy of Sciences was formulated. The Great Patriotic War had special significance for the development of Soviet science. Demand from the Party leadership for new research and development rose sharply that could be used for production of weapons and military vehicles. The evacuation of scientific institutes, universities, and hightechnology manufacturing from Moscow, Leningrad, and the European part of the Soviet Union to the Urals, Siberia, and the Central Asian Republics resulted in a strong transfer of scientific potential to these regions of the country. Perm, Sverdlovsk, Chelyabinsk, Omsk, Tomsk, Novosibirsk, and other cities of the Urals and Siberia and Tashkent, Alma-Ata, and other cities of the Union Republics of Central Asia, which formerly were not among the leading scientific and educational centers, received a colossal influx for their innovation development. Although many researchers returned to their home cities after the war, the local personnel they had trained continued the research and development begun during the war years. The equipment evacuated in the first months of the war also often remained in the rearguard cities, and it became necessary to restore all of the infrastructure and supply the buildings with new equipment. As a result, the scientific potential of the country practically doubled in the course of a few years after the war, although this increase was accompanied by huge strains on the strength of the Soviet population. Unfortunately, the growth of potential had more of an extensive than an intensive character, but at that point in time, it was enough it was necessary to increase the productive capacities of Soviet science. Increasing the effectiveness of their use was a task that fell to the next stage of the development of the Soviet scientific system.

a deeply pragmatic character, and its basic principle engendered hope among the leaders of the Soviet state that some panacea would be found in science for solving economic, social, and political problems with the greatest effectiveness and smallest expense. If charlatans had appeared to V.I. Lenin and A.V. Lunacharchsky in 1918 promising to create a perpetual motion machine or a chemical method to make gold from lead, they would probably have received resources to carry out the research. In fact, some completely pseudoscientific projects can be found among the research carried out in the 1920s and 1930s in the Soviet Union and financed from the state budget, such as several attempts by O.B. Lepeshinskaya to obtain newly forming cells from undifferentiated living matter. However, due to a lucky combination of circumstances, there were very few charlatans among the scientists of that time. Alongside an increase in attention to the development of science, the Soviet government cast its attention to the development of generally accessible peoples education. As early as November 1917, almost immediately after the seizure of power, the Bolsheviks created the Peoples Commissariat of Enlightenment, Narkompros. In 1920, general education was introduced in the country, including courses to liquidate illiteracy in adults. At the same time, professional (factory-plant) academies were created that taught not only general, but also professional skills, a certain analog of the German Fachhochschuele. The network of universities expanded, and universities and specialized institutes were created in the provinces. In 1917, the sphere of science passed into the administration of Narkompros, and partially, the Supreme Soviet of the Peoples Economy. The SSPE was given primarily areas of scientific research that were important for peoples agriculture, which lead to the creation of the Scientific-Technical Division, tasked with the development of applied science. In the summer of 1918, all universities passed into the control of Narkompros. To manage scientific and higher educational establishments, a special Scientific Division was created in Narkompros. In turn, the State Scientific Council was created as an advisory body. In 1921, the Main Administration of Scientific Institutions (Glavnauka) was created on the basis of the Scientific Division, also in the structure of Narkompros. The Academy of Sciences at that moment was also subordinate to Glavnauka and, correspondingly, Narkompros. Each of these organizations devoted great efforts to increasing the number of institutes subordinate to them, developing as large an amount of scientific research within their corresponding areas

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The Evolution of the Russian Academy of Sciences


The history of Peters founding of the Academy of Sciences is inseparably bound up with the history of all Russian science, but it cannot be said that the Academy has always played an unambiguously positive role. In the beginning, the scale of the activity of the Petersburg Academy of Sciences was not great. The idea of raising the status and increasing the resource base of the Academy was widespread in Russian society as early as the 1830s, but serious reform of and elevation of the formal status of the Academy did not take place until 1917. Nevertheless, the Academy gradually began to acquire definite features of a future super-ministry of science. For example, the Academy of Sciences spent more than half of all the resources allocated by the Ministry of Peoples Enlightenment on scientific goals. At the same time, society considered the then-existing structure and organizational resources of the Petersburg Academy of Sciences to be in a rather critical state both outmoded, not corresponding to the real needs of the economy or the life of society, and focused on an old classical approach to education and science in which the main attention was directed to disciplines in the humanities, especially classical ones. In the structure of the Academy in the beginning of the 20th century, there were five laboratories, seven museums, the Russian Archaeological Institute in Constantinople, the Pulkov Astronomical Observatory, and the Main Physics Observatory. The staff of the Academy of Sciences in 1912 consisted of 153 people, including 46 academicians, a large proportion of whom were representative of astronomy, mathematics, geology, and an array of humanities. About half of the entire scientific budget of the Ministry of Enlightenment was spent on the work of the Academy, which indirectly gives an idea of the general number of researchers in Russia at the time. The key peculiarity of the first stage of development of Soviet science and the Soviet innovation system was strengthening of the role of the Academy of Sciences. This ministry had managed relatively successfully to survive the Revolution and Civil War, and find a common language with the Soviet government as scientists in the technical and natural sciences and in general was able to relate positively to this government, seeing new opportunities for development of research. As early as 1918, the old Petersburg Academy of Sciences signed an agreement on cooperation with the Bolsheviks, and as a result, it became part of the Narkompros system and began to receive financing. Later, the Academy of Sciences, using its independent expert status, its fame in the international scientific community, and its policy of noninterference in questions of politics and ideology, was able to become a super-organization, playing a key role in the Soviet system, being responsible for all scientific issues and factually independent from all ministries and departments, with the exception of the Party Central Committee.

The Evolution of the Russian Academy of Sciences

Stage 6. Leadership and Self-Assurance (19451990). A Superpowers Science Gradually Decreases Its Rate of Development
The next stage began approximately in 1945, after the end of the Great Patriotic War, when it became clear that the victorious countries, despite all the contradictions between them, would find possibilities for peaceful coexistence. This understanding finally came to the leadership of the two superpowers the Soviet Union and U.S. after the Cuban Missile Crisis of 1962, but the foundation of the new model was being formed already in 1945. In these conditions, competition between the two systems had a more peaceful character, with the war becoming cold, battles were not won by direct military encounters, but by demonstrations of military power and scientific-technical accomplishments, including ones not directly tied to any military theme. This situation enabled phenomenal rates of growth of science and machinery both in the Soviet Union and in the U.S., as science and innovation became the main weapon of the new war. Innovation activities in the Soviet Union were not limited to just the sphere of fundamental, classical science. The pragmatism and technocratic nature of the Soviet leadership, in combination with the already pressing task of industrial modernization, created demand for applied science that would be more directly applicable in production. This task went beyond the bounds of the sphere of competency of the Academy of Science, and, moreover, it was necessary to ensure intense cooperative work with the branch ministries that were directing the real manufacturing sector. In the years of the war, all these tasks were handled by the State Committee of Defense. However, in peacetime, a new organ of government better suited to the tasks of peaceful construction was needed. To solve these problems, the State Committee on Implementation of Cutting-Edge Machinery in the Peoples Economy (Gostekhnika of the Soviet Union) was created in 1948 under the auspices of the Government of the Soviet Union. The basic mission of this organization was assistance in the large-scale and accelerated application of new technologies in industrial manufacturing construction, and other branches of the economy. In the future, Gostekhnika, after undergoing a series of reforms and being transformed as a result into the State Committee of the Soviet Union on Science and Technology (SCST of the Soviet Union), became one of the key state organs coordinating the sphere of applied science and technology. The example of the SCST has been used by many countries, including the U.S. and China.

In the period from 1918 to 1935, relatively rapid growth took place of the staff and resources of the Academy, first and foremost in connection with the new tasks given to the Academy by the Soviet government. (For example, the development of recommendations on the rational allocation of industry according to territory.) And so, the Academys laboratories began to become full-fledged scientific institutes. In 1925, the 200th anniversary of the founding of the Academy of Science was officially celebrated, and a new charter was drawn up in which the Academy received the status of supreme scientific institute, along with Soviet Academy of Sciences. The position of president of the Academy of Sciences became electable, and the organization became self-governing and independent. The number of acting members of the Academy in 1928 was practically doubled from 45 to 85 people by a decision of the Council of Peoples Commissars. The decision in 1928 was even more important, because specialists in the technical sphere would become part of the structure of the Academy, creating special, technical chairs. As a result, in 1935, this movement was formalized in the creation of a special Division of Technical Sciences of the Soviet Academy of Sciences, which would become important for technical and quasi-technical (physics-technical, chemical-technical, etc.) solutions in Soviet science. The most serious changes in the real status of the Academy of Sciences began in 1934, when the Academy was moved from Leningrad to Moscow, next to the main ministries of the government of the Soviet Union. The Academy was able to become the exclusive organization for coordination of all scientific work while at the same time, retaining formal independence and right to self-administration. The Academy of Sciences was able to unite a whole array of disciplines that were critical for the Soviet government its own scientific research in various areas, applied and technological developments, and social sciences. Growth of this system proceeded not only through increasing the number of scientific institutes and laboratories or incorporating previously independent organizations within the Academys structure, but also as a result of penetrating into areas through organization of divisions of the Academy of Sciences in Union Republics and areas of the Russian Soviet Federated Republic. As a result of the marked growth of the Academy of Sciences, the status and real role of universities were reduced, including those of very old ones Leningrad, Kazan and other universities created in the provinces. Moreover, the tendency that had arisen already during the time of Nikolai I toward preferring technical schools to universities only increased in the Soviet era. Moscow Lomonosov State University can be named as almost the only classical university that partially preserved its high status and prestige in the Soviet era, using the model of a research university in its work. However, the role of non-university institutes, first and foremost

technical institutes and academies, grew. In Moscow, the N. E. Bauman Moscow Higher Technical School and its affiliate institutes, and consequently Moscow Institute of Physics and Technology, became key forges of personnel for the Soviet industry and government departments. The complicated political and economic events of the 1990s increased the influence of the former Soviet Academy of Sciences the current Russian Academy of Sciences. First and foremost, the RAS obtained complete independence of work, not only formally, as in the Soviet era, but in reality. In the conditions of a weak state and weak social structures, the RAS obtained relatively strong lobbying power. In conditions of political opposition between the new Russian authorities and supporters of the old political system, the RAS, as an independent organization with a neutral political position, was able to obtain support, both moral and material, from all sides of the conflict. The formal appearance of competitors in the form of new academies also ended up strengthening the RAS positions. Society very soon came to the conclusion that the majority of these new academies did not inspire confidence. In such a situation, the authority of the old Academy, remaining in the inheritance from the Soviet Union and glorified with the name of old and new Nobel laureates and general designers, only grew. Society confessed that only the academies of the RAS could count on societal respect. If in the political sense the RAS won more in the situation of the 1990s, in the economic sense it lost out. Government financing dropped dramatically, and a significant amount of the real estate that had passed into the Academys management could only partially be used for commercial goals, as the formal owner was the government. In the 2000s, the situation changed again: the RAS began to obtain much greater government financing, but the level of independence and freedom of action fundamentally diminished. At the present time, broad discussions are being held in government ministries and society regarding the necessity of seriously reforming the Academy of Sciences.

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Coordination of Policy in the Area of Science, Technology, and Innovations: Gostekhnika the State Committee of the Soviet Union on Science and Technology

Goskomitet played an important role in science and technology in the economic and technological development of the Soviet Union in the 1950s and 1960s. However, as early as the 1970s, the results of the work of the Soviet Academy of Sciences and SCST were insufficiently satisfactory. This is shown in the decree of the Central Committee of the Communist Party of the Soviet Union of August 18, 1983, On Measures to Accelerate Scientific-Technical Progress in the Peoples Economy. In this decree, the work of the Academy of Sciences and SCST was criticized as insufficiently dependable and produced insufficiently good results from its scientific activity. One of the consequences of this decree was a new managerial method the creation of scientific-productive mergers (SPOs). And in a number of cases, interbranch scientific-productive mergers, in which scientific and productive divisions from various branches of industry were grouped in one place to receive a maximal effect and reduce losses and delays in inter-organizational interaction. It can be said that SPOs were a predecessor to high-technology clusters in the system of the Soviet economy. The phase of the 1970s and 1980s was connected to a rather intense search for new models and paths of development within the framework of the Soviet economy and science. The problem was that the time for searches had already passed the demands of the new economic epoch, new situations in the external environment, and new needs of society greatly exceeded the resources and managerial potential that the government possessed. However, the dissolution of the Soviet Union was connected to a larger extent with political factors than with economic problems or lack of success in the scientific system. As a result of the complicated political situation unfolding in the Soviet Union at the end of the 1980s, the Soviet Union was dissolved into the former Union Republics, which are now newly independent states.

of orders of those branches of industry that had been retained in the new economic conditions for instance, the fuel-energy complex. It is important to note that at the end of the 1980s, a widespread idea existed in society regarding the potential commercialization of scientific ideas and developments that had been accumulated in both NIIs (Research Institutes) and universities. It was considered that after the commercialization of ideas was allowed, scientific centers would be able to become self-financing, and the most talented engineers and researches would engage in successful commercial activity. Practice, however, showed that these ideas were unrealistic. In the absence of working institutes (infrastructure) for commercialization during conditions of large-scale economic crisis and a drop-off of industrial productivity, ideas and developments in themselves were not needed by anyone. Nevertheless, many scientific workers and university teachers tried in the period from 19891993 to commercialize technology and create their own business. The majority of these attempts were unsuccessful, and in some situations, former workers in science have resorted to ordinary commercial activity (trade, construction, the finance sector, etc.). In specific cases, science workers were able to create successful enterprises based on Soviet innovation developments. It is interesting that the majority of enterprises existing at present in Russia that work in the innovation sphere and having achieved stable success were founded precisely during the period from 19891993 on the basis of Soviet innovations. The strengthening of the Russian state and general economic growth of Russia beginning in 19992000 led to important changes in the sphere of science. Government financing of higher schools of education rose markedly. Dealing with objects of intellectual property became somewhat more orderly, including in the area of state secrets. The increase in industrial productivity began to form a basic demand for scientific research and development, and not only in the fuel-energy complex. The increasing income of the population enabled a rudimentary appearance of business angels who invested their own resources in commercialization of ideas and developments. Attempts were made to create an innovation infrastructure, such as centers of technology transfer and commercialization, venture funds, business incubators, technoparks, and special scientificimplementation economic zones. The Foundation of Assistance in Development of Small Forms of Enterprises in the Scientific-Technical Sphere, receiving wide renown as the Bortnik Foundation, played an important role in stimulating innovation activity.
On February 15, 1948, a new state department was created under the auspices of the Council of Ministries of the Soviet Union that was responsible for technological improvement of production in Soviet peoples agriculture the State Committee on Implementation of CuttingEdge Machinery in the Peoples Economy, or Gostekhnika of the Soviet Union. The former Division of Machinery of Gosplan of the Soviet Union, which came from another, analogous division in the Supreme Council of Peoples Agriculture (SCPA), which had arisen shortly after the Revolution, came into the structure of Gostekhnika. This organization was created mainly on the initiative of A.V. Malyshev, a graduate of the N.E. Bauman MHTS. Malyshev was the peoples commissar of heavy machine building in 1939 and in the war years had been the peoples commissar of the tank industry. Beginning in 1946, he served as the minister of transport machine building, and simultaneously, an assistant to the representative of the Council of Ministers of the Soviet Union. He became the first representative of Gostekhnika and then returned to a ministerial post, beginning as minister of machine building, then minister of ship building, and then in 1953, the first minister in the Soviet Union of medium machine building, i.e., the creation of the atomic industry. The creation of Gostekhnika was connected to the reorganization of Gosplan of the Soviet Union, in the course of which Gosplans previous structure was split into two new organizations the State Committee on Supplying Peoples Agriculture of the Soviet Union (Gossnab) and Gostekhnika. Gostekhnikas first large-scale project was construction of the Volga-Don canal (19501952). Goskomitet prepared a recommendation that foresaw a colossal savings of labor expenditure on the project through use of more powerful earth-moving machinery. New models of excavators, trucks, and other specialized machines were developed and introduced especially for the project in an extremely short period of time. As a result, only about 200,000 people were used in the project instead of the planned 500,000; i.e., less than half, and the project was successfully completed on time May 31, 1952. In status, the head of Gostekhnika was also a deputy prime-minister, as we would say today (i.e., assistant to the representative of the Council of Ministers of the Soviet Union). Initially, also the All-Union Committee on Standardization was included in the structure of Gostekhnika, but starting in 1951, an independent Administration of Standardization was formed under the Council of Ministers of the Soviet Union. Another important element of Gostekhnika was the Administration of ScientificTechnical Cooperation (ASTC) (with socialist countries), which played a key role in the realization of providing technical help to developing countries. In particular, the ASTC made a meaningful contribution to the technological development of the Peoples Republic of China in the period of friendly relations between the Soviet Union and China. From the beginning, the tasks set before this organization were large-scale and made up a complex area of work; thus, carrying out one task assisted in another. Gostekhnikas sphere of work included: Creation of provisional and yearly plans on technical and technological improvement of all branches of the peoples economy; Control and independent expertise over the plans of all ministries and departments in the area of research and development of new machinery; Organization of government experiments on models of new machinery and reports to the Council of Ministers on the results of the experiments; Support of inventors engaging in patenting and licensing and defense of authors rights (the State Committee on Inventions and Discoveries was part of Gostekhnika); Guaranteeing of information for scientific-technical work; Development and implementation of policy in the area of standardization and technical regulation, development, and control of government standards (as has been discussed above); and International scientific-technical cooperation and technology transfer to less-developed countries. After the fact, Gostekhnika had to become the headquarters of innovations and new technologies in the Soviet Union. The principles of Gostekhnikas work were cutting-edge for their time on the levels of both the Soviet Union and the world. This ministry had to coordinate the work of all ministries and departments in the area of science, technology, and, we would say today, innovations. However, Gostekhnika was unable to make decisions on its own it was able to only influence the decisions of the Council of Ministers of the Soviet Union or those of branch ministries/departments. In addition, Gostekhnika worked along with Gosplan in working out state plans for the peoples economy, and then the implementation of these plans was performed by separate ministries. Despite all the administrative reforms and reorganizations of the government which took place in the Soviet Union rather often, especially during the Khrushchev era, Gostekhnika lasted through the whole Soviet period to 1991 after its work was restored in 1955, although its name was changed in 1957 to the State Scientific-Technological Committee of the Council of Ministers (SSTC). In 1961, it became the State Committee on Coordination of Scientific-Research Work (SCCSRW). Finally, in 1966 the ministry was named the State Committee of the Soviet Union on Science and Technology (SCST). The role of the SCST

Stage 7. Collapse of the Old System and Unclear Perspectives (1991Present) Is Science Needed in Conditions of Economic Reform?
In the new economic and political conditions, the wide-scale reforms in the sphere of managing science and technological development initiated in 1983 could not be realized. Science and the hightechnology industry themselves, deprived of state financing since 1992, were on the verge of dying out. The basic resource that could be used by high-technology enterprises and scientific institutes to survive became contracts with foreign organizations and charitable grants from foreign organizations or, in rare cases, fulfilling

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Coordination of Policy in the Area of Science, Technology, and Innovations: Gostekhnika the State Committee of the Soviet Union on Science and Technology

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All of these measures, however, did not lead to an adequate


was to a large degree one of coordination and planning. The committee did not concern itself with the direct financing of promising developments. Nevertheless, the SCST possessed a reserve fund that was formulated every year through deductions of 1.5% off the top of the ministries funds for development of new machinery. It should be noted that, in the period from 1955 to 1966, Gostekhnika was the real coordinator of all the scientific-innovation work in the Soviet Union. It is accurate to say that even the Soviet Academy of Sciences was subordinate, and had to carry out its activity in coordination with government plans developed by the SSTC/SCCSRW. In the beginning, the SSTC/SCCSRW recruited from the engineering milieu. The last engineering leader of the SCCSRW was a participant in the Soviet space program, the former Director of Tula Scientific Research Institute no. 88, K.N. Rundev. The restored SCST was headed by V.A. Kirillin, an energy scientist and Party functionary, who in 1966 become one of the vice presidents of the Soviet Academy of Sciences. No further engineering personnel entered into the leadership of the SCST. Kirillin was replaced by Academician G.I. Marchuk, who had come from fundamental science, and was a former president of the Soviet Academy of Sciences. Soon thereafter, the Academy of Sciences reverted to formal independence from the SCST. The key task of the SCST after the reorganization in 19661967 was the creation of Basic Areas of Development of Science and Machinery and Basic Scientific-Technical Problems in a five-year period. And on the basis of these two documents SCST later created The Government Plan for Scientific Research Work and Use of the Achievements of Science and Technology in the Peoples Economy, which became part of The Governmental Five-Year Plan of Development of the Peoples Economy. These documents were worked out on the basis of scientific-technical prognoses covering a period of 1015 years that the SCST had to draw up together with the Soviet Academy of Sciences and other relevant key ministries (Gosstroi, Gosplan). The system of documents going into the five-year plan in turn included a series of lower level plans in different areas, including in the area of science: Coordinated plans for solving basic scientific-technical problems; Five-year plans of scientific-research work and the use of the achievements of science and technology in production (in branches of the peoples economy); and Yearly plans of scientific-research work and the use of the achievements of science and technology in production (in branches of the peoples economy). The needs of the peoples economy were assessed on the basis of prognoses, five-year general government plans were drawn up to satisfy these needs and solve tasks of development, and then these plans were detailed to the level of concrete enterprises in plans of a lower level and short-term (yearly) plans. Within the bounds of its competency, the SCST reacted relatively well to the problems arising within the economically planned peoples economy. Alongside coordinated plans, which took place in a natural fashion, the program integration method of directing the development of science and technology was suggested by Goskomitet and adopted for use, which foresaw the formulation of a limited list of scientifictechnical integrated programs. A management model was predicted such that management of typical sectors and enterprises would be realized on the basis of an cross-sector balance, and that the program integration method would be used for realization of innovation, breakthrough projects.

Scale matters. Despite the fact that certain areas of science in pre-Revolutionary Russia were first-class by world standards, as a whole, its scale poorly corresponded to the tasks before the country and to the size of the economy. As a result, this first-class science played no role in national industry. The Soviet state, even after reducing for a time the level of scientific schools in leading areas, through simple expansion of the scale of scientific activity was able to make science an important factor in the development of the economy, with the result that it ensured great scientific achievements in the long-term. Science relies on the system of education. Another problem of pre-Revolutionary Russia was a small share of the population with general, higher, and middle education. By ensuring general education, the Soviet Union was able to create a broad basis for recruiting researchers and engineers. Many famous Soviet scientists who achieved meaningful success had come from distant regions and underprivileged layers of society who would not have been able to obtain access to education and a scientific career in the conditions of pre-Revolutionary Russia. The solutions that were successful yesterday become useless today, and harmful tomorrow. The clearest confirmation of this thesis is the late Soviet period, when the system of the System Academy of Sciences ceased to produce adequate results after having received full independence, freedom from control, and colossal resources for scientific work as a reward for previous services. In a number of cases, it actually became a hindrance to the work of competing organizations and ministries. Science is more stable and vital in universities. Despite the small influence of the government on scientific research, in pre-Revolutionary Russia, in particular areas, scientific schools, based mainly on universities, were some of the best in the world. The Soviet system of isolated scientific centers was able to exist in conditions of constant control and stimulation by the government. In the new post-Soviet conditions, when science was left on its own, these scientific centers degraded, while university science was partially able to preserve itself. In this way, Scientific Research Institutes can be a more effective instrument of scientific research in the case of focused attention and support from the government, and in the case of lessening this attention, university science gives the best results.

increase in the results of scientific and innovation activity. The Russias national innovation system has continued to lag behind those of its key competitors, including not only traditional ones the U.S., Germany, France, the United Kingdom, Japan but also new, ambitious rivals Finland, South Korea, Israel, China, and even Brazil and India. *** Studying the history of Russias experience in creating and developing its scientific system allows the following conclusions to be drawn that are relevant for our time: The person who is catching up needs to run faster than the person with whom he is catching up. The Russian government has always found itself in the position of catching up in the scientific sphere, relative to the more developed countries of Western Europe (and later also the U.S.). The reason for this is that, for various reasons, the epoch of Enlightenment took place in Russia not in the 15th16th centuries, as in the countries of Europe, but in the 17th18th centuries. At the same time, only vigorous and thoroughgoing efforts to develop the domestic scientific system lessened the stagnation. As soon as the situation was left without control in the belief that the impulse had already been imparted and the national innovation system would henceforth develop on its own, the stagnation and malaise grew at disastrous rates. Constant comparison with the better is the pledge of success. Taking into account its position of catching-up, the Russian government has in several periods used foreign experience (for instance, in the era of Peter I), and in other cases has developed its own, previously nonexistent instruments and organizational structures proceeding from the tasks before the country (for instance, during the creation of the Goskomitet of the Soviet Union on Science and Technology), and, third, combined the best international experience and its own solutions (the work of Lomonosov, the organization of science in the early years of the Soviet state). At the same time, it must be noted that some of these methods clearly turned out to be better than others. However, it can be said unambiguously that the freezing of developing mechanisms and organizational structures, without comparison with the international dynamics and with the dynamic of the tasks before the country, has never led to success.

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This approach will offer a general understanding about the composition of national innovation systems in the leading countries, illustrate the specificities of their birth and development in various historical-economic conditions, and provide real examples of political and economic solution and methods that allow the innovation climate to be radically improved. In the sections devoted to each country, a description of the structure and evolution of the national innovation system is provided and the key specificities and basic instruments of its Within the framework of the project, the experience of the innovation policies of 25 countries were studied, developed and practically used. Below are presented findings of analysis of the innovation policies of three countries that we chose for more detailed description: two that have achieved very impressive results in a relatively short span of time while at the same time being at different stages of development of the innovation system (Finland, China), and also the experience of the U.S., which has long been a recognized world leader in this area. policy are distinguished.

The extremely effective methods of work of the American state structures (agencies and foundations) responsible for support of science and technologies have been successfully incorporated into the arsenals of many countries. The national innovation system of the U.S. is not only the largest in the world, but also leads in diversification. An unprecedentedly wide spectrum of possibilities for support of innovations is the result of this combination. The U.S. occupies the first place in our rating of the competitiveness of national innovation systems. The profile of the U.S. NIS is shown in the figure below.

the 19th century. American companies began to create their own research laboratories, and in 1920, there were approximately 400. A significant amount of these laboratories were created in the chemicals industry. Several industrialists spent significant sums on creation of new universities and foundations to support scientific research. At the time, the basic source of financial help to universities and colleges was private investment; the federal government financed only a very limited spectrum of research, for the most part, agricultural. The path of development of the U.S. innovation policy in the 20th century can be divided into four stages. The period between the First and Second World Wars can be identified as the time of the formation of the national innovation system and important changes in approaches to financing science. The beginning period of the Cold War (19451957) was characterized by growth of state financing of R&D and the formation of state policy in the sphere of scientific research.

5. International Experience of Development of National Innovation Systems and Policy in the Area of Science, Technologies, and Innovations

The National Innovation System and Policy in the Area of Science, Technologies, and Innovations in the U.S.
The U.S. rightly prides itself on its very high achievements both in science and in its developed system of the commercialization of its findings. American innovation clusters have long provided textbook examples.

Stages of Development of Innovation Policy in the U.S.


To understand the current composition and structure of the American innovation system, it makes sense to begin with a short overview of the history of its development. The U.S. had already become a leading world industrial power at the end of

Figure 57 Figure 56 The Geography of International Experience BRIC


better
1 4 8 7 1 1 6 11 16 17 23 16 18 6 5 9

Profile of the Competitiveness of the National Innovational System of the United States OECD
1 3 9 1 5 7 3 1

USA

26

27

26

38

supplemental

worse

talented people and ideas

commercialization

innovational potential of companies


obligatory standards and regulation capability of generating new knowledge technological level of production capability of taking knowledge from others

clusters and technological infrastructure

conditions of demand

institutes and effectiveness of government administration


freedom from corruption independence of courts quality of government administration protection of property rights

defense of intellectual property

critical mass

mobility on the labor market

quality of scientific research

level of development of innovational clusters

level of development of traditional clusters

availability of electrical energy

access to the consumer market

natural-science education in school

availability of talented people on the labor market

availability of traditional financing

government purchases

availability of venture financing

voluntary standards

level of equipment production

availability of infrastructure for commercialization

resources for scientific research

Source: Analysis by Bauman Innovation

Examples of countries in which innovational strategies have been developed

Source: Bauman Innovation

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quality of higher education

level of development of IT

factors

military purchases

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The critical moment signaling the beginning of the next stage (19571989) was the launch by the Soviet Union of the first artificial satellite in 1957. The new policy in the areas of science, education, technologies, and innovations born from measures taken to return the U.S. to technological superiority allowed the country to strengthen its leading positions and laid the foundations for the achievements of the current state of development (19892010).

according to contracts between universities and companies, while in the period before the war, practically all resources were given to federal research institutes. It was at this stage that a full-fledge state policy in the area of scientific research arose. In 1950, the National Science Foundation (NSF) was created, the methods of work of which are still today considered a model of organization of financing of fundamental scientific research.

budget obtained the possibility of choosing to obtain a patent. In its turn, the receiver of financial help was obligated to take upon itself definite obligations allowing the state to effectively influence the process of commercialization of inventions. The BayhDole Act changed the interrelationship between the government, universities, and the private sector in the sphere of transfer of property rights and encouragement of licensing of federal inventions to the private sector in a fundamental way. On the whole, the BayhDole Act is one of the most important instruments of governmental policy in the area of commercialization of innovations. The StevensonWydler Technology Innovation Act of 1980 gave wide powers to the Department of Commerce of the U.S., and tasked it with initiating processes of adoption of innovations in the state and private sectors, as well as providing multifaceted support to technology transfer to the general national level. Considering that federal laboratories had a significant amount of commercially valuable technologies that could assist in increasing the competitiveness of U.S. firms, the law demanded that every federal laboratory create an office for announcing commercially valuable technologies and the subsequent transfer of them to the private sector (an Office of Technology Licensing or Office of Technology Transfer). The policy of technology transfer inserted into the basis of the StevensonWydler Act conceptually coincided with the positions of the BayhDole Act. Both laws increased the effectiveness of processes of adoption by the private sector of the results of scientific research and development obtained with the support of the federal government.

the state and private sectors, were aimed at ensuring as much as possible full use of the findings of R&D in practice. The further development of the relationship of the federal government to the problems of innovations can be characterized as cyclical periods of high activity were replaced by periods of idleness. This took place partly because innovations, as a rule, have only secondary significance in relation to such questions as defense and national security, the budget deficit, taxation, health, and social security. Thus, after the period of high activity of the 1990s the result of which was the reorganization of the Department of Commerce of the U.S., which as a consequence caused the Department to play a fundamentally more serious role in the innovation system was followed in the beginning of the 2000s with something of a decline. In the middle of the 2000s, a realization and consideration took place in the scientific and sociopolitical circles of the U.S. of the unfolding world economic processes of globalization that were accompanied by an intensity of international competition. Rapid growth of the national innovation potential was recognized as one of the most important conditions for advancing in a number of areas and once again maintaining the lead position of the country in the economy, education, technologies, science, and national security. As a result, a series of practical steps were taken, such as the COMPETES Act passed in 2007, which significantly increased financing for science education, and initiated a wide spectrum of new programs and new organizational structures designed to ensure that the U.S. holds dominant positions in technology, education, and science.

Stage 1: The birth of the innovation system (19141945) The period between World Wars I and II
WWI had a significant influence on the organization of American science and its role in the countrys economy. The basic engine of these changes was the mass adoption of the findings of scientific research into real production. The effect was so strong that the birth of industrial R&D took place as a meaningful factor of economic development, as well as, in the opinion of many experts, that of the entire innovation system of the U.S. The period between the World Wars was characterized by a certain fall in the interest of the federal government in research and development. Nevertheless, it was at this time that important changes took place in financing science. For instance, in 1930, the National Institutes of Health (NIH) were created a federal medical research agency with a large research budget that is part of the U.S. Department of Health and Human Services. During WWII, the government increased its investment both in science as a whole and in fundamental research in particular. The growing needs of the defense industry led to the creation of national physics and engineering laboratories financed by the Department of Energy. If at the beginning of the 20th century, American scientists went to Europe to increase their level of knowledge, in the course of WWII and after American science was becoming stronger due to an inflow of scientists from Europe.

Stage 3: A splash of activity in innovation policy (19571989) The period of the Cold War after the launch of a Soviet satellite and the disappearance of the socialist camp
The Soviet Unions satellite launch in 1957 had enormous influence on the further development of the American innovation system. The National Aeronautics and Space Administration (NASA) was created in July 1958. In addition, the position of scientific advisor to the President was restored, and the Defense Advanced Research Projects Agency (DARPA) was created. Around 1960, the share of the federal investment in financing of academic research reached 60%. Financing of research in the civil sector significantly rose as well, particularly in medicine. From 1950 to 1960, the U.S. military expenditures grew from $12.9 billion to $39.2 billion. However, from 19601970, the opinion that American science was excessively militarized became increasingly widespread in society. As a result, in the mid-60s, the share of financing of defense research shrank to half of the general federal expenditures on R&D. The role of the Department of Defense in academic research also shrank from 44% of federal expenditures on R&D in 1958 to 21% in 1965, and a mere 9% in 1980. After Ronald Reagans election as President in 1980 and the beginning of another twist in the arms race, defense expenditures again sharply rose to 75% of the general federal budget on R&D. The Strategic Defense Initiative program adopted in 1984 played a major role. The activity of the federal government in the sphere of innovation policy also increased. In particular, in the 1980s, a whole array of key legal measures were realized by the government that had a large influence on the face of the U.S. NIS. For example, the BayhDole Act passed in 1980, guaranteeing universities, noncommercial organizations, and small enterprises property rights to inventions created with government financial support. Organizations that received financing from the federal

Stage 4: Change of orientations and refinement of the innovation system (19892010) The current period
The crisis in the Soviet Union and other socialist countries of Europe and the ensuing destruction of the basic military and political competitor to the U.S. again transformed the situation as the attention of the majority of federal agencies switched to the development of the American economy, increasing its competitiveness and processes of commercialization of the results of university scientific research and technology transfer. At the end of the 1980s, the Omnibus Trade and Competitiveness Act of 1988 legally strengthened the process of creating centers of transfer of industrial technologies and industrial services. The centers, formed on the basis of close cooperation between

The Structure of the U.S. Innovation System


On the federal level, the innovation system has several hubs. The White House and U.S. Office of Science and Technology Policy (OSTP) coordinate the basic federal initiatives. Headed by the scientific advisor of the presidential administration of the U.S., the OSTP provides consultations on questions of scientifictechnical policy, coordinates inter-ministry budgets for research and development, and is responsible for solving general problems in the area of innovations. The Presidents Council of Advisors on Science and Technology (PCAST) and the National Science and Technology Council (NSTC) advise the President and the administration on questions of science, technologies, and innovations.

Stage 2: Growth of government financing of R&D (19451957) The beginning of the Cold War
With the beginning of the Cold War, the role of the government in the sphere of scientific research began to quickly increase national defense required serious investments. As a result, the share of government financing of R&D grew to 75% from less than 20% in less than five years. At the same time, a greater percentage of federal resources were allocated

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The Office of Management and Budget (OMB), also acting under the auspices of the White House, evaluates the effectiveness of programs and processes in different agencies, as well as their needs, and determines the priority areas of financing. The President uses this information to plan budget expenditures. The White House leads the executive branch of the system in the structure overseeing the agencies of various functions. Many of them are active participants in innovation policy. For example, one of the main players in the innovation system is the U.S. Department of Commerce, the U.S. Patent and Trademark Office (USPTO), National Institute of Standards and Technology (NIST), Census Bureau, and Internal Trade Administration. Beginning with WWII, the American innovation system was deeply intertwined with national defense. The primary organization engaging in coordination of defense research is DARPA. This agencys main task, which was initially formed to prevent technological surprises such as the Soviet satellite, evolved over time and at present can be briefly defined as ensuring that the U.S. occupies leading positions in new military technologies. It is important to note that a series of military developments initially funded by this agency such as the creation of the first computer networks, which eventually led to the development of the Internet have exerted vast influence on the character of current civilization. A flexible and transparent organizational structure (there are 140 regular scientific employees and only two levels of administrative hierarchy in the agency), constant search for and hire world-class specialists (with special attention focused on project management staff), and a culture of teamwork and concentration of attention not on evolutionary, but on more revolutionary, vanguard research and development are particular characteristics of DARPA that lie at the basis of the effectiveness of the agency and its ability to always be at the forefront of science and technology. Recently, proposals have been examined to create other federal agencies based on the successful model of DARPA. However, serious doubts exist that the DARPA model can be replicated for the stimulation of commercial research and development. In the area of defense research, the state is simultaneously customer and consumer. The basic markets, conditions of use of intellectual property, and possibilities of access to information about current promising research are different. Another unique aspect of the innovation system of the U.S. is significant expenditures in the area of health research. Financ-

ing takes place through the National Institutes of Health (NIH), a federal medical research agency with a large research budget that is under the aegis of the U.S. Department of Health and Human Services (HHS). The agency was created in 1930, and contains 27 institutes and research centers carrying out research in different areas of health, including the problems of aging, and childrens and adolescents health, with a budget of over $40 billion. Financing of defense R&D and biomedical research, as a rule, is allocated for achieving concrete goals, for example, reinforcing national security or increasing lifespan; however, such programs may include large-scale fundamental research as well. The only federal agency that supports fundamental science is the National Science Foundation (NSF). The Foundation finances promising developments in universities and scientificresearch centers, alongside programs of natural-science and technical education and applied initiatives, such as the creation of engineering-research centers or industry-university centers. In addition, NSF is a reliable source of information necessary for realization of policy on the current condition of the U.S. innovation system. At the head of the Foundation stands a group of 24 well-known scientific and social figures appointed by the President of the U.S. with the agreement of the Senate for a period of six years. The Small Business Administration (SBA) is an important agent of commercialization. The SBA coordinates one of the largest federal initiatives in the area of financing innovation activity Small Business Innovation Research (SBIR) as well as the Small Business Technology Transfer Program (STTP). In 2005, a decision was made within the framework of the programs of the SBIR and STTP on financing the innovations of small and mid-sized companies with a total sum of $2 billion. The U.S. Congress plays an important role in the innovation system as a legislative body, allocates budget resources, carries out public hearings on problems, and exercises necessary control over business. Congress acts via a committee structure. The basic committees in questions of the innovation system are the Committees of the Chamber of Small Business and Science and Technology, as well as the Senate Committee on Trade, Science, and Transportation. The Senate also appoints leading figures (for instance, the Secretary of Commerce of director of the NIST). Local state governments, as a rule, participate much more actively in the innovation process than does the federal government; first and foremost, because of their proximity to the needs

of the concrete sectors that form the bases of regional economies. Many recent federal programs have their historical roots in long-term initiatives of states or regional innovation initiatives. A large amount of innovations in the U.S. are realized by the private sector. According to the data of the NSF, over 2,000 private enterprises annually financed more than 70% of expenses on applied research and development in the U.S. In the last 20 years, companies in the private sector have engaged in applied research and development to the sum of over 80% of expenditures on these goals in the U.S. Innovations in the private industrial sector are stimulated both by large transnational and national corporations and by high-technology small enterprises. A developed sector of venture capital engages in significant support of high-technology start-ups. A whole array of intermediary organizations plays an important role in the national innovation policy. In the 1980s, as a result of concern over the competitiveness of the processing industry of the U.S., which was dropping relative to those of Japan and the Federal Republic of Germany, the Council on Competitiveness was created. The National Academies also exist to provide consultation on questions of science and technology. These organizations carry out research and also, with the goal of simultaneously discussing current problems and evaluating the effectiveness of innovation policy, organize conferences and working meetings and ensure the work of forums of different subjects of American innovation policy. The private sector and universities, along with government institutes, play an important role in selection and planning of areas of policy. In addition, a series of specialized organizations exist that are responsible for training and exchange of innovation practices between states. University science is a very important element of the innovation system of the U.S. Fundamental research is conducted mainly in universities and colleges (about 60% of the total volume of all fundamental research), mainly using resources allocated from the federal budget. Such a division of labor has shown itself to be highly effective university professors are traditionally far from the demands of the market, and private enterprises, in turn, do not have enough resources to carry out fundamental research and do not have the broad vision necessary for science on this level. Moreover, the very nature of fundamental research often entails the impossibility of assessing the commercial value of its findings in the early stages of work, making it too risky for

private enterprise. Universities also play an important role in technology transfer, and are centers of the formation of business incubators. The system of national laboratories and scientific research centers (Federally Funded Research and Development Centers (FFRDCs) have great significance in the area of R&D. FFRDCs are financed from the federal budget. Nine ministries are connected with this system. The U.S. Department of Energy has the largest and most geographically branching network of national laboratories; four of which are run by private companies, four by noncommercial organizations, and another eight by universities. In the last few years, national laboratories have placed much emphasis on transfer of technologies and innovations, including through their bureaus of technology transfer, as well as encouraging licensing creation of technology incubators. The Federal Laboratory Consortium for Technology Transfer (FLC) is a pan-national organization created to reinforce cooperation between different agents of the innovation system, provide various services to federal laboratories and research centers, and assist in transfer of technology. In addition, a large number of collaborative projects and initiatives with the participation of ministries, agencies, and the private sector exist.

The System of Instruments of U.S. Innovation Policy


The basic instrument of the policy of the U.S. in the area of scientific research is open competitive financing through the National Science Foundation. Medical research is financed in an analogous way through the National Institutes of Health. The NSF is an independent federal agency created by Congress in 1950 for development of the natural and technical science and the humanities. The basic priority of the NSF is support of individual researchers. Decisions to finance a project are made on the basis of an independent expert assessment, taking into account the potential influence of the project on achieving a number of strategic goals (increasing security, improving health, developing education, etc.). The NSF allocated financing in the framework of four strategic areas: scientific research (54% of the budget in 2008), research infrastructure (26%), instruction (14%), and administration of research resources (6%). This financing comes to all of 4% of total federal expenditures on research and development; however; more than 30% of total federal financing of nonmedical fundamental research takes places through the NSF. In specific

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areas, such as space research, the basic sources of financing are other financial agencies, such as NASA. In the others, financing takes place basically through the NSF. A large part (around 70%) of financing is provided to researchers in colleges, universities, and academic consortia. With the goal of strengthening the links between the educational, industrial, and research elements of the innovation system, the NSF implements programs on creation of industry/university cooperative research centers (IUCRCs) and engineering research centers (ERCs). The goal of the IUCRC program is assistance for scientific research with the participation of industrial enterprises, universities, and the government, as well as support of the development of scientific-research infrastructure. The program also offers scientific and educational opportunities to students. The NSF guarantees the starting capital necessary for creation of centers and then pays for administrative and other expenses over the course of five years. The annual budget of a typical IUCRC is around $12 million. By 2007, 55 IUCRCs had been created. In 1985, the ERC program a large-scale initiative of qualitatively changing engineering education and its role in the economy of the U.S. was started. Acknowledging that in the conditions of the modern world, a traditional increase in efficiency and quality is not enough to preserve competitiveness, the programs organizers implemented a series of measures to radically increase the innovation potential of the U.S. in the global context. In addition to strengthening the symbiotic relationships between different participants in the innovation process and the development of commercial technologies, a great deal of attention is directed to identifying talented students in engineering specializations, giving them opportunities to participate in R&D while still studying (including in collaborative international projects), and developing their creative abilities and motivation to achieve a higher scientific degree. The NSF annually offers each ERC financing of a minimum of $2 million. The possibility of extending financing depends on the results of an assessment carried out every three years of the results of the centers work. The maximum period of support is 11 years. The ERC budgets are around $10 million, and are formed from financing by the NSF and research grants of other federal agencies, contracts, state governments, universities, membership fees of private companies, and fees in the form of goods or services. By 2007, 20 ERCs had been created.

One of the basic federal programs of commercialization and development of small innovation business is Small Business Innovation Research (SBIR). This program demands that federal ministries with a notable R&D budget provide targeted financing of R&D in small business. One of the aims of SBIR is increasing the possibilities of small enterprises to satisfy federal demands for R&D. Eleven ministries with a total yearly budget for scientific research of $100 million or more need to reserve 2.5% of this financing for requests in the SBIR program. At the first stage, SBIR offers grants of up to $100,000 for setting up a technical-economic base, and at the second stage, grants of up to $750,000 for financing of further confirmation of the area of research. The SBIR model also includes a third stage commercialization of a product or technology on the market; however, at this stage, federal resources are not allocated. With the framework of the program, every year several thousand grants are dispersed to small companies. After the adoption of the Small Business Technology Transfer Act of 1992 (Public Law 102564), the task of assisting in partnerships between private firms and universities became included in SBIRs program. In addition, a new program of financing of collaborative research projects between small university enterprises and federal laboratories was initiated, the Small Business Technology Transfer (SBTT). Up to 2006, the total amount of financing of research for both programs was $20.6 billion; in all, 70,000 grants of the first stage and around 25,000 grants of the second stage were given out; over 16,000 companies participated in the program, and more than 57,000 patents being awarded. The participation in the program of outside partners can be characterized with the following figures: around 1,500 exchanges of venture investment were concluded with a sum of $26.8 billion; 597 companies were auctioned and went on the exchange; and 914 mergers and acquisitions took place with the participation of SBIR and SBTT grantees. Every year, SBIR grants make up less than a tenth of the investments of the American sector of venture capital. Nevertheless, SBIR fulfills two important functions in the innovation system of the U.S. First, SBIR serves as a supplement to venture capital, offering earlier financing and a mechanism of certification for beginning entrepreneurs engaged in development of innovation technologies that may later attract private financing. Second, SBIR can also serve as an alternative to venture capital, especially in regions were the venture sector is weak, and in cases in which entrepreneurs are working on the realization of

innovation ideas that did not possess sufficient potential for rapid growth to attract venture capital. As an example of government support of commercialization, the Advanced Technology Program (ATP), which was created in accordance with the Act on Commerce and Competition (1988), can be adduced. This program, realized by the NIST, enabled the creation of companies engaged in applied development by means of financing of the commercialization of the results of research accompanied with high levels of risk. The program was implemented by the mechanism of formal inquiries on financing from below that passed through an expert evaluation. In the framework of the program in collaboration with private companies, by 2005, around 770 projects with a total sum of $2.3 billion had been realized. A large amount of financing was offered to small high-technology companies working in such areas as electronics and photonics, information technology, biotechnology, and new materials. The program achieved positive results. Nevertheless, serious criticism was directed against it that raised doubts as to the need for the government to interfere in the stages of the innovation process, which could be more effectively realized by the private sector. In sum, despite support from the scientific and business communities, the program was closed in 2007.

Finland achieved success in the development of innovations, owing to an effective policy of development of science and technologies. The results of this today are companies that are competitive on the world level of production, as well as the technologies they use to reach that position. Finland is developing leading-edge technologies in many areas: information/communications, biotechnology, metallurgy, forestry and the chemicals industry, construction, energy, protection of the environment, and social security.

Stages of Development of Innovation Policy in Finland


Although the origin of Finlands scientific-technical policy was in the middle of the last century, the essential steps leading to significant successes were taken in the relatively more recent past. The evolution of Finlands innovation policy can be divided into three basic stages. In the initial stage of development, from 19601978, the creation of this policy took place against a backdrop of rapid and uninterrupted changes in the economy. In this period, the first technological programs were adopted and implemented. The next stage (19791989) was the decisive moment in Finlands innovation history, and developed the policy that became the basis for the success of the country in the following 20 years. In the current stage (19902010), Finland has attained impressive results in innovation, thanks to intelligent management of the development of the system.

The National Innovation System and Policy in the Areas of Science, Technology, and Innovation of Finland
Finland achieved leading positions in science and technology only at the cusp of the millennium. Although it would be impossible to imagine the success of the country without such companies as Nokia, analysis shows that it has deeper causes. The country achieved its current leading position, thanks to a professional technological policy that developed in the 1980s, the use of cutting-edge approaches to technological development in the 1990s, and ultimately, the great innovation abilities of its companies. Finland is one of the most intensely developing economies in the world in terms of competitiveness. It is considered one of the world leaders in development of innovations, and occupies leading positions in such indicators as level of scientific-research and technological cooperation, development and implementation of science-intensive technologies, and use of new information technologies.

Stage 1: The birth of the innovation system (19601978) Uninterrupted structural changes
Before WWII, Finland was primarily a country that exported raw materials. The industrialization of the country began with development of the extractive sectors, forestry industry, and branches of heavy industry. In 1950, it was as before an agrarian country with a large rural population. However, beginning in 1960, a rapid and uninterrupted process of structural changes took place in the economy and society. The success of contemporary branches of industry has deep roots in the achievements of traditional sectors. For example, the kernel of the forestry clusters, the productive chain of the forestry industry, expanded from manufacture of cellulose to the creation of factories for manufacturing paper, production of control and measurement instruments, new chemical and biotechnological by-products, and a system of electricity supply for large-scale production.

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Such rapid changes took place in the beneficial environment of an industrial structure in which a few large corporations dominated and the state and private sectors were highly collaborative. In the postwar period, large state corporations played a basic role. In addition, there was great influence from external trade, especially the two-way trade relations with the Soviet Union, which enabled successful industrial growth. Later, the same large corporations that were responsible for industrialization in the 1950s and 1960s began to play a leading role in the birth of new branches of industry and the birth of an innovation economy at the end of the 1980s and beginning of the 1990s. Cultural homogeneity, egalitarian values, and relatively small socioeconomic differences between the different groups of the population, as well as low barriers to social mobility, are often mentioned among the factors that paved the way to Finlands rapid modernization. In addition, two traditional Finnish values played a part: a strong belief in technological solutions for overcoming the problems of nature, and a stubborn belief that culture and education are the primary sources of social and economic success. The political figures of the 1950s ware able to create a longterm program of stable growth of the national economy, with a solid partnership between the government and the private sector. At the same time, Finland was proceeding along the path of creating a state model of general well-being. The creation of a sociopolitical context on the labor market beneficial for the creation of a new innovation system enabled the formation from 19601979 of a flexible contract system that allowed mutually advantageous compromises to be made between workers and employers. It was the concrete political decisions made in the course of the postwar decades that established the foundations of the innovation system. One of these was the creation of the National Fund of Research and Development (Sitra) in 1967, which later played the vital role of a pan-national venture fund. Another important decision was the widening of the national basis of scientific-research resources. To achieve this goal, a structural policy was worked out in detail and developed over the course of decades. Regional universities were opened, and the system of professional education was improved and expanded. Moreover, large-scale migration of the population (including a large quantity of young people) from rural areas enabled rapid growth of both urban regions and regional and local industrial centers. At the end of the 1970s, a new technological policy was formulated and enacted in Finland.

Stage 2: Formation of innovation policy (19791989) The decisive moment


At the end of the 1970s, the European labor market was to a large degree paralyzed by strikes by unions over automatization of production and adoption of new technologies. Finnish politicians reacted to this through the creation of one of the largest government committees, the Technological Committee. Its goal was the development of a national vision of the countrys technological future. The committee consisted of representatives of all interested parties and was supported by all the available national research resources. The committee developed a large-scale research program oriented toward the industrial-technological development of the country. The work was accompanied by public debates and reinforced by advertising campaigns, especially among the political left and unions. The leaders of these organizations were also active participants in the work of the Committee. It less than two years the Committee proposed for consideration a long-term program that had been worked out through general efforts on adopting new technologies in the Finnish economy and increasing the countrys general technological level. The main idea was a systematic increase of investment in research and economic development with the goal of catching up to other developed countries. The basic reliance was on three areas: electronics,

to develop scientific and technological policy was supported by all interested sides. In 1987, the Council on Scientific and Technological Policy (STPC) was created on the basis of the former state Committee on Scientific Policy. The STPC became a platform for searching for a political and social consensus as to the new stage of development of the country in a period of economic decline caused by the disappearance of Finlands main trading partner the Soviet Union.

ditions for attracting financing from abroad, especially from transnational companies and the European Union. In 1998, foreign financing was already more than 5% of all expenditures on research and development, which exceeded the 1990s level by tenfold. In the 1990s, a mechanism was perfected for managing technological policy and a cluster approach to economy development was used. The ideas of network, cluster, and national innovation system began to be used in everyday politics. It was believed that these ideas more precisely reflected the essence of the system and its functional characteristics. This new rhetoric marking the occasion of the appearance of a knowledge economy and underlining the importance of knowledge, know-how, and high-technology as basic factors of competitiveness on the international market, seems to have been used in Finland earlier than in any other country. By means of technological programs realized by Tekes and thanks to the growth of venture financing from Sitra, Finland was

Stage 3: Formation of the contemporary innovation system (19902010) The contemporary stage
At the beginning of the 1990s, state financing of R&D, despite the deep economic decline, continued to increase without any negative political or social reaction to this growth. Expenditures of R&D in Finland grew without interruption over the next two decades, both in an absolute sense and as a percentage of GDP. In these years, Finland was able to create con-

Figure 58 Profile of the Competitiveness of the National Innovational System of Finland BRIC
better
2 7 6 2 5 8 11 19 22 25 19 22 27 9 9 1

OECD
3 7 8 2 5 8 10

Finland
3 6 1 7

biotechnology, and materials. The basic indications of the Committees program were adopted, which, among other things, allowed mass strikes to be avoided in Finland. However, a more important long-term result was the beginning of the creation of an effective system of raising the countrys technological potential. In 1982, a government Decree on Technological Policy was enacted. the agenda during the whole decade of the 1980s. In 1983, the
supplemental

21

worse

Changes in the structure of government institutes were on National Technological Agency (Tekes) was created, the task of which was the coordination and expansion of the technological program that had earlier been created by the Technological Committee. The first technoparks in Finland were created. From 19891990, new efforts were exerted by the Technothere no such wide discussion on strategies of development more practical goals of creation, expansion, and perfecting the mechanisms of realization of technological policy were pursued. At the same time, the government increased the financing of R&D a political priority. The commitment in political circles
factors

talented people and ideas

commercialization

innovational potential of companies


obligatory standards and regulation technological level of production capability of generating new knowledge capability of taking knowledge from others

clusters and technological infrastructure

conditions of demand

institutes and effectiveness of government administration


freedom from corruption protection of property rights independence of courts quality of government administration

critical mass

mobility on the labor market

quality of scientific research

availability of talented people on the labor market

level of development of innovational clusters

level of development of traditional clusters

availability of electrical energy

natural-science education in school

availability of traditional financing

access to the consumer market

government purchases

defense of intellectual property

availability of venture financing

voluntary standards

level of equipment production

resources for scientific research

availability of infrastructure for commercialization

quality of higher education

logical Committee to developed technological policy. This time,

Source: Bauman Innovation

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level of development of IT

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able to integrate the spheres of R&D, education, and commercialization to rapidly form a highly developed regional innovation infrastructure. In the essence of its activity, Sitra is a state venture fund and, in distinction from Tekes, finances not R&D itself, but new companies. Finnish firms were some of the first to realize new knowledge, adopting it in practice, and developing new technologies. Organically included in the network of innovation activity, Finnish companies were ready to produce the needed goods at the needed time and conquered a meaningful share of the quickly growing world market.

range of services, such as technological support of R&D, venture financing, guaranteeing access to the international market and establishing international links, training, education, increasing qualifications, development of entrepreneurial and technical talents, and consulting services (for example, for creation of optimal organizational models). The foundation of todays Finnish innovation system is a developed system of support of innovation activity, the elements of which are both government structures and private companies that closely cooperate with them, including distribution of significant resources for applied research and development. The system is characterized by high stability and sharp division of the functions of each of its components. A characteristic feature is the full informational transparency of the participants of the innovation system, which opens possibilities for cooperation both between state institutes and private companies, and between different territorial formations.

sities, and research institutes coordinated through the programs of the Tekes agency is an important distinctive characteristic of Finlands innovation system. The basic government organizations financing R&D in Finland are the Tekes agency and the National Academy of Sciences of Finland. Tekes is responsible for identifying problems and raising the technological level of companies, while the Academy is responsible for fundamental scientific research. The Academy implements financing of research through concrete projects, research programs, and Centers of Excellence, as well as focusing resources into increasing the qualifications of researchers. Financing from the Academy for the most part goes to projects that are proposed by scientists themselves. The programs of the Academy cover all areas of science. In the recent past they have increasingly been acquiring a targeted character, and adoption of achieved results is becoming an important criterion for making decisions about financial research. In this way, to develop a program or project, more attention is directed to the process of analysis and assessments of the structure and perspectives of research, as well as to questions of the usability of the obtained findings and the ability to transform them into a market product. In addition, leading Finnish universities have their own research programs; however their total contribution to the development of scientific-research programs remains insignificant. On the other hand, it is important to observe that the research groups and centers created on the basis of universities can carry out research much more effectively in the intersections between various branches of knowledge. The Law on Universities adopted in 1998 meaningfully increased the authority of several universities, thus increasing their potential to flexibly react to the rapidly changing needs of the external environment. The potential of universities to attract outside financing also grew, and as a result, the research of universities is inclining to the side of applied research. Finland is actively developing international cooperation in the area of fundamental research. In addition to a large number of all-European programs in which Finnish scientific organizations and foreign partners participate in Finnish national scientific programs, the Academy, along with Tekes, offers financing for work in Finland to leading foreign scientists within the framework of the special program FiDiPro. The financing of the work of these scientists for a period of two to five years is allocated according to the results of a selection of applications of Finnish universities and research institutes.

Active support of the processes of commercializing the R&D findings take place by means of grants and programs of Tekes. The participants and grant recipients are both scientificresearch institutes and private companies. Thus, beginning in 2008, the agency has been allocating grants according to the Tuli program for commercialization in amounts from 5,000 to 200,000 thousand euros at different stages of project realization, which are given to Finnish universities, polytechnic colleges, and to individual students and researchers. These grants allow financing of work on a project and compensating for expenditures on materials and components for the creation of prototypes, and also may be used for attracting professional managers or payments for consulting services. A leading role in the system of support of commercialization is played by the Sitra Foundation, which offers venture financing. At the end of 2009, Sitras portfolio of venture investments included 60 companies and a total investment of 126 million euros. A multitude of private funds also carrying out venture financing in Finland: in 2001, there were over 400 of them (with a total sum of investment on the order of 350 million euros). Centers of technology transfer under the auspices of Finnish universities play an active role in commercialization, with their role observably growing after the legislative changes of 19902000. Amendments were introduced into the university legislation in 1998 that encourage the participation of universities in disseminating the findings of scientific universities and their use by commercial enterprises. And in 2006, new legislation came into effect regarding the intellectual property rights of people who work at universities, reinforcing cooperation between universities and enterprises. Targeted financial support of increasing the technological level of companies is a powerful motivator in Finlands innovation policy. Tax advantages are not used in Finland for support stimulating R&D; it is only since 2009 that proposals to introduce them have been discussed at the state level. Instead, companies receive direct financial support. Thus, the Tekes agency finances companies R&D by means of special targeted programs, as well as offering loan or grant financing for projects. An important condition for offering financing in these projects and programs is the cooperation of universities and small and midsized companies. Development and transfer of technologies are included. As a result, more than half of state financing of R&D in companies goes to small and midsized business.

The Structure of Finlands Innovation System


One of the key elements of Finnish economic policy is technologies. The need to stimulate their development is recognized at the highest level of the Finnish government. The basic questions of high-technology development are regularly discussed by the Council on Scientific and Technological Policy (STPC), which is the center of administration of the Finnish innovation system. The STPC is responsible for strategic development and coordination of national policy. The prime minister is the head of the Council. The members of the STPC are heads of key ministries and companies, participants in the national innovation system: several representatives of the Council of Ministers, the Ministry of Science and Technology Affairs, and the Finance Ministry; heads of universities, state scientific-research centers, and technological institutes; the private sector; and unions. The Ministry of Commerce and Industry (at the present time, united with a series of other ministries in a single Ministry of Economics and Employment) carries out monitoring of the countrys technological policy. The main acting body of the Finnish government engaging in practical realization of the national technological policy is Tekes, which carries out promotion and coordination of scientific-research projects and programs. On the regional level, technological policy is implemented by 14 centers of employment and economic development (T&E Centers). The basic organizations that participate in the innovation system are the National Academy of Sciences of Finland (Academy of Finland), Tekes, state and private scientificresearch organizations, agencies of technology transfer, and financial organizations. United in the framework of the national innovation system in a single organism, these organizations provide companies a wide

The System of Instruments of the Innovation Policy of Finland


The characteristics of the innovation policy of Finland are: Stimulation of collaboration between universities and companies in the framework of different scientific and technological programs; Large government investments in science and the innovation sphere, and attraction of national private capital; Complex integration in international innovation networks; and Stimulation of initiatives on development of regions and cluster programs. In the opinion of the majority of experts, the transformation in the 1990s of the standard process of carrying out R&D into general innovation research and technological programs was a critical moment for the scientific and technological policy. These programs became an effective instrument of state policy for coordinating the interests of science and business, and an important result of their implementation was an intensification of cooperation between all participants in the innovation process. The sector clusters of the Finnish economy are characterized by strong interaction between participants and are extremely concentrated, with their development depending on internal suppliers. In Finland, cluster programs are being realized that are aimed at the creation of permanent network links between industry and science. Strong cooperation between firms, univer-

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The National Innovation System and Policy in the Area of Science, Technology, and Innovation in China
In the last 20 years, China has also demonstrated impressive innovation-technological growth. As in Finland, the basis of this growth was strategically established in 1980 by the countrys leadership. If ten years ago, it would have been difficult to talk about Chinas role in the development of cutting-edge technology, today Beijing and Shanghai are important as centers of innovation activity, on scale with London and Paris. China is especially distinguished as a leader in development of innovations against the backdrop of the other BRIC countries. The history of China in the last quarter of the 20th century represents one of the best examples of rapid development of an innovation system and progress in reforming all of its components. Relying on its rich internal resources and intelligent political leadership, the country has been able to transform itself from a supplier of a cheap work force into a scientific-technological leader. China has been able to successfully overcome both the multitudinous weak sides of its innovation system, such as, for example, a low quality of education and scientific research, and political and institutional barriers.

been possible to talk about a new course of development of science and technology in China a policy directed to a wider use of innovations in the development of the national economy.

institutes, productive enterprises, and research divisions of universities. At the same time, the Ministry of Education was responsible for the university activity and the corresponding branch ministries for the work of research institutes and industrial enterprises: machine building, the chemicals industry, and others. The development of links between NIIs and production was also carried out by ministries. In 1956, the authorities worked out a ten-year plan of national development of science and technology, the bases of which were atomic energy, electronics, and the space program. Thanks to the centralized system of research and production, many largescale projects were successfully realized, including the creation of nuclear and hydrogen bombs in 1964 and 1967, and the launch of the first Chinese satellite in 1970. However, this system had essential drawbacks. The centralized system of administration implemented large-scale projects at any price, regardless of the connection to effectiveness or increasing productivity. The lack of stimuli for independent development of innovations for Chinese enterprises threatened a degree of backwardness relative to South Korea, which had begun its development in the 1950s practically from the same level, but had been able to achieve significantly higher indicators of effectiveness. Thus, a number of technologies in China did not change in course of 40 years after their adoption from the Soviet Union in the beginning of the 1950s. It is especially worthwhile to distinguish a sub-stage that took place in the period of the Chinese Cultural Revolution of 19661976. Many universities and scientific-research institutes were forced to dismiss their employees and send them away for agricultural labor. As a result, a whole generation of professors and scientists was lost. In addition, the Chinese government placed a strong emphasis on foreign policy on increasing autonomy and sovereignty. This led to stressed diplomatic relations with Western countries and conflict with the Soviet Union after the cooling of relations in the 1960s.

of a so-called socialist market economy and openness to the outside world. Reform of the scientific-technical policy began with an approximately two-year period of planning and evolved into several successive stages; the beginning of each was marked by a National Scientific-Technical Conference during which strategic decisions were made. The reform possessed a tentative nature characterized by gradual accumulation of experience and a deepening understanding of necessary systemic changes and use of the knowledge obtained in practice. The conference of 1978 was the first step along the path of reforming the innovation system. During the course of the conference, the fundamental influence of science and technology on growth of labor productivity and the economy as a whole was evaluated. This approach was distinguished from the earlier widespread view of science and technology as purely intellectual spheres divorced from practice. From this moment, up to 1985, the government of China ensured the necessary conditions for the appearance of initiatives of the research community from below. The basic organizational novelty was commercialization of the results of research obtained by government research organizations and shrinking of the gulf between the science sector and industry. The simultaneously occurring reform of higher education included stimulation of fundamental research and the opening of new educational programs. However, scientific-research institutes and the principle of direct financing underwent few changes in comparison to the pre-reform period. As before, imports of technologies dominated, but the spectrum of sectors developing by means of adoption of technologies widened. Automobile and textiles industries began to develop. Alongside this, from the point of view of foreign policy, China was once again becoming a more open country. The next stage featured more profound institutional changes of the innovation system that began in 1985 with the start of new reforms of science and education. In this period, the basic goals of the government consisted of closing the gap between R&D carried out by institutes and industrial production, and in the development of high-technology sectors. Several programs were adopted to support high-technology sectors with the goal of expanding productive abilities and increasing the share of domestic enterprises. However, in the majority of sectors, China still has not succeeded in weaning itself from imports of technologies and high-technology components.

Stage 1: Creation of the Innovation System (19491976) The epoch of Maoism and the Cultural Revolution
After the formation of the Peoples Republic of China in 1949, the goal of the Chinese authorities became restoration and modernization of the productive forces that had been destroyed in the course of the previous 20 years during the Japanese invasion and Civil War. To achieve the set tasks, the government of Mao Tse-Tung, who was at that time the leader and ideologue of the Peoples Republic of China, began to import and adopt technologies, to a great extent relying on subsidized imports from the Soviet Union. During the realization of the first Five-Year Plan at the beginning of the 1950s, China imported technological systems primarily for heavy industry, energy production, extraction of useful minerals, the refining and chemicals industry, and machine building. In addition, the Chinese authorities founded 400 research organizations, first and foremost, for the purpose of copying models given by the Soviet Union and acquired in other countries. These organizations can be distinguished into three groups: institutes of the Chinese Academy of Sciences engaging in fundamental research; scientific divisions in universities responsible for preparing personnel and carrying out research; and institutes that specialized in applied research for industrial enterprises. To bring their plans to life, the Chinese authorities used the experience of a centralized organization of industry in the Soviet Union. The most influential body of government planning was the State Planning Commission (SPC), which developed economic plans and engaged in control over their implementation and distribution of resources. The SPC every year prepared fiveyear plans incorporating projects in the areas of science and technology, determining the division of capital and labor between sectors, targeted productive indicators, setting of prices, and division of income. The Commission also coordinated the work of the second-tier state bodies that formed narrower aspects of innovation policy and divided functions of control between themselves. The State Science and Technology Commission (SSTC) regulated and controlled the innovation work of scientific-research

Stages of Development of Innovation Policy in China


The contemporary development of Chinas innovation policy began in 1949 with the formation of the Peoples Republic of China. The beginning of each stage was connected to the arrival to power of new leaders or a change of political course. The initial period of development (19491976) encompassed the creation of the innovation system in the epoch of Maoism (19491966) and the Cultural Revolution (19661976). The coming to power of Deng Xiaoping was a critical moment both for the Chinese economy and for the national innovation system. The stage of the formation of an innovation policy (19761995) included the development of a new economic course (19761978), carrying out reforms of the economy and system of scientific research (19781985), and development of high-technology sectors (19851995). The beginning of the rule of Jiang Zemin and the ensuing reform of state institutes and the administration of Chinas innovation system (19952006) was a stage of new reforms and capitalization on achievements. The structure of administration of the innovation system as a whole was formed at the cusp of the 21st century, and since 2006, it has

Stage 2: The critical moment (19761995) Creation of the basic institutes of R&D and orientation to high technology
In 1976, Deng Xiaoping came to power in China, leading to the beginning of radical changes in the foreign and domestic policies of China. A pan-national program of reform was initiated the Policy of Reform and Openness, directed to the creation

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The tasks of the reforms were changes in the mechanism of distributing state resources and transformation of the R&D organization into commercial enterprises, or merging them with large industrial enterprises. In 1986, with the framework of expanding the programs of financing of science, the National Foundation of Natural Sciences was formed. In 1988, the Chinese authorities began to create hightechnology zones industrial parks and incubators. The instruments of financing R&D of high-technology firms began to intensely develop by means of grants and subsidized interest on bank credit. In ten years, there were already 53 high-technology zones at the national level, and the number of enterprises registered in them was 65,000. The question of reforming the management of personnel in state scientific-research centers became urgent. Programs were introduced covering expenses on training of Chinese specialists abroad and attracting specialists who had gone to Western countries. At the same time, the Chinese government began to work on attracting direct foreign investment, for the most part, in the home electronics and automobile construction sectors.

As a whole, the reforms enabled gradual introduction of market mechanisms. The most significant of these changes were the launch of various government programs in the R&D sector and the appearance of a technologies market and private industrial enterprises. The basic achievements were an increase in the share of nongovernmental financing in the R&D sector and universities obtaining dominant positions in scientific research.

The basic task was to increase the Chinas competitiveness in world markets. In the course of ten years, innovation policy concentrated on giving commercial enterprises, including small- and midsized businesses, a leading role in the innovation system of China with the goal of increasing their innovation potential and the volume of commercialization of technologies. The institutional changes included new schemes of financing research and the transformation of state institutions. The Chinese government began to employ the experience of the innovation policies of the OECD countries. Bureaucrats and analysts responsible for the development of innovation policy became acquainted with the leading conceptions of the structure of the innovation system in the West, and a specialist was appointed minister of science and technologies who had ten years of experience of work, and had received a candidates degree, in Germany. In this period, there were also many changes in the mechanisms of the administration of Chinas innovation system. In 1998, a special Administrative Group responsible for innovations was created under the auspices of the State Council of the Peoples Republic of China. In addition, a State Commission on

Stage 4: A new course of development of science and technologies (19952006) Using innovations for developing the economy
In 2006, the next stage of the development of Chinas innovation policy began. The Chinese government adopted a new midand long-term plan for development of the countrys innovation system that changed and emphasized several areas of the policy. First and foremost, the Chinese authorities cut expenditures on imports of technologies, thus enabling the increase of the negotiating strength of Chinese players in the technologies market; stimulating the innovation activity of private enterprises; significantly increase the share of GDP in R&D; and move to a qualitatively new level in protection of intellectual property. However, an insignificant amount of time has passed since the plan was adopted, so it is still difficult to evaluate the course and preliminary results of these changes.

Stage 3: Capitalizing on achievements (19952006) Perfecting institutes of directing the innovation system development
In the 1990s, Jiang Zemin began to conquer the leading positions in the Chinese Communist Party. Thanks to his initiative, in 1995 a new strategy was adopted of a rebirth of national science and the system of education based on the growth of international competition in the area of technologies. The strategy was reflected in Chinas intention to enter the WTO.

Structure of the Innovation System of China


The administration of the innovation system of China on the national level is implemented through the following government structures: The Administrative Group on Science, Technology, and Education of the State Council of the Peoples Republic of China, which is the key body and is responsible for strategic decisions; A series of ministries and agencies at the ministerial level responsible for development and realization of innovation policy: the National Committee on Development and Reform, the Chinese Academy of Sciences, the Chinese Academy of Engineering Sciences, the Ministry of Education, the State Committee on Intellectual Property, the National Foundation of Natural Sciences, and branch ministries, among which are the Ministry of Industry and Information Technology and the Ministry of Agriculture. The most important ministry in the innovation system is the Ministry of Science and Technology (MOST); A series of ministries and agencies at the ministerial level indirectly influence the development and realization of innovation policy: the Ministry of Finance, the Ministry of Commerce, and the Ministry of Human Resources. The Administrative Group on Science, Technology, and Education of the State Committee of the Peoples Republic of China is the highest body of administration of the innovation system

Figure 59 Profile of the Competitiveness of the National Innovational System of China BRIC
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3 2 7 15 19 23 29 30 30 37 36 44 48 45 42 44 43 44 49 43 41 42 28 21 9 16

Science and Technologies was formed in the Ministry of Science and Technologies, with broadened authority and increased financing. In 1999, the government institutes of the Chinese OECD China Academy of Sciences were reformed. Many of them became independent organizations or part of the research divisions of industrial enterprises. Analogous changes occurred with institutes that were part of the branch ministries, which were being reformed at the time. However, the Academy of Sciences remained the basic beneficiary of government resources for science, retaining within its structure 112 organizations, 84 of which were scientific-research institutes. In addition to this, an Innovation Found was formed in 1999 that allocated resources to technological enterprises of smalland midsized business. From this year on, expenditures on education sharply increased, and as a result, the average yearly rate of growth of the number of Chinese students and university graduates rose to approximately 25%. In 2001, China joined the WTO, and the government adopted a new plan of developing trade directed at increasing the volume of exports. Since that year, new tax instruments were introduced to stimulate innovation activity; specifically, tax breaks for expenses on R&D and imports of foreign technologies. Laws were also adopted on venture financing, and an association of venture companies was created.

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21 20 22

supplemental

worse

talented people and ideas

commercialization

innovational potential of companies


obligatory standards and regulation capability of generating new knowledge technological level of production capability of taking knowledge from others

clusters and technological infrastructure

conditions of demand

institutes and effectiveness of government administration


freedom from corruption protection of property rights independence of courts quality of government administration

defense of intellectual property

critical mass

mobility on the labor market

quality of scientific research

level of development of traditional clusters

level of development of innovational clusters

availability of electrical energy

access to the consumer market

availability of venture financing

availability of talented people on the labor market

availability of traditional financing

government purchases

natural-science education in school

voluntary standards

level of equipment production

availability of infrastructure for commercialization

resources for scientific research

Source: Bauman Innovation

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quality of higher education

level of development of IT

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of China. The group was created in 1998, and is responsible for development of the mid- and long-term strategic plans on science and technology from 2006 to 2020 that were adopted by the government in January 2006. The Administrative Group takes strategic decisions and has the right of the final vote. The prime minister and his advisor the state advisor on science, technology, and education head the Administrative Group on Science, Technology, and Education. All ministers whose sphere of activity is connected with science, technology, and education are part of the leadership of the Administrative Group. The Committee on Defense of Intellectual Property is directly subordinate to the Administrative Group on Science, Technology, and Education of the State Council of the Peoples Republic of China. It organizes and coordinates work on defense of rights to intellectual property and works out legislative projects and standards for evaluating IP, as well as policy in the area of the issuing and defense of patents. In addition, the representatives of the Committee participate in international negotiations on questions concerning IP. The Chinese Academy of Sciences (CAS) is also under the direct administration of the Administrative Group on Science, Technology, and Education, and is therefore on the same level of the government hierarchy as ministries. Beginning in 1949, it has been an inseparable part of science and innovation. In the course of reforming government scientific-research institutes, the CAS was responsible for the creation of 80 national research institutes and commercialization of the results of R&D. At present, the Academy is responsible for conducting national research on natural resources; provides the government with statistical information and consulting services in the area of R&D; trains young specialists beginning to work in the science field; and coordinates the work and finances 91 scientific-research institutes. The Chinese Academy of Engineering Sciences, created in 1994, carries out analogous functions. Another body subordinate to the Administrative Group and also responsible for innovation policy on the macro level is the National Development and Reform Commission (NDRC). The Commission is responsible for the development of 5-, 15-, and 20-year plans for the development of China. A department of high-technology sectors is part of the NDRC. This subdivision plays a special role, and is responsible for monitoring the development of high-technology sectors and technologies and the development of strategies, plans, and investment projects with the goal of actively implementing innovations. There are

other departments of the Commission: a Department of Strategic Planning, Department of Investment and Capital Acquisitions, and Department of Small and Midsized Enterprises, the functions of which include working out of plans of development, approving expenditures on R&D, and support of small and midsized business. These departments are important components of the NDRC, which, in turn, has strong horizontal links with other structures. The National Commission distributes resources for R&D and coordinates the actions of other ministries, which ensures its critical role in the development of pan-national scientific-technical plans. The Ministry of Science and Technology (MOST) develops a more concrete innovation policy in concordance with the plans prepared by the NDRC. The MOST is the responsible ministry in innovation policy in all spheres. It works out strategic programs and legislation in the area of scientific and technological policy, carries out research on the influence of the innovation system on social and economic development, implements programs in the area of science and technology, and creates scientific parks and incubators. Along with other ministries, the MOST works at composing the strategy of development, determining priority areas, and development and adoption of legislation in the area of innovation. In the process of development and implementation of technological policy, the MOST closely cooperates with the National Commission on Development and Reform; in the area of science with the Chinese Academy of Sciences, the Ministry of Education, and the National Foundation of Natural Sciences; in questions of support of investment and innovation in MSB enterprises with the National Commission on Development and Reform and the Ministry of Finance; and, finally, in the area of development of human resources with the Ministry of Education, the Ministry of Human Resources, and the Chinese Academy of Sciences. In the absence of a coordinating body and delineation of authority, cooperation between these ministries is significantly more difficult. The MOST implements policy through the so-called 3+2 program. This is three basic programs (fundamental research, development of high-priority technologies, and research and development in the area of high technology) and two supplementary programs in the area of R&D: creating infrastructure for innovation, and creating conditions for the industrialization of China. With the goal of dividing up the functions of development

and implementation of innovation policy, the ministry delegates carrying out state programs on R&D and administration of national high-technology zones specially created by affiliated centers. One of the organizational problems is the redundant functions of the National Foundation of Natural Sciences (NFNS), which provides financing to projects of an analogous type. The NFNS was formed in 1986 as an agency for financing key scientific-research projects. The Foundations budget is formed from resources allocated by the Ministry of Finances, business, and regional authorities. The Foundation carries out financing primarily of scientific-research projects within the framework of selected priority areas. In distinction from an American foundation, the NFNS does not concern itself with university educational projects; only scientific-research projects fall under its purview. In 20 years, the NFNS has financed around 100,000 projects. The Ministry of Education (MOE) is responsible for preparing qualified personnel, university research, and commercialization of its results. In the middle of the 1990s, the majority of higher educational institutes in the purview of branch ministries came under the aegis of the MOE. This gave the ministry the possibility to formulate and implement a united national policy in the system of higher education. The MOE implements a series of programs designed to prepare young specialists and attract talented people from other countries to Chinese universities. In addition, the MOE is responsible for stimulating university research and commercialization of its findings; enterprises managed by universities; start-ups; rights to intellectual property; technology transfer; science parks; and cooperation between enterprises in different sectors. As examples of branch ministries/participants in the innovation system, we can name the Ministry of Agriculture, the Ministry of Health, and the Ministry of Industry and Information Technology. The Ministry of Agriculture is responsible for R&D in the area of agriculture (including in the sphere of biotechnology); the Ministry of Health, for medical science; and the Ministry of Industry and Information Technology, for R&D in the area of information and communication technology. Government institutes carrying out research in corresponding areas are part of the competency of these ministries. In comparison to the MOST, the ministries implement innovation policies in their area through affiliated structures, as well as by means of investment in R&D in sector enterprises.

With the goal of supporting development and adoption of technologies, the Innovation Foundation for Small Business was created in China. This foundation assists the technological development of MSB enterprises by means of subsidization and beneficial investing. The Foundation also implements support of commercialization of scientific development. Finally, several enterprises of the third group of government ministries guarantee the resources necessary for development of innovations. The Ministry of Finance is responsible for distribution of the budget for science and technology according to various articles of expenditure, determining the structure of expenditures for purchases of equipment and land, financing labor, and building construction. The Ministry of Commerce develops and implements measures that are aimed at stimulating trade in high-technology goods, attracting direct foreign investment, and importing technology. The Ministry of Human Resources supports specialists working in the innovation sphere and attracting specialists from abroad. As far as the local level of administration is concerned, the policy carried out by regional and municipal authorities is to a significant extent autonomous. Regional subdivisions of all ministries of the central government exist. In addition, every province has its own commission on science and technology. The local administrative bodies are assigned the task of carrying out government policy in concrete social, economic, and geographical conditions. In areas that are unregulated by the central government, the local authorities have the authority to carry out their own independent policy. Financing of innovation activity comes from different funds, as taxes in China are divided into local and federal. Sixty percent of expenditures on innovation policy are financed by the federal government and 40% by local government bodies. Such a flexibility of the system has serious advantages; however, the absence of a unified mechanism of coordination leads to blurring of the responsibilities of central and local governmental bodies, lack of coordination of work, competing priorities, and duplication of functions. As a result, reduction of the general effectiveness and regional disproportions in financing of innovations are observed.

The system of instruments of Chinas innovation policy


A complicated and much diversified structure of development and implementation of innovation policy, including a multitude of government bodies, has been formed in China. The

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Administrative Group on Science, Technology, and Education of the State Council of the Peoples Republic of China is the key body coordinating innovation policy. However, another ten or so agencies, foundations, and ministries are responsible for development and implementation of innovation policy. The abundance of responsible bodies leads to the appearance of a multilayered and uncoordinated innovation policy. Lacking sharp delineation of authority, government bodies have to act as determined by the concrete situation. China is actively attracting direct foreign investment into science-intensive and high-technology sectors. For instance, Chinas automobile sector was formed through large-scale investment by international companies. At the same time, insufficient attention is given to innovations in the service sector, which is highly significant in developed countries. It also must be mentioned that there is a strong predilection toward creating physical infrastructure: roads, ports, and energy plants. Such a policy predetermines the competitiveness of, for the most part, manufacturing companies that need contemporary physical infrastructure. China uses the majority of instruments that are used today in the OECD countries. However, all the instruments are implemented by the government from above, with minimal involvement of other interested parties, in particular the private sector. Development of policy is carried out in the framework of a planned economy in the form of directed development of programs and plans. This, in turn, somewhat reduces the effectiveness of using cutting-edge instruments. To this day, there exists in China a definite imbalance in innovation policy in favor of support of large state enterprises. For development of the innovation system and expansion of the scale of innovation activity, Chinese government structures use a wide range of instruments: from direct financing to creation of innovation clusters. The most important role in financing of fundamental research is played by the National Foundation of Natural Sciences, founded in 1987. The Foundation allocates money not only on the principle of central distribution, but in the form of grant financing. The Foundations budget is primarily supplied through the government. The Foundation supports both research groups and individual scientific initiatives. Selection of projects takes place based on the results of expert evaluations. From 2001 to 2005, ten billion yuan (or more than $1.2 billion USD) were allocated to research financing. In 2006, the total budget of the Foundation was more than 2.68 billion yuan (around $300 million USD).

Another initiative directed to support of fundamental research in priority areas is the 973 program. From 1998 to 2005, five billion Yuan were allocated to this program, with 143 key projects being financed during this period. In 2005, the Foundation regarded health (17.4%), information technology (12.1%), materials science (14.3%), agriculture (17%), energy (10.5%), natural resources and ecology (17.4%), medical research (14.7%), and others (2.8%) as priority areas. In 1998, during a period of active development of university research, the Knowledge Innovation Program for support of the Chinese Academy of Sciences (CAS) was created. This program foresaw the reorganization of the institutes of the CAS with the goal of increasing their effectiveness and competitiveness against a backdrop of a growing role of research institutes attached to universities. The programs budget comes to around 1 billion yuan a year. The main goal of the program is to make the CAS a center of fundamental research at the world level, and includes a plan to attract scientists from abroad. In addition, in the framework of personnel policy, special programs exist examining the allocation of grants to Chinese scientists who are returning from other countries. The results of these programs are rather good. For example, through means of the One Hundred Talents Program, from 20012005, 422 scientists returned, who were presented laboratories and resources for research. In the area of technological policy, China has in the last decade been actively engaging in import of technologies. The Chinese authorities are stimulating the inflow of direct foreign investment and transfer of technologies from international companies. For instance, the conditions for foreign automobile manufacturers and IT companies to have access to the internal Chinese market were needed to provide licenses and patents to Chinese enterprises. Moreover, international companies had to sell products manufactured in China on international markets, leaving national markets to domestic producers. However, some initiatives of this policy were eliminated in connection with Chinas entry in the WTO. Another important instrument in Chinas innovation policy is the development of high-technology sectors. The program 863 is the key one in this area. The total budget of this program from 2001 to 2005 exceeded those of other programs by several times. The budget was divided into two parts: civilian and military. This program was initiated in 1986 with the goal of closing the gulf between the level of development of high-technology sectors in developed countries and in China. The program was rather suc-

cessful: the amount of patents issued based on its findings increased from 108 in 1999 to 3,106 in 2005; the number of publications in Chinese from 6,828 to 34,462; the number of publications in English from 1,629 to 9,830; and the number of new products and processes from 357 to 9,328. Alongside this, the share of the high-technology sector in the Chinese economy increased from 2.21% of GDP to 4.44% in 2005. Another important instrument of Chinas innovation policy is special technological zones, created in 1988 under the program Torch. Currently, 53 high-technology zones are operating in China, and the number of companies registered in them exceeds 65,000. These zones guarantee infrastructure for development of high-technology companies by means of tax stimuli, specially created government administrative bodies, reduction of transaction costs, and development of innovation clusters. In 2004, the added value created by companies in the high-technology sector came to 643 billion yuan (3.97% of GDP). It is important to note that the share of high-technology companies in the added value created in technoparks is 86.6%. The majority of these companies are start-ups attached to universities or government enterprises, or new private firms or companies created through the attraction of direct foreign investment. From the point of view of commercialization of the results of R&D, it is worth noting the policy of China, which is directed toward stimulating the appearance of new companies that have been split off from universities and government enterprises. Clear examples of high-technology companies formed in this way are Lenova, which was split off from the Chinese Academy of Sciences, and Beida Founder, which is a product of the University of Beijing. The greatest share of such companies is in the biotechnology sector. An important step in this area was support of the innovation activity of small and midsized companies by a special foundation created in 1999. MSB enterprises have limited ability to carry out R&D, and often need to order research from universities. As a result, the quantity of orders to universities from this sector rose sharply, coming to 26% of the total expenditure of companies on R&D in 2004. In addition to other things, support of R&D in individual sectors is at a developed level. In agreement with the plan adopted in 2006, the Chinese authorities have singled out 512 large innovation companies in strategically important sectors with the intention of financing their R&D subdivisions. In addition, in 2000, special tax benefits were introduced in China for

companies that produce integral micro-schemes and program guarantees. As far as government purchases are concerned, according to the new national plan adopted in 2006, government bodies are required to allocate a definite share of their expenditures to products of innovation Chinese companies. At the same time, the decision of whether to make a purchase does not depend on whether it is advantageous from the point of view of losses or not, but is based exclusively on the criteria of innovation products. In accordance with the new rules, government bodies can purchase foreign products only if there are no alternatives in China. Other limitations also exist expenditures on purchases of equipment from Chinese manufacturers must come to no less than 30%, and if money is allocated to a priority national project, no less than 60%. *** On the basis of an analysis of the innovation systems of the most competitive countries, a conclusion can be drawn that, in contemporary conditions, competition with the leading players on the world market without creation and continual refinement of a national innovation system is impossible. In all of the examined instances, the government is either the main player or one of the key players. Concrete, successful realizations of the idea of a national innovation system can fundamentally vary, depending on the historical-economic context (for example, for historical reasons, the American system is more diversified and flexible, and the Finnish one is more structured, yet both are highly effective). Nevertheless, in our view, it is possible to formulate several basic propositions that are to a significant degree common to various countries. The following factors enable successful development of a national innovation system: A consistent and long-term government policy with sharply formulated goals and tasks. Gradual realization of such a policy, taking into account experience accumulated, increases its effectiveness; The presence of a thought-out and coordinated system of development and implemented innovation and scientifictechnical policy of government organizations. Flexibility and a wide range are important characteristics of the system. It is also necessary to create a system of coordinated bodies, which allows duplication of functions to be avoided, as well as a personnel policy that ensures attracting highly qualified experts;

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International Experience of Development of National Innovation Systems and Policy in the Area of Science, Technologies, and Innovations

Rational use of existing innovation potential as a foundation for building an economy of a new type; Understanding of the basic role of an engineering corps in achieving a world level of competitiveness, while directing special attention to engineering and natural-science education. R&D, commercialization of the findings of fundamental research, and adoption of them in industry is impossible without a large number of engineers with a broad outlook as well as highly creative potential and entrepreneurial talent; Regular efforts to improve and strengthen cooperation between the private, research, and education sectors; Creation and targeted support of areas important for a growing national-technological potential that are either developing insufficiently, or not developing at all on their own (financing of fundamental research and potentially ground-breaking technologies either with no clear commercial promise at the initial stage or accompanied with large risks, support of interdisciplinary development, venture financing of promising but high-risk start-ups, etc.); As much government support as possible for potentially innovation firms by providing them with financial help and services in different forms (tax breaks to large corporations, targeted financing of R&D of small firms); Developed programs of commercialization of technology; Strategic attraction of foreign investment and transnational companies; The presence and regular refinement of developed legislation in the area of intellectual property; and Systematic study and adoption of the best international experience.

6. Competing for the Future Today: Areas of a New Innovation Policy


(for example, the presence of a critical mass of investment in

Building Blocks of a New Innovation Policy for Russia


The new innovation policy for Russia may consist of six basic components/areas: 1. Ambitions, coordination, and assessment of an integrated innovation policy; 2. Policy in the area of government scientific research; 3. Policy in the area of commercialization and development of small and midsized innovative companies; 4. Technological policy; 5. A regional dimension of innovation policy development of regional innovation systems and assistance of regions in realization of regional innovation policy; and 6. Framework conditions and stimuli.

scientific research, technical traditions, quality of higher education, and the structure of sectors of the economy) have great significance and change rather slowly; an ambitious and effective innovation policy can be an important factor for development. Finland, Ireland, and China are good examples of how the ambitions of government authorities and society have fostered the creation of a strong innovation system in a country, practically from scratch. To initiate and bring to fruition, a new innovation policy, it is necessary to create a general administrative platform on the basis of the ability to solve the following basic tasks: Increasing the effectiveness of coordination between various institutions and organizations during development and implementation of innovation policy; Using contemporary approaches and the creation of a system based on the evaluation of the success and effectiveness of individual programs within the framework of innovation policy; and Refinement and development of the system of statistical monitoring in the sphere of innovation policy. The difficulty of implementing an innovation policy in different countries, including Russia, is due in part to the fact that various aspects of the innovation systems are divided between different institutions and may lack coordination and

Ambitions/Priorities, Coordination and Evaluation of Integrated Innovation Policy


International experience with accelerated development of innovation systems shows that on their own, an ambitious government innovation policy can play a large role for advancing development of an NIS. Despite the fact that basic and inherited factors of competitiveness of innovation systems

Figure 60 Areas of Innovation Policy

collaboration. For example, the ministry of education is usually responsible for the system of university education; the ministry of industry, for the development of technological potential in the economy; etc. The practice of the Soviet Union, U.S., and other countries shows that it is impossible to create a single super-ministry that would answer all questions of innovation policy, as there is not one example of a successful ministry of innovation. Innovation policy is one of the most complicated areas of government policy, requiring effective cross-institutional coordination and control. Every specialized ministry needs to professionally solve its tasks, such as ensuring the quality of university education or effectively introducing new technologies in industry. At the same time however, different areas of innovation policy must be successfully coordinated with each other. In various countries, this task is solved by

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Leadership, coordination, and evaluation of integrated innovation policy

Policy in the area of government scientific research

Policy in the area of commercialization and development of small and midsized business

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Technological policy

Regional dimension of innovation policy

Appropriate conditions and stimuli

Source: Bauman Innovation

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C o m p e t i n g f o r t h e F u t u r e To d a y : New Innovat ion Policy for Russia

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Development of the Leading Universities in China


Source: Bauman Innovation

means of creating special councils or boards under the auspices of the president or prime minister. Taking into account the extremely high level of fragmentation of innovation policy between various institutions in Russia8, the creation of an analogous structure is not only desirable, but unavoidable, and must be the starting point and catalyst for increasing the competitiveness of the Russian innovation system. At the first stage, a model of a coordination board can be selected. At the next stage, in the process of adopting a strategy for increasing the competitiveness of Russias innovation system, the work of the board needs to be expanded to the role of a planning organization9. In the framework of implementing innovation policy in many countries, increasingly greater significance is being given to the creation of a system of regular monitoring of the condition of the innovation system, as well as evaluating the success and effectiveness the innovation policy and the innovation system as a whole. For these goals, it is necessary to work out new, contemporary methods for evaluating targeted programs in the sphere of innovation policy. This would include such areas as evaluating the competitiveness of scientific research and the contribution it makes to the countrys socioeconomic development. One important participant in the procedure of evaluating the results of an innovation policy may be the Audit Chamber, taking into account the duties assigned to it and its experience in control and evaluation of the effectiveness of expending resources from the state budget. Increasing the quality and methods of statistical observation is also necessary in multiple areas. These would include observing entrepreneurial activity and the demographics of firms, the level of technology used in various companies, and the contribution of innovations to the growth of competitiveness and productivity of both individual enterprises and whole sectors.

could participate in the creation of an effective infrastructure to control the quality and effectiveness of technical regulation, assist in development of tax benefits for companies engaging in R&D, and shift the focus of government purchases to include more innovative products; The OECD for adoption of contemporary principles of governmental management in organizations involved in the implementation of innovation policy, as well as for assessment of individual areas of government innovation policy; and The World Intellectual Property Organization (WIPO) for developing a comprehensive strategy for increasing the effectiveness of protection of intellectual property and monitoring the process of implementing recommendations and fundamental measures. Attracting international organizations may have the following advantages: Attraction of the best international experience for Russian businesses; Assistance in the implementation of some areas of policy; Evaluating the effectiveness of the strategy as a whole (including basic measures, achievements of key targeted indicators); Evaluating the ability and effectiveness of individual instruments (for instance, tax benefits, individual programs); and Increasing the effectiveness of government administration and the level of qualification of personnel in key organizations through realization of special complex projects. in the technological improvement of existing enterprises in Streamlining and increasing the effectiveness of administration of the system of government scientificresearch organizations; Development of the research function of leading universities; Development of natural-science and engineering education; and Development of medical-biological research and research infrastructure through formation of integrated medical complexes (medical university + Research Institute + clinic) that are competitive on the world scale.
There exist three practices for building universities at a world level. The first proposes selecting the best universities that already exist and developing them further. The second model is based on merging different institutions with the purpose of attaining synergy. The third variant, finally, consists in the creation of a leading-edge university from scratch. In its program of creating world-class universities, China uses the first variant. Developing already-existing universities is much less expensive than creating them. Thanks to a thorough program of development, the University of Beijing and the University of Tsinghua have become world-class. These universities were given the privilege of first choice of the best students from each province. In 1993, a code of recommendations for developing the system of higher education was issued in China. It envisioned the creation of 100 key high-level universities. As a result, in 1995 the largest program of the system of higher education since 1949 was launched (program 211). It consisted of three parts: the creation of necessary powers in universities, the formation of competence in priority areas of knowledge, and the creation of a new system of government services and administration in the system of education. In the course of ten years, 29.3 billion Yuan (around $3.6 billion USD) were invested in this program, including 8.8 billion Yuan ($1.1 billion USD) from the central budget. The majority (15.8 billion Yuan, or around $2 billion USD) went to formation of competences in priority areas of knowledge. Here it is important to note that, due to low labor costs, the structural changes in the system of higher education cost ten times less than it did in Western countries. In 1998, Jiang Zemin announced that China would develop worldclass universities oriented toward science and technology. As a result of this, program 985, which envisioned creating a number of world-class universities, was launched in China in 1999. At the first stage of the programs realization, 34 select universities were allocated resources in the amount of 14 billion Yuan ($1.73 billion USD). In the second stage, from 2004 to 2007, another four universities were selected for financing. According to world ratings of universities, the most successful one in China is the University of Tsinghua, which was founded in 1911. In this university, there exists a special system of management directed toward commercialization of the findings of R&D and development links with the real sector. For example, a university committee is responsible for links with both Chinese and foreign companies. In addition, the university has founded a special company that manages its assets. A scientific park and incubator operate under the auspices of the university. In the last few years, over 100 companies have been created under the aegis of the University of Tsinghua. It occupies leading positions in China in terms of number of contracts. In 2005, its total budget came to 0.5 billion Yuan (around $62 million USD). This year, the University of Tsinghua has registered 530 patents. In addition, 100 laboratories work within the university, half of which are integrated with Chinese enterprises and half with foreign ones.

Policy in the Area of Government Scientific Research


Competitive scientific research is a primary source of innovative potential in the mid- and long-term perspectives. It also generates innovative breakthroughs, allowing new sectors of the economy to arise or transforming existing ones. A competitive level of scientific research in universities or scientific centers is a necessary prerequisite for competitive professional education, in particular, with natural-science and engineering disciplines. Opportunities for university students to participate in productive research are also important if the graduates of these universities are to play a large role

the future. Conversely, if they do not have experience in carrying out contemporary scientific research, these new scientists and engineers will be unable to conduct high-quality scientific research and development, or adopt new technologies for their companies. For these reasons, increasing the scale and the effectiveness of government investment in scientific research is one of the key elements of government innovation policy in many countries. A policy of government-funded, scientific research in Russia could be implemented by doing the following: Increasing the volume and raising the effectiveness of financing scientific research by the government;

Attraction of International Organizations for Assistance in the Realization of Separate Areas of Innovation Policy
Collaborative work with foreign and international organizations in individual areas of innovation policy may become an important part of the work of the Commission. This could include organizations such as: The World Bank for implementation of a project-oriented approach to reform of individual areas. They

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A significant contribution to innovation l policy is made not only by profile ministries, such as the Ministry of Education and Science, the Ministry of Industry and Trade, and the Ministry of Economic Development, but also by branch ministries and agencies the Ministry of Health and Social Development in medical science; the Ministry of Agriculture in agricultural science; the Ministry of Connections and Mass Communications, which plays a key role in the development of information-communications technology; the Ministry of Natural Resources, in geological and ecological sciences; the Ministry of Energy; the Federal Space Agency; and the power ministries (the Ministry of Internal Affairs; the Ministry of Affairs of Civil Defense, Emergency Situations, and Removing the Effects of Accidents; and, of course, the Ministry of Defense. Analogous to the GNKT of the Soviet Union, the experience of which has been used in other countries, including the U.S. (OSTP) and China.

Insert 6 C o m p e t i n g f o r t h e F u t u r e To d a y : A r e a s o f a N e w I n n o v a t i o n P o l i c y

Tax Stimuli of R&D in Companies


Source: OECD, analysis of tax stimuli in particular countries by Bauman Innovation

Policy in the Area of Commercialization and Development of Innovation Enterprises of Small- and Mid-sized Business
The main emphasis of government policy in Russia in the last ten years has been placed on developing infrastructure for the commercialization of ideas that were previously developed in the science sector. For example, attempts are being made to develop the sector of venture investment, expand the spectrum of grants for support of commercialization and development of innovation enterprises of small- and mid-sized businesses, and create incubators and technology-implementation basic economic zones. However, as international experience shows, without increasing the competitiveness of Russias innovation system, concentrating solely on the development of infrastructure for commercialization cannot lead to the expected results. It is necessary to use a wider spectrum of instruments of innovation policy, first and foremost those that will increase the rate of success in scientific research and stimulate the technological modernization of industry. Nevertheless, questions of commercialization are still rather important. So while it is not the entire solution, it is still necessary to focus on increasing the effectiveness and development of infrastructure for commercialization in the following areas: Expanding the effectiveness of financial resources for commercialization, especially in the early stages up to the stage of creation of companies (including increasing resources and simplification and increasing the effectiveness of the procedure of selection); Increasing the effectiveness of the strong points of the innovation infrastructure (micro-instruments). This would include centers of commercialization/transfer of technology attached to universities and Research Institutes, increasing the availability of real estate and infrastructure for startup technological companies, and increasing the availability and quality of professional services for commercialization and creation and development of technological companies; and Widening the availability of financial resources for technological development of existing enterprises of small and mid-sized business (for example, through expanding the portfolio of grants for realization of technological modernization and adaptation of modern technologies for enterprises of small and mid-sized business).

Technological Policy
The specificity of technological policy lies in the fact that it is oriented toward working industrial companies, and its basic goal is the increased productivity of companies, sectoral clusters, and sectors by improving the level of technology available and increasing innovative activity. To this end, it is necessary to use various instruments of direct and indirect support of companies, while streamlining and increasing the effectiveness of government branch scientific-research institutes. For example, the government can render either direct financial support or co-financing to ambitious projects that are developing new products and technologies involving the cooperation of several companies. It needs to be noted that, in the framework of technological policy, efforts need to be focused not only in hightech branches, but also in branches that are traditionally considered low- and middle-technology. Taking into account the current changes in the defense industry (strengthening of competition, increasing numbers of private suppliers, expanding possibilities for international cooperation and attracting foreign companies, as well as structural changes), it is extremely important to implement modern principles of development for weapons and security systems. Given that the production of military equipment is an extremely important factor for the development of the countrys innovation sector10, innovations regarding research, development, and mass production in this area must be considered to be one of the key decision making factors when government purchases are made in this area. A new technological policy can be implemented in the following areas: Support for technological upgrading and stimulation of innovation activities in companies (for example, with the use of various instruments of direct financing of innovation projects of enterprises); Streamlining and increasing the effectiveness of related scientific-research institutes; Increasing the technological level of small- and mid-sized business; Testing and introducing a series of tax benefits for companies engaging in R&D; Active attraction to Russia of international companies in order to carry out R&D and other innovation activities; and Adoption of modern principles of defense and national security R&D management. Adoption of modern principles of administration of R&D in the interests of defense and security.
Two instruments of financial support of R&D in companies can be distinguished: Direct financing of R&D (for instance, using grants or beneficial targeted credit); and Indirect support of R&D through tax stimuli. The advantage of direct financing of research is that it allows the state to retain control over the direction and content of the R&D, for instance, guaranteeing that industry will help solve important social problems in the spheres of national defense, health, and energy. On the other hand, direct financing of R&D is often criticized on the principle of the selection of winners and losers both in the sense of the chosen subject of research and on the level of particular firms receiving financial aid. Tax stimuli of R&D have a different set of advantages and disadvantages. Such methods allow market mechanisms, not the state, to determine the distribution of investment in R&D in sectors of the economy, firms, and individual projects. Insofar as tax stimuli are based on profit, this can create preferable conditions for R&D that create high yield in a short-term period, rather than long-term R&D and investment in research infrastructure. Moreover, tax stimuli ensure a weakened effect of distribution of the findings of R&D among firms and sectors of the economy, as compared to direct financing. It should be noted that the worth of a program of tax stimulation of R&D is secured in its strong independence of the general rate of corporate taxation. Enterprises of many countries would prefer a general lowering of taxes or reduction of corporate taxes to targeted stimuli of investment in R&D. Countries use different combinations of methods to support R&D. For instance, the U.S., the United Kingdom, and France use both direct financing of R&D and the creation of tax stimuli. Italy and New Zealand directly finance R&D in the private sector, but provide no preferential taxation. On the other hand, Spain, Portugal, Canada, and Australia use generous fiscal stimulation of R&D, but employ direct financing to a much lesser degree. Fiscal stimuli of R&D usually take one of three forms: Abatement of the tax base additional sums from current expenditures of enterprises subtracted from the gross profit taking into account taxation of profit; Tax credit a sum subtracted from tax obligations that does not depend on the companies profitability; and Delay of tax payments (tax holidays), offering loosening of taxation in the form of delay of payment. Abatements allow firms to subtract more from the taxable profit than has been expended on R&D. Tax credit represents a definite percentage of expenditure on R&D subtracted from the tax on profit that needs to be paid. Abatement is a reduction of the taxable profit, while tax credit is a reduction of the final tax obligation. In addition, there exist two other differences between abatement and credit: increasing abatement depends on the rate of corporate taxation, while increasing credit does not; an unused abatement may be carried over to a future period and used for future taxes in the framework of a transfer of usual losses to a future period, while a transfer of unused credit requires the creation of a special fund for servicing unused credits. The conditions accompanying tax credits and abatements significantly vary, including rates, the presence of a fiscal maximum, and conditions for transfer and their cancellation for taxable profit. The majority of countries that offer credits or abatements have also set limits to the maximum tax volume allowable to firms. Two types of limits exist: a maximum absolute expenditure on R&D that can be included in an application for tax benefits or a maximum deduction on a given benefit. Depending on the basis of the tax credits or tax abatements, three fundamental forms of calculating these tax benefits can be distinguished: the amount of expenditure of R&D in the current year, the increase of expenditures on R&D, and a combination of amount and increase. The disadvantage of stimuli based on amount is that they only support the current level of R&D, i.e., R&D that the firm would have carried out in any case. Basing things on increase is useful in solving this problem; however, it has a drawback: difficulties in determining the basic period or basic level of R&D needed for calculating increase or elevation. In different countries, there exists a tendency toward providing tax stimuli or a greater volume of tax benefits for the achievement of certain goals, for instance, support of small-business enterprises or innovation firms or assistance to partnership between companies, universities, and NIIs. In addition to general national stimuli of R&D, and ever-greater number of regions (states and provinces) in federal states (such as Canada and the U.S.) are introducing their own tax benefits. It is expected that in these and other countries, such tax benefits will increase according to the growth of competition between regions for science-intensive investment. A combination of federal and regional tax benefits may also seriously reduce the cost of R&D carried out by business. It is also important to call attention to the potential risks of using tax stimuli connected with possible tax evasion. For example, in the middle of the 1990s, Germany canceled tax benefits for R&D for nontargeted use of them. Some countries have passed regulative acts

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In addition to the U.S., where the defense sector plays a key role in the creation of groundbreaking innovations, the example of Israel, where one of the most developed innovation economies in the world was created in a short time on the basis of the defense industry, is very indicative. The United Kingdom, France, Switzerland, and other countries can also be adduced as examples.

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Tax Stimuli of R&D in Companies

Support of Innovation Cluster Initiatives by Means of Competition between Regions. BioRegio Program in Germany
Source: Bauman Innovation

to prevent artificial divisions of large companies into several smaller ones with the goal of obtained targeted tax benefits for small business. Tax stimuli can be an important instrument in attracting activity of international companies in the area of R&D. However, it should be noted that in this case, special demands need to be placed for such companies, for example: Location R&D needs to be carried out in the country providing the tax stimuli; National component for instance, staff or equipment needs to be present in the R&D; Use of findings the use of findings of R&D must bring benefits to the country that is carrying out stimulation of R&D; and Intellectual property rights the right to intellectual property appearing as a result of R&D belongs to the country that is carrying out stimulation of R&D. For instance, according to the regulative acts adopted in Canada and the U.S., R&D falling under tax stimulation must be carried out within the territory of the country. So-called tax holidays are another instrument for attracting foreign investment into the development of innovation sectors and the development of innovation companies. This strategy is more frequently used in developing countries and countries with a transitional economy. Such measures are often used for individual high-technology sectors or companies working on a definite territory, for example, in special economic zones. As an example, in India freedom from taxation for a ten-year period is used in targeted sectors, such as microelectronics. In China, full freedom from tax can be obtained for a period of five years. The recommendations for using tax stimuli in Russia are as follows: To efficiently use mixed direct and indirect methods to finance support of R&D in companies, insofar as the current level of activity in the sphere of R&D is extremely low and it is necessary to support it by all available means; Tax stimuli for R&D can be used as one of the instruments to attract international companies to relocate their research divisions and other types of activity connected with innovation to Russia; To efficiently begin to adopt practices of direct and indirect co-financing of R&D in companies with conduction of limited experiments. International practices attests to the existence of three possible means of limiting experimental zones by size of company, by branch, and by territory. Limitation

based on branch or territory appears to be more realistic for instance, in specific regions or free economic zones; and Correct preparation of procedures for offering tax benefits of direct financing has key significance. The basic risks of an absence of results using a given instrument are connected precisely with an incorrect procedure of offering them.

By the beginning of the 1990s, German science had achieved quite a number of successes in the sector of biotechnological knowledge. A series of universities and research centers were actively engaging in biotechnological research and the generation of impressive ideas. However, many of these ideas did not go beyond the walls of the laboratory: scientists either had no entrepreneurial ambitions or were unable to find financing to transform the ideas into products. Some pharmaceutical companies saw large opportunities for their development outside Germany and moved their laboratories and production to other countries. The number of newly arising biotechnological companies (startups) was insignificant. In addition, a number of psychological barriers existed to progress in biotechnological business: society held a skeptical attitude to future biotechnology, which increased the influence of the ideology of the greens and the absence of promotion on the side of the government. Nevertheless, at the present time in Germany we can see a boom in the development of biotechnology. Germany occupies second place in Europe, yielding only to the United Kingdom, where biotechnology began significantly earlier. Biotechnology is one of the economic sectors most attractive for investment, and supported by the government. Several biotechnological clusters that are competitive and self-developing exist in the country. One of the effective instruments used to stimulate these changes and initiate the development of innovation clusters was the BioRegio program. This program was launched in 1995 and focused on supporting commercialization of biotechnological know-how; strengthening links between research organizations and business; and creating beneficial conditions for licensing, management, and marketing in the area of biotechnology. The first program, BioRegio, was an efficient political instrument and to a large degree influenced the creation in Germany of biotechnological clusters vital, self-developing economic organisms. BioRegio (19952010) was initiated by the Ministry of Education and Research of Germany (BMBF) and was in essence a competition between regions for the best project for development of a biotechnological cluster on their territory. The structure of the cluster, according to the conditions of the competition, had to ensure intense interaction between research organizations, financial institutes, and industrial players, as well as enable a more intense transformation of biotechnological developments into marketable products, technologies, and services. According to the conditions of the competition, the three regions that presented the most promising projects would, beginning in 1997, be able to receive $50 million USD from the federal government and industry for a period of five years.

The criteria for selection of the winning regions were: The presence of contemporary research institutes; Interdisciplinary links between research organizations (including clinics); The existence of biotechnological companies and a business climate conducive to the appearance of new companies (start-ups); A strategy for transforming ideas into commercial products and services; A developed level of supporting services; Official permits and licenses for biotechnological activity; and Confirmation by financial institutes of readiness to invest in biotechnological companies. Preparation of projects took place over almost the entirety of 1995 on the basis of the administration of the 17 regions that participated in the program. In 1996, clusters located in the cities of Heidelberg, Munich, and Duesseldorf were announced the winners. It is important to note that even regions that did not win the BioRegio competition, thanks to well-workedout innovation projects, were later able to receive financing in the framework of other programs. And, moreover, the process of preparation for the competition itself helped regions to see the new opportunities for developing biotechnological clusters on their territory, as well as strengthening the links between potential participants thereof, who actively cooperated on the stage of developing projects.

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Regional Dimension of Innovation Policy: Development of Regional Innovation Systems and Assistance to Regions in Implementing Policy
Regional and municipal authorities can play a large role in increasing the competitiveness of Russias innovation system. Within the framework of federal innovation policy, active assistance and support from these levels of government is necessary in the following three areas: development of innovation centers competitive on the world level in several regions, and used as platforms for development of innovation clusters; stimulation of the most competitive and promising innovation clusters (for instance, through a system of competitive project financing for realization of strategies to develop innovation clusters in a limited number of regions that have won the competition); and assistance in the development of regional innovation policy (for example, development of infrastructure for commercialization and small- and mid-sized businesses development, and help in the local implementation of technological policy).

In many countries, including Russia, the government is the largest purchaser of products and services, and so is able to play an essential role in stimulating innovation. In Russia, this role is becoming more prominent for a number of reasons. First, the need to guarantee national defense and security; second, as a result of the unprecedented infrastructural challenges based on the scale of the country; and third, due to the traditionally increased attention that Russian society gives to national successes in the area of science. One of the instruments may be the creation of a specialized government agency that is responsible for increasing the effectiveness of government purchases.

Second, the national model of the innovation system of each country is formed under the influence of factors that were active in the past. Copying another countrys experience is to copy the experience of previous years without talking into account the present and, even more importantly, the future. Third, in every country, there may be only individual elements of an innovation system that are examples of best practices, while other elements of the national innovation system may be ineffective due to the aforementioned factors and, thus, unsuited for duplication. In this way, to develop an ideal model it is appropriate to use individual instruments of innovation policy that have proven effective in several countries at minimum, and are oriented toward the present tasks that lie before Russias innovation system. An ideal model for Russias NIS was created in the framework of the project based on the following principles: An inventory of the key international trends and analysis of the best international experiences (approbated in several countries); The applicability of this model for Russian conditions; and An inventory of Russian and Soviet experience (insofar as many models and instruments of the Soviet period were copied in other countries and are successfully being used in the present time, for instance in China). The process of formulating the new model may include both creation of new elements and a reorganization of the strategy of existing organizations. For this reason, we will describe the ideal model by indicating all its key elements and their basic tasks, without reference to existing organizations that may presently be, either fully or partly, responsible for analogous tasks. The key elements of an ideal system of implementing an innovation policy are: A Board on Scientific Research, Technology, and Innovation; A Foundation of Leading-Edge Research; A Foundation of Commercialization and Development of Small Innovation Business; A Foundation of Support of Leading Innovation Companies; and An Agency of Development of Technology.

Board on Scientific Research, Technology, and Innovation


The key tasks of the Boards work must be: Development of a detailed strategy for increasing the competitiveness of the innovation system; Development of a detailed plan of action to be considered in developing the national system in the short-, mid-, and long-term perspectives; Coordination and implementation of the strategy, and plan of measures to be taken including making effective decisions; and Monitoring and evaluation of the effectiveness of the plan of action. It is essential to have a plan of action to develop the NIS, as only the measures for which there are responsible organizations can truly be implemented. This plan would include allocating financing, defining time periods of realization, defining goals, and in many cases, defining indicators of realization. While a good strategy may include various good intentions, until these tasks and initiatives are transformed into a real plan of action, they will remain just intentions. Within the framework for developing the plan of action, it is appropriate to use a new-generation dedicated program approach. In particular, the intent is to structure the general plan of action to implement innovative strategy in separate strategic targeted programs, with clear understanding of the goals, targeted indicators, tasks, plan of action, and key risks. A single ministry, organization, or the Board itself, must be responsible for realization of each individual program. In this way, the Plan of Realizing Innovation Strategy will consist of a limited number of strategic programs. The realization of the portfolio of programs will be regularly monitored in the framework of the Board, but not by individual plans of action. A Working Group of the Board should be responsible for carrying out monitoring. In turn, for all measures that are part of an individual strategic program, there must be assigned responsible bodies, definite financing, formulation of results, and deadlines. The key factors for the success of the Board are first, the work of a continually active Working Group (Secretariat), and second, the presence of an independent council of experts. The Working Group should carry out analytical work, prepare the program and agenda of meetings of the Board, and interact with other ministries, agencies, regional authorities, and big business. To a large degree, the results achieved by the Board depend on

The Necessity of an Account of Various Temporary Horizons


The various priorities of an innovation policy can have different effects in different portions of society and areas of industry, and these effects will vary with time. For example, an effective technological policy may provide results in the short- or mid-term perspectives, a focus on commercialization and development of small and midsized innovation enterprises no earlier than the midterm perspective, and policy in the area of scientific research only in the mid-and long-term perspectives. As international experience shows, the advancement and establishment of stable NISs can only occur in conditions where adequate attention is given to all key components of an innovation policy.

Framework Conditions and Stimuli


The key to increasing the competitiveness of the innovation system is through framework conditions and stimuli. Therefore, it is necessary to concentrate our efforts on basic areas in the framework of a comprehensive innovation policy: Increasing the effectiveness of intellectual property protection including working out regulations on the correct application of legislation on intellectual property, and solving conflicts involving the allocation of IP rights between legal and physical persons participating in its development; Creation of an effective infrastructure for the regulation of quality and technical standards (for instance, adoption of contemporary standards for clinical research, etc.); Lowering of barriers to attracting highly qualified specialists from abroad (including the issuing of visas and labor legislation); and Increasing the effectiveness of foreign trade regulations (including implementing customs legislation that is more efficient and beneficial for the innovative sector, and regulating imports of high-technology equipment and components).

An Ideal Model of a National Innovation System for Russia


We propose creating what we call an ideal model as the basis for an innovation policy for Russia. This new ideal model would be tailored specifically to Russian needs, and is not a direct copy of a particular model from another country for the following reasons: First, each countrys model has its own important specifics based on the economic and social factors. These include the necessity of satisfying the interests of various groups, the principles of administration adopted in the country and the role of the government, the specifics of development of the national economy and industry, etc. If a model is removed from the context of a specific country, it may become ineffective.

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Coordination of Innovation Policy: Roles of Special Councils. Example: the Chilean National Council on Innovation and Competitiveness (CNIC)
Source: Bauman Innovation

the effectiveness and professionalism of the Working Group. An independent international expert council should guarantee the social legitimacy of the work of the Board and is a form of insurance from lobbying by business or individual ministries. The expert council should include representatives of international organizations, in particular, the World Bank, OECD, and World Intellectual Property Organization. In addition, within the framework of the Board, there should be separate subcommittees that are oriented toward development and realization of individual areas of policy in scientific research, technological policy, and other areas. The subcommittees program and the agenda of their meetings should also be prepared by the general Working Group under the auspices of the Board and confirmed during the meetings of the board. Reports on the results of the work of the subcommittee will be discussed in meetings of the Board. The creation of the Board may be the first step toward launching an ambitious and complex strategic program of increasing the competitiveness of Russias innovation system. The Board should become, essentially, the headquarters for the development, implementation and evaluation of the strategy of innovation system development, as well as administering the plan of action. As international experience shows, given correct organization of the work, essential results may be obtained in a relatively short time (three to five years), and a powerful impulse can be imparted for further development.

Foundation of Leading-Edge Research


The Foundation of Leading-Edge Research may become one of the key instruments of competitive financing and development of human resources for scientific research. The basic areas and instruments on the work of the Foundation are: Financing of individual and group research projects through research grants; Financing of research projects in the framework of targeted programs; Allocation of professorial and graduate stipends; Attraction of researchers from abroad, for example, through allocation of special professorial stipends for foreign scientists; and Financing of centers of excellence in particular scientific areas (for example, in the course of five to six years, for the achievement of expected results and reliability).
Administration of innovation policy is often realized at the very highest level; however, in practically no country in the world is there a single ministry that is entirely responsible for solving all the tasks of science and technological policy. Usually, the functions of developing and implementing programs are allotted between different agencies and ministries (of science, education, technology, industry, commerce), and the highest body is a commission or council under the auspices of the head of the government or the highest representative of the government. Three models of such advisory bodies (commissions or councils) can be identified, depending on their key role and tasks: A commission as a planner (examples of such commissions are found, in particular, in Japan, China, and in the past in the Soviet Union in the form of the State Committee on Science and Technology); A commission as a coordinator (such commissions operate, for instance, in Chile, Finland, and Holland); and A commission as an advisor (such commissions operate, for instance, in the U.S., Canada, the United Kingdom, and Switzerland). In the first case, the commission fulfills the role of a sort of integrating headquarters of innovations, which as a system integrator brings to work all ministries and agencies participating in development and is responsible for planning the basic measures, allocation of financing, making key decisions, and evaluating results achieved. In the second case, the commission plays the role of a coordinator, formulating a general strategy and bringing into accord and coordinating the activity of separate ministries and agencies. developing strategy for attracting leading international experts and international organizations)*; and A highly professional Secretariat staff (the working group of the commission) the regular working body. One of the best examples of organizing a commission along the model of a coordinator is the Chilean National Council on Innovation and Competitiveness (CNIC). The Council was founded in 2006 under the auspices of the countrys president and designated for solving the following basic tasks: Working out suggestions and measures for realizing a longterm national strategy of innovation development; Amendment of the current strategy every four years with the involvement of international organizations; Proposals on improvement of legislation active in the scientifictechnological area; Direct participation in distribution of financing allocated by the government and private sector; Determination of the degree of participation of social and private organizations of a local and regional level in the processes of the innovation development of Chile; and Annual report to the government on the course of the use of the strategy. The Chilean Council on Innovation has 17 members with a right to vote: five ministers (finance, the economy, and education), several representatives from private business and scientific circles, two independent political experts (one of whom heads the Council), and two representatives of the largest labor unions. The acting vice-president of the Corporation for Assistance in Industrial Development (CORFO) and a representative of the National Commission on Scientific and Technological Research (CONICYT) participate in the Councils work on a regular basis. The Chilean Foundation for Innovation and Competitiveness (FIC) has become a key instrument in the work of the Council.

Figire 61 Structure of the Commission on Scientific Research, Technology, and Innovation

In the third case, the commission is created as a source of independent, professional information for the heads of key ministries. The key factors of effective work of such a commission are: Regular attention to the subject and commission by the counCommission

trys leadership; Legitimacy and status, including the possibility of influencing


Working Group

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decision-making on reforming the innovation system (including reforming and creating new elements of the innovation system

Subcommissions on individual areas

and distributing financing), and even-handed interaction with key ministries and international organizations;

Government scientific research

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Technological policy

Correctly execute the planning of key tasks and working functions of the commission (goals, position, structure, participants, work-

Defense of intellectual property


Source: Bauman Innovation

Infrastructure of quality and technical regulation

Government purchases

ing regulations); The presence of sufficient financial resources for conducting analytical work on basic areas of reforming the innovation system (for example, diagnosing and developing basic areas,

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For example, the GKNT USSR annually received about 1.5% of the amount of the budget in ministry funds for development of new technology.

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The Implementation of the Policy in the Sphere of Scientific Research: the National Science Foundation (NSF) in U.S.
Source: Bauman Innovation

The Implementation of the Policy in the Sphere of Scientific Research: the National Science Foundation (NSF) in U.S.

The National Science Foundation (NSF) is a U.S. federal agency with the basic task, according to the Law on the NSF adopted in 1950, of advancing the progress of science; improving national health; wellbeing, and social security; and ensuring national security. NSF supports fundamental science and engineering in all areas except medicine. The NSFs first priority is support of individual researchers who suggest projects. Correspondingly, around 80% of research financed by the NSF takes place from the ground up, i.e., begins with receiving applications from potential recipients. It must be noted that several areas of research are more strongly characterized as from the ground up than others. This is the case, for example, for astronomy, in which it is necessary to plan research ten years in advance due to needed access to global infrastructure for astronomical research. To stimulate scientific progress and solutions to social issues, the basic attention is focused on interdisciplinary research. At the present time, the concepts of transformational and high-risk projects with high return are being discussed. This includes projects that may lead to serious breakthrough solutions in scientific and social issues. A special division of the Science Commission engages in looking for, describing, and financing such projects. Another mechanism that is widely used by the NSF to acquire information directly from individual researchers is holding meetings, seminars, and conferences. They take place in the course of the whole year in practically all scientific areas in order to convene interested persons with the goal of determining new promising areas and opportunities. The results of such activities allow the NSF to develop new research projects; in particular, interdisciplinary projects that overlap traditional areas. NSF supports almost 200,000 researchers, instructors, and students each year. In 2008, it examined on a competitive basis around 45,000 applications and financed over 11,000; the NSFs budget was $6.1 billion USD, of which 79% was spend on financing research and related activity, while 12% went to education and development of human resources. NSF is financed by budget resources assigned by the U.S. Congress. The total resources entering the NSF from the federal budget is about 4% of the general federal expenditure on research and development, or about 30-50% of general federal financing of nonmedical research in academic institutes. In several areas, the NSF is a basic source of federal financing of academic research. The majority (73%) of financing is given to colleges, universities, and academic consortia, but some of the resources are also allocated to federal agencies and laboratories (9%), noncommercial organizations (7%), and business (6%). The activity of the NSF is mainly focused on fundamental research, but a number of its programs, such as Engineering-Research Centers and Industrial-Research Centers, have an industrial orientation. In addition,

the NSF is a dependable source of information on the state of affairs in the U.S. innovation system that is necessary for innovation policy, as well as on sponsored research projects and initiatives in the area of analysis and assessment of innovation activity. NSF is headed by a council of 24 well-known scientific and social figures appointed by the president of the U.S. with the approval of the Senate for a period of six years and working on social principles. The current activity is directed by NSFs director. Around 2,100 people work in the central office of the NSF, including around 200 scientists and employees of research institutes. The structure of the NSF includes seven departments (of biological sciences, computer and information technology, education and human resources, earth sciences, mathematics, and physics, as well as social, behavioral, and economic sciences), and six offices or boards (informational infrastructure; integrated activity; international science and engineering; programs of Arctic and Antarctic research; and the budget, financing, and distribution of resources, as well as information and management of resources). The board of integration engages in unification and management of NSFs missions, and coordination and supervision of interactions between departments. Program managers are responsible for making final decisions on financing. The majority of them are involved in many programs at once, but usually they head only one of them for which they are responsible. The heads of each department have the right to modify decisions made by program managers, although this is rarely done. NSF has a multitude of observational councils. They gather opinions and results of the work of various commissions and give recommendations to the heads of the NSF on priorities and possibilities. For example, each director of a department has such a council, which usually meets twice a year. The members of these councils typically come from academic circles, but often include representatives of industry. Each division within a department is subject to an audit assessment by outside scientists who make up a committee of visitors assigned to the observational council to evaluate the adequacy of both the portfolio and the process. A very fair, competitive, and transparent system of expert assessment of scientific-research projects has been developed at NSF. Every application for financing is evaluated by a minimum of three independent experts who are scientists, engineers, or instructors who work outside the organization. The NSF selects reviewers from a national pool of experts in each area, and their assessments have a confidential character. At the present time, an average of about 50,000 specialists play a part in the expert groups of the NSF each year.

A reviewers task is to identify projects of the highest level. The NSFs review process is considered a gold standard in reviewing scientific projects and guarantees that only the best initiatives will pass to the financing stage. The two basic criteria for evaluation of projects based on expertise are the influence of the potential result of the research project in the area of education, or reaching a definite social goal and increasing research potential, including perfecting the abilities and qualifications of researchers. The NSFs managers examine the project itself and the materials received from outside experts. After scientific, technical, and program analysis, the program manager accepts or rejects the application. The decisive stage of accepting or rejecting a project takes place at the departmental level. A responsible researcher whose project has been declined by the NSF will receive information and an explanation of the reasons for the rejection, along with copies of the references that influenced the making of the decision. If the explanation does not satisfy the researcher, he or she can request additional information from the responsible employee or director of the division of the NSF.

If the project is accepted, recommendations will be presented to the Department of Grants and Agreements of the NSF. The manager of this department examines the recommendations and, as a rule, will award financing in the course of 30 days after having received the documents. The budget of the NSF is very detailed, with separate articles of expenditure for current activity, infrastructure, support of researchers, and so forth. These funds may be used only upon direct order, and transfer of money from one category to another is only realized with the approval of the Office of Management and Budget (OMB) and Congress. As a whole, the NSF possesses very limited possibilities for redistribution of resources after approval of the budget. The budget is worked out in detailed fashion for all departments, each subdivision within a department, interdepartmental programs, and often for a large amount of programs, especially new or priority ones. Decisions on the detailed budget are made during a meeting of Congress, where serious dispute often arises over decreasing or increasing one or another program or initiative over an amount of hundreds of thousands of dollars in a budget of several billion.

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Creation of Centers of Competence in the Sphere of Advanced Scientific Research and Involvement of International Organizations: Chilean Experience
Source: Bauman Innovation

In the last few years, Chile has implemented a series of efforts to improve the situation in the area of research against the background of a developing country. Although the indicators that characterize the scientific base of Chile are still rather low*, it is possible to speak of rapid rates of a change in the situation for the better. To make such progress possible, the government of Chile initiated several programs; one of the most successful is the Millennium Science Initiative (MSI). In the framework of this program, so-called centers of competence** are created in science, the goal of which is the support of a limited number of scientific institutes (Science Institutes) and scientific groups (Science Nuclei) selected on the results of competition. The activity of the centers of competence is dedicated not only to realization of leading-edge scientific research and training of scientists, but also to the dissemination of new knowledge by means of educational programs and creating links between the private sector and partnership with other institutes. An important task of the MSI is the creation of a beneficial environment (sufficient resource base, critical mass of professionals, the right to self-direction, flexibility and effectiveness) that will enable increased pro-

ductivity. Such conditions, in turn, enable slowing the process of the countrys brain drain, and even the return of Chilean scientists who are currently working in developed countries. The World Bank, which had at the time experience in competitive financing in other countries of the region, was brought in to bring the initiative to life. The Ministry of Planning and Cooperation was responsible for implementing the program, as was a Secretariat specially created in February 1999. In March 1999, the World Bank and the government of Chile allocated $5 million USD in the framework of an Innovation-Educational Loan (IEL)***, into which the government of Chile later allocated $10 million USD. The MSI became an excellent example of effective use of a World Bank IEL. To observe the course of realization of the program, a special observatorial body was created in June 1999 the National Commission of the MSI, composed of representatives of Chile and other countries. Centers of competence were created between March 1999 and September 2002 (toward the end of the period, the Innovation-Educational Loan was exhausted). All in all, three research groups of the world level (Science Institutes) and ten young promising research groups (Science

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* For example, there is only one scientist per thousand economically active members of the population in Chile, while the analogous indicator for developed countries is five scientists. As far as yearly preparation of scientists at the Ph.D. level is concerned, to reach the level of developed countries, Chile would need to increase this indicator 30-fold. ** The original name was centers of excellence. *** The original name was Learning and Innovation Loan (LIL).

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Creation of Centers of Competence in the Sphere of Advanced Scientific Research and Involvement of International Organizations: Chilean Experience

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Agency of Development of Technology


Nuclei) received support. The project was very successful and showed how leading-edge scientific research can be an effective business and strengthen the national system of Chile. The following can be identified as the most important results of the MSI program: Growth of attention to science from the Chilean government; Creation of a transparent, open, and effective from the point of view of the later commercialization process selection of scientific groups, about which the Scientific community came to know and accepted; Increasing the productivity of leading Chilean researchers; Increasing the possibilities and quality of leading-edge educational programs; Assistance in dissemination of different forms of cooperation between centers of competence, business, and other organizations; and Creation of systems of monitoring and assessment that can serve as a platform for improving scientific-technological policy. The program showed that with an intelligently organized process of scientific groups, the results of their activity can exceed expenditure of resources many times over. It is also important to note that the use of investment can be effective only in conditions in which competition winners have the right to independent allocation of resources and bureaucratic barriers are maximally lowered. Grants need to be large enough for research groups to have conditions identical to those of similar groups in other countries. It often happens that the best research teams very quickly exhaust the reserves of their material base. In this case, additional investments are effective.

The basic goal of the Agency should be to increase the productivity of branch sectors and clusters through assistance in technological upgrading and stimulation of innovation within companies. The Agencys basic areas and instruments of work are: Co-financing companies directed to develop new products or technological processes, as well as the adaptation and development of basic sectoral technologies through a system of grants and tax-related credits; Co-financing and administration of technological targeted programs directed towards increasing the competitiveness and productivity of high-priority sectoral clusters and sectors; and Development of strategies and programs to technologically upgrade existing high-priority sectoral clusters and sectors, and create new ones.

Other Models of the Innovation System


There are a number of important conditions for realizing an ideal model: High quality of government administration; Meaningful volume of financial expenditures; and High level of competence and leadership of personnel responsible for key reforms and management of key elements of the NIS. At the present time, it is rather difficult to create these conditions. Two key problems in the area of government administration that have been recognized by the countrys leadership are a high level of corruption, and the absence of personnel responsibility on the part of bureaucrats for the results of their work. If this is not remedied, it may lead to compromising the ideal model and all expenditures of time and resources will be wasted. And so we propose two alternative scenarios to increase the effectiveness and competitiveness of Russias NIS that have a smaller array of limitations. If at the present time implementing the ideal model seems improbable, we need to choose other methods oriented toward improving the existing elements and gradual implementation of several key elements of the model. The first alternative can be thought of as combining the old and the new. In the framework of this scenario, we foresee adding three new key elements of the NIS, taking into account the best practice and real tasks that await the Russias innovation system: A commission on scientific research, technology, and innovation; The creation of a foundation of leading-edge scientific research (or broadening the tasks and resources of existing organizations); and The creation of a technology agency. In addition, within the framework of the given scenario, the emphasis is placed on essential improving quality of the work done, and giving new functions to three existing key elements of Russias NIS: The Russian Academy of Sciences. Here the adoption of principles of results-based management would be implemented. This includes long- and mid-term planning of R&D, with a managed budget and expected results; regular reporting of the results of work before

Foundation of Commercialization and Development of Small Innovation Business


The basic goal of the work of this foundation should consist of assisting in the commercialization of scientific research through co-financing and infrastructure creation. The basic areas and instruments of the work of the Foundation are: Support for the process of commercialization from concept to company, with the use of a portfolio of various grants; Support of the technological development of small innovative companies from demand to concept, with a portfolio of various grants; Focused support of technological development of small innovation companies who seek to commercialize ideas in high-priority sectoral clusters and sectors through the use of proactive targeted programs; Increasing the effectiveness of commercialization infrastructure through support of individual micro-instruments. This would include centers of technology transfer, incubators, and services for startup companies (such as co-financing, regular assessment, and publication and dissemination of best practices, including foreign); Motivation and support of individual researchers and informal teams, not only registered companies; Assist in finding and retaining specialized researchers for the purposes of commercializing specific innova-

tions using a portfolio of corresponding grants and services; and Collaborative programs, with individual branch ministries, intended to implement a focused combination of measures for support of individual clusters and sectors in specially selected regions.

In this way, the government can support ambitious projects, initiated by mid-sized companies, which are dedicated to developing new products and technologies. This will involve acquiring both the most modern and most appropriate technologies, in order to create new products. For example, multiple suppliers of automobile parts could implement a simultaneous switch over to a new quality standard, part of which may involve adopting new equipment and productive processes. The involvement of universities and scientific-research institutes in this type of development would also be actively supported in the framework of these projects. The goal of the policy is to be pragmatic and oriented toward increasing the competitiveness and productivity of particular sectoral clusters or sectors. It is important to note that technological policy is implemented not only with the goal of developing high-technology sectors, but also to affect change in traditional sectors. Through the use of similar instruments, Chile was able to reform its coastal fishing industry into a totally new form, a sector of fisheries and fish processing by importing modern technologies. Previous to this, no research or development had taken place in Chile in the area of fishing. As a result, exports from this (now revised) old sector, rose from several tens of millions to several billion dollars. Finland uses analogous instruments for development of priority clusters from telecommunications to forestry development and biopharmaceuticals.

Foundation of Support of Leading Innovation Companies


The Foundation may become an important instrument for creation and development of small innovation companies in new high-tech sectors, as well as in high-technology segments of traditional sectors, with high export potential and/or meaningful potential for import substitution. The basic areas and instruments of the work of the Foundation are: Co-financing of accelerated growth of companies at various stages from creation to expansion to foreign markets; Co-financing of specialized services directed to accelerated development and expansion of companies; and Co-financing of purchases of foreign companies that possess complementary technological, productive, sales, or service competencies. In its principles and work models, the Foundation needs to correspond to the direct investment foundation type of institution to provide financial and other services to interested enterprises.

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Implementation of Technological Policy: National Technological Agency of Finland (Tekes)


Source: Bauman Innovation

Implementation of Technological Policy: National Technological Agency of Finland (Tekes)

the legislative authorities and the population; regular discussion and adjustment of the priorities of the research program; expensive projects must be seen to be fulfilling a social role; cooperation and integration of academic research institutes with key Russian research universities, both in Moscow and in other regions; The Russian Corporation of Nanotechnology. Here there would be: the adjustment of existing strategy, or choice of a new one based on the principles of positioning in Russias NIS; expanding the sectoral profile of supported projects; and a focus on support of the creation and expansion of innovation business beyond Russias borders; and The Foundation for Assistance to Small Forms of Enterprises in the Scientific-Technical Sphere: Here there would be: widening of the portfolio of grants for support of technological development of innovation companies of small and medium business; the realization of new programs oriented toward real actions in priority sectoral clusters and sectors; participation in increasing the effectiveness of the individual elements of the innovation infrastructure; simplification; and increasing the effectiveness of procedures for government interaction with companies. The second alternative can be thought of as improving the existing system. Within the framework of this scenario, we do not suggest creating new elements of the NIS, but rather to concentrate all efforts on increasing the effectiveness of current elements, first and foremost those that were enumerated above.

The National Technological Agency of Finland (Tekes) was created in 1983 under the auspices of the Ministry of Commerce and Industry with the goal of increasing the technological competitiveness of Finnish industry, expanding and diversifying industrial production, and stimulating export of hightechnology products. Tekes is the main body of the state sector of Finland for implementing national technological policy. Its mission is to enable accelerate development of Finnish industry and the service sector through technological achievements and innovations for modernization of the economy, increasing added value and export, raising the productivity and quality of workplaces, and growth of employment and well-being. The agency provides grants and loans to innovation enterprises for the development of new products and ensures financing of scientific-research institutes and universities to carry out applied technical research. All in all, 281 people (as of 2009) work in Tekes central office, of which about half are specialists in technologies and business experts. The agency works in cooperation with several basic partners. The basic partner in fundamental research is the Academy of Sciences of Finland. On the regional level, centers of employment and technological development (T & E Centers) implement technological policy. Tekes has technological subdivisions in 14 such regional centers on the whole territory of Finland; 89 people (as of 2009) work in these subdivisions. The main goal of these centers is to keep entrepreneurial and innovation activity involved in Finland. In addition, Tekes has six offices outside of the country: in Beijing, Brussels, Tokyo, San Jose (Silicon Valley), Shanghai, and Washington D.C. Sixteen people work in these offices. Tekes basic goal lies in increasing the technological level and development of innovation activity of companies. For this, Tekes stimulates companies research divisions to work together with universities and scientific institutes and to collaborative realization of technological innovations. Every year, several thousand companies and scientific-research divisions work in Tekes, and multitude of international partners can be added to this. Their activity encompasses all scientific areas. Usually, Tekes provides from 35% to 80% of the amount needed for realization of an announced project, with the remainder being invested by companies themselves. Innovations are financed not only in industry, but also in the service sector. Over the course of the first decade of the millennium, the share of financing that went to innovation in the service sector rose, achieving 25% in 2009. The agency directs half of its budget to competitive financing of projects. All in all, in 2009, a total of 1,535 projects were completed 882 R&D projects of private companies, 414 projects of academic research, and 239 technicaleconomic bases and contracts for rendering services in the innovation sphere and the decision was made to finance 2,177 new projects at a sum of 579 million euros.

The other half of the agencys budget (43% in 2009) is directed to national programs in priority areas. These areas, proceeding from the demands of the national economy and technological trends in world industry, are determined by Tekes experts. In 2009, work on 29 programs took place from 3,869 companies and 1,571 scientific-research organizations. Two forms of the program are implemented: technological and cluster. Applied research and development are carried out in the framework of technological programs. Such a program is usually a large-scale, multi-year project encompassing scientific-research projects of institutes and universities, applied research, and industrial adoption of results. Tekes allocates half of the general volume of financing of technological programs, and the other half comes from companies participating in the programs. A typical national research program last from three to five years. A larger amount of technological companies are attracted to research and development. Tekes technological programs stimulate close and active cooperation between all participants of the scientific-research and technological process: companies, branch research institutes, the Academy of Finland, and universities. As a result, the effectiveness of the whole process increases significantly. The basic achievements of technological programs are new marketable products, technologies, processes, and services, and the development of technological and research capabilities, as well as those in the area of commercialization of the results of technological programs. The tasks of Tekes specialized cluster programs in many ways coincide with the tasks of the technological programs. A national cluster program is a large-scale scientific and research initiative usually coordinated by ministries in which many branches of industry are involved. Its basic task is to increase the international competitiveness of regions and clusters through growth of the technological level of companies, the creation of new products and services, and stimulation of high-technology exports. All scientific-research, technological, and industrial tasks are subordinate to these needs. Cluster programs present broad opportunities for interaction between regional administrations, researchers, producers, suppliers of products and services, and other participants in the cluster. Ministries, companies, social organizations, and scientific-research institutes participate in collaborative projects, including both the state and private sectors. Such close interaction demands attentive coordination. Maintaining collaboration between the participants in a cluster program is carried out by coordinators, who are responsible for monitoring the program or individual projects, and exchanging information between the programs leadership and project heads. The general leadership of a cluster program is performed by a leading group in which are included representatives of financial institutes, business, and, in most cases, scientific-research organizations. The lead group makes all basic decisions in the course of realizing the program.

Tekes encourages companies to expand the possibilities of development and use of new technologies. The work of the agency is directed toward support of high-technology companies, in particular to new small and midsized enterprises, and also to new forms of commercial activity and international cooperation. Large companies are attracted to participate in long-term scientificresearch work that aims to solve critical technological problems and demands close, multifaceted interaction with research organizations and small and midsized companies. This activity in particular enables regional development. Interaction with smaller companies is a key criterion for Tekes selection of R&D projects of large companies for financing. Depending on the characteristics of the project and the research conducted, corresponding financing is allocated low-interest loans or grants. Financing may be provided as well to foreign companies registered in Finland. Foreign companies carrying out scientific research and development in Finland are not required to have a Finnish partner in order to receive financing. One of Tekes key tasks is to evaluate the influence of technologies on the development of the economy and society. This evaluation is used for distribution of financing, as well as during development and implementation of technological programs. The activity of Tekes itself, including the results of technological and cluster programs, is assessed by independent experts. Another vital area of Tekes work is the creation of a global network with the goal of bringing world-class technological companies, universities, and scientific-research organizations together with their Finnish colleagues. Finland is especially active in international activity within the borders of the European Union; in addition, Tekes coordinates broad cooperation with the U.S. and Japan, including mutual financing of projects, and follows technological opportunities in other important regions, especially in the East and China. Tekes often works in partnership with leading research universities in foreign countries with the goal of exchanging know-how and technologies. An example of such cooperation is the Finland-Berkeley Program, with a goal of creating and implementing mutual high-quality scientific-research projects in which Finnish researchers work with leading colleagues at the University of California at Berkeley. In order to keep their clients abreast of all current opportunities connected with European scientific-research programs, Tekes coordinates the cooperation of Finland with different European countries in the framework of the general European research space. Thus, Tekes ensures the work of the Finnish Secretariat on R&D of the European Union, which provides information on programs of scientific and technological research; coordinates cooperation in the framework of the European project EURECA and the COST program in the area of research; and engages in coordination and financing of cooperation between the European Space Agency and Finland.

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Technological Policy in Defence: the Defence Advanced Research Projects Agency (DARPA)
Source: Bauman Innovation

Technological Policy in Defence: the Defence Advanced Research Projects Agency (DARPA)

The launch of the first artificial earth satellite by the Soviet Union took place on October 4, 1957. This event had a significant influence on the development of the innovation policy of the U.S., as it signified a breakthrough in the scientific and technological spheres by its competitor state, and had a great influence on the international military-political balance. For the U.S., falling behind the Soviet Union in the space race pointed up the appearance of mistakes in the American space program, but also the presence of serious problems in the organization and administration of scientific-technological development in the interest of national security. In order to prevent technological surprises for the U.S. and create technological surprises for its potential opponents, the Advanced Research Projects Agency of the U.S. Department of Defense (ARPA) was founded in 1958. The word defense was later added to create the Defense Advanced Research Projects Agency (DARPA). The creation of DARPA was one of the first actions in the reconstruction of the American defense potential in the 1950s and 1960s. It is important to note that DARPA was created completely differently than were the then-existing military scientific-research structures: it had no laboratories, it did not depend on other organizations or organizational elements, it did not engage in solving current everyday military tasks, it was ready for possible failures, and it was open to new knowledge and tried to manage risks. The agency was not subordinate to the leadership of the army. A series of stages can be distinguished in the history of DARPAs development. From the moment of its creation up to 1965, the agency specialized in global national tasks: the space program, defense from ballistic missiles, and registration of nuclear experiments. In 1960, all civilian space projects were transferred to NASA and military space programs to individual services and institutes. This allowed DARPA to concentrate its efforts on the programs of DEFENDER (defense from ballistic missiles), VELA (registration of nuclear research), and AGILE (counterinsurgency measures), and begin work on research in the areas of human behavior, computers, and materials. At the end of the 1960s, after already-developed programs were transferred to other services and institutes, DARPA reexamined its role and tasks, and began to concentrate on a wide spectrum of relatively small and, for the most part, research programs. In 1972, DARPA received its current name and began to specialize in energy programs, development of informatics (the precursor to the Internet, Arpanet), research in the area of artificial intelligence, speech recognition, development of signals, and tactical technologies. In the 1970s, the basic theme of DARPA was technologies of the air, earth, sea, and space, such as command, control, and communication; tactical defensive

and anti-defensive technologies; infrared detection of objects from space; high-energy laser technologies for a space antimissile system; anti-ship weaponry; perfection of guided missiles; and defensive applications for the computer program. In addition, research was begun in the area of integral micro-schemes, leading to submicron technologies in electronics; research in the area of electronic devices, which developed into the Very Large Scale Integration (VLSI) Program; and research in the area of groups of charged particles. In the 1980s, the thematic focus shifted to programs for development of information and programs for aviation, including the National Aerospace Program and Ultrasound Research Program. During the course of the Strategic Computer Program, leading-edge technologies for data processing and network technologies were developed. In addition, DARPA developed new ideas of superlight satellites and administered programs for production of defensive weaponry, submarines, and the armor/anti-armor program. In the 1990s, DARPA developed both productive and process revolutionary technologies. Beginning with the basic technologies in electronics and materials processing, the agency created new computers, sensors, and connection devices; developed new means of production; and stimulated the use of these technologies in industry. The basic task DARPAs mission consists of achieving technological military superiority of the U.S. over potential opponents and preventing unanticipated threats to national security through development of leading-edge technologies and systems that would allow American military forces to obtain revolutionary advantages. The agency conducts relatively risky (in terms of likelihood of obtaining a positive result) research and development with the goal of obtaining greater results. DARPA possesses a unique range of organizational and operational characteristics, including a small size (only around 150 people), a dense two-level organizational structure, a focus on breakthrough technologies, and a flexible and adaptive research program. The agency does not adhere to the customary rules of human resource management in the government sector, which gives it greater access to talented people, as well as speed and flexibility in organization of R&D. DARPA usually creates a strong team and ensures its networked interaction with technical expertise, university researchers, and technological companies, which usually are not meaningful players in either the defense industry or in radical innovation. Ninety-seven percent of the agencys funding is invested in universities and military-industry companies. The goal of this approach, which is unique among American scientificresearch agencies, is the creation of a strong collective intellect that solves a set task, as well as guaranteeing links between fundamental research and practical applications.

The agencys technical personnel are selected from world-class scientists and engineers who represent industry, universities, government laboratories, and federal scientific-research centers, and are hired for a period of from three to five years. DARPA actively uses the technical and administrative services of different agencies on a temporary basis, which provides the possibilities for flexible entry and exit into various technological areas without dragging along extraneous personnel, while simultaneously developing cooperation between agencies. In this way, DARPA supports and regularly refreshes strong teams of qualified researchers, stimulating interaction and exchange of knowledge. A peculiarity in the formation of the agencys projects consists in their organization in answer to technological demands. DARPA moves from beginning to end along a chain in creating an innovation product. It tries to anticipate new possibilities and then organizes fundamental scientifictechnical breakthroughs that would allow these possibilities to be realized. The duration of a project is from three to five years, with an emphasis on accomplishing a set task by the end of the project. Global technological problems may be solved in the course of a longer period, but only as a part of successive stages. At the end of the period, the project ends completely. It may occur that a new project may be begun immediately after the conclusion of another project in the same area with the same manager, and for an outside observer this may appear to be a simple prolongation of the previous project. However, for DARPA, it is a completely self-contained decision on the basis of an expert assessment of the current situation and possibilities. For this reason, previous investments in this area are non-essential. DARPA has always been distinguished by superior administration of projects. From the very beginning, a very important task of the directors of the agency has been to find talented managers of projects and direct their creative potential toward strong teams to solve grandiose tasks. All of the agencys projects have rather great risks, as they are directed solely at attaining qualitative breakthroughs, and as the winnings from a potential success are relatively large, the agency is fully prepared for failure in specific areas. DARPA does not engage only its own organization and carrying out of research, but also in transfer of technologies to the military sphere i.e., for the army and navy. DARPAs projects are usually realized by universities and companies and enable development of their research and technological potential. After termination of a project, it is often necessary to ensure a link between potential users of the new technology and the acting organizations that possess the technology. The agency uses three strategies. First, DARPA tries to invest in the development of one or another technology up to the point where its basic technological and eco-

nomic parameters are determined; i.e., the organization that is developing the technology receives stimuli to either develop and use it or sell it. Second, DARPA assigns potential buyers of one or another technology to allocate the majority of its financing to its development, sign contracts with the developers, and control current work on the project. Such a strategy creates a group of supporters in the organization potential orderers and as soon as the developers are confident that the technology works, they can count on the orderer including corresponding areas in their program of purchases. Third, from time to time, with the goal of demonstrating a technical model and reducing risks, DARPA constructs prototypes of large and complicated technical systems. In these cases, at one of the initial stages of the project it is necessary to demand that potential orderers sign an agreement on transfer of technology, so that an overly large time delay does not arise between the moment of completion of its development and the time at which an order can be placed.

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Administrative Aspects of Realizing Government Innovation Policy


At the present time, various components of the government innovation system are being implemented, both by government ministries and agencies and by government corporations. Government ministries and agencies create regulative acts, work out sectoral policy, formulate and implement ministerial targeted programs. They also distribute budget resources in accordance with a given ministerial target program according to principles inscribed in the budget of direct or mixed financing. That is, in the case of ministries and agencies, the key instruments for influencing the innovation sector are regulating acts and budget financing. The status of a particular organization does not make much difference be it a ministry, agency, or service in any case, the administrative methods that they employ are regulation and distribution of budget resources. State corporations have only one instrument financing. They fulfill government orders of goods and services in accordance with their work plans. Their sources of resources for these purchases are; first, the addition of resources of the federal budget in the state corporations capital; second, income from its profile activity. In the future, the legal status of state corporations needs to be changed in order to transform them into jointstock companies, but their contribution to innovation policy will not be reduced as a result. In this scheme, another important element of government policy, implementation agencies, are omitted. The task of these agencies is to work with enterprises and organizations in order to implement key tasks of innovation policy in practice. These agencies use instruments such as consulting, meetings, and negotiations, and will spend budget resources in agreement with estimates and targeted programs. However, they do not create regulatory norms. In terms of legal status, these agencies are somewhere between a classical government ministry and a joint-stock company, possessing more freedom of action in spending resources in interacting with enterprises, but at the same time they are subject to stricter discipline in spending resources and achieving results, as are government ministries. Clear examples of the success of this model are the Technological Agency of Finland (Tekes) and DARPA in the U.S. In 20032004, an attempt was also made in Russia to create a system of agencies and services for practical implementation of policy defined by federal ministries. However, this attempt was generally unsuccessful, and at the present time (2010), a reverse

process has begun to dissolve these agencies and transfer their functions to the purview of profile ministries. A complex analysis of the reasons for the unsuccessful implementation of agencies and services within Russias government bodies is not a task of this report, but it is enough to note that, when the agencies were created in 2004, some of the functions of ministries were simply reassigned to them. This resulted in the system becoming more complicated both for the government ministries and for the users of their services. The newly created agencies had only an executive character and so could not become bodies of implementation for government policy. The not-very-successful attempt at large-scale creation of federal executive agencies is no reason to abstain from creating specially planned implementation agencies to realize a number of important functions of government innovation policy. At the same time, a special legislative, regulatory status and authority of implementation agencies needs to be created. Currently in Russia, there is no effective organizational instrument such as government committees that are part of the structure of the government, while also playing the role of a supervisory and strategic body in a defined area of activity. A previous example of such a body is the Government Committee of Science and Technology of the Soviet Union, which served as a model for a similar body within the Peoples Republic of China, and has been successfully employed until present day. In Belarus, an analogous republican body has been retained, which coordinates all government scientific-technological innovation policies, while also controlling and evaluating the effectiveness of R&D as it applies to real production.

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CONTENTS

Preface Introduction: Description of the Project

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1. Competing for the Future:


The Competitiveness of National Systems of Innovation

2. Strengths and Weaknesses of Russias


National Innovational System

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3. Possibilities and Threats


for Developing the National Innovational System of Russia

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4. The History of the Development


of Russias Innovational System

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5. International Experience of Development


of National Innovational Systems and Policy in the Area of Science, Technologies, and Innovations

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6. Competing for the Future Today:


Areas of a New Innovational Policy

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In our projects, we always try to rely on objective indicators and the opinions of key groups, which in the present research are the opinions of participants and consumers of the innovational system. I would like to immediately direct attention to the fact that, in this work, we, first and foremost, have tried to present a systematic view of the problems and the system of complex solutions, and therefore we have enumerated many solutions and ideas that have been published before in various works dedicated to the problems of Russia's innovational system. These works have to a large extent been oriented toward improving the current system and examined individual factors and aspects of innovational policy. It was important for us to have a wider look at the situation and, combining this look with international experience, propose ambitious, but realistic recommendations on the creation of new elements of the innovational system. I would like to give my special thanks to the sponsors of the project, who gave us invaluable support: The Russian Corporation of Nanotechnologies; The U.S.-Russia Foundation for Economic Advancement and the Rule of Law; The OAO Russian Bank of Development; The Foundation of Assistance in Development of Small Forms of Enterprises in the ScientificTechnical Sphere; The OOO Center of Entrepreneurship; and Ernst and Young (CIS), Moscow office.

I would also like to underline that the general point of view of the report and the conclusions drawn and recommendations presented in the report are not the official positions and opinions of the sponsors and partners of the project. I hope that today we will not so much complain about the imperfection of the innovational system that currently exists in Russia as concentrate on the realization of a new and ambitious innovational policy. I also hope that after getting acquainted with our report no one will retain the feeling that innovation is something dark and mysterious that it is not worth trying. It is worth doing it as soon as possible, as the Future begins today!

Sergei Borisov President, OPORA RUSSIA

Preface
Dear Friends,
The goal of the project Competing for the Future Today: A New Policy of Innovation for Russia is to develop recommendations for a new innovational policy. Developing innovations and the attending policy are not goals in themselves; they are the valuable instruments we need to attain real goals that concern the entire nation, such as a better quality of life, a competitive economy, and the rational use of natural resources to preserve a beneficial ecological environment now and for future generations.

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Introduction Description of the Project


This report is part of the research project Competing for the Future Today: A New Strategy for Development of Russia's National System of Innovation. Several goals were set within the scope of this project: first, to evaluate the competitiveness of Russia's national system of innovation; second, to carry out an analysis of international experience in the development of systems of innovation and the implementation of policies of innovation; and third, to work out recommendations for a new Russian system of innovation. A special instrument was developed for a general evaluation of the Russia's system of innovation: the Index of Competitiveness of National Systems of Innovation. On the basis of an analysis of international experience in the development of innovations and the identification of factors

guaranteeing and supporting this development, a multilevel structure was developed for the Index combining individual factors into groups and addenda. To form the Index, statistical data were used, for instance, the amount expended on Research & Development (R&D) and education; the quantity of scientific publications and the number of times they were cited; the number of certificates formulated according to ISO 9001:2000; and the results of large-scale global polls given to heads of leading companies, including polls of the World Economic Forum (WEF), the results of comparisons of scientific education (PISA), international ratings of universities, and other data, the reliability of which has been recognized by world expert opinion. For a more detailed analysis of the situation, in the next stage, a multipurpose survey was created for important figures in Russia's system of innovation.

In order to discuss the state of affairs in different areas in 2010, a structured meeting was held with leading Russian experts specializing in different aspects and mechanisms of the development of systems of innovation, such as: Infrastructure for commercial application; Financing of companies involved in innovative work; The role of standards and technical regulation in innovational policy; The system of scientific research, universities, and NII; Intellectual property; and State purchases and innovations. One of the key elements of the project was an annual forum of OPORA RUSSIA, the forum for innovation of small and mid-sized enterprises Competing for the Future Today (held on March 23, 2010), which included the first public discussion of the basic conclusions and recommendations of the project. A representative of the Russian government; representatives from federal and regional governmental departments, the business community, and international organizations; and leading Russian and foreign experts participated in the forum.

In the course of the project, a series of interviews were conducted with leading international experts and representatives of state ministries responsible for the realization of separate vectors of state policy in the fields of science, technology, and innovation, including The Organization for Economic Development and Cooperation (OECD) The World Bank The United Nations Conference on Trade and Development (UNCTD) The United Nations European Commission (UNICE) The International Organization for Standardization (ISO) The World Intellectual Property Organization (WIPO) The U.S. Council on Competitiveness The project was implemented by the consulting company Bauman Innovation/Strategy Partners, part of the group of companies of OAO Sberbank Russia, on request by OPORA RUSSIA. Alexei Prazdnichnykh (the project head), Dmitrii Adov, Sergei Lozinskii, Ekaterina Marandi, Nikita Popov, Georgii Rybalchenko, and Olga Rybalchenko composed the team of Bauman Innovation. Sergei Borisov, Natalia Zolotykh, Viktor Klimov (the project coordinator), Ekaterina Reut, Irina Gaiduk and Svetlana Nugumanova of OPORA RUSSIA participated in the project.

Figure 1 The Innovation System Participants Surveys Carried out within the Scope of the Project The main objectives of surveys
survey of leading Russian scientists working in Russia (203 respondents) assessment of the effectiveness of the systems of government scientific research in Russia identification of the possibilities of and barriers to scientific work and commercial application assessment of the climate for innovation in Russia and the priorities of the state's policies for stimulating innovation assessment of companies' work in innovative areas identification of barriers to development of companies working in innovative areas assessment of the climate for innovation in Russia and the priorities of the state's policies for stimulating innovation assessment of companies' work ininnovative areas identification of barriers to development of companies working in innovative areas assessment of innovative behavior (population as a consumer) assessment of interest in science and a scientific career (population as a source of useful people) assessment of the importance of science and technology as a budgetary priority (population as electorate)

survey of heads of small Russian companies working in innovative areas (200 companies)

survey of heads of mid-sized and large Russian companies (250 companies)

survey of the Russian population (2,000 respondents)

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for companies that are reworking or reorienting their production. However, other products, as well as other new technologies or business models, are new for both a sector in a country

and companies activity in innovative areas. In addition to increase in productivity, innovations ensure enhancement of societys well-being by influencing the quality of life, level of safety, and reduction of negative ecological consequences of economic activity. A great many innovations in the area of sorting and recycling refuse permit minimization of human effect on the environment and make city streets, water, and air cleaner. New medicines and methods of treatment help people to cope with an ever-greater number of diseases and increase life expectancy. New means of transport reduce the time that people spend in transit, and new methods of building construction increase their safety and resistance to earthquakes. The breakneck economic development of countries that are leading in the area of innovation is based on the ability of their systems to use the achievements of the technological process for the creation of additional value. The leading countries have achieved a high level of well-being to a large extent due to their successes in the organization of fruitful processes of innovation. The conception of the competitiveness of national systems of innovation explains why some countries achieve good results in carrying out innovation. We define competitiveness of a national system of innovation as the presence of an obligatorily large number of resources, institutes, and policies capable of guaranteeing the successfulness of processes of innovation and their use for increasing future well-being.

Additional Features of Competitiveness of Systems of Innovation


Investigations of countries and regions permit the assertion that no single main factor exists to determine the competitiveness of systems of innovation. Each success story the United States, Japan, Switzerland, Finland and Israel has come to be, thanks to the simultaneous action of a unique confluence of factors. Talented inventors and great scientific discoveries alone do not innovative results make. Engineering education and financial resources, interaction between clusters and technological infrastructure, the attractiveness of the country to foreign scientists and engineers and correct state policy, the sphere of commercialization, and the demand for novelty literally everything from which a country's system of innovation derives is significant for its competitiveness. We distinguish six additional features of competitiveness of systems of innovation.

1. Competing for the Future: The Competitiveness of National Systems of Innovation


Well, in our country, said Alice, still panting a little, youd generally get to somewhere elseif you run very fast for a long time, as weve been doing. A slow sort of country! said the Queen. Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that! Lewis Carroll, Through the Looking-Glass

and for the entire national market. Some innovations are new for the world as a whole: they are on the technological cutting edge of technology, and are new technological achievements or completely new business models. Innovations are differentiated on the basis of their consequences for the development of sectors and for the state of competition between innovating companies. Every new model of a Nokia cell phone, Ford light automobile, or Microsoft Office software product represents an improved innovation, which has minimal influence on the structure of the sector and competition between companies. On the other hand, such products as cassette players and such technologies as digital animation fundamentally change the sector, and the conditions of competition between companies. We call such innovations transformative. Thus, for example, digital anima-

1. Talented People and Ideas


The educational and scientific sector saturates the labor market with technologically oriented talented people and feeds the entire system of innovation with ideas; talented people and ideas are the fundamental sources of innovation. The educational system is the source of talented people for innovation. Although the qualifications of engineers and scientists of a country depend, first and foremost, on the quality of higher education, true preparation begins early in school. Education in the natural sciences and mathematics in school

What Innovation Is
Innovation can be defined as the development and adoption of new or perfected products and services, processes, systems, organized structures, or business models directed at creating a new consumer value, improving financial results, and increasing productivity. Such a definition immediately underlines several key features of this multifaceted understanding, each of which merits separate attention. Innovations are realized by both commercial and noncommercial organizations, and may have various goals. For companies, the final goal of the great majority of innovations is to receive greater financial results, while in the areas of healthcare, education, and defense the primary goal of innovation is the creation of new social values for the public good (for instance, prevention of fires or reduction of mortality from specific diseases) and reduction of expenses. New or perfected products, processes, or business models are possible results of innovation. The iPhone a revolutionary new means of mobile communication is a contemporary example of innovation in a product. The production of biofuels is a well-known example of innovation in a process. The appearance on the market of air cargo carriages or so-called budget airlines is a famous example of innovation in a business model. The results of innovation may be distinguished on the level of their novelty. Many new and perfected products are such only

tion and motion capture technology fundamentally widened the possibilities of cinematographic companies and enabled a wide dissemination of 3D movie theaters. These technologies are today transforming the cinematographic sector, and allow the creation of such films as Avatar. Finally, some products and technologies are genuine breakthroughs and lead to the creation of completely new sectors. The personal computer led to revolutionary changes in the production sector computing technology and the creation of a completely new sector personal computer hardware. The technology of manufacturing plastic can be classed as a breakthrough process. Innovations on the scale of an individual sector lead to an increase in productive capability. A multitude of examples of innovations that have allowed companies to reduce losses can be adduced: the Bessemer process of producing steel, the technology of chemical synthesis of rubber, digital ATS, selfservice stores, and electronic payment systems. However, a large proportion of innovations permitted a heightening of productive capability by means of acquisition of products and services of greater consumer quality: cellular telephony, liquid crystal displays, and automobiles with automatic transmission. As a whole, innovations are an important element of economic growth. The progress in China, South Korea, and other developing countries with high economic growth rates is to a great extent based on an increase in technological level

Figure 2 Additional Features of Competitiveness of National Systems of Innovation and Results for the Economy and Society

factors of the competitiveness of systems of innovation


1 talented people and investment in ideas 2 commercial application 3 conditions of demand 4 technological infrastructure and clusters 5 innovation on companies 6 institutes and effectiveness of state policy

Achieving the goals of socioeconomic development


high quality of life ecology and safety

3 2 5 4 1 6
Productive capacity and competitiveness of the economy

Source: Bauman Innovation

Compet ing for the Future: The Compet it iveness of Nat ional Systems of Innovat ion

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gives a springboard for entry into higher education, and also helps to form abilities and patterns to living that enable the development of technology. The ability of an educational system to nurture future talents and create conditions conducive for their development fulfills the functions of a social elevator, and is critical for innovation. Talented people are included in processes of innovation on the labor market. For development of innovations, a market will be beneficial that is supplied with well-prepared specialists and the possibilities it presents for realization of their research and inventive abilities. Education increases mobility, and, therefore, in those countries in which working conditions are not sufficiently attractive, part of the potential of the educational system is lost as a result of an outflow of engineers and researchers. On the other hand, countries that provide the best working conditions attract the best specialists from all over the world. The openness and attractiveness of a country for foreign specialists are important constituent parts of the competitiveness of its system of innovation. Low visa barriers, ease of receiving permission to work, and a general readiness on the part of society to work with foreigners are factors of attractiveness and accessibility. Investments in new ideas are the starting-point of the process of innovation. If cutting-edge scientific research is being conducted in a country, its results can be used for the creation of technologies and products that will be new and the best in the world. On the other hand, an insufficiently high quality of research will result in a deficit of innovative ideas and move the country away from the technological leading edge. Research on a global level is impossible if sufficient resources are not divided up; however, financial inflows alone will not guarantee automatic results. The presence of a so-called critical mass of research is also an important factor in the development of innovations: isolated breakthroughs in narrow areas cannot have such a meaningful influence on technological development as it does large-scale research in neighboring branches of knowledge.

sentatives. A developed specialized infrastructure for commercial application enables selection of the best projects and the unhindered realization thereof: centers of technology transfer, business incubators, and necessary services for beginning enterprises and companies. In its turn, the entity that finances projects depends on programs of technological grants, the work of venture funds, and the general level of development of the countrys financial sector, which guarantees access to financial resources at all stages of innovation from the idea to its appearance on the stock market.

4. Technological Infrastructure and Sector Clusters


Many organizations are involved in the process of creating innovations. The system of innovation itself is a complicated network of interaction between small and large companies, research institutes, educational organizations, consumers, associations, the government, and other organizations. These interactions prove fruitful if they are based on a widely accessible technological infrastructure, contemporary technical standards, and a developed system of intellectual property. Innovations on the frontier of technology are possible only when use of modern technology is widespread in the economy. The level of companies business equipment, access of the population to electrical energy, development of transport infrastructure, and accessibility of computers and communications networks determine whether modern inventions can be used in the economy and stimulate innovation in all areas. The extent of dispersal of each new technology of general use, such as information technology, opens possibilities to companies for creation of new products, and transforms whole sectors. For instance, modern information technologies allow a radical increase in the productivity of the trade sector, and the sphere of financial services in developed countries. Technical standards and certification are a large influence on the innovative activity of companies. Developed obligatory standards can create economic stimuli for companies to use more refined technologies and eliminate obsolete ones. Outdated standards present a threat for development, as they, on one hand, reduce these stimuli, and, on the other, create needless losses during the adoption of new productive processes or make their adoption illegal. Voluntary certification serves as a signal of quality and a confirmation of correspondence with a number of world standards and makes it easier for companies to obtain access to the world market. In addition, the propagation of systems of world certification enables technological exchange and refinement, reduces the general level of expenses in the economy, and accelerates diffusion of technological achievements development of new products. Countries differ on the extent to which intellectual property rights are defended and a balance is observed between the rights of the author/creator and user. Without a developed legal system and regulation in the area, a market of technology will not be able to function, and if the law does not safeguard the results of the work of researchers, innovations will be not be possible. Companies will not invest in the creation of

knowledge if the results of their labor may be replicated by competitors without difficulty. On the regional level, clusters play an important role in a countrys system of innovation. The development of clusters makes the creation of new companies easier, as well as enabling the exchange of technological knowledge and accelerating the dispersion of innovations. Clusters in traditional sectors makes large-scale technological improvement easier, and competitive innovational clusters are centers in which completely new sectors the locomotives of future development are created.

3. The Innovative Potential of Companies


Although new breakthroughs in knowledge are created, by and large, in the process of scientific research, the companies are the key players in the process of innovation. The innovational potential and technological capabilities in developed countries are concentrated precisely in companies, and in many sectors, a special role is played by small and mid-sized business. The logic of the behavior of companies and their motivations to engage in innovative activity depends on to what extent innovations are a factor in companies competitiveness and their success on the market. In conditions in which the profit of companies depends solely upon access to natural resources or the market, innovations are not in demand. On the other hand, companies whose profits depend on new products are continually occupied with technological renewal. They actively finance applied scientific research, the search for outside ideas, and all the work connected to appropriating their results. Companies potential for creating something new depends on the level of their productive processes. If this level is far from the best world standards, companies will be unable to move the technological frontier forward, and their innovations will hardly be the most ground-breaking in the world. Foreign investors can be an important source for increasing the general technological level of production. Although innovations are based on knowledge and ideas that find their use in companies, it is not necessary that they do it all themselves. For innovation, the ability of companies to create new knowledge and the naturalization of it by technological leaders are equally beneficial.

2. Commercial Application
The transformation of scientific ideas and inventions into new products and technologies does not occur on its own. The risks and difficulties connected with the creation of a new product or technology are so great, that they demand a thoroughgoing analysis of the commercial potential of the idea, and close interaction between scientists, inventors, and business repre-

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The Development of Innovational Clusters Is an Important Factor of Competitiveness of Innovational Systems


Source: Bauman Innovation

The Development of Innovational Clusters Is an Important Factor of Competitiveness of Innovational Systems

In the second half of the 20th century, the appearance and development of the majority of enterprises in high-technology sectors took place on a limited quantity of territories. These enterprises were overgrown by differently related and supporting organizations, specialized suppliers, and infrastructure. Corresponding concentrations of companies oriented toward the production of high-technology final products received the name innovational clusters. One of the best examples of development of the high-technology sector based on the principle of clusters is the development of the world biotechnology sector in the last few decades. The first biotechnological clusters appeared 30 years ago in the U.S. and, as time has shown, became the key source of the formation of the American biotechnology sector in the mid- and long-term. To date, the most highly developed biotechnological clusters are found in the U.S.; there are around 70 of them worldwide in different stages of development.

The Basic Stages of the Development of Biotechnological Clusters


Biotechnological clusters began to develop most actively in the last few decades; however, even the most advanced of them have not managed to pass through all the stages of cluster development from creation to transformation. Therefore, in the framework of the project, we conducted an analysis of biotechnological innovational clusters, and other, more mature ones. This has allowed us to make some suggestions regarding the potential transformation of clusters of biotechnology. Any cluster, as an economic organism, proceeds through several stages of development. A complete representation of the processes taking place in an innovational cluster from creation to transformation allows us to carry out an analysis of these clusters in the computer and information technologies sectors. The international experience studied within the framework of the project showed that, in the development of innovational clusters, and in particulars biotechnological clusters, it is possible to distinguish four stages.* Understanding these stages may prove to be useful for state agencies, as each stages possesses its own set of barriers and possibilities for accelerating the development of high-technology sectors and regions.

Four stages of development of innovational clusters: 1. Origination 2. Development 3. Organic Growth 4. Transformation

frameworks of universities and SRIs play a large role. The basic sources of financing of beginning companies are venture funds, individuals, and programs of state support. The presence of a necessary infrastructure, so-called incubators in the form of office, laboratory, or production facilities, has great significance for development. Access to administrative services in questions of accounting, law, taxation, and other subjects is

The First Stage: Origination Biotechnological clusters, as a rule, arise on the basis of existing powerful scientific centers, whether they are leading universities or scientific research institutes (SRIs), which implement Fundamental and Applied Scientific Research (R&D) in the biotechnological or related sectors. In the majority of situations, this R&D is financed by the state. Three forces initiate the creation of innovational clusters in the biotechnological sector: (1) Commercialization of technology and the appearance of young biotechnology companies; (2) The arrival of a large company from another region; and (3) An active role on the part of local leaders. For example, the origin of the creation of an innovational cluster in the computer and informational technologies sector in Silicon Valley (California, U.S.) was Stanford University. The dean of the university, Fred-

a fundamental issue for young companies.

The Second Stage: Development During the stage of development of biotechnological clusters, more and more companies locate divisions in the cluster. The reason for this is the availability of qualified staff and/or advantages regarding expenses. Companies that arose in the first stage begin to grow. The first success stories appear which signal the existence of new uncovered possibilities. The desire and hope to repeat the success reinforce the inflow of talented people and financial resources. More new companies appear. The rapid economic dynamics enable the attraction of financial resources, as well as suppliers of necessary products and services oriented towards servicing arising and growing companies and arriving branches of large companies. During the development stage, demand for infrastructure increases, especially for laboratory and production facilities. Companies appear and develop that provide specific services, for instance, companies that engage in research to order (so-called contract research organizations, or CROs) and production to order (contract manufacturing organizations, or CMOs). In the course of a clusters growth, the labor market becomes more developed and specialized and a horizontal mobility of human resources arises; that is, the movement of specialists from company to company and from universities and SRIs to companies and vice versa. This leads to a fundamental increase in the intensity of exchange of knowledge and experience in the cluster. In the process of development, the cluster becomes a source of specialized managerial personnel. At the second stage, various networked organizations appear in the cluster. Their efficient work is a distinguishing characteristic of developed biotechnological clusters. Contacts arise with clusters in other countries and regions.

Figure 3 Stages of Development of Innovational Clusters

erick Terman, played a large role in the creation of this cluster, as did the company Hewlett-Packard, which was founded there in 1937. In Boston, the bases for the appearance of innovational clusters were the Massachusetts Institute of Technology (MIT) and Harvard University. In the region of Sophia-Antipolis (France), the arrival of outside companies, such as Texas Instruments or IBM, which created R&D centers, stimulated the development of clusters. It is of interest to note that, in Israel, military R&D and state support programs had a significant influence on the development of innovational clusters. The most developed biotechnological cluster in the Bay Area, in San

Origination
Strong scientific centers (universities, SRIs)

Development
More attractive companies Growth of new companies First success stories More new companies Attraction of suppliers Formation of networked organizations

Organic Growth
Movement of companies from other regions Attraction of leading specialists Development of a supportive infrastructure and systems of suppliers Increase of concentration of local and global connections

Transformation
Influence of technological and market factors on the appearance of new clusters (for instance, the role of nanotechnology) The birth of new clusters from the intersection of existing clusters (for instance, bioinformatics)

Francisco, California, came into being about 30 years ago. This occurred after Herbert Boyer, a biochemist at the University of California at San Francisco, set up a company that began to develop and produce new medicines, based on the technology of DNA recombination. Through the support of the venture financier Robert Swanson, Genentech, the world's first biotechnology company, was formed. Through the support of the Stanford

development of clusters

First new companies (Start-Up) Outside companies Social enterprises

The Third Stage: Organic Growth At this stage, local universities and SRIs develop educational and research programs oriented toward increasing the clusters competitiveness. In addition, there occurs development and growth of specialized infrastructure and the system of suppliers. A critical mass arises in the cluster of organizations and infrastructure that leads to a growth in productivity, and stimulates innovative work both in the companies and in the

1978

Boston (Massachusetts, United States) Cambridge (Great Britain) Munich (Germany) Singapore

Universitys center of technology exchange, Boyer and his Stanford colleague Stanley Cohen were able to patent the results of their research, and it played a large role in the creation of Genentech. In this way, the companies in their initial stages appeared near uni-

Examples of Biotechnological Clusters

1988 1994 1999

*This model does not contain an exhaustive presentation of the processes of the appearance and development of innovational clusters Source: Bauman Innovation

versities and SRIs, supporting tight links and often using a common infrastructure. Effective centers of technology exchange acting within the

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The Development of Innovational Clusters Is an Important Factor of Competitiveness of Innovational Systems

The Development of Innovational Clusters Is an Important Factor of Competitiveness of Innovational Systems

cluster itself. At the third stage of development, biotechnological clusters become attractive to scientists and business in the scientific, economic, and cultural senses. And so the effect of attraction due to achievements in clusters of a critical mass fundamental strengthens. Even large companies that are already entrenched in the market frequently decide to locate scientific-research divisions and/or productive power in regions where developed biotechnological clusters are located. Thus, for example, the American biotechnological cluster in the city of San Diego possesses an ideal environment for the appearance of biomedical discoveries and therefore, like a magnet, pulls in international pharmaceutical companies. The Swiss company Novartis has recently located two scientific centers in San Diego: the Novartis Agricultural Discovery Institute, which will engage in research in the area of agricultural biotechnology, and the Novartis Institute of Functional Genomics, which specializes in studying the functional peculiarities of human genes for predicting various ailments.

Six key factors of success for development of biotechnological clusters are: 1. Intensity of R&D; 2. Availability and quality of human resources; 3. Effectiveness of the process of commercialization and exchange of technology; 4. Availability of adequate financial resources; 5. Availability and quality of infrastructure; and 6. Availability and quality of the network.

clinical trials; specialists in the sphere of biotechnological productive processes; and administrative specialists in the area of marketing, finance, and economics, including those with MBA degrees. Managerial personnel with experience of working in the biopharmaceutical sector are an especially important resource for the development of clusters. Such specialists also play a large role in the process of the creation and development of biotechnology companies. They may also enable the appearance of effective networked organizations (i.e., a multifaceted group of associations) and stimulate the appearance and development of international links. The availability of qualified managerial per-

elements of this process. Such centers provide support to scientific workers in the patenting of developments, evaluation of possibilities, and finding financing for revision of technologies and the creation of enterprises, as well as other questions connected with commercialization of the findings of R&D. As was mentioned above, the activity of the center of technological exchange at Stanford University gave the first push to the creation of the first biotechnological company, Genentech. The set of tasks that centers of technology exchange handle varies from country to country. Sometimes, such centers are concerned with a large number of tasks. For example, the innovational center at the Helsinki University of Technology concerns itself with informational support to researchers as they look for financing for research projects and legal support in the process of drawing up contracts with enterprises in carrying out R&D, as well as supporting and enhancing contacts with university graduates.

The First Factor: Intensity of R&D The development of the biotechnology sector relies on the results of fundamental and applied research carried out in universities, SRIs, clinics, and companies. The biotechnological sector is one of the highesttechnology sectors in the world. One of the key factors in the development of biotechnological clusters is the intensity of fundamental and applied research in the biotechnological and related areas. The most successful

sonnel depends on many factors, such as the presence of divisions of large international companies, and cultural and sector factors influencing the mobility of such specialists between companies, the general level of development of the labor market, and the presence of opportunities to increase the level of qualification

The Third Factor: Effectiveness of the Process of Commercialization and Exchange of Technology The presence of an effective process of commercialization (including investigation, evaluation, revision of technologies, and other stages) is an important factor in the success of biotechnological clusters. The centers of technological exchange that exist in universities and SRIs, or are organized on the basis of several organizations engaging in R&D, are one of the

The Fourth Factor: Availability of Adequate Financial Resources A developed infrastructure of financing commercialization of promising partners and creation and development of biotechnological companies is also an important factor for the evolution of biotechnological clusters. It is composed of both individuals angel investors and specialized private venture capital funds, state foundations, the banking sector, and the fund market for high-technology companies. Specialized venture

The Fourth Stage: Transformation Following on the appearance of new technologies and/or the intersection of several clusters and the resulting development of new products and services, structural changes begin. These structural changes create the fourth stage of development of a cluster transformation. So, for example, progress in the area of technologies can essentially transform the medical services and biopharmaceuticals sectors and, in the final account, lead to transformation of biotechnological clusters. It is predicted that, in the first half of the 21st century, technologies connected with the human genome, proteins, antibodies, and cellular structures that are used for curing and replacing damaged cells may become transformative ones. It is expected that, in the second half of the century, structures comparable in size to an atom (nanotechnologies) will be used for improving and curing illnesses of the human body. These and other technologies may also create a transformation of biotechnological clusters.

examples of biotechnological clusters that have appeared and rely on the strength of R&D are those in California and Massachusetts (U.S.). Three types of R&D can be distinguished within biotechnological clusters: (1) R&D in universities and SRIs; (2) Corporate R&D; and (3) Clinical trials and research. The scale and quality of R&D in universities, SRIs, companies, and clinics and the interaction between them is one of the key competitive advantages of biotechnological clusters. Flexibility in the formation and development of interdisciplinary scientific-research groups has great significance for strengthening the dynamics in R&D. For instance, in Boston, leading research universities such as Harvard University, MIT, and the University of Massachusetts play a large role, as do leading clinics, for Massachusetts General Hospital. These universities attract qualified scientists from all over the world. In Germany,

Figure 4 Key Factors for the Development of Regional Innovational Clusters


supporting service CRO, CMO Network of suppliers fundamental and applied research clinical R&D

R&D

Key Factors of Success in the Development of Innovational Biotechnological Clusters


According to the findings of analysis of the evolution of biotechnological clusters, six key factors of success (KFSs) appeared that accelerated the development of these clusters. With the help of these factors, it is possible to estimate the competitiveness of biotechnological clusters and carry out a comparative analysis of clusters at the level of a single country or on a world scale.

in the newer biotechnological cluster in Munich, there also exists a strong technological base that includes state-financed SRIs, such as the Max Planck Institute, and several leading research universities and clinics.

incubators laboratory and productive facilities transport infrastructure real estate general quality of life

Infrastructure

Human resources

researchers technical personnel management

The Second Factor: Availability and Quality of Human Resources The availability and quality of qualified personnel and necessary specialists of various types have great significance for the development of biotechnological clusters. These are researchers with an academic degree specializing in biochemistry, molecular biology, and other branches of science; technical personnel; specialists in executing preclinical and
risk (venture) capital state financial support

The Development of Biotechnological Clusters


investigating and evaluating revision patenting service support

Financial resources

Commercialization of technology

Source: Bauman Innovation

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5. Conditions of Demand
funds, angel investors, and state foundations play a critical role in the creation and growth of biotechnology companies. They are concentrated in the most developed biotechnological clusters, as for successful work knowledge of the key players in the cluster and personal contacts are obligatory. State foundations and programs are also often an important source of capital for the development of a cluster and are usually created in order to guarantee the financing of those stages of commercialization in which alternative market sources of financing are absent. planning, carrying out and assessing clinical trials, specialized marketing services and managerial services, and so forth, play an even greater role in the development of biotechnological clusters. Often, biotechnology companies use distribution networks of large pharmaceutical companies to distribute their products. The formation of such an ecosystem (network) lowers constant costs, reduces the time it takes to release new products and services onto the market, and increases the flexibility of biotechnological companies.

Thus, in the absence of a guarantee of property rights, investors will strive to select projects that will issue an immediate high level of return. Dependence of courts on the executive government and influence groups does not allow inventors and investors to use them for defense of their rights and resolution of conflict situations. Widespread corruption lowers the effectiveness of expenses on R&D and resources designated for support of commercialization. Running a business based on a new technology in such circumstances is extraordinarily difficult. As with institutes, the quality of government decisions creates only conditions for development, but if this quality drops below a certain level, insurmountable barriers arise on the path to innovations. An inability of the government to spend the budget in accordance with priorities, modify policy in accordance with the economic situation, and make informed decisions and put them into action leads to ineffective administration and a general lowering of the competitiveness of the national innovational system.

The ability and inclination of national companies to work with innovations depends in many respects on external stimuli, first and foremost, on the characteristic demands of the internal market. It is extremely difficult to develop innovations if consumers, the government, and the state sector are oriented only toward the price of goods and services, or if access of companies to the market is limited. The scale of the internal market is an obvious advantage of and stimulus for the development of innovations. Large countries, such as the U.S., China, and Russia, have been able to use this factor in their development. Not only the extent, but also the quality of demand has significance for competitiveness. How early on consumers prefer new technologies to less perfected alternatives is determined by their level of sophistication. Not all innovations have products with mass demand as their result. In many sectors, such as production of machinery and tools, most of their production goes into the industrial markets. For such innovations, beneficial conditions arise when access to these markets is not subject to limitation and regulation and the business of companies the potential buyers of new technologies is based to a larger extent on unique products and processes than on exclusive rights to access to resources. The government has a large influence on the development of innovations through participation in the formation of demand civilian and military purchases. Thus, the prototype of the Internet arose as a result of the development of projects of the U.S. Department of Defense, and energy-saving technologies became widespread in Europe as a result of deliberate purchases by governments. The more the technological level of items and tools purchased by the government is a priority, the stronger the stimuli will be for innovations in these areas; for instance, the medical and aerospace industries.

The Fifth Factor: Availability and Quality of Infrastructure The infrastructure for development of biotechnological clusters consists of the following elements: incubators for beginning companies, facilities for laboratory research and organization of production, and a developed road network inside the cluster and developed means of transportation between the cluster and key transport centers; i.e., an airport. A developed state of telecommunications infrastructure (mobile telecoms, high-speed access to the Internet) also has great importance. Incubators basically represent necessary facilities for a cost reasonable for a beginning enterprise and basic administrative services (accounting, legal services, etc.). Some of them also offer beginning companies and researchers a more developed set of strategic and operational services, such as access to financing, functional service, and support from experienced enterprises. Effective infrastructure is also characterized by a high availability and quality of real estate for employees of companies, universities, SRIs, and other cluster participants. An essential role in successful development of regional innovational clusters is played by the general quality of life in the given region. This is characterized by a number of indicators, each of which contributes to the creation of beneficial conditions for life in the region, for instance, availability of quality housing, excellent schools, natural conditions and the ecological situation, a safe and congenial working atmosphere, the presence of possibilities for leisure and recreation, etc. As a result of an increased quality of life, talented, active people who are the key resource for the development of innovational clusters are attracted to and remain in the region.

Supplements as a System
Five supplementary competitive issues directly influence the development of innovations, but each is connected with a separate component of the innovational system and a separate stage of the process. Talented people and ideas characterize the condition of the systems of education and science. The second supplement is part of the sphere of transformation of scientific and technical ideas into new products and business. The third describes the innovative capabilities of companies. The fourth concerns the potential of cooperation, stimuli, and infrastructure. The fifth concerns the demand and diffusion of innovations. Institutes and state administration are factors with an immediate effect; they influence all the constituent parts of the innovational system and determine the likelihood of an increase in competitiveness, while considering all the other factors. No single supplemental competitiveness is the main or basic one. Successful innovations are founded on the harmonious action of all parties, and the development of each is obligatory. However, depending on the situation, some of them may become more important. For instance, the relative importance of supplementary and separate factors depends on the level of development of the countrys innovational system.

6. Institutes and Government Administration


The milieu in which the participants of an innovational system interact is under the influence of the state policy and institutional peculiarities of a country. Although institutes only create the general conditions of interaction, a low quality of them may pose the main difficulty and hinder any attempt by the government to attain greater innovational activity. The ability of all participants in an innovational system to make decisions and plan long-term investments depends on a high quality of institutes.

The Sixth Factor: Availability and Quality of the Network of Suppliers In the process of development of biotechnological clusters, a developed level of the system of suppliers of needed materials, reagents, equipment, and specialized services acquires even greater significance. Suppliers of specialized services, such as carrying out research to order, organizing biotechnological production to order (CMO), implementing

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Compet ing for the Future: The Compet it iveness of Nat ional Systems of Innovat ion

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The Stages of Development of Innovational Systems


Only a small number of countries are able to really influence the movement of todays technological frontier in the direction of greater perfection. In many other countries, innovational systems allow them only to master the achievements of the leaders. It could be said that they are located on the second stage of development. Our analysis of national innovational systems also us to distinguish three stages of development: Use of technology; Adaptation of technology; and Creation of technology.

At the stage of use of technology, companies buy finished products, components, technologies, and equipment in leading countries with the purpose of modernizing their production. Products and technologies that are new for the country are the most important for companies competitiveness. Technological standards and infrastructure are far from the world level, sector clusters are undeveloped, access to suppliers and productive equipment is in general low, and many elements of the innovational system, such as scientific-research institutes, may be completely absent. Export of high-technology production is absent. At the stage of adaptation of technologies, companies buy a license abroad or try to copy the final products, relying on the

Figure 6 Rating of the Competitiveness of National Innovative Systems


1 2 3 4 5 6 7 8 9 United States Sweden Switzerland Singapore Finland Germany Israel Japan United Kingdom 11 Norway 12 South Korea 13 Austria 14 Canada 15 Australia 16 France 17 Ireland 18 Hong Kong (China) 19 Taiwan 20 New Zealand 21 Spain 22 Czech Republic 23 Italy 24 Estonia 25 Slovenia 26 Portugal 27 Hungary 28 India 29 China 30 South Africa 31 Brazil 32 Lithuania 33 Greece 34 Slovakia 35 Thailand 36 Turkey 37 Poland 38 Russia 39 Latvia 40 Mexico 41 Columbia 42 Romania 43 Philippines 44 Argentina 45 Kazakhstan 46 Bulgaria 47 Peru 48 Venezuela 49 Bangladesh 50 Bolivia

10 Netherlands
Source: Bauman Innovation

Figure 5 System of Indicators for Evaluating the Competitiveness of National Innovational Systems
Index of competitiveness of NISs

83*
supplements

Figure 7
20 %
innovational potential of a company

25 %
talented people and ideas

10 %
commercialization

15 %
conditions of demand

20 %
technological infrastructure and clusters

10 %
institutes and effectiveness of government administration institutes

Profile of the Competitiveness of Russia's National System of Innovation OECD


better
6 9 7

29
talented people financial resources for innovation

8
access to the market and conditions of demand

5
intellectual property

22
technological and innovative potential of a company

11

Brazil, India, China Russia

groups of factors

20
natural-science education in school quality of higher education availability of talented people on the labor market mobility on the labor market state sector of R&D

6
availability of traditional financing mobility of venture financing infrastructure for commercialization

5
defense of intellectual property standards and regulation

7
protection of property rights independence of courts freedom from corruption government administration
21 22 19 33 44 49 36 48 49 16 30

access to the consumer market government nonmilitary purchases military purchases

factors

technological level of production capability of taking knowledge from others capability of generating new knowledge

2
availability of infrastructure for commercialization

7
worse obligatory standards and regulation voluntary standards technological infrastructure

27

23 31 45 42 48 40 37 43 34

4
quality of government administration supplements

34

38

35 45

9
resources for scientific research critical mass quality of scientific research

talented people and ideas

commercialization

innovational potential of company capability of generating new knowledge capability of taking knowledge from others technological level of production obligatory standards and regulation

clusters and technological infrastructure

conditions of demand

6
level of equipment production availability of electrical energy level of development of IT level of development of clusters

institutes and effectiveness of government administration protection of property rights independence of courts freedom from corruption quality of government administration

critical mass

availability of electrical energy

quality of higher education

resources for scientific research

natural-science education in school

mobility on the labor market

quality of scientific research

voluntary standards

defense of intellectual property

level of development of traditional clusters

availability of talented people on the labor market

access to the consumer market

availability of venture financing

level of development of innovational clusters

availability of traditional financing

83*

the number of separate indicators used for the rating is indicated

25 % ** the weight of a supplement is indicated

7
level of development of traditional clusters level of development of innovational clusters

Source: Bauman Innovation

Source: Bauman Innovation

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availability of infrastructure for commercialization

level of development of IT

government purchases

factors

military purchases

level of equipment production

Compet ing for the Future: The Compet it iveness of Nat ional Systems of Innovat ion

potential of their engineers. They became able to modify imported production equipment according to their own needs and independently produce a number of components. Technological standards and regulation are being perfected. Sector clusters, including suppliers, receive a powerful impetus for development. Products and productive technologies that are new to the country remain, as before, important for competitiveness, but at the same time, they are not new to the world in general. Increasing the effectiveness of productive processes and services is the basic strategic priority of companies innovative work. They may actively develop production and export of high-technology products produced according to license, and with the use of imported technologies. At the stage of creation of technology, companies compete, creating and applying innovations, many of which are new for the world. Self-sufficient fundamental scientific research is developed, the sphere of commercialization acquires significance, and innovational clusters form. Infrastructure and technical regulation reach world standards. Sector clusters and interaction in the system of suppliers reach a high level of development. Not only final products, but also technologies, are exported. Countries can perfect their innovational systems and pass from one stage to another. The history of technological progress in the 20th century shows that countries can pass through all three stages in their development. Japan, South Korea, Israel, Finland, and other countries that today contribute greatly to the creation of tomorrows technologies have joined the group of leaders, passing through the path of catchup development. Some countries, like Chile and China, are closing with the leaders in the level of development of their innovational system. Only such countries as the United Kingdom, Germany, or the U.S. have led in the sphere of science and technology throughout the entire 20th century. As far as our country is concerned, the innovational system was rather strongly segmented during the period of the Soviet Union into all three stages: in some areas, it was only able to use foreign technologies; in others, it could adapt imported technologies; and in a series of fields the Soviet innovational system was able to create new, world-class technologies. The national innovational system of Russia has somewhat reduced its capabilities in comparison with the Soviet period. The number of areas in which new technologies may be created has significantly dropped, and the segment oriented towards simple

use of imported technologies has grown. Simultaneously, the general segmentation and uneven rate of growth of the Russian innovational system has been retained.

2. Strengths and Weaknesses of Russias National Innovational System


In this section, we characterize the strengths and weaknesses of each supplemental competitiveness of Russias innovational system. This evaluation consists of two parts: a brief synopsis and the analytical section what the facts say, in which are presented indicators of statistics or polls that most clearly illustrate the examined strengths and weaknesses of the Russian innovational system.

Rating of the Competitiveness of the National Innovational System and Position of Russia
In the three illustrations, the factors used for calculating the Index of Competitiveness of National Innovation Systems, the result of the rating so achieved, and a profile of the Russian innovational system are shown. The U.S., Sweden, and Switzerland occupy the top rungs of the rating, with Finland and Israel being in the top ten leaders. In this rating, Russia only occupies the 38th place out of 50 countries, yielding not only to its BRIC neighbors China, India, and Brazil but even Turkey and Thailand. In the profile of Russias innovational system are shown its position according to different factors in comparison with the OECD (the average for all the countries) and B(R)IC countries. As can be seen in the profile, only a few factors are Russias strong suit, and the majority (more than half) of the factors of the country occupy lower positions.

Possibilities in the Sector of Education and Talented Young People from the Provinces (Social Elevator)
The social structure of the polity established in the Soviet period and the basic social mechanisms are such that free higher education still exists, and egalitarian principles of access to a high quality of higher education yet dominate in societal opinion. As a result, applicants from different social layers and different regions still have the possibility of enrolling in the leading universities. Such principles are without question generally accepted in developed countries and do not demand discussion, just as in the case of the Soviet Union. However, the situation is otherwise in developing countries and the majority of countries of the Third World: higher, especially first-class, education is available only to representatives of the privileged classes, and as a result, education is one of the means of social segregation, as was the case in pre-Revolutionary Russia. That the situation in contemporary Russia is otherwise, so that talented young people from the provinces have access to quality higher education, is a strong positive side of Russia's NIS.

Talented People and Ideas: Strengths and Weaknesses


Potential of the Educational System (Large Extent of Middle and Higher Education, Meaningful Share of Engineers and Scientific Specialists, High Basic Level)
The system of professional education in Russia still has a rather high potential if you compare it, not with the leading countries, but with the world average level, for instance, with the real level of other so-called BRIC countries (i.e., Brazil, India, and China). First, the share of the Russian population possessing middle or higher education is rather large, with this share increasing among the younger generation. Second, the share of engineering or natural-science specializations in is still rather high in the structure of education, although it is continually decreasing. Third, the basic level of university education is also rather high, relative to the average world level. In addition, the highest-quality educational resources have traditionally been concentrated and the highest-quality educational programs used in leading universities, which allows the preparation of high-level personnel. As a result, in certain areas (for example, in mathematics, physics, chemistry, and certain engineering sciences), preparation still takes place in Russian universities of specialists of a competitive level in demand on the world market of scientific and engineering personnel. The potential of the Russian educational system can be used for creation of an innovational economy, given large-scale support and development of education.

Retained Scientific Schools


Separate educational programs preparing specialists of high quality on demand at the international level have been preserved in leading Russian universities. In a series of cases, these educational programs are integrated with scientific groups carrying out research on the world level. In such a way, self-supporting scientific schools are formed. Their very presence is extremely important capital, obligatory for any programs of modernization of the economy and stimulation of innovational development. The number of these schools is already small, but they are being preserved.

A Critical Mass of Resources for R&D


Scientific activity, especially in fundamental areas, demands a significant expense of resources; in the first place, budgetary ones. Therefore, only a few countries have the possibility of carrying out scientific development in a wide range of areas, and the majority of countries concentrate on a rather narrow spectrum of research. In addition, the broad range of conducted scientific research has an additional effect due to synergy between different

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areas and the search for new discoveries at junctures between different areas. In this way, size is important: to have an NIS and competitiveness on the world level, a country needs to have a definite critical mass of resources used for carrying out R&D. Russia still has such a critical mass, having inherited it from the Soviet Union.

increase in financing of state R&D compared to the 1990s and the beginning of the 2000s, the results of R&D as expressed in the number of publications in international scientific journals and quantity of registered patents have improved relatively little, compared with the growth of the volume of financing. The poor amount of results of state expenses on R&D is connected with a whole series of factors, among which, in addition to the low level of financing, insufficient replacement of personnel and a poor quality of infrastructure for research, as well as inadequate dispersal of financing, are important. To carry out competitive and productive research, the presence of well-trained and work-capable human resources is necessary. In the majority of Russias scientific centers, persons of retirement age or approaching retirement age compose the core of the personnels potential. In addition, many of the most qualified researchers have left Russia for scientific centers in other countries, or have gone over to other sectors of the economy that ensure a higher level of income. For young people, work in the area of science has not in general seemed either prestigious or attractive, and so replacement of personnel in scientific centers has not taken place in the course of this entire period. As a result, those groups of personnel that still remain in the scientific sector are already unable to carry out full-scale research without taking specific steps to attract new Opinion Sergei Belousov, General Director, Parallels The presence of a focus is an important element of innovational policy. It should not be selected proceeding from the attractiveness in the media of this or that area of innovation, but from the interests of business, that is, potential profitability. One of our problems is that we are trying to attack the innovational economy on all fronts simultaneously. It is impossible, though, to develop and incorporate innovations immediately in all areas. It surprised me that Russia was in only 38th place out of 50 in the ranking of competitiveness of national innovational systems. I am sure that there are areas in which we occupy a higher position, and it follows that we should direct out attention to them.

specialists, and the means to do so are not being allocated to scientific centers. Moreover, to carry out truly groundbreaking research and receive meaningful results, contemporary high-quality research infrastructure is needed, beginning with specialized facilities, equipment, and materials. This infrastructure is poorly developed, as, in the majority of organizations; it has not been upgraded since the Soviet period and was often lost in the 1990s. Insofar as the resources allocated to R&D are insufficient for upgrading infrastructure, research takes place on an outmoded basis that is not often beneficial in obtaining new results. Finally, no steps to heighten the effectiveness of R&D will provide results without a genuine increase in the scale of financing, but, correspondingly, an increase of financing from the budget into the system will not provide results without a genuine improvement of the effectiveness of state expenses on scientific research and development. State financing is in general poorly allocated. Instead of supporting those areas and scientific schools in which Russia is still competitive, financing is smeared in a thin layer over all still existing scientific organizations. Therefore, the volume of financing making it to a final research group is not sufficient for solving existing scientific problems. As a result, it is used only for support of the current functioning of an organization or for modernization of old results that were achieved as a result of Soviet research projects. Given this, the allocation of resources among scientific groups to a large extent depends on the personal preferences of individuals who implement disbursement of financing, and so corruption, favoritism, and simple support of unproductive organizations and groups have a place here.

leading positions in these rankings are occupied by universities in the U.S. and the United Kingdom: Harvard University, MIT, Cambridge University, Oxford University, and others. Russias leading university, the Moscow Lomonosov State University, does not always even enter into the top hundred of these rankings. Other Russian universities that feature in some international ratings, including St. Petersburg, Kazan, Novosibirsk, and Tomsk universities, cannot boast of even such modest achievements. The leading Russian university occupies the highest position (77th place in 2009) in a ranking complied by specialists from China. Specialists of the Center of World-Class Universities of Shanghai Jiao Tong University rate it as higher than their own universities. Thus, it is worth noting that specialists from the United Kingdom and Taiwan, using a different method of evaluation oriented to a large extent to todays scientific services and the level of teaching quality, give much higher rankings to Chinese universities. In this framework, the Moscow Lomonosov State University appears in the second or even the third hundred, next to Czech or South African universities. This analysis shows that Russia is losing the advantages in higher education acquired in the past and in certain indicators, is beginning to yield even to China and Brazil. What do people think about the quality of higher education in Russia? Business sees many lacunae in the preparation of graduates from university technical and natural-science departments. Thirty percent of the heads of small innovational companies consider the level of preparation to be low, as do 35% of the heads of mid-sized and large companies in traditional sectors. At the same time, the number of heads who are satisfied with the current university preparation, whether in innovational or in traditional business, does not come to half of those questioned (47% and 41%). The picture as regards middle professional and school education looks significantly worse. More than half of heads of companies assess the level of preparation of graduates from institutions of middle professional education as low, and not corresponding to the needs of business. Only around 20% of respondents rate their preparation positively. The level of teaching of mathematics and natural sciences in schools is assessed highly by only 36% of heads of small innovational companies and only 45% of leaders of mid-sized and large businesses in traditional sectors. The populations assessment of the quality of Russian school education in the areas of mathematics and natural sciences can

Deterioration of the Situation in the Sphere of Education (Mathematical and Natural-Science Education in School, Middle Professional and Higher, Scientific and Engineering)
Corruption in institutes of higher education, an outflow of the most qualified personnel abroad or into the commercial sectors of the economy; reduction of financing; the absence of any sort of control on the quality of education; and lack of prestige of natural-science and mathematical education in Russia have a constant effect on the sphere of higher education, especially in the natural sciences, engineering, and mathematics. The quality of the preparation of personnel is deteriorating; this process has acquired a self-sustaining character, and, without special action being taken, may lead to deterioration of Russias educational system in the midterm.

Low Level of State Expenses on R&D


Today, the level of state expenses on R&D, despite its dramatic increase in recent years, is far from the level necessary for support of Russias NIS, much less its development. International comparisons show that the volume of financing of R&D from the Russian budget does not correspond to the ambitious goals set before the scientific system, and does not allow Russia to compete with the leading countries in the sphere of cuttingedge research. On the one hand, for support of a critical mass of scientific research and the development of the potential of the scientific and educational system, a certain level of financing is needed. On the other hand, not every increase in financing is capable of leading to a corresponding increase of results. Moreover, if the process of degradation of the national innovational system takes on an irreversible character, after a certain critical point, even a great increase in financing will be unable to give positive results.

Talented People and Ideas: What the Facts Say


Expenses in Russia on education are not high relative to GDP. Regardless of the fact that, in 20002006, state expenses on education were increased to 0.9% of GDP, today their share of the economy is less than 4% less than in Turkey and Brazil, not to mention developed countries. As far as an analysis of the Russias position in the world higher education is concerned, it is enough to look at international rankings of universities to be persuaded of the serious backwardness of the leading Russian universities relative to the universities of those developed countries in which the achievements of the Russian education were recently admired. The

Low Level of Results of State R&D


The results of the activity of Russias national innovational system in recent years have been rather poor. Despite a marked

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be characterized as reserved. Extreme assessments, such as Russian education is the best in the world and Russian education is far behind the world level are unpopular: they received only 4% and 3% support, respectively. The largest number of people questioned believe that Russian education occupies a middle level (43% of respondents); the amount of those who believe the quality of Russian education to be rather high is half this (21%), but it in turn exceeds by twofold the amount of those who consider the quality of Russian education to be rather low. Unfortunately, those respondents who assessed Russian school education as poor cannot be accused of unnecessary pessimism: the facts show that the harsh respondents are right and that Russia is in fact yielding its positions in the area of school education. According to data of PISA (Programme for International Student Assessment)1 an international investigation of the quality of preparation of schoolchildren Russian

schoolchildren are firmly in the lower half of the ratings in all areas of knowledge. For example, out schoolchildren occupy the 34th to 35th positions in a rating of 57 countries in the areas of mathematics and natural sciences. As far as the ability to apply knowledge in practice is concerned, i.e., to give scientific explanations for different phenomena, Russian schoolchildren also enter only into the fourth decile of countries. This would not seem so dire, if young people were able to receive the knowledge and abilities in the following stages of education. So, for example, the U.S., which to a large extent also cannot boast of the successes of its schoolchildren, compensates for the loss by means of its strong system of university education, in which a significant component of the educational system is research work by students and instructors, in addition to their teaching, actively engage in scientific work. In Russia, it is only in a limited num-

ber of universities that students have the possibility to use their received knowledge in practice and participate in scien-

tific investigation. As a whole, it can be said that the Russian system of education is weakly oriented toward fostering scientific thinking in its students. A low level of scientific literacy on the part of the Russian

Figure 9 Positions of Leading Universities of the World's Countries in International Ratings Position of the leading university of a country in a rating by Shanghai Jiao Tong University ARWU, 2009
1 4 20 27 40 55 59 64 72 77 115 158 209 219 259 318 339 347 423 424 United States United Kingdom Japan Canada France Germany Australia Israel Finland Russia Brazil South Korea China South Africa Czech Republic India Hungary Poland Chile Turkey

population is a significant problem, as well as an indirect confirmation of the poor effectiveness of the educational system. According to the findings of research embracing 38 countries and assessing different aspects of the scientific literacy of the population, Russia, in practically every indicator, appears only in the fourth decile of countries.

Position of the leading university of a country in a rating by Times Higher Education QS, 2009
1 2 17 18 22 28 47 49 55 67 102 108 146 155 163 207 229 277 302 360 United States United Kingdom Australia Canada Japan France South Korea China Germany Sweden Israel Finland South Africa Russia India Brazil Czech Republic Chile Poland Turkey

Position of the leading university of a country in a rating of the results of scientific work by HEEACT, 2009
1 11 14 15 34 42 45 48 50 51 78 117 144 226 227 306 353 362 413 431 United States Canada Japan United Kingdom Sweden Germany South Korea Finland France Australia Brazil Israel China Czech Republic Russia South Africa Poland India Chile Hungary

Figure 11 Human Resources: Opinions of Mid-Sized and Large Russian Companies

Level of preparation of graduates of institutions of middle professional education


8% low 17% 26% 25% 16% 6% high

Figure 8 State Expenses on Education in Countries of the World Amount (%) of state expenses on education in terms of GDP in 2007
Israel Finland United States France Poland Hungary South Africa Ukraine Belarus Australia Brazil Canada Czech Republic Germany South Korea Turkey Russia Japan Chile India China Kazakhstan
0% 2% 4% 6%

Level of preparation of graduates of university technical and natural-science departments


4% low 13% 18% 24% 18% 19% 4% high

Change in share of state expenses on education with respect to GDP in 20002007


Ukraine Brazil China Russia, 20002004 Poland Hungary South Korea Czech Republic United States Australia Turkey Finland Germany Japan France Chile South Africa Israel Canada Belarus Kazakhstan India
8% 2%

6.2 % 6.1 % 5.7 % 5.6 % 5.5 % 5.4 % 5.4 % 5.4 % 5.2 % 5.2 % 5.1 % 4.9 % 4.6 % 4.4 % 4.4 % 4.0 % 3.9 % 3.5 % 3.4 % 3.2 % 2.9 % 2.9 %

1.7 % 1.2 % 1.0 % 0.9 % 0.8 % 0.8 % 0.7 % 0.6 % 0.6 % 0.1 % 0.1 % 0.0 % 0.0 % -0.1 % -0.2 % -0.4 % -0.6 % -0.7 % -0.8 % -0.8 % -1.0 % -1.2 %
1% 0% 1% 2%

Source: Center for World-Class Education of Shanghai Jiao Tong University, Times Higher Education, Quacquarelly Symonds Ltd.,Higher Education Evaluation and Accreditation Council of Taiwan, analysis by Bauman Innovation

Level of teaching in schools of mathematics and natural sciences


6% low 11% 14% 24% 23% 18% 5% high

Figure 10 Human Resources: Opinions of Small Innovational Companies

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Figure 12

Level of preparation of graduates of institutions of middle professional education


9% low 21% 24% 29% 15% 3% high

School Education: Opinion of the Population The Russian population's assessment of the quality of school education in the areas of mathematics and the natural sciences (physics, chemistry, biology)
Very high: Russian education is one of the best in the world Relatively high Average level Relatively low Extremely low: Russian education is falling behind the world's Hard to answer 4% 21% 43% 10% 3% 19%
0% 10% 20% 30% 40% 50%

Level of preparation of graduates of university technical and natural-science departments


9% low 21% 23% 28% 13% 6% high

Level of teaching in schools of mathematics and natural sciences


10% low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

17%

13%

24%

21%

14% 1% high

Source: UNESCO Institute for Statistics, World Bank, analysis by Bauman Innovation

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

The PISA program is carried out by the OECD (in 2006, for 57 countries), and in each country from 4,500 to 10,000 15-year-old schoolchildren participate in the testing in different population centers.

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Figure 13 Level of Education of Schoolchildren in Different Countries Knowledge of mathematics


Finland South Korea Switzerland Canada Japan Estonia Czech Republic Austria Slovenia Ireland Poland 34 of 57 Russia Turkey Chile Brazil
300 400 500

To define the level of scientific literacy, respondents were given a series of statements, each of which reflected the essence of a particular theory from different branches of sciAbility to work with a text
548.4 547.5 529.7 527.0 523.1 514.6 509.9 505.5 504.5 501.5 495.4 475.7 474.4 423.9 411.4 369.5
600

deficiency of education in biology an area of knowledge that is vitally important. As an aside, in Russia, an additional important question was posed to respondents from the area of biology, on the content of genes in plants. The data are as follows: 36% of Russian citizens assert that normal plants do not contain genes, while genetically modified ones do. Thus, the existence of a certain imbalance can be postulated between the teaching of various disciplines, and, moreover, a lack of attention to fostering scientific thought in schools can be noted. It is worth paying attention to another problem that has been becoming greater in the last few years and is intensifying: the deterioration of the basic level of knowledge of the population. This is pseudoscience, and the stream of pseudoscientific information that is aimed at the population by the mass media. Poor scientific literacy and too-frequent absence of a critical style of thinking results in our population believing many pseudoscientific ideas, including (which is particularly dangerous) incorrect ideas in medicine. As a result, in the population we observe not just a lack of knowledge, but also the dissemination of errors in many spheres of knowledge. The data of surveys show that, insofar as understanding of science is concerned, the population of Russia is falling behind many countries. Thus, to the question, Is astrology a science?,

Knowledge of precise sciences


556.0 546.9 527.0 517.3 507.6 500.7 499.3 498.0 494.4 490.2 482.7 447.1 442.1 439.9 392.9 Finland Canada Japan Estonia South Korea Slovenia Czech Republic Switzerland Austria Ireland Poland United States 35 of 57 Russia Chile Turkey Brazil
300 400 500

ence. The suggested theses could either be true or false. Respondents were asked to agree with or deny the thesis. The picture for Russia was depressing. If the answers of respondents from 38 countries on theses are analyzed2, the middling level of correct answers by our population (48%) places Russia in the 32nd place. The countries of Northern Europe lead in this rating; the average amount of correct answers there exceeds 70%, and, in the case of Sweden, which is in first place, it is close to 80%. Russian citizens received their only distinguished position among the different questions, ninth, for knowledge of atomic theory: 49% of respondents in Russia asserted that the electron is smaller than the atom. In the other six questions, Russia was in 29th to 37th place. If the 32nd position (52% of correct answers) in assessment of the thesis the ancestors of human beings arose from animals could have been cribbed from the unacceptability of a scientific explanation of the origin of human beings on religious bases, it is also the case that, for example, the 34th position of Russian respondents (only 18%[!] of correct answers)

South Korea Finland Canada Ireland Poland Estonia Switzerland Japan Slovenia Austria Czech Republic Turkey Chile 39 of 56 Russia Brazil
300 400 500

563.3 534.5 531.4 531.4 522.1 518.8 512.9 511.5 510.8 508.3 497.8 488.9 479.5 438.2 423.8 390.3
600

United States

600

Source: OECD, Programme for International Student Assessment (PISA) 2006

Figure 14 Abilities of Schoolchildren to Explain Phenomena Scientifically

in assessment of the false thesis antibiotics kill not only bacteria, but also viruses, can be explained only by a serious

The Earth and space


Finland Estonia Canada Slovenia South Korea Japan Czech Republic Ireland United States Austria Switzerland Poland 33 of 57 Russia Chile Turkey Brazil
300 400 500

Living systems
Finland Estonia Canada Japan Czech Republic Austria Slovenia Switzerland Poland Ireland South Korea 31 of 57 Russia 573.8 539.8 530.5 526.2 524.7 522.1 516.7 512.4 509.1 505.6 498.2 489.9 486.8 434.4 425.3 402.9
400 500 600

Physical systems Figure 15


Finland Estonia Czech Republic Slovenia Japan South Korea Canada Austria Switzerland Ireland Poland United States 33 of 57 Russia Chile Turkey Brazil
300 400 500

554.3 540.4 540.3 533.5 533.0 530.3 526.0 508.1 504.0 502.5 502.3 501.3 481.5 428.2 425.1 374.9
600

559.7 535.0 534.0 530.9 530.4 529.8 529.0 517.7 506.4 504.5 497.1 585.2 479.2 433.2 416.1 384.8
600

Scientific Literacy of the Russian Population Relative to Other Countries Average amount of correct answers on seven test questions
Finland Czech Republic France Germany Hungary South Korea United States Estonia Poland Japan Russia Turkey China 72 % 69 % 68 % 65 % 65 % 60 % 59 % 58 % 54 % 54 % 46 % 41 % 37 % The continents on which we live move The center of the Earth is very hot The ancestors of human beings arose animals The electron is smaller than the atom All radiation is created by human beings Lasers work by focusing sound waves Antibiotics kill not only bacteria, but also viruses
Percentage of correct answers (Russian population)

Assessments of Respondents from Russia of the Truth of a Judgment (Seven Test Questions)
72 % 69 % 52 % 49 % 34 % 31 % 18 %

Russia's Place in 38 32 37 32 9 34 29 34

United States Chile Turkey Brazil


300

Source: OECD, Programme for International Student Assessment (PISA) 2006

Source: O. Shuvalova "The results of scientific activities in the eyes of population", Journal "Forsight", 2007, issue 2

The content of surveys in different countries varied, and therefore seven questions that appeared in all surveys with the same formulation can be used for comparison of countries.

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only 18% of Russian respondents answered, It is not. Such a low amount of correct answers is what allowed Russia to occupy only the 29th place out of 34. For comparison, in Finland, 77% of the population believes that astrology is not a science, and in the U.S., 66%. Now we turn to the state of affairs that has developed in the area of scientific research. If the system of education and scientific literacy of the population about which we spoke above has a direct influence on the innovational system of a country, then scientific research represents a very important component of the innovational system. In terms of expenditures on R&D relative to GDP, Russia is positioned in the club of such countries as Estonia, Belarus, South Africa, and Ukraine; slightly exceeds India, Turkey, and Chile; and is behind China and the Czech Republic. The average expenditure on R&D in the group of countries to which Russia belongs is less than half that of such a group of countries as the U.S., Germany, France, and Canada and less than a third of Japan, Finland, and South Korea. From the graph it is also visible that the achievements of Israel in the area of R&D have not cost that country cheap in the literal sense of the term Israel allocates 5% of its GDP to research and development, and this amount is continually increasing. At the same time, the share of Russias GDP spent on education has increased mildly in the last 10 years, which is partly explainable by the rapid growth rate of GDP itself. What position Russias innovational system occupies in the set of the worlds innovational systems is eloquently attested to by the diagram showing the countrys percentage of expenditure relative to the world expenditure on R&D. In this indicator, Russia lags behind South Korea by twofold (let us note that here the question concerns gross, and not relative, expenditure). The levels of the leaders the U.S. and Japan appear completely unattainable. Even such countries as Germany, France, and China already contribute incomparably greater shares to R&D than does Russia. Moreover, if the existing rates of growth of expenditures on R&D continue, in the midterm, such countries as Finland and Israel, and possibly Turkey, will catch up to Russia: their share of world expenditure on R&D rose greatly from 19972007. In this period, Russia lost 5% of its share, while that of China more than doubled. Such developed countries as the U.S. and France saw their share diminish, but this did not affect their leading positions. In quantity of international publications, Russian scientists seriously lag behind the average world level, this being weakly

connected with the specifics of the scientific areas in which publications are done. The greatest volume of amount of publications by Russian scientists is physics, chemistry, and engineering. The highest level of specialization in publications (i.e., the relationship of the share of publications on Russia to the global amount of publications in a branch of knowledge) can also be observed in physics, space and earth sciences, mathematics, chemistry, and engineering. At the same time, the quality (evaluated according to number of publications cited) of Russian publications is falling behind the world average in all disciplines. The highest quality of publications of Russian scientists is in physics, pharmacology and toxicology, and engineering.

The widespread belief that Russian scientists work in specific areas in which the quantity of cited publications a priori falls behind other, more-cited branches is not supported by objective facts. As a whole, the level of citations per article for Russian publications is 4.1, while the world average is 10.4. When this gap is determined on the basis of the portfolio of publications, that is, the specifics of the portfolio of publications in scientific disciplines, it is only one citation per article; when this gulf is determined on the basis of the level of publications, i.e., the difference in frequency of citation in a single branch of scientific knowledge, it is more than five citations per article.

It is important to note also that the state of affairs in the area of publications of Russian scientists has somewhat improved in the last few years. It is interesting that, after a decline in the beginning of the 1990s, the amount of indexed publications grew until 2000, after which a new sharp decline occurred, and the situation began to rectify itself again only in 2006. The small quantity of publications by Russian scientists is to a large extent because of the low level of science financing. In the amount of publications per researcher, Russian researchers occupy one of the very last places, falling behind even Brazil, and, if the quantity of publications is compared

Figure 16 Scientific Literacy of the Russian Population Relative to Other Countries

Figure 17 General Expenditures on R&D in Countries of the World

Understanding of what a science is in different countries (percentage of respondents)


77% Finland 12% 11%

Share of expenditure on R&D percentage of GDP in 2007 and change (p.p.) in 19972007 (size of circle reflects volume of expenditure on R&D in US$ 1 million)
high

Share (%) of country in world expenditure on R&D in 2007


United States Israel Japan Germany France China 34.13 % 14.04 % 7.88 % 5.06 % 4.43 % 3.13 % 1.35 % 0.88 % 0.79 % 0.72 % 0.43 % 0.25 %
10 % 20 % 30 % 40 %

5%

United States 53% France 41% Germany Czech Republic 24% 19% 57% 21% 38% 20% 27%

Expenditure on R&D as percentage of GDP in 2007

66%

28%

6%

4%

Japan

Finland South Korea

South Korea Russia India Finland Israel Turkey South Africa

United States
3%

Germany France
2%

Canada Czech Republic China

23% Turkey 23% Hungary 22% Estonia 18% Russia 18% Poland 14% 24%

36%

41%

0%

32%

45%

54%

Hungary Estonia Belarus 1 % Ukraine South Africa India Turkey Poland Chile Russia
low

Change in country share in world expenditure on R&D between 1997 and 2007
China Turkey South Africa Israel 103 % 79 % 40 % 38 % 23 % 13 % 5% 1% 0% -5 % -9 %

Kazakhstan
0% 0.5 % 0.0 % 0.5 % 1.0 % 1.5 % 2.0 %

34%

48%

South Korea Finland Japan

Change of expense on R&D as percentage of GDP in 19972007


low high

68%

India Germany Russia United States

do not consider astrology a science

do consider astrology a science

Data for Russia from 2007; for European countries 2005, for United States 2006 Source: O.R. Shuvalova, Does the Population Need Knowledge?, Alma Mater: Journal of Higher Schools, 2009, no. 3. Source: UNESCO Institute for Statistics, World Bank, analysis by Bauman Innovation

France -16 %
40 % 0% 40 % 80 % 120 %

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C o m p e t i n g

f o r

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to the amount of expenditure on R&D, Russia is already on the level of strong middle contenders, outpacing many developed countries. Unfortunately, the problem concerns not only the quantity, but also quality, of publications. Articles by scientists from the RAS system are usually published in journals of a lower rank than the works of their colleagues from other academies of sciences, including the Polish and Chinese ones. This is also related to the mediocre level of citation of publications by RAS scientists. Today, the sector of scientific research in Russia has a full spectrum of problems. The situation regarding personnel looks unhealthy: the deficiency of science practitioners is rather large, but the most discouraging thing is that there are no prerequi-

sites for preserving them. To the contrary, judging by trends, the insufficiency of personnel is only increasing. Scientists evaluate the quality of Russian higher education and preparation of personnel for scientific work rather highly: 64% of responding scientists believe that Russian higher education approximates the worlds best level in one degree or another, while 17% of scientists provide negative assessments, their opinion being that the quality of higher education is low, worse than in other countries. In this way, scientists show that have much greater optimism regarding this question than do heads of companies. Graduate education was also highly appraised by scientists. More than 70% of survey respondents give a high assessment of the quality of preparation in graduate school and the level of contemporary candidates dissertations. Negative

assessments in this case are significantly fewer than as regards higher education: only 6% of respondents expressed dissatisfaction with graduate school preparation, and only 10% with the quality of dissertations. These high appraisals of the quality of preparation of colleagues notwithstanding, the situation with respect to personnel in Russian science is not simple. The results of a survey

of scientists show that a third (33%) of researcher respondents experiences a lack of colleague in their group, and 12% regard the current situation regarding personnel as critical. For 49% of scientific groups the situation regarding necessary personnel looks comparatively better; however, the answers given to different questions force us to regard this superiority as untrustworthy.

Figure 19 Indicators of Production of Scientific Research in Countries of the World: Science As a Whole and Leading Scientific Organizations Ratio of number of articles in int. journals to number of researchers in the public sector in 2007.
United States 1.14 1.11 0.55 0.47 0.45 0.44 0.44 0.40 0.34 0.28 0.27 0.25 0.24 0.23 0.21 0.18 0.13 0.13 0.04 0.0 0.5 1.0 1.5 China Poland Hungary Czech Republic Belarus Israel Turkey South Africa Russia Australia Canada South Korea Finland Chile Germany France United States Japan Kazakhstan 0 5 10 15 Canada Chile

Number of articles in int. journals per US$ million expenditure on R&D in 2007
15.0 11.7 9.8 9.5 8.4 8.0 7.8 6.4 5.9 5.2 5.2 5.2 5.0 4.9 3.8 3.5 3.3 2.9 2.5 20

Average level of journals in which works are published by members of academies and scientific societies from 20032007
Max Plank Society, Germany Higher Council on Scientific Research, Spain Council on Scientific and Industrial Research, India National Research Center, France Agency on Science and Technology, Japan National Research Council, Italy Czech Academy of Sciences Polish Academy of Sciences Chinese Academy of Sciences Russian Academy of Sciences National Academy of Sciences of Ukraine

1.06 1.05 1.03 1.03 1.02 1.02 1.01 1.01 0.99 0.98 0.96

Figure 18 Publications by Russian Scientists According to Scientific Disciplines

Germany India

Portfolio of international publications by Russian scientists in different scientific disciplines from 19992009: specialization and quality
high

Composition of the level of citations of Russian articles in scientific disciplines from 19992009
12 10 relation of number of citations to number of publications 8 6 4 2 0 World portfolio as a whole level Russia
4.1 10.4 -1.0 -5.2

China Finland South Korea Czech Republic Japan Hungary Turkey Estonia Poland Brazil Russia Belarus Ukraine Kazakhstan

0.90 0.95 1,00 1,05 1,10

Quality of publications

Average level of citations of publications by academies of sciences and scientific societies from 2003-2007
Max Plank Society, Germany Agency on Science and Technology, Japan Higher Council on Scientific Research, Spain National Research Center, France National Research Council, Italy Czech Academy of Sciences Council on Scientific and Industrial Research, India Polish Academy of Sciences Chinese Academy of Sciences Russian Academy of Sciences National Academy of Sciences of Ukraine

Physics Pharmacology and toxicology Engineering sciences Ecology Botany and ecology Clinical medicine Biology and biochemistry Information science Materials science Molecular biology and genetics Chemistry Mathematics Space sciences

12.0 9.1 7.8 7.5 5.2 5.6 5.3 4.1 3.8 2.7 2.0 0 2 4 6 8 10 12 14

Publications by Russian scientists, ISI indexed, from 19992009


32,000
Earth sciences

30,000 28,000 26,000 24,000 22,000

Social sciences (general)


low

Specialization
low
Source: ISI, NSF, analysis by Bauman Innovation

high

20,000
1994 1996 1998 2000 2002 2004 2006 2008
Source: SCOPUS, SCImago, UNESCO Institute for Statistics, analysis by Bauman Innovation

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First, the current labor market is extremely poor, this concerning both qualified and young specialists. Sixty percent of respondents say that finding a qualified specialist in their area of scientific work is either very difficult or impossible (18% of respondents picked the impossible option), and only 16% of scientists believe that it would be relatively easy to attract a specialist to their group. Science is being poorly replenished with young scientists: 11% of scientists see no inflow of young people at all, and another 47% consider this inflow to be extremely weak. Only about one-fifth of scientists (19%) observe young people coming into science. Moreover, scientific groups are in great need of qualified young people and the possibility of passing on knowledge: 57% of participants in the survey speak of a severe inadequacy of colleagues younger than 35. Against the background of a deficiency of personnel, it is important to note also the lack of auxiliary technical staff: 28% of respondents say that a lack of such specialists is critical for their scientific group. Second, scientists are leaving both Russian science and science in general. Thus, 47% of respondents report an active outflow of Russian scientists abroad. Twenty-nine percent of respondents do not see the phenomenon of a brain drain to other countries (or consider this to be a minor problem). People are leaving science for other fields of work unrelated to science. Thirty-eight percent of participants in the survey assert that there is an active departure of colleagues to other areas. For comparison, less than a third (32%) of respondents does not observe people actively leaving science. The situation concerning infrastructure for carrying out scientific research is comparable to the problematic nature of questions of personnel. More than a third of respondents (37%) experience a deficit of laboratory equipment, and 31% of scientists say that the equipment they use is either fundamentally or nearly obsolete. There are slightly more positive answers, although their share does not reach half: only 44% of participants in the survey think that equipment for carrying out scientific research is more or less adequate and only 45% of scientists rate the quality of laboratory equipment as corresponding to or approaching world standards. As far as laboratory materials are concerned, 36% of researchers experience a lack of them (14% of respondents said that this lack is systematic). Again, only fewer than half of scientists (45%) say that there are enough laboratory materials for their scientific work.

The situation concerning provision of computers and office machinery looks better. Seventy-three percent of respondents say that provision is good, and enables effective work. Nevertheless, a big question remains: is it permissible that, in a segment of scientific research, namely, the forward-most sphere of economic activity, 12% of leading scientists said that there was poor provision of computers and office machinery with a negative effect on their work. In addition to this, 21% of scientists note a poor availability of specialized software. As far as ones place of work and facilities are concerned, 33% of respondents assess their quality as poor (9% as extremely poor). The percentage of scientists satisfied with their workplaces is 8%. Scientists assess the system of financing scientific work as extremely poor. The problem of meagerness of financing is worsened due to the ineffectiveness of distributing resources and a series of barriers in the system of competitive financing. The aggregate volume of financing is extremely low. Fifty-six percent of scientists consider it insufficient, and to be holding back scientific work to one or another degree (19% of leading scientists participants in the survey called current financing extremely meager). Only 29% of researchers consider the volume of financing to be more or less sufficient (only 2% believe that financing is sufficient for productive scientific work).

Another 24% of those surveyed assess the current volume of financing with a rating of satisfactory. The developing system of competitive financing of scientific research is highly competitive: in the opinions of 34% of those surveyed, competition is extremely strong and there are very many requests; another 45% consider the level of competition to be more or less high, and only 4% of participants in the survey consider the level of competition for competitive financing to be more or less low. However, the real conditions in which this competition takes place are far from perfection. The demands for competition requests presented in the frameworks of competitions for financing of R&D are not always

adequate. In the opinions of scientists, very often it is needed to include a great deal of superfluous information that is in no way connected to the planned work in a request. Thirty-seven percent of scientists consider demands for the contents of requests in their area of work to be inadequate (10% of those surveyed selected the answer completely inadequate). Exactly the same amount of respondents, 37%, considers the demands for requests to be logical. The state of affairs in accounting in competitive financing is even worse: 58% of respondents consider demands for reports to be illogical and state that they are often required to present cumbersome accounts that are overloaded with superfluous information, the writing of which takes much time away from the basic work. A mere less than a quarter of respondents (23%) say that the accounting is relatively logical

Figure 21 Personnel in Russian Science: Opinions of Scientists

and that the time that they use to do it is reasonable.

Figure 22

Current situation regarding personnel


12% 8% 13% 19% 16% 13% 20%

Infrastructure for Carrying Out Scientific Research: Opinions of Scientists

lack of personnel

adequate personnel

Adequacy of laboratory equipment Availability of qualified specialists on the labor market


18% low 23% 19% 24% 11% 4%1% high 11% 13% 13% 19% 20% 19% 5%

inadequate

adequate

Quality of laboratory equipment


10% 5% 16% 25% 18% 16% 11%

Inflow of young people into science in the last 3 years


11% 18% 29% 23% 14% 4%1% active

Figure 20 Quality of Higher Education and Graduate School: Opinions of Scientists

fundamentally obsolete

corresponds to world standards

weak

Adequacy of laboratory materials Outflow of scientists abroad in the last 3 years


16% active 13% 18% 25% 13% 9% 7% inadequate adequate weak 14% 10% 12% 19% 20% 17% 8%

Quality of higher education


6% 10% 20% 27% 23% 14%

Departure of scientists to other areas in the last 3 years


low: behind other countries high: better than world level 10% active 22% high: better than world level 11% 17% 31% 14% 14% 4% weak

Provision of computer and office machinery


1% 4% 7% bad 15% 22% 30% 21% good

Quality of preparation in graduate school


3% 2% 21% 22% 29%

Severity of lack of specialists


Scientific colleagues younger than 35 Auxiliary technical personnel Scientific colleagues older than 35 58 %* 28 % 18 % 7%

Availability of specialized software


5% 7% low 9% 19% 15% 23% 23% high

low: behind other countries

Level of contemporary candidate's dissertations


2% 7% low
Source: Russian Innovation Survey 1999-2009, Bauman Innovation, OPORA RUSSIA

Quality of workplace and facilities


9% low
Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

18%

26%

19%

29% high

Project leaders

11%

13%

31%

20%

13%

4% high

* Share of respondents (of the general number) experiencing a lack of the indicated specialists (the number of answers exceeds 100%: two variants of an answer were admitted Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

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The work of competition commissions is a cause of much dissatisfaction. This concerns the quality of the expertise and methods of payment on the basis of which applications are evaluated. Forty percent of participants in the survey rated the competition commissions as lacking in competence and unable

to identify the strongest applications (at the same time, 8% of those surveyed called the competition commissions extremely incompetent). Only 31% of those surveyed believe that the competence of competition commissions is more or less sufficient to identify the strongest applications (the competence of competition commissions receives high marks from 5% of scientists). A situation in which weak applications and/or those that

insufficient for resolving the scientific tasks the grant is meant to address. Second, there exists a regularity in the rules by which resources are distributed, according to which demands for certain expenses that often do not give scientists the right to dispose of the grant as they deem expedient. The first problem the incommensurability of the sizes of grants to tasks is pressing for 59% of survey participants (18% of answers are extremely negative). It is important to note that such a state of affairs is in many ways founded on the existing rules for carrying out competitions and methods of evaluation, given which the announced cost of carrying out research becomes in many cases a more significant criterion than socalled qualified criteria. In sum, talented scientific groups are obligated to underestimate the cost on their applications in order to not fall behind dishonest applications in competition for com-

petitive financing. In this way, the competitive mechanisms used in allocating grants for science arouse the same censure as do mechanisms of government purchases of complex production, which will be discussed below. In both this and other instances, it is impossible to underestimate the significance of qualified and reputational criteria for determining which applications win. The second problem, connected with illogical demands for articles of loss, is noted by more than half the surveyed scientists: 52% of respondents say that the inadequate rules for the resources of a grant to one degree or another hinder normal work. Only a little more than a quarter give positive assessments, with only 28% of respondents considering the articles of loss to be more or less logical. In characterizing the effectiveness of administration of scientific work, respondents use negative assessments. Thus,

Figure 23 The System of Financing Scientific Work: Opinions of Scientists

have been best agreed upon win is a result of the poor competence of competition commissions, as well as the widespread practices of informal payments (paybacks) and carrying out of competitions under particular people, which will be dis24% 13% 5%2%

Current volume of financing


19% 16% 21%

cussed below. Among the participants of the survey of scientists, 30% of respondents believe that distribution of financing is all too often based on a nonobjective and unfair approach. Only 32% of respondents believe that an objective, fair approach, in which the strongest applications win in the majority of circumstances, holds sway in their field of work.

meager, holds back scientific work

sufficient for productive scientific work

Competition for obtaining competitive financing


2%2% 16% weak 20% 25% 34% strong

Despite all the above-described unappealing nature of the picture concerning distribution of competitive financing, the greatest problems are observed by scientists after grants have been received. First, the amounts of grants are, in most cases,

Figure 25 Barriers to Conducting Scientific Research: Opinions of Scientists

Figure 26
Leadership in Science and Technology: Opinions of Small Innovational Companies, Mid-Sized and Large Companies, and the Population

Adequateness of demands for contents of requests


10% 14% 13% 25% 14% 12% 11%

inadequate, much superfluousness

adequateness

Basic barriers to conducting scientific research


more important problems

Quality of scientific-research organizations in the opinions of companies


Quality of research in the opinions of small innovational companies
3% 14% 14% 19% 22% 18% 10% high

Competency of competitive commissions


8% low 15% 17% 29% 18% 8% 5% high

Figure 24 Effectiveness of Management of Scientific Work: Opinions of Scientists

Lack of financing

82 %*

poor: behind the world level

Objectivity of distributing competitive financing


5% 7% unobjective and unfair 18% 39% 18% 12% 2% objective and fair

Effectiveness of use of budget resources for creation of new knowledge


12% poor 20% 15% 31% 9% 10% 3% high

Lack of equipment and infrastructure Ineffectiveness of the system of state administration of the area of scientific research (this concerns the work of relevant ministries and divisions) Lack of scientific personnel

52 %

Quality of research in the opinions of mid-sized and large companies


17% 17% 15% 22% 20% 6%3% high

poor: behind the world level 35 %

Correspondence of sizes of grants to tasks


18% 18% 23% 19% 16% 3% 3%

Effectiveness of distribution of direct budget financing among scientific organizations


15% 14% 26% 34% 7% 3% high

34 %

The importance of the problem is increasing

Assessment of the Russian population of the leadership of countries in the area of science and technology
Japan Germany United States China Russia
less important problems

66 %* 33 % 32 % 30 % 27 % 7% 3% 2% 1% 1%
0% 10% 20% 30% 40% 50% 60% 70%

resources insufficient

resources sufficient poor

Ineffectiveness of administrative direction in scientific organizations

21 %

Rules for distributing resources in grants


18% illogical, hindering work 16% 18% 20% 8% 12% 8% logical incorrect correct
Ineffectiveness of the work of the Russian Academy of Sciences
0% 20% 40% 60% 80%

Correctness of the choice of priority areas for financing


6% 13% 22% 41% 12% 5%2%
Poor quality of preparation of scientific personnel

16 %

United Kingdom France India Brazil Other


* percentage of respondents identifying a country as one of three world leaders in the area of science and technology Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

Adequacy of accounting in competitive financing


22% 25% 11% 19% 7% 8% 8%

Flexibility of the system of scientific organizations in Russia


16% 16% 19% 34% 10% 3%2% high

12 %

needlessly cumbersome and inadequate

adequate, takes up reasonable time

poor, a barrier to development of new areas


Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

*The sum of answers exceeds 100%: three variants of an answer were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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when discussing the effectiveness of using budget resources allocated to scientific work in Russia (meaning that all resources targeted by the government for scientific work, 45% of respondents called it poor (12% chose extremely poor). In their view, the resources expended to a large extent do not lead to the appearance of new knowledge. Only 22% of surveyed scientists think that budget money is being translated into new knowledge. Ineffective use of budget resources is the result of a whole series of problems in the system of administrating scientific work support of unproductive scientific organizations, a very problematic approach to choosing priorities for dispersing grant resources, and poor conditions for developing new scientific areas. Thus, 55% of participants in the survey of scientists think that the current dispersement of direct budget financing among scientific organizations is ineffective and hinders the development of science (only 11% of respondents say that it is effective), 41% of scientists criticize the choice of priority areas for allocation of competitive budgetary financing (19% of survey participants support the choice of priorities), and 51% of those surveyed say that there is an inflexibility in the system of scientific organizations in Russia, which is unable to develop new areas (only 15% said that it was flexible). The problem of ineffectiveness of the system of government administration of the sector of scientific research came in the third place in the list of barriers to carrying out scientific research, it being noted by 35%3 of scientists. The problem of inadequacy of equipment and infrastructure, which was noted by 52% of those surveyed, came in the second place in this anti-rating. Practically all participants in the survey (82%) are of the opinion that the main barrier to carrying out scientific research in Russia is inadequate financing. More than a third of scientists (34%) consider one of the main barriers to be lack of scientific personnel, 21% of scientists have serious concerns about administration on the level of scientific organizations, and 12% think that the Russian Academy of Sciences is a serious barrier. In the opinions of business and the population, Russias positions in science and technology are rather weak. Many business representatives give negative assessments to the quality of Russian scientific-research organizations (NROs). Thus, about half (49%) of heads of mid-sized and large companies in traditional sectors of the economy think that Russian NROs lag behind foreign ones. The opposing point of view is supported by 29% of those surveyed. Heads of small companies, many of

whom themselves have worked in scientific research in the past, give a more positive assessment on the whole, but even in this case 31% of respondents think that the quality of Russian NROs is beneath the world level. Fifty percent of heads of small innovational companies say that Russian NROs correspond to the world level. In the opinion of two-thirds of Russias inhabitants, Japan is one of the three leaders in the area of science and technology (66%4 of those surveyed). Germany gathered half as many votes (33% of those surveyed), with the U.S. (32%) coming in slightly behind it, and China (30%) following them. The idea that Russia is a world leader in science and technology (Russia being one in the trio of leaders) is shared by 27% of those surveyed. Such trust on the part of the Russian population in Russian science is not, unfortunately, due to facts, but rather the patriotism of the surveyed citizens and lingering stereotypes from the Soviet period (which were completely accurate at the time of the Soviet Union) that our science is one of the worlds best. The United Kingdom (7%) and France (3%), which in fact substantially surpass Russia in the scientific sphere at the present time, come in far behind Russia.

Commercialization: Strength and Weaknesses


Poor effectiveness of infrastructure for commercialization (poor availability of financing, bad work on the level of micro-instruments: technology-exchange centers, specialized services, and real estate for scientific companies)
Despite the significant financial resources that Russia has acquired in the last few years during the period of economic growth, obtaining financing is extremely complicated even for those who are successfully engaged in commercial enterprises, especially as regards long-term financing. The problem of low availability of financing worsened in 2009 during the world economic crisis. For starting companies that are working in innovational, high-risk sectors, financing is an even greater problem. The Fund for Cooperation in the Development of Small Enterprises is practically the only real source of financial resources for innovational teams, but its resources are not sufficient for

Figure 27 Possibilities for Commercialization of the Results of Scientific Work and Entrepreneurial Moods: Opinions of Scientists

Entrepreneurial moods among Russian scientists


12% 22% 19% 28% 12% 6%

not widespread

widespread

Possibility of creating new products or processes


15% poor 14% 13% 18% 14% 16% 10% high

Market potential for commercialization (demand)


18% poor 13% 16% 18% 12% 15% 8% high

Scientists' understanding of steps needed for commercialization


21% weak 11% 22% 18% 6% 5% 16% complete

Sources: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Figure 28 Experience in Commercialization of Results of Scientific Work: Opinions of Scientists

Attracting financing for commercialization of research


25% complicated 34% 19% 18% 3% 1% easy

Attempts at commercialization of results of scientific research

Sources of financing for commercialization


One's own resources or those of acquaintances Investments by Russian companies 39 %*

yes, successful none 3.8 % 4.9 % yes, but unsuccessful

32 %

Investments by foreign companies The Fund for Cooperation in the Development of Small Enterprises

29 %

74.2 % 17.0 % Yes, but it is too early to talk about results

26 % 8%

Venture fund

Bank credit

0%

Other

0%

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

* The total number of answers exceeds 100%: several different answers were allowed

Respondents could note no more than three barriers to carrying out scientific research. Respondents could note no more than three countries that are leaders in the area of science and technology.

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everyone, and the conditions of the Fund are far from suitable for all starting groups. In addition to lack of financing, poor availability of real estate and infrastructure for starting small innovational companies is a large problem. There are few business incubators, and it is not a rarity that the conditions for use of facilities are unacceptable for beginning small enterprises. Services for beginning small innovational companies in the existing incubators often consist in offering real estate on advantageous conditions. Free consulting services on selection and training of personnel, creation of finance and marketing plans, legalconsultation, and training of entrepreneurs themselves practically do not exist; that is, the entire sector of services is absent that, in essence, forms the basis of the success of business incubators in developed countries. It is an additional problem that institutes dedicated to realizing commercialization of technology (for instance, centers of technology exchange in universities, venture funds, etc.), although officially designated and active, often work extremely ineffectively.

ed in the creation of a business (only 18% of those surveyed believe that scientists seriously aim for commercialization of their developments) or do not know how the process of commercialization takes place (only 27% of scientists say that

they have some knowledge of the steps needed to create a business). But even if through happy circumstance a scientific talent and entrepreneurial abilities and inclination are united in one person, he or she will more likely than not confront enormous difficulties in trying to find money for commercialization. Seventy-

making up the innovational infrastructure that plays a meaningful role in the financing of commercialization of developments is the Fund for Cooperation in the Development of Small Enterprises in the Scientific-Technical Sphere. Venture funds play practically no role. The results of a survey of innovational small companies reinforce the pessimism of scientists. In the great majority of cases, financial problems constantly accompany innovational work. Thus, in the opinion of 84% of respondents, finding means for development of a product (preparation of a prototype, patenting) is impossible or extremely difficult. Eight-six percent of company heads say that venture financing is almost unavailable at the stage of putting a product on the market or development of a beginning company. The data regarding how and with what resources small innovational companies came into being are interesting. In the majority of cases, enterprises were created by colleagues at scientific institutes or universities who decided to commercialize their area of research (61%). This is the route that is generally taken worldwide, and in this way Russia is fully in the mainstream of international tendencies. The share is significant Opinion

Figure 29 Availability of Financing in the Early Stages: Opinions of Small Innovational Companies

eight percent of surveyed scientists say that in Russia, it is extremely difficult (25% chose the option impossible) to find resources for commercialization of their own research. Almost three-quarters of surveyed scientists and researchers
14% high

Availability of financing for a beginning company for development of a product


6% 10% low 20% 27% 23%

have no experience at all in commercialization of the findings of scientific work. Les then 4% of those surveyed can boast of successful attempts at commercialization, while almost 5% have undertaken attempts that turned out unsuccessful. Another 17% are trying to commercialize the results of their work at the present time and still cannot say that they have been successful.

Availability of venture financing for a beginning company


3% 2% low 21% 22% 29% 22% high

At the same time, as a rule, either researchers own resources or those of their relatives (39%), or investments by private Russian companies, or investment by foreign companies (29%) are

History of companies' beginnings


Before the creation of the firm, its founders worked in a university or SRI and used their accumulated experience The founders worked in a state company and used their accumulated experience The founders worked in a private commercial firm, but decided to split off The firm's creation was in no way connected with previous experience and abilities Other

61 %

the sources of financing for such commercialization. The only organization among all Russian governmental organizations

Low Level of Entrepreneurial Activity of Researchers, and the Population as a Whole


The general level of entrepreneurial activity among the population of Russia is extremely low. This is brought about by many factors, including the absence of a real positive example of entrepreneurship in popular opinion. There are practically no examples of people who began with a small business and then, year after year, increased their turnover, finally becoming rich as a result of developing the same area in which they began, such as Steve Jobs or Bill Gates. Moreover, society knows well, that people engaging in small business experience constant interference in their work and are victimized by negative actions on the part of state departments and crime.

17 %

11 %

Figure 30 Innovational Infrastructure: Opinions of Small Innovational Companies

Aleksandr Galitskii, Managing partner, Almaz Capital Partners Innovation is transformation of knowledge into
8% 7% 1% high

6% 6%

Availability of facilities in a business incubator for a beginning company


12% low 30% 20% 23%

something that can bring profit. We need to learn to work on profit, not loss. When we learn to do this, we will change Russia into an innovational country. We need to get used to the brand Developed in Russia, and not just Made in Russia. In our country, there is a very large gap between fundamental scientific research and production. To overcome this, we need knowledge that has never been developed in Russia. It takes ten years to train a specialist in the area of product management. What distinguishes us from other countries in our approach to innovations can be analyzed for a long time, but the basic problem, in my view, consists in the lack of systematicity in our actions. The government serves as the ground for development, but it needs to create this ground systematically.

Sources for starting capital


The founders' own resources Resources of a state venture fund or fund for support of commercialization Resources of private investors private persons (inc. relatives) Resources of a specialized non-state fund Bank credit Other forms of state support

75 %*

27 %

Availability of specialized services (IS, business planning, marketing)


3% low 25% 23% 25% 13% 8% 3% high

16 %

Commercialization: What the Facts Say


There exists a definite potential for commercialization of the results of the scientific work of Russian scientists: 43% of surveyed scientists say that new products or processes can be created on the basis of their work, and 35% of respondents believe that the results of their scientific work would meet with market demand. However, those scientists who say that their scientific research has potential are with great likelihood not interest-

9%

Availability of specialized educational programs on business development


3% 12% 20% 28% 18% 16% 4% high

7% 6%

low

Quality of specialized educational programs on business development


9% low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Other

3%

13%

22%

30%

16%

7% 2% high

* The total number of answers exceeds 100%: several different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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of those who went into innovational business from a state company or commercial organization (17% and 11%, respectively). Concerning financing of the start-up, in the majority of cases, the resources of the founders served as the source (75%), and often additional resources were obtained from private persons, including friends and relatives (16%). In a relatively large amount of cases, state support resources of specialized funds (27%) or other forms (6%) was the main source. Private institutional resources bank credit (7%) or resources of specialized nongovernmental funds (9%) were used only in rare cases. Heads of innovational small companies express lack of satisfaction with other aspects of the innovational infrastructure in addition to poor availability of financing. So, for example, 62% of those surveyed say that the availability of facilities in business

incubators is poor (this concerns offices and laboratories that a beginning company can use at an advantageous cost). Only 16% of survey participants consider facilities in business incubators to be more or less available. It is often difficult for beginning small innovational companies to find specialized services (in the areas of intellectual property, business planning, and marketing research). Fifty-one percent of respondents say that the availability of such services is poor (24% disagree with them). The state of affairs regarding the availability of specialized educational programs to increase qualifications in the area of business management is better (this concerns, for example, such subjects as a business plan, quality control, marketing and promotion, exports, finances, and the productive process). In this case, there are fewer unsatis-

fied (35%) and more satisfied (38%) heads of companies. It is true, however, that the quality of such programs is rated poorly: in the opinion of 44% of participants in the survey, such programs do not match the demands of their business. Twenty-five percent of respondents are satisfied with the quality of educational programs.

Figure 32 Consumer Interest in Innovations

Readiness of consumers to use innovational goods instead of those they already use
7% Sweden 7% 44% 41% 33% 38% 34% 38% 34% 34% 37% 31% 29% 32% 32% 30% 31% 23% 26% 27% 26% 23% 23% 20% 36% 49% 56% 38% 47% 42% 46% 51% 47% 47% 51% 50% 53% 26% 9% 13% 8% 13% 5% 6% 41% 43% 47% 45% 12% 34% 48% 41% 40% 4% 40% 42% 6% 4% 7% 3% 9% 6% 9% 19% 4% 5% 11% 7% 7% 8% 6% Slovenia 7% Netherlands 12% Italy 7% United Kingdom 10% Romania 5% Czech Republic 8% Denmark 7% Estonia 4% Finland 5% EU25 7% Spain 4% France 4% Ireland 5% Latvia 4% Hungary 12% Turkey 6% Greece 4% Germany 4% Poland 4% Lithuania 3% Russia 5% Bulgaria 2% 15% Portugal 14% 18% 13% 9% 11% 12% 7% 13% 5% 16% 4% 10% 9% 7% 14% 12% 4% 15% 11% 7% 11% 1% 48% 32% 7% 6%

Conditions of Demand: Strengths and Weaknesses


Poor effectiveness and indifference to innovation of government purchases, including purchases in infrastructural sectors and the sectors of defense, security, and space
Government purchases may be divided into three levels from the point of view of their orientation to innovation: Government purchases of standard products or services

Figure 31 Size of the Internal Market of Countries in the Area of Military Purchases Size of the internal market (GDP + import export) in 2007, US$ million, according to purchasing power parity
United States China Japan India Germany France Russia Brazil Canada South Korea Turkey Australia Poland South Africa Ukraine Czech Republic Chile Israel Hungary Finland Kazakhstan Estonia
0 5,000 10,000 15,000

for which standard criteria of selection can be formulated (for instance, automobiles or office equipment); Government purchases of complicated, high-technology Share (%) of military R&D of GDP in 2007
United States 14,549.9 6,410.8 4,212.0 3,081.5 2,613.0 2,085.8 1,912.4 1,806.3 1,240.5 1,191.3 932.4 773.7 631.4 481.6 332.9 237.5 199.2 188.5 186.9 176.8 153.8 30.8
20,000

or science-intensive products or services for which it is


0.53 % 0.37 % 0.17 % 0.05 % 0.02 % 0.02 % 0.01 % 0.01 % 0.00 %

difficult to formulate criteria of selection (for instance, complex systems of fire safety for complex industrial facilities, large-scale architectural projects, etc); and State purchases of R&D, for which it is even harder to standardize criteria of selection. Here, two types of R&D are possible: (1) the search for a solution to an existing problem (for example, working out methods for managing and preventing technogenic disasters in hydro-energy) and (2) fundamental research oriented toward understanding some sphere of knowledge (for example, determining the causes of illness). Government purchases stimulate innovation to a greater degree at each successive level. The currently existing policy of government purchases uses the short-term cost as the main criterion, not taking into account the factors of quality and innovativeness. There is another problem in the area of purchases of weapons and military technology alongside demand for unique, nonstandard products and services, a significant volume of purchases are of standard products and services. However, the norms of the law on government purchases do not extend to the areas of defense and security, and as a result, a significant space arises for abuse in the form of purchases standard, cheap production at elevated prices. This problem is not unique to Russia.

Russia France Germany Finland Poland Czech Republic Estonia Hungary


0.0 % 0.2 % 0.04 % 0.06 % 0.08 %

1.0 %

Share (%) of expenditure on purchase of arms of GDP in 2007


United States Russia Poland France Finland Estonia Hungary Germany Czech Republic
0.0 % 0.2 % 0.04 % 0.06 % 0.08 %

0.85 % 0.68 % 0.42 % 0.34 % 0.33 % 0.29 % 0.15 % 0.15 % 0.15 %


1.0 %

YES, even if the innovational good is SIGNIFICANTLY MORE EXPENSIVE YES, if the innovational good DOES NOT DIFFER IN PRICE

YES, if the innovational good is SLIGHTLY MORE EXPENSIVE NO Hard to answer

Source: World Bank, European Defence Agency, US DOD, SIPRI, analysis by Bauman Innovation

Source: Special EUROBAROMETER 236 Population Innovation Readiness, Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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It is well known that, at one time, analysis uncovered a severalfold elevation of the price of standard parts in the case of government purchases of military hardware in the U.S. Therefore, it is necessary to create a thorough system of criteria for purchases of standard goods in the areas of defense and security. However, even a systematization of criteria of government purchases on the first level cannot produce the desired effect of stimulation of innovation. With growth of the level of orientation to innovation, the significance of economic criteria for selection of a supplier inevitably diminishes and, simultaneously, the significance of qualified criteria and, most importantly, the effectiveness of the process of making purchases needs to grow. For these reasons, on the second and third levels of government purchases, it is practically impossible to regulate all selection criteria with one law. Thus, for example, in world practice of government orders of R&D in technological policy, an internal set of experts is exclusively used, with information being kept confidential; when government orders in scientific policy, external, including international, experts are used in order to ensure that the selection is independent.

According to the findings of surveys in Russia, as a whole 62% of the population is ready to exchange their customary goods for innovational ones, while in the EU countries, this figure is 82%. In this respect, the inhabitants of Russia are more conservative in their use of consumer goods. At the same time, it is important to note that questions of a goods price do not have a fundamental meaning here: the shares of Russian citizens who are willing to use new items when they are significantly more expensive than the customary ones, insignificantly more expensive than the customary ones, or have no difference in price from the customary ones are consistently lower than among the populations of the EU countries. The share of those who unequivocally do not want to use innovational goods is almost 2.5 times higher in Russia than in Europe (26% vs. 11%). The consumption conservatism of the inhabitants of Russia is even more clearly distinguished when a comparison is done on a country-by-country basis. It is clear that there is no country in Europe with such a significant share of consumers who strongly have no desire to buy innovational goods in place of tested and traditional ones. In Greece, which is in first place according to conservativism of consumers in the European Union, this figure is only 16%. Thus, if comparison is made with Europe, the consumption preferences of the population of Russia stimulate companies to adopt innovational products/services to a lesser extent.

al complexes and facilities. This potential is continually diminishing and may be completely exhausted in the near-term. However, it still exists, and is an extremely important positive factor for innovational development.

To date, the question of the rights to intellectual property created in the course of carrying out research on budgetary resources has not been conclusively regulated. There is no sharp division between intellectual property rights between its immediate creators (physical persons) and the organizations in which the staff worked during the process of creation of the intellectual property (legal persons). In addition, the existing system of assessing the cost of IP and assignment of property rights to IP between the government and physical and legal persons does not create stimuli for introducing IP into economic activity. Developers (physical persons) are not interested in this, as they see no material benefits for themselves; for organizations this also makes no sense due to the small perceived value of IP; and the government is simply not physically in a condition to manage all the objects of IP that it possesses. It is also necessary to note the poor legal literacy of researchers and administrative personnel in the area of defense and protection of IP, as the legislation itself is relatively difficult to understand. There are simply not enough qualified specialists in this sphere (for instance, competent patent lawyers) for the scale of the country. Another significant problem is the general ineffectiveness of the work of the court system, including in defense and protection of IP.

Ineffectiveness of Infrastructure for Technical Regulation (Outdated Standards, System of Metrology and Accreditation)
The system of standardization and regulation is one of the most problematic, both for the development of industry and for innovational development. The existing technical regulation is either based on the already-outdated standards of the 1980s, and holds back the adoption of new technologies or has no demands on enterprises whatsoever, which creates favorable conditions for unethical manufacturers and gives to impetus to innovators.

Barriers in the Area of Defense and Protection of Intellectual Property


In itself, the legislation in the area of intellectual property in Russia does not have significant failings. The problems lie in several areas.

Conditions of Demand: What the Facts Say


A large size of the internal market can be included about the small number of advantages of the Russian innovational system. Russian innovational companies can rely on a large-scale and accessible market for purchases of new products for achieving effective scales of production. South African, Chilean, and Israeli companies, for example, do not possess such advantages. The volumes of Russian military purchases are relatively high in both absolute and relative terms (according to estimates by international experts at the Stockholm Institute SIPRI). As share of GDP, expenditure on purchases of weapons and scientific research and experiments in the interests of national defense in Russia lags only behind the U.S. The Russian MIC (military-industrial complex) remains an important element of the national innovational system. In the meanwhile, equally important for development of innovations are both the volume of the market and the inclination of local consumers to use new items, as well as the priorities of the government in relationship to state purchases: the meaning of the level of innovational production. The attitude of residents of Russia to using innovational consumer goods differs from the mood of consumers in the European Union.

Figure 33 Intellectual Property: Opinions of Scientists

Technological Infrastructure and Sector Clusters: Weak and Strong Sides


The Presence of Fundamental Technologies
Thanks to the fact that, in the Soviet Union, during realization of large-scale infrastructural projects and programs, preference was given to working with our own forces, from development of technology to domestic industrial production, today we have a rather high level (again in comparison to world average indicators, and not with those of the leading countries) of fundamental technologies of production of equipment and exploitation of resources in the areas of energy, railways, air transport, etc. For instance, the results of the accident on the Sayano-Shushenskaya GES (HPP) were overcome through our own efforts, and new equipment, rather than old, of Russian manufacture was set in place. Russian companies still win international competitions for construction of nuclear electrostations and installation of equipment for energy and other infrastructur-

Low Level of Development of Key Regional Innovational Clusters


9% 17% available

Availability of patenting in Russia


15% unavailable 13% 13% 28% 6%

The presence of developed, competitive innovational clusters on the regional level is a key factor in innovational development in the leading countries. The most famous examples of such clusters are Silicon Valley, California; biotechnological clusters in Boston, San Francisco, and Munich; and the aerospace cluster in Toulouse. On the basis of such clusters, demand for scientific research and development develops in universities and scientific centers, new companies appear, specialized financial instruments for commercialization of technology are created, etc. In Russia, there are very few such clusters and the level of their competitiveness is too low in comparison with the world leaders. There are separate elements of innovational clusters in Moscow, Moscow oblast, St. Petersburg, and Novosibirsk, and to some extent in Tomsk, Nizhni Novgorod, and Kazan. However, in the conditions of a poorly developed real sector of the economy, first and foremost in developing production, and without corresponding government

Availability of patenting abroad


23% unavailable 16% 4% 28% 13% 11% 5%

available

Legislation in protection of IP
25% undeveloped: IP not protected 21% 22% 24% 3%3%1% developed

Rights to the findings of scientific work


27% do not belong to the scientists 17% 11% 21% 7% 5% 12%

belong to the scientist

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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support, these clusters cannot effectively develop and compete with their foreign analogs.

scientists in commercialization, mentioned as well were the low interest of scientists in entrepreneurship and their weak competency in questions of commercialization, as well as a poor availability of resources, primarily financial ones. However, there is a colossal problem in the fact that often a scientist simply has nothing to commercialize, as in many cases he or she does not own the rights to his or her scientific work. The iron logic here works as follows: if a scientist who is a coworker in a scientific organization works in a laboratory

of this organization and receives a salary from budget money, both the scientific organization and the government that finances this scientific research are entitled to own the rights to the scientists work. As a result, an enormous amount of ideas simply cannot be transformed into innovations, because neither scientific organizations nor the government will try to commercialize them. Fifty-five percent of surveyed scientists say that, in the majority of cases, they cannot register intellectual property and use it according to their discretion, as the rights to the findings of their scientific work partially or fully belong to either the organization in which they work or to the grant-making organization. Only a quarter of participants

The cost of patenting is the second problem. Thirty-one percent of surveyed scientists say that there is poor availability of patenting in Russia from the point of view of cost. In the opinion of 43% of the surveys participants, the expense of patenting is unacceptable abroad. Protection of intellectual property is an even greater source of censure: only 7% of those surveyed consider the Russian legislation in this sphere to be more or less adequate, and intellectual property to be protected. The amount of those who say that there is inadequate development of legislation and weak defense of intellectual property is 68%. Business is in solidarity with the scientific community regarding the quality of protection of intellectual property. Fifty-six percent of heads of small innovational companies and

Technological Infrastructure and Branch Clusters: What the Facts Say


As survey results show, the existing state of affairs in the sphere of protection and defense of intellectual property is a source of many barriers for the innovational system. When the matter concerned the poor involvement of Russian

Figure 34 Intellectual Property, Standards, Regulation: Opinions of Small Innovational Companies

Figure 35 Intellectual Property, Standards, Regulation: Opinions of Mid-Sized and Large Russian Companies

in the survey (24%) say that they can obtain rights to their scientific findings.

Defense of IP in general
21% weak 19% 16% 25% 15% 2%2% strong

Defense of IP in general
31% weak 24% 14% 14% 10% 4%3% strong

Figure 36 Assessment of Technological Regulation: Obligatory Standards and Voluntary Certificates of Quality Assessment by companies of the level of perfection of national technological standards as a result of a survey of the World Economic Forum in 2009
Germany Japan Finland 6.34 5.97 5.93 5.91 5.89 5.84 5.63 5.62 5.13 5.07 4.97 4.90 4.69 4.61 4.55 4.35 4.27 4.14 3.93 3.80 3.76 3.48
1 2 3 4 5 6 7

Defense of IP: patents for inventions, industrial models


11% weak 15% 17% 26% 14% 8% 9% strong

Defense of IP: patents for inventions, industrial models


21% weak 15% 18% 24% 13% 7% 3% strong

Number of ISO 9001:2000 active certificates per 1000 people in the population in 2007
Israel Hungary Czech Republic Japan Germany Estonia France Australia Finland South Korea Chile Poland Canada Turkey China Belarus Russia Brazil South Africa Kazakhstan Ukraine India
0.00 0.50 1.00 1.50

1.51 1.04 1.01 0.57 0.55 0.47 0.37 0.35 0.34 0.33 0.24 0.24 0.23 0.17 0.16 0.13 0.08 0.08 0.07 0.05 0.05 0.04
2.00

Defense of IP: trademark registration


7% 7% weak 16% 25% 17% 15% 13% strong

Defense of IP: trademark registration


8% weak 10% 16% 22% 18% 18% 7% strong

France Canada Australia Czech Republic

Defense of IP: author's rights


10% weak 17% 18% 28% 13% 9% 5% strong

Defense of IP: author's rights


13% weak 18% 19% 27% 12% 10% 2% strong

United States Estonia Hungary South Africa

Defense of IP: commercial secrets, know-how


3% 13% weak 19% 27% 16% 15% 7% strong

Defense of IP: commercial secrets, know-how


12% weak 11% 18% 27% 13% 13% 4%

Chile Brazil South Korea Poland

strong

Adoption by companies of international standards (ISO, GMP)


21% weak 11% 13% 19% 12% 11% 12% active

Adoption by companies of international standards (ISO, GMP)


13% weak 10% 11% 13% 13% 18% 22% active

India China Israel Turkey Kazakhstan

Quality of regulation of export of high-technology production


17% 11% 17% 31% 5% 5% high

Quality of regulation of export of high-technology production


12% 12% 15% 31% 10% 8% 11% high

Russia Ukraine

low: regulation is a barrier


Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

low: regulation is a barrier


Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: International Standards Organization, World Economic Forum, analysis by Bauman Innovation

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69% of heads of mid-size and large companies in traditional sectors believe that intellectual property is poorly protected. The state of affairs in the area of defense of authors rights and patent rights for inventions and industrial designs arouses the most condemnation. The state of affairs in regulation of exports of high-technology products also does not satisfy business. Forty-five percent of heads of small innovational companies believe that the current regulations are a barrier to business (39% of heads of mid-sized and large companies support this point of view). Twenty-five percent of heads in innovational business and 29% in traditional business disagree with them. The technical standards, regulation, system of quality certification, and metrology also are not part of the strong side of the Russian innovational system. If we look at statistics, Russia is behind the majority of countries in allocation of international certificates of quality. For example, it is a rare Russian company that can boast of having an ISO 9001:2000 certificate. Data on the per capita number of these certificates are provided in

the illustration, and analogous results are obtained if we use the number of companies or volume of GDP as an indicator. It is also possible to carry out international comparisons of the quality of technical standards in various countries, using for this the findings of a survey by the World Economic Forum. In 2009, in the opinion of heads of companies, Russian technical standards are quite far from perfect both in an absolute sense and in comparison with other countries. Not only the quality of regulation and the general level of infrastructure are important factors in the competitiveness of an innovational system; the level of development of sector and innovational clusters concentrations of economic and innovational activity are, as well. The Russian scientific and innovational system has always been characterized by a super-concentration of resources in the capitals Moscow and St. Petersburg. This was the case before the October Revolution and during the Soviet period, and persists today. However, if earlier this super-concentration gave at least adequate results, at the present time Moscow (along with Moscow Region) and St. Petersburg (along with Leningrad Region) have practically lost their status of

nological processes may take place only rarely. On the other hand, a high level of innovational activity in itself does not testify to a companys high technological level. Frequent upgrading of a product line is not an indicator of a high level of productive technologies or high technical characteristic of production. The low level of innovational activity of Russian companies can be explained as the result of two key factors: the specific characteristics of the sectoral structure of the economy (or, in other words, the effect of the portfolio of sectors), on the one hand, and poor stimuli and insufficiency of resources for such activity and its basic sectors on the other. First, the structure of the Russian economy is such that sectors are dominant in it that a priori, in their nature, have

a lower level of innovational activity: extraction and refinement of natural resources, metallurgy, and agriculture, as well as infrastructural sectors and the service sector. In these sectors, product innovations are not a key factor for a business success, and, as far as technologies and equipment are concerned, in the Russian conditions it is easier and cheaper for companies to buy technologies and equipment from leading manufacturers (mainly foreign ones). The share of innovative active sectors in the Russian economy such sectors as information-communications technologies, biopharmaceuticals, machine and equipment production, production of new materials, and aerospace production is extremely small. It is important to clarify that this concerns share in terms of value added, and not in absolute value: a significant part of value

Figure 38 Technological Level of Production, Ability of Companies to Adopt Technology and Expenditure on R&D Share (%) of companies' expenditure on R&D in terms of GDP in 2007
Israel Japan South Korea Finland United States Germany Australia Canada China Czech Republic Russia Belarus South Africa Estonia Hungary 3.73 % 2.68 % 2.65 % 2.51 % 1.92 % 1.79 % 1.33 % 1.24 % 1.07 % 1.01 % 0.72 % 0.60 % 0.57 % 0.53 % 0.49 % 0.48 % 0.48 % 0.29 % 0.17 % 0.16 % 0.14 % 0.09 %
1% 2% 3% 4%

Ability of companies to adopt and adapt technology, findings of a WEF survey, 2009
Japan United States Finland Israel Germany South Korea Australia Canada France Estonia India Chile South Africa Czech Republic Brazil China Turkey Poland Hungary Kazakhstan Ukraine Russia
1 2 3 4 5 6

Perfection of the production process of companies, findings of a WEF survey, 2009


6.4 6.2 6.1 6.1 6.0 6.0 5.9 5.7 5.5 5.5 5.5 5.5 5.4 5.4 5.4 5.1 5.1 4.8 4.7 4.5 4.4 4.2
7

Figure 37 Innovational Activity in Leading Innovational Centers of the World Scales and successfulness of innovational activity in leading innovational centers on the basis of evaluations of the number of triadic patent families in 20052007
high

international scientific centers. The diagram shows the scales of innovational activity in the worlds leading agglomerations and the successfulness of their scientific activity. Moscow and St. Petersburg are behind in both indicators. The diagram shows that Moscow and St. Petersburg are still not competing not only with the clear
Eindhoven Rochester (agglomeration) Tampere Cambridge (region) Munich Agglomeration of the city of Tokyo Silicon Valley (agglomeration)

Japan Germany Finland United States France Canada South Korea Israel Australia Czech Republic Brazil Chile Estonia South Africa India Poland Turkey China Hungary Kazakhstan Ukraine Russia
1 2 3 4 5 6

6.4 6.4 6.0 5.9 5.7 5.3 5.1 5.1 5.1 4.7 4.6 4.5 4.4 4.3 4.3 4.1 4.1 3.9 3.8 3.7 3.5 3.4
7

leaders (Tokyo, Silicon Valley, Seoul, Eindhoven, Osaka, Rochester, San Diego), but also with yesterdays middle-performers (Helsinki, Tel-Aviv). In terms of scale of innovational activity, Moscow and St. Petersburg are comparable with leading regions of countries of the Third World (Johannesburg and Pretoria, Bangalore), but at the same time are behind them in successfulness.

Successfulness of innovational activity

San Diego (agglomeration) Agglomeration Frankfurt-am-Main of the city of Osaka (agglomeration) Agglomeration Ottawa of the city of Seoul Rein-Ruhr (region) Tel-Aviv (agglomeration) Paris (agglomeration) Singapore Perth Beijing Montreal Vancouver (agglomeration) Vilnius Prague Warsaw Johannesburg and Pretoria (Gauteng province) Shanghai Huanshi Bangalore Moscow and Moscow Region

Oulu Haifa (agglomeration) Helsinki (agglomeration)

Innovational Potential of Companies: Weak and Strong Sides


Poor innovational activity in sectors of the economy through adaptation of foreign and development of domestic technology
It is important to distinguish technological level and innolarge

Brazil Ukraine Turkey Poland India Chile Kazakhstan


0%

Kiev

St. Petersburg and Leningrad Region

low

Scale of innovational activity


small
Source: OECD Triadic Patent Families Database (July 2009), OECD, EUROSTAT, national statistical organizations, analysis by Bauman Innovation

vational activity. On the one hand, the level of technologies and production equipment used by companies may be high, but at the same time, adoption of new products and perfected tech-

Source: World Economic Forum, World Bank, UNESCO Institute for Statistics, analysis by Bauman Innovation

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still concentrated in old industrial sectors in which innovations are actively being adopted, including machine building, the defense industry, and tool construction. Second, even in the dominant sectors of the Russian economy, the level of innovative activity is lower than in analogous sectors of other countries. On the one hand, there are often not benefits for enterprises in refinement and adoption of innovations. Companies have no need to outpace their competitors through new refinements, as the level of competition in the Russian economy is low, and victory in the competitive struggle is achieved to a large extent through use of administrative resources and limiting competitors access to the market, not through adoption of innovations. Consumers in Russia, especially in the state sector, are also inexperienced and undemanding regarding quality of products, and the factor

of the innovative nature of invented products has little meaning for state purchases. On the other hand, there are also insufficient resources available to active enterprises for carrying out innovational activity; they do not receive tax benefits for carrying out innovative work and do not have access to longterm credit for refinement and adoption of new technologies. Moreover, a lack of qualified sector researchers, who in the Soviet times were concentrated in the sectors of NII; a low technological level of suppliers of parts (for example, in machine building and automobile production); and a lack of qualified engineers and workers are problems.

Opinion Andrei Korkunov, Representative, Board of Directors of OAO Ankor Bank In Russia today, there is not enough knowledge and technology, as well as a culture of using them, and therefore we need the possibility to import them and attract foreign specialists. If we have new technologies, it is possible on this basis to create something new with the help of our scientists. But in the beginning, it is necessary to learn to do something. Therefore, for us each new technology, even one that is already widely used abroad, is an innovation. In addition, foreign experience will help Russia to overcome the problem of extremely poor labor productivity: specialists that have been brought in will teach our colleagues to work effectively by example.

in definite sectors, it is advantageous to have a research center in Russia, the results of the work of which are then used in production divisions situated in other countries. However, such cases are singular.

Innovational Potential of Companies: What the Facts Say


The innovational abilities of companies are divided into three factors: (1) their abilities to create new knowledge, (2) their abilities to adapt and adopt knowledge (technologies) from outside for use in their own innovational processes, and (3) their technological level. As far as the ability to create new knowledge is concerned, Russian companies are not in the last place: their share of expenditure on R&D as percentage of GDP in 2007 was 0.72%. This is greater than in neighboring Ukraine

Figure 39 Stimuli and Resources for Innovational Activity in Sectors

Figure 40 Barriers to Innovational Activity: Opinions of Small Innovational Companies Basic barriers to innovational activity of innovational companies
Lack of available resources within the company Poor availability of financing from outside sources Overly large expenses needed for innovational activity Non-definability of demand for a new product or service Lack of qualified personnel Lack of marketing information Limited nature of standards and sector regulation Difficulty of looking for suppliers Lack of information connected with technologies No reason for innovation: demand for new products or services is absent Unclear priorities of innovation by shareholders and the board of directors Ineffective innovational management inside the company
0% 20 % 40 % 60 %

Dispersion of sectors
high

Stimuli for innovations in sectors


intensity of competition consumer demand for high quality of goods defense of intellectual property

Low Level of Foreign Investment in Russia in the R&D Sector (Foreign companies do not carry out R&D in Russia)
In a number of countries, the innovational activity of foreign
pharmaceuticals, medical equipment telecommunications equipment, information technologies food and drink products

60 %* 50 % 40 % 24 % 18 % 8% 7% 6% 6% 5% 2% 2%

investors is an important factor in the innovational process. Using a number of factors of production that are competitive in a given country (for example, the presence of unique researchers, low cost of a qualified work force, significant internal demand for innovational products), foreign investors carry out research and development in this country. The most

aerospace, defense

Stimuli for innovations in sector

oil and gas extraction electronics automobiles, transport equipment textiles, clothing other production

wholesale and retail trade

attractive countries for carrying out R&D are the U.S., Germany, the United Kingdom, India, France, Japan, and China. Unfortunately, foreign investors, with some rare exceptions (Intel, Boeing), practically do not carry out research and development in Russia. This is because foreign investors regard Rus-

Resources for innovations in sectors


availability of financial resources for innovational activity availability of human resources availability and technological level of parts/equipment outside possibilities for R&D

construction

sia either as a significant market for sales of their products or as a source of natural resources. The quality of the conditions for carrying out innovational work in Russia is extremely poor, and therefore practically no investors oriented toward the production of innovations with the goal of exporting them to other countries have come to Russia in the past few years. The above-mentioned exceptions
high

electrical energy, gas, water supply

low

Guaranteed resources for innovations in sector


low
Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA Commentary: Based only on the findings of a survey of heads of large and mid-sized companies in the represented sectors

are connected to the fact that our country still has strong programs of preparing specialists in a number of areas of engineering and the natural sciences and for some companies

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

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and Belarus, as well as Turkey, Chile, or Brazil; however, it is almost one-and-a-half times less than in China. As far as the ability to assimilate knowledge and technological level of production is concerned, according to the findings of an annual survey by the World Economic Forum of the heads of leading companies in more than 100 countries, it is extremely low in comparison with the talents and abilities of companies in other countries. If the expert opinion of the heads of leading Russian companies is to be believed, in 2009 even Ukrainian and Kazakh firms outpaced them in this respect. The comparatively low innovational activity of companies and sectors is explained by negative external factors: poor sector stimuli and low resource guarantees. The sector stimuli for innovation are, first and foremost, intensity of competition, the significance of innovations as a factor of success

in the competitive struggle, the lack of experience of basic consumers on the internal market and their demands for innovation in products and services, the importance of the factor of their innovativeness in state purchases, access to export markets, and quality of regulation in the area of intellectual property. Insofar as resources are concerned, financial and human resources, the services of scientific-research organizations and suppliers of components, and the quality of preparation of technical specialists in higher educational institutions are important for innovation. The findings of surveys of large and mid-sized Russian companies operating in so-called traditional sectors show that, on the whole, there are rather serious problems both from the point of view of stimuli for innovation and from the point of view of resources for innovation. However as far as stimuli for innovation are concerned, the various branches of the Russian economy are in completely different situations.

and production of medical equipment. There are relatively large stimuli for innovation in the aerospace, defense, and oiland-gas sectors. However, the availability of resources for innovation in these branches, in the opinions of the leadership of enterprises, is a little lower than the average level. A very high level of guaranteeing resources for innovation is noted by heads of surveyed companies in such sectors as trade and construction. However, these sectors, to the contrary, do not have great stimuli for innovational activity. Only two sectors in Russia, the food industry and manufacture of telecommunications equipment, along with the information technology sector, in the opinion of heads of companies in these sectors, are guaranteed resources to a sufficient degree and simultaneously have relatively large stimuli for innovation. At the same time, in the majority of sectors in production of electronics, in light industry, in automobile production, and in infrastructure sectors there are neither stimuli nor resources for innovation to a sufficient extent.

Figure 44 Barriers to Development of Business: Opinions of Small Innovational Companies

Basic problems for development of innovational companies


Low availability of financial resources Fall of demand in the sector Administrative barriers/ sector regulation Tax regulation Corruption Poor access to contemporary technologies and equipment Weak protection of intellectual property High cost of personnel on the labor market Poor availability of manufacturing and office real estate Low qualifications of personnel

56 %* 49 % 23 % 19 % 18 % 16 % 15 % 12 % 11 % 6% 6% 2% 0%
0% 20 % 40 % 60 %

Figure 41 Barriers to Innovational Activity: Opinions of Mid-Sized and Large Russian Companies Basic barriers to innovational activity of mid-sized and large companies
Lack of available resources within the company Overly large expenses needed for innovational activity Poor availability of financing from outside sources Non-definability of demand for a new product or service Lack of qualified personnel Lack of marketing information Limited nature of standards and sector regulation Difficulty of looking for suppliers Lack of information connected with technologies No reason for innovation: demand for new products or services is absent Ineffective innovational management inside the company Unclear priorities of innovation by shareholders and the board of directors
0% 20 % 40 % 60 %

Stimuli are relatively large in such sectors as pharmaceuticals

Figure 42 Human Resources: Opinions of Small Innovational Companies

Figure 43
External trade regulation

62 %* 33 % 33 % 23 % 19 %

Human Resources: Opinions of Mid-Sized and Large Russian Companies

Poor infrastructure (transport, energy) Inadequate decisions by shareholders and/or the board of directors

Availability of engineers and technical specialists


9% low 18% 20% 17% 18% 13% 4% high

Availability of engineers and technical specialists


8% low 21% 18% 23% 17% 10% 3% high

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Cost of engineers and technical specialists


2% 11% 18% 21% 26% 14% 8%

Cost of engineers and technical specialists


2% 8% 12% 32% 20% 14% 13% acceptable

unacceptable 12 % 8% 6% 6% 5% 5% 4% low

acceptable

unacceptable

Figure 45 Attractiveness of Countries for Relocation of R&D Divisions

Availability of qualified workers


11% low 18% 20% 23% 14% 9% 5% high

Availability of qualified workers


15% low 21% 16% 19% 13% 11% 5% high

Countries that are most attractive for relocation of R&D divisions, %


United States 19% 15 % 8% 5% 4% 4% 4% 3%

Availability of specialists for nonmanufacturing divisions


3% 6% low 15% 23% 27% 17% 10% high

Availability of specialists for nonmanufacturing divisions


1% 6% low 12% 24% 26% 21% 10% high

Germany United Kingdom India France Japan

Availability of high-level managers with work experience


17% 22% 22% 19% 12% 6% 2% high

Availability of high-level managers with work experience


18% low
Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

20%

19%

18%

14%

7% 4% high

China Netherlands
Source: E&Y 2008, data from a survey of 800 European companies

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

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It is interesting that the oil-and-gas sector, in the opinions of heads of surveyed companies, is close to this group, insofar as the level of stimuli for innovation in the oil-and-gas sector is only a little higher than average. In many sectors, the basic locomotive of activity is small innovational companies. Therefore, for development of innovations in these sectors, it is very important to overcome the barriers hindering their activity. In a survey of Russian technological companies, respondents were asked to name up to three barriers limiting the innovational work of their companies. According to the surveys findings, the basic barrier is a lack of available resources for investing in innovations (60%), this being especially critical when the existence of the next-largest barriers are taken into account the poor availability of financing from outside sources (50%) and high cost of innovational projects in Russia (40%). Other problems are less significant, for example, that it is hard to forecast demand for innovational products on the consumer market (24% of those surveyed) and there are not enough qualified personnel (18%). Other barriers are still less significant. The barriers to innovational activity of large and mid-sized companies in traditional sectors of the economy, in the opinions of the surveyed heads, are on the whole identical to the barriers that were named by small innovational companies, with the difference that, here, the problem of lack of available financial means received somewhat greater support from those surveyed (62%) and the problems of high cost of innovational activity and lack of resources on the financial market received somewhat less support (about 33%). This is logical, as it is easier for large companies to attract financial resources and, due to their scale, engage in the realization of innovational projects more cheaply. It is interesting to note that mid-sized and large companies more frequently experience a lack of information connected with technologies 12% of respondents noted this as one of the three barriers to their innovational activity. As shown above, heads of companies (both innovational and traditional) often name lack of qualified personnel as a serious barrier. If this problem is examined in greater detail, the following picture emerges: about half of companies (47% from innovational business and 47% from traditional large and mid-sized business) say that it is difficult to look for qualified engineers and technical specialists. It should be emphasized that for

many companies this is a question of availability, not a question of cost: 31% of heads of small innovational companies and 22% of heads of mid-sized and large companies said that engineers demands for high salaries were problematic. The problem of looking for qualified workers is reversed: 49% of small innovational companies and 52% of traditional companies experience difficulties. The most inaccessible for companies are high-level managers with work experience: 61% of representatives of innovational business and 57% of heads of mid-sized and large companies experience many difficulties in seeking specialists. There is one positive note: it is more or less easy to find specialists for nonmanufacturing divisions, such as, for example, financial services, supply, and sales, with less than a quarter of companies running into problems in this area. If the development of innovational business as a whole is discussed, it must be known that small companies encounter an entire complex of problems that coincide in many ways with the problems of Russian business in general. At the present day, the greatest problem for Russian small innovational companies is poor availability of financial resources (noted by 56%5 of heads), decline in demand in the sector is in second place (49%), and administrative barriers and sector regulation are in third (23%). Nineteen percent of heads named tax regulation as one of the basic problems, and

18% corruption. For 16% of companies, poor access to contemporary technologies and equipment is critical. Fifteen percent of companies suffer from a weak defense of intellectual property. There are other, less significant problems that limit the development of small innovational companies. These include a high cost and poor qualifications of personnel, low availability of manufacturing and office real estate, and an array of others. Judging by the results of a survey of international companies, the state of the Russian innovational climate does not attract foreign investment into the R&D sector. Thus, accord-

ing to the results of a survey of international companies with headquarters in Europe, Russia is not present in the list of countries that are attractive for relocation of R&D divisions. In this way, the Russian innovational system is giving up the fight (it might be more accurate to say giving up without a fight) for such small amounts of foreign investment that traditionally enable a countrys innovational potential to be increased. It is interesting to note that India and China have entered the list of most attractive countries, their positions being comparable to those of France and Japan.

Figure 47 Effectiveness of Policy: Opinions of Small Innovational Companies

Figure 48 Effectiveness of Policy: Opinions of Mid-Sized and Large Russian Companies

Effectiveness of government policy in the area of science, technology, and innovations


20% low 28% 15% 22% 8% 5% 2% high

Effectiveness of government policy in the area of science, technology, and innovations


24% low 21% 20% 24% 5% 3%3% high

Measures to stimulate innovation from the side of the government


Financial support of R&D in companies (for example, through tax stimuli and co-financing of R&D) Increasing financing of research carried out in scientific research organizations and universities Development of engineering and natural-science education

Measures to stimulate innovation from the side of the government


60 %*
Financial support of R&D in companies (for example, through tax stimuli and co-financing of R&D) Development of engineering and natural-science education

57 %*

50 %

41 %

Figure 46 Corruption in the System of Competitive Financing: Opinions of Scientists

50 %

Increasing financing of research carried out in scientific research organizations and universities Increasing the effectiveness of the existing system of state Scientific research organizations (through reform)

35 %

Practice of holding competitions under particular people


19% widespread 15% 17% 32% 6% 7% 4% not widespread

Financial support of commercialization for example, grants for development of a prototype and patenting) Increasing the effectiveness of the existing system of state Scientific research organizations (through reform)

41 %

25 %

29 %

Financial support of commercialization (for example, grants for development of a prototype and patenting) Development of infrastructure for commercialization (business incubators, CTT, venture financing) Increasing the effectiveness of standards and sector regulation

22 %

Practice of informal payment (kickbacks), Russian organizations


8% 6% widespread 12% 32% 8% 7% 26% not widespread

Strengthening protection of IP

15 %

20 %

Development of infrastructure for commercialization (business incubators, CTT, venture financing)

11 %

18 %

Practice of informal payment (kickbacks), foreign organizations


4% 3% 8% widespread 15% 5% 6% 58% not widespread

Increasing the effectiveness of standards and sector regulation


0% 20 % 40 % 60 %

8%

Strengthening protection of IP
0% 20 % 40 % 60 %

18 %

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 2009-2010, Bauman Innovation, OPORA RUSSIA

Respondents were asked to identify no more then three problems for development of their companies.

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Institutes and Effectiveness of Governmental Administration: Weak and Strong Sides


Poor effectiveness of government policy in the area of science, technologies, and innovations
As indicated above, specific aspects of state policy in the area of science, technologies, and innovations are limiting factors for the development of Russias NIS. The reason for this is that government policy in this area is ineffective. Each ministry and department acts proceeding from its own considerations and does not want to coordinate the determination of expenditures and priorities with other departments, with the result that government resources are fragmented. Modern effective instruments for stimulating innovational activity are not used that have shown their worth in many countries; for example, such as an established national science fund or a department oriented toward supporting technological upgrading of industrial enterprises. Corruption, favoritism, the absence of personal responsibility on the part of heads of departments or subdivisions for negative effects of their work are a big problem, as they are in government administration in general.

Business is inclined to poorly evaluate the effectiveness of government policy in the area of science, technologies, and innovations. Thus, 63% of heads of small innovational companies and 65% of heads of mid-sized and large companies in traditional sectors see no or almost no positive results from the work of the government in this area. The quantity of those who assess positive results as being more or less actual is extremely small: 15% of small innovational companies and 11% of traditional ones. As key government measures for stimulating innovations in the Russian economy, business suggests, in the first rank, financial support of R&D in companies (for instance, through tax stimuli and co-financing of R&D) (60%6 of heads of small

innovational companies and 57% of heads of traditional companies vote for such a measure). In the opinion of 50% of heads in innovational and 41% in traditional business, development of engineering and natural-science education is capable of stimulating innovations. Increasing financing of research carried out in scientific-research organizations and universities is the third-most-popular measure (50% and 35%). Moreover, companies propose that the state actively support commercialization through support of a system of grants; carry out reform of the existing system of state scientific research with the aim of increasing its effectiveness; and attend to questions connected with intellectual property, standards and regulation, and development of infrastructure for commercialization. Leading scientists gave their opinions on the development of the system of scientific research in Russia. From the point of

increasing financing of fundamental scientific research (72%7) and applied scientific research (48%) are very important measures. If these most desired measures are also the least realized due to limited resources, fulfillment of the following measures depends exclusively on political will and the professionalism of the people who manage the system of scientific research. More than a quarter of scientists (28%) are in favor of redistribution of financing in favor of leading scientific organizations and abstaining from supporting weak ones. Such measures as changing the sector priorities of financing of scientific research (23%), the development of scientific research in universities (23%), and improving the system of preparing scientific personnel (22%) are equally supported by scientists. Eighteen percent of surveyed scientists name reform of the RAS, as one of the key measures, 17% believe that scientific organizations engaging in fundamental research need to be integrated with

Figure 49 Priorities for Government Policy in the Area of Scientific Research: Opinions of Scientists

view of the surveyed representatives of key interest groups,

Priority actions for developing the system of scientific research in Russia


Increasing expenditures on fundamental research

Figure 50 Priorities for Financing by the Government: Opinions of the Population


77 %*

Assessment by the population of Russia of spheres demanding first-priority increase in financing


Health 73 %*

The European Union and some other countries: portion of the population believing that financing of scientific research should be increased at the expense of other spheres
Italy France Spain Turkey Croatia Portugal Germany Romania Hungary Slovenia EU25 Poland Greece Austria Norway Bulgaria Slovakia Denmark Czech Republic Lithuania Sweden Iceland Latvia United Kingdom Estonia Switzerland Ireland Finland Netherlands Russia
0% 20 % 40 % 60 %

Increasing expenditures on applied research and development Increasing financing of strong scientific organizations through ceasing to support weak ones

48 %

Institutes and Effectiveness: What the Facts Say


The results of a survey of scientists show that corruption in the system of competitive financing of scientific research is widespread. More than half (51%) of scientists report that the practice of carrying out competitions under particular people is widespread (19% use the formulation extremely widespread). Only 17% of those surveyed say that there is no or little presence of such practice. Another manifestation of corruption is informal payments or kickbacks that must be paid to the organizers to win a competition. In correspondence with the results of surveys, such informal payments exist both when competitions are held by Russian organizations and when grants are distributed by foreign organizations. The state of affairs appears worse in the case of Russian organizations: 26% of participants in the survey say that kickbacks are widespread, and only 17% think that Russian grant-giving organizations work more or less honestly. Twenty percent of respondents reported that there are kickbacks when competitions are held by foreign organizations, while 69% of scientists disagreed with them.

28 %

Education Security (crime reduction) Ecology and protection of the environment

52 %

Changing priorities of financing scientific research

23 %

43 %

Development of scientific work in universities

23 %

29 %

Improving the system of preparing personnel

Defense capability 22 % Science and technology

28 %

18 %

Reform of the RAS system

18 %

Entrepreneurship and small business


0% 20 % 40 % 60 %

10 %
80 %

Integration of scientific organizations carrying out fundamental research with leading universities Strengthening the rights of scientists to the results of their scientific work
0% 20 % 40 % 60 %

17 %

16 %
80 %

* Portion of respondents indicating the sphere as one of three priorities for increasing financing

69 % 68 % 68 % 66 % 60 % 60 % 59 % 58 % 58 % 57 % 56 % 54 % 52 % 51 % 50 % 50 % 49 % 48 % 46 % 46 % 45 % 44 % 41 % 40 % 39 % 35 % 30 % 25 % 18 %
80 %

* The total number of answers exceeds 100%: three different answers were allowed Source: Russian Innovation Survey 20091010, Bauman Innovation, OPORA RUSSIA

Source: Russian Innovation Survey 20092010, Bauman Innovation, OPORA RUSSIA

Source: EUROBAROMETER 224 Europeans, Science & Technology, 2005

Respondents were asked to identify no more than three key measures.

Respondents were asked to identify no more than three most effective measures.

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universities, and 16% want the government to strengthen their results to the results of scientific work. In this way, representatives of such key interest groups as business and the scientific community recommend simultaneously increasing both government financing of the scientificresearch sector and raising the effectiveness of the work of the existing system of financing and administration of scientific research. Increasing financing needs to be directed not only at support of fundamental and applied scientific research, but also at co-financing of R&D in companies through tax advantages and direct co-financing from the budget. These measures must concern not only small and mid-sized technological companies, but also large and mid-sized companies in traditional sectors of the economy (for example, in automobile construction, the chemicals industry, the food industry, production of building materials, etc.), which also may be interested in realization of applied science and adoption of its findings in their activity. Raising the effectiveness of the work of the existing system of financing and administration of scientific research should include changes in the priorities of allocating financing of R&D (including changes in the system of formulating and choice of priorities itself), as well as moving to a more effective distribution of resources between organizations: the strongest and most competitive scientific organizations should be the first to receive financing. In addition, it is important to form a system for preparing new scientific personnel and guarantee the effectiveness of interaction between the sectors of scientific organizations, higher education, and industry/agriculture, while the basic focus needs to be on developing the sector of fundamental and applied scientific research in universities. The population, for its part, will not soon be ready to support the idea of increasing financing of science and technology. From the point of view of those surveyed, health (73%) and education (52%) are the first priorities for government financing; as well, more attention needs to be directed to order, security, and reducing crime (43%). Protection of the environment (29%) and defense (28%) are markedly lower priorities. The attitude of the population to priorities for financing from the state budget is rather rational from the point of view of the real situation in Russia. Science and technology, in the opinion of the population, are not clear priorities, with only 18% of those surveyed saying otherwise. As the results show, the widespread

myth that the Russian population is most concerned with the defense shield or national prestige, has little basis. For comparison, data are provided on the attitudes of the inhabitants of various European countries to priorities for financing of science and technology relative to other areas. It is interesting that the populations of countries that have achieved significant success in the sphere of science and technology are least inclined to demand an increase in financing of this sphere and believe it to be a priority to a lesser extent (the Netherlands, Finland, Switzerland, the United Kingdom, and Sweden). To the contrary, the populations of countries in which science and technology are at present insufficiently developed and insufficiently financed are to the greatest degree inclined to consider the area of science and technology to be a priority and to the greatest degree demand increasing financing for these sectors, including at the expense of other areas (Italy, Spain, Turkey, Croatia, Portugal). France and Germany are exceptions to this trend: the populations of these countries, despite their part great successes in science and technology, demand a further increase in financing of this sphere at the expense of others.

3. Possibilities and Threats for Developing the National Innovational System of Russia
wallet). All this forms a colossal potential market for innova-

Possibilities for development of innovational system


Demand for innovations in infrastructural and social sectors in Russia
The level of obsolescence of the physical infrastructure (motor vehicle and railroads, airports, etc.) in Russia is very high. According to Rosstats data, the wear and tear of the basic foundations of organizations of in production and supply of electrical energy, gas, and water exceeds 50%, and 12.7% of the general volume of the basic foundations was completely worn out at the beginning of 2009. In addition, the current condition of infrastructure leads to significant losses of resources (including energy resources and water, and time and resources of transportation companies and the population in transportation infrastructure), the result of which the potential level of the competitiveness of the Russian economy and the potential size of gross domestic product decreases. Simple renovation of the physical infrastructure demands significant financial expenditures and an extensive time frame. In addition, the process of planning the currently existing infrastructure took place in a different period of time and a different social order, the result of which the criteria upon which the infrastructural systems were based were very different from contemporary needs. In such a situation, innovational solutions are extremely important in the areas of infrastructure planning, technological solutions, the process of reconstruction and repair of infrastructure and control of its functioning, and so forth. For example, the sector that supports basic human needs in Russia requires a spectrum of innovational solutions, from new technologies for the work of TETs and boiler rooms, to new methods of purifying water and controlling the demand for resources. There is an analogous potential demand for innovations in the social sectors, that is, in education (including preschool, school, and professional), health, and social protection of the population (for instance, the social card technologies that are already used in some regions, in which a whole package of different benefits provided to a resident of the region is integrated within the framework of a single electronic plastic card, which at the same time can fulfill the function of an electronic

tional solutions.

Potential Demand in the Defense, Security, and Space Sectors in Russia


Considering the territorial dimensions, historical context, and political ambitions of the countrys leadership and population, it is extremely important for Russia to have a strong and well-supplied army, ensure security and order on all the countrys territory, and occupy leading positions in space projects and use of the World Ocean. These requirements traditionally create increased demand for the findings of fundamental and applied science and high-technology production. Such demand provides an additional stimulus for development of science and innovational production; at the same time, there are few countries in the world that have the possibility of creating such stimuli, and the experience of these countries shows the importance of such stimuli for development of science and innovational activity. The U.S., China, and Israel are such examples, in which a large amount of new technologies have come from the defense sector.

Russias Large Internal Consumer Market


The combination of a large population and a rather large (by world standards) level of per capita income makes Russias consumer market one of the largest in the world (one of the top ten countries). This inevitably leads to a large concentration of production of consumer goods in Russia, especially if the quality of the conditions for the development of business are improved. In its turn, this production demands constant upgrading on the level of technologies, processes, and innovations in production of consumer goods. For example, the potential demand for agriculture and the food industry for innovations is already rather high, and with more beneficial conditions for business and more available investment resources, it would be able to stimulate rapid growth of research and development in the agri-food sphere.

Availability of Knowledge and Technologies


At the end of the 20th century, the development of innovations in companies ceased to be based exclusively on internal

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sources. From 19902000, the technology market actively developed: exchanges upon absorption of small high-tech companies and purchases and sales of technologies became a widespread phenomenon. Today, this trend gives Russian companies the possibility to accelerate their innovational development through external sources. In its turn, external sources of innovations are becoming increasingly available to companies from Russia. If during the Soviet era there existed significant limitations for Soviet enterprises in the area of purchasing equipment, and new technologies and the main possessors of current technology were the U.S. and its close allies the United Kingdom, Japan, the FRG the number of countries that have their own unique technologies has fundamentally increased and no political limitations akin to the JacksonVanik amendment can keep Russian companies from buying new technologies from companies in Singapore, Taiwan, or Israel. Moreover, competition has also strongly increased between manufacturers of new products and new equipment, which means that potential Russian orders may have great importance for them, and companies from different countries will be prepared to compete for these orders.

Increasing the Quantity and Raising the Mobility of Researchers through Growth in Developing Countries
If there are not enough researchers in Russian science today and it is impossible to prepare them in the short-term, there is a particular solution to the problem: attracting researchers with the necessary qualifications from other countries. Moreover, if in the past (in the time of Peter I or in the early Soviet Union) the sole source of such people was the Western developed countries (Europe and the U.S.), today more and more countries have their own quality universities to prepare competitive researchers. Russia is fully able to attract talented scientists from such countries as Iran, India, Vietnam, and countries in Latin America, Central and Eastern Europe. A thoroughly prepared policy for attracting talented people from other countries is needed.

hindrances in their development, in distinction from adoption of educational programs, productive technologies, etc. There is an array of examples from the practice of Russian commercial companies for this as well: ISO standards, the HASSP American voluntary standard for food production, and the GMP standard of pharmaceuticals production are being successfully adopted in Russian production.

from 19972006, and is today over $30 billion. Although foreign investors rarely endow the creation of R&D divisions in our country, this practice does exist. For instance, the Boeing engineering center in Moscow was the most active participant in developing the new model of the Boeing 787 Dreamliner airplane. Competition for orders to carry out R&D and for provision of areas for relocation of a TNCs R&D divisions in the country is continuously increasing, but, all the same, the possibilities that appear due to increasing the share of TNC R&D divided between foreign scientific centers is also increasing. This trend opens up new perspectives for development of scientific research and development in Russia in those areas in which Russia still has competitive scientific schools.

Increasing the Share of R&D of Transnational Companies in Different Countries


Globalization of the economy leads to an increasingly greater share of scientific research and development in the interests of transnational corporations taking place not in a TNCs own research divisions, and not even in universities or scientific centers near the TNC, but in research centers scattered across the whole world. Thus, the general expenditures of American TNCs on scientific research and development taking place in affiliated divisions in different countries doubled

Increasing the Quantity and Raising the Mobility of Researchers through Growth in Developing Countries
If there are not enough researchers in Russian science today and it is impossible to prepare them in the short-term, there is a particular solution to the problem: attracting researchers with the necessary qualifications from other countries. Moreover, if in the past (in the time of Peter I or in the early Soviet Union) the sole source of such people was the Western developed countries (Europe and the U.S.), today more and more countries have their own quality universities to prepare competitive researchers. Russia is fully able to attract talented scientists from such countries as Iran, India, Vietnam, and countries in Latin America, Central and Eastern Europe. A thoroughly prepared policy for attracting talented people from other countries is needed.

Figure 51 Dynamics of Number of Researchers in 19952007

Administrative and Political Potential for Realizing an Ambitious Program of Increasing the Competitiveness of Russias Innovational System
The population of Russia has rather large demands that the government will be able to realize in the modernization of the economy and the ability to improve peoples lives. For the inhabitants of Russia, it is important that their country be as much as possible a leader in a very large number of areas, from sports and the economy to military power and science. This creates tremendous potential support of public opinion to realize an ambitious and complex program for increasing the competitiveness of the Russias innovational system. At the same time, the centralization of administration that has taken place in the last ten years creates beneficial conditions for realizing such a program, as well as broad possibilities for using mechanisms of controlling and increasing the responsibility of relevant authorities for achieved or unachieved results.

Amount of researchers in 19952007 (thousands of full positions)


1,500

Amount of researchers in 19962006 (thousands of full positions)


United States
200 150 India

1,250

100

China
50 1,000 0 750

Hungary, Poland, Slovakia, and Czech Republic

Brazil Turkey

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Japan

Awards of PhDs in the areas of natural and technical sciences in 1998-2007


8,000 6,000 Hungary, Poland, Slovakia, and Czech Republic Brazil Turkey 0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Availability and Possibilities for Using and Adapting the Highest International Standards and Systems of Technical Regulations
Despite the significant problems and barriers for innovational activity in the area of standards and technical regulation, given political will, these problems can be solved rather quickly: the world has many positive examples of solving analogous problems, and corresponding measures can be used successfully in Russian practice. The experience of other countries shows that such measures do not encounter great

500

Russia

250

other countries*

India 4,000 2,000

South Korea
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

* Other countries include four Eastern European countries (Hungary, Poland, Slovakia, and the Czech Republic), as well as Brazil, India, and Turkey Source: UNESCO Institute for Statistics, EUROSTAT, OECD, NDF, analysis by Bauman Innovation

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Expansion and Increase of Access to Foreign Markets for Russian Companies owing to developing countries
The action of globalization and general economic development result in continuous expansion of the sales market for innovational products. At the present time, China is entering into the ranks of the largest markets for innovational products alongside the U.S., EU, and Japan. The markets of the other BRIC countries (Brazil, Russia, and India) are gradually growing, and the markets of such countries as Mexico, Turkey, South Africa, Pakistan, Indonesia, Malaysia, and Vietnam will likely have increasingly greater significance. In addition, previously closed national markets for example, the Japanese are gradually becoming more open. This all creates new possibilities for export of Russian innovational products. Opinion David Yan, Representative, Board of Directors of ABBYY You cant forget that the whole world is an enormous market. It is incorrect to focus only inside the country. There is the successful example of Israel, a small country with a large number of immigrant scientists (including those from Russia): every Israeli innovational company is created with its eye on the world market. This is a brilliant position that Russia does not have enough of. Alas, it is much harder to change something in our country that it is to start from scratch, but we need to formulate an innovational environment such that it will attract the worlds best minds and not reject even its own scientists, half of whom currently work abroad. Thirty million people in 130 countries are using our developments. We need to achieve dominating positions in specific technologies on the world level.

are constantly entering the ranks of competitors. If previously the Soviet Union competed in the scientific sphere with the U.S. and, partially, with the United Kingdom, France, the Federal Republic of Germany, and Japan, today not only are China, India, and the countries of South-East Asia becoming potential competitors, so are Brazil, Mexico, Spain, and even Romania, Bulgaria, and Turkey and, possibly, Ukraine, Belarus, and Kazakhstan. The factors that determine the competitiveness of innovational systems are becoming more mobile: key researchers can be enticed to a new place of work, and leading companies are able to offer more advantageous conditions for relocation of business. Even in the U.S., where traditionally direct support of business by the government is considered impermissible, the governments of states and cities provide interest-free conditions to the most important investors, all the way up to construction of manufacturing facilities at the expense of the individual state, tax advantages, etc. The conditions of living for

researchers have great significance; in particular, the natural conditions. In such circumstances, a continuation of the existing unfriendly policy in relation to researchers and small innovational companies may lead to a complete loss of Russias scientific and technological potential.

situation has not improved, even in the more favorable conditions of the economic growth of the 2000s. This means that, in the midterm perspective, Russia may lose its NIS, not as a result of competition with other countries, but simply as a consequence of full degradation of innovational potential.

Russia is the Only Country Where the Innovational System is Degrading


Analysis of statistical data and findings of comparisons of different countries shows that Russia has certain uniqueness relative to other countries. This uniqueness, unfortunately, is negative: while, in all other countries, even poor and backward ones, the level of development and competitiveness of the innovational system has grown, in Russia it has cardinally decreased in comparison with the level of the 1980s. The

Freezing in Place the Current Structure of the Economy


As was mentioned above in the description of the weak sides of Russias NIS, the current structure of the economy (portfolio of branch sectors) does not enable innovational development, as the majority of the branch sectors that currently dominate the Russian economy have a low level of innovational activity (extraction and refinement of oil and gas, the service sector, metallurgy, etc.). Unfortunately, trends in recent

Figure 53 Development of the Market of Products of High-Technology Sectors in 1995-2005

Figure 52 US Companies Expenditures on R&G in other countries of the world in 1997-2006

Yearly rates of growth of volume of the internal market and imports of products of high-technology sectors in 19952005,* %
high

Imports of products of high-technology sectors in 19952005, US $ million, in 2000 prices


50,000 40,000 30,000 20,000 India Turkey Iran
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

30 %

world average rate of growth of imports

US Companies Expenditures on R&G in foreign affiliate branches in 19972006, US $million


1,000 900 800 700

China
25 %

Hungary, Poland, Slovakia, and Czech Republic

Rate of growth of the internal market of products of high-technology sectors in 19952005, %

Israel

20 %

10,000 0

15 %

China
600 500 400 300 200 100

United States Iran


10 %

Czech Republic Poland India Turkey Mexico

Hungary

Share of imports in the volume of the internal market of products of high-technology sectors in 19952005, %
100 % 80 % Hungary, Poland, Slovakia, and Czech Republic Iran Turkey India

Brazil Australia India

5%

Indonesia Canada United Kingdom Egypt Brazil Argentina

Russia Germany Malaysia Thailand Japan


10 % 15 %

world average rate of growth of market

Philippines

60 % 40 %

low

Threats to development of the innovational system


Strengthening Competition between Innovational Systems and Increasing Mobility of Factors
The competition between the innovational systems of various countries is constantly increasing, while new countries

South Korea Russia

0% 0%

5%

20 %

25 %

30 %

Rate of growth of imports of products of high-technology sectors in 1995-2005, % of points


2006 low
Source: NSF, Global Insight, analysis by Bauman Innovation

20 % 0%

0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: NSF, analysis by Bauman Innovation

high

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

* The size of the circle reflects the volume of the internal market of products of high-technology sectors of industry (according to OECD classifications)

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years have been such that this non-beneficial structure of the economy is freezing in place; that is, there are no factors that would allow the portfolio of branch sectors to be changed in a natural way to the benefit of high-technology and innovational ones.

Loss of the Populations Scientific Literacy and Expansion of Pseudoscience


At the end of the 1980s, the propaganda of various pseudoscientific and occult ideas began to fill the mass media and penetrate even into respected scientific and scholarly centers. Astrology, various psychological and religious cults, and wide dissemination of charlatanism and pseudoscientific ideas, on the one hand, are able to appeal to the imaginations of poorly educated people and recruit fanatical followers, and, on the other, call forth a lack of trust in the whole system of Russian science and education among rationally thinking, pragmatic people. The lack of trust in innovational products observed in surveys of the population is in many ways explained by precisely a fear of charlatanism and confidence schemes under the cover of innovations. In conditions of degradation of the educational system and loss of the populations scientific literacy (which the surveys also attest to), this all may lead to the transformation of Russia into a typical Third World country.

oped countries, people, at the very least, understand that, in choosing the career of scientist or engineer, they will be able to care for their family, but in Russia, the profession of scientist or engineer means being poor and lacking a serious career. As a result, the portion of university graduates in engineering and natural-science specializations is dropping, although it is still rather high compared to other countries. In this way, only people who are passionate about being a scientist or engineer will make that career choice. Another variant when young people enter a scientific or engineering specialization in the hope of obtaining qualifications that are recognized abroad and then leaving the country also does not offer a positive outlook for the Russian NIS. At the present day, the force of inertia is still strong and many families retain the understanding that demand for researchers and engineers

in Russia will be restored and, correspondingly, it is worthwhile for young people to obtain a scientific or engineering specialization if they are inclined to such work. However, in the midterm perspective, the action of inertia may cease and engineering schools and natural-science departments may lose their students. This is especially dangerous in conditions of a demographic pit, in which the overall number of young people is to fall in the midterm.

Loss of Basic Technologies (Construction, Infrastructure and Transportation, Health)


In the description of the possibilities lying before Russias NIS, it was noted that the wear and tear of the physical and social infrastructure in Russia offers an important opportunity for adopting innovational solutions in its upgrading. Unfortunately, if measures to upgrade key infrastructure on the basis of modern technology are not taken in the midterm perspective, we will run into real risk of complete loss of this infrastructure, both in the basic technologies of using it and the production of equipment for it. As a result, restoring this level will cost the country a great amount of expenditures, connected to greater risks.

Freezing of the Low Level of Entrepreneurial Activity of the Population (Including Scientists)
Entrepreneurial activity is in general unattractive for the Russian population. The level of this activity in our country is lower than in many other countries, both more and less developed

Figure 54 Preparation of Scientists and Engineers Portion of university graduates in natural-science and engineering-technical specializations in 2006, %
China South Korea Finland Germany France Belarus Russia Japan Ukraine Czech Republic Israel Australia Chile Estonia Canada South Africa Turkey Poland United States Hungary Brazil
0% 10 % 20 % 30 % 40 %
natural-science specializations engineering-technical specializations

Expanding the Possibilities for Immigration of Russian Professionals and Strengthening Competition for Human Resources
On the one hand, the development of the sectors of education and science in various countries that do not have strong NISs leads to the appearance of a greater number of qualified specialist researchers, which creates new opportunities for the development of Russias innovational system through attracting talented people from other countries. However, on the other hand, this development leads to the appearance of new openings for researchers and teachers in these countries. For example, there is increasingly a great demand for scientists, university instructors, and researchers not only in China and India, but also in Indonesia, Malaysia, Pakistan, and the countries of the Middle East, while the conditions offered in these countries to foreign specialists are fully competitive by world standards. Therefore, if earlier the threat of a brain drain proceeded only from the U.S. and Western Europe, today practically any of the worlds countries, with the exception of the very most backward ones, is able to offer talented researchers and teachers advantageous working conditions and living standards.

Low Level of Attractiveness of Scientific and Engineering Careers


A trend toward a diminishing of the attractiveness of the careers of scientist and engineer is characteristic of many countries. In the 19th and 20th centuries, the status of a scientist or engineer was extremely high and, therefore, such a career was extremely prestigious for young people. At the present time humanitarian, creative, and media professions (musician, actor, stylist, designer, journalist, etc.) are more attractive to young people. The opinion was formerly widespread in society that an engineer or scientist is a person who through his or her work is making life better, guaranteeing scientific progress, working toward the fight against disease, conquering space, and so forth. In the last several decades, the successes of science and engineering have reached a definite ceiling and serious breakthroughs that would be significant for the population are no longer taking place. At the same time, life in the developed countries has become of higher quality and better-protected, and in such conditions people prefer entertainment and looking for fame and success, not labor in the name of progress. Unfortunately, in Russia this trend is expressed much more strongly and is at the same time reinforced by the general degradation of the national innovational system. In devel-

47.1 % 36.9 % 28.7 % 27.2 % 25.7 % 25.7 % 24.5 % 24.1 % 24.0 % 23.5 % 22.3 % 20.9 % 20.9 % 19.3 % 18.0 % 17.7 % 17.4 % 16.8 % 14.7 % 12.4 % 11.3 %
50 %

Change in portion of university graduates in natural-science and engineering specializations between 1999 and 2006, pp
Australia Estonia Finland Japan United States Germany Czech Republic Russia China Canada France Hungary South Korea -0.2 % -0.4 % -1.0 % -1.0 % -1.5 % -2.3 % -2.9 % -3.3 % -3.6 % -4.8 % -6.1 %
-6 % -4 % -2 % 0% 2%

0.9 % 0.9 %

-8 %

Source: UNESCO Institute for Statistics, OECD, analysis by Bauman Innovation

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ones, with this state of affairs having persisted over the course of last several years. In the last few years, the federal government and regional state ministries have engaged in great initiatives to support small business; however, in key areas, such as availability of real estate and financial resources, these initiatives have not been able to bring about serious changes for the better. Moreover, trends are such that the unattractiveness of entrepreneurial activity in crisis conditions is getting stronger and the low level of this activity of the population is becoming frozen in place, as the quality of conditions for conducting small business are only getting worse and the risks of entrepreneurial activity (administrative pressure, being squeezed by criminal elements, etc.) are growing. This may all lead to the populations activity in the area of small business, which is especially important in the conditions of an economic crisis, not only not increasing, but, on the contrary, dropping even more, which, in its turn, will lead to a widespread psychology of

social freeloading, which greatly frightens governmental economic ministries. However, in conditions in which engaging in entrepreneurial activity is very risky and senseless from the point of view of material success, such a psychology is completely justified.

Relocation of Purchases of Systems in the Areas of Security and Defense Abroad


At the present time, a trend toward purchasing arms, military equipment, and other systems in the area of security is becoming increasingly typical. This is because analogous Russian production does not correspond to contemporary demands, and carrying out development of new machinery corresponding to defense goals takes a rather long time, but we may need to go to war now. Although such explanations appear rational, the habit of finding easier, simpler solutions and acting on short-term interest always leads to negative results. Purchasing arms and military equipment abroad will lead to a fundamental shrinking of the market not only internally, but externally as well for Russian producers of analogous equipment, for this is a negative signal to the main consumers of Russian military products. Large risks may arise that a significant part of the technology of defense production will be lost, and those opportunities that Russias NIS has as a result of the significant defense market for innovational products will be wasted.

will and stimuli for government ministries will lead to a lack of any steps being taken for real upgrading and development of the potential. The overall threat consists in that, despite the widening window of opportunity, Russia simply will not be able to use it.

Fall of Prices for Oil and Reduction of Possibilities for Investment in Development of the Innovational System
In a situation in which the basic source of flow of money into the federal budget is profits from export of oil and gas, likely drops of price for energy resources are a key threat to the budget and, accordingly, the governments possibilities of investing in the innovational system, of government purchases of innovational products, carrying out R&D by means of budget resources, etc.

Figure 55 Entrepreneurial Activity Participation of the population in creating new business (data for 2009 or the last available year*), %, and level of GDP per capita in 2008, US dollars, purchasing power parity compared
high

Risks of Technological Disasters


The gradual loss of competency in the areas of using large infrastructural objects and production of equipment for these objects in the midterm perspective will lead to an increase in the amount of technogenic disasters akin to the fire at the
China

20 % 18 % 16 %

Sayano-Shushenskaya GES (HPP) in 20092010. In addition to the negative consequences for the population, these disasters
Brazil Chile

will mean a loss of more technological opportunities for the economy, for example, reduction of the volume of electrical
Australia

Entrepreneurial activity of the population

14 % 12 %
India

energy produced and so forth. In conditions of technological degradation, it will not be as easy to restore previous objects as it was to overcome the results of the fire.

10 % 8% 6% 4% 2%
low

Kazakhstan

Hungary Czech Republic South Korea Israel Canada

United States

*** In summing up the results of the analysis of the opportunities and threats, it can be noted that the lists of opportunities and threats, in general, do not contradict each other and do not hinder reciprocal realization. The opportunities are connected with the attraction to Russia of new researchers

South Africa

Turkey France Russia Finland Germany Japan

0%
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

Level of GDP per capita


low
*Data on entrepreneurial activity in India and Turkey from 2008; Kazakhstan from 2007; Australia, Canada, and Czech Republic from 2006 Source: Global Entrepreneurship Monitor, World Bank, analysis by Bauman Innovation

and small innovational companies, the expansion of sales markets, the use of instruments and standards that have been approbated in other countries, etc. The threats are mostly that the scientific, educational, and innovational potential still existing in Russia will be wasted and the absence of political

high

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Analysis of Strong and Weak Positions, Opportunities, and Threats to Development of the Russias National Innovational System
Strengths
Potential of the system of education (extent of middle and higher education, share of engineering and scientific specializations); Retained scientific schools; Social elevators in the educational sector; Critical mass of resources for R&D; and Level of basic technologies (construction, infrastructure and transportation, defense and security, health).

Weaknesses
Low level of government expenditures on R&D and low level of successfulness of government R&D (due to ineffectiveness of allocation of government financing, infrastructure, availability of human resources, and the system of administration of NII); Worsening situation in the sector of education (mathematics and natural science in school, middle professional and higher engineering and scientific); Infrastructure for commercialization (micro-instruments: centers technology transfer, availability and quality of services for beginning companies, real estate, availability of financing) is poor; Low level of entrepreneurial activity of researchers and the population in general; Poor effectiveness and lack of innovative potential of government purchases, including the social sectors and defense, security, and space sectors; Low innovational activity in sectors of the economy through adaptation of foreign technologies and the development of domestic technologies (structure of the economy: effect of the sector portfolio on income, low relative sector level due to barriers on the level of stimuli [competition, sophistication of consumers] and resources [suppliers, human resources, and others] for innovation); Low level of foreign investment in Russia in the R&D sector; Ineffectiveness of infrastructure for technical regulation (outmoded standards, system of metrology and accreditation); Barriers in the area of defense of intellectual property; Low level of development of key regional innovational clusters; and Low effectiveness of government policy in the area of science, technologies, and innovations (adequacy and effectiveness of allocating resources, coordination of different areas, assessment and orientation toward a result, use of modern instruments).

Opportunities
Demand for innovations in infrastructural and social sectors in Russia Potential demand for innovations in the sectors of defense, security and space in Russia Russias large internal consumer market Availability of knowledge and technologies Administrative and political opportunities for realization of an ambitious and complex program of increasing the competitiveness of Russias innovational system Increasing the quality and mobility of researchers (through growth in developing countries) Availability and possibilities of using and adapting the best international standards and system of technical regulation Increasing the amount of R&D in various countries Expanding and increasing the accessibility of foreign markets to Russian companies, also through developing countries

Threats
Intensification of competition between innovational systems (increase in the mobility of factors of innovational systems: researchers, companies) Russia is the only country in the world where the innovational system is degrading Freezing of the current structure of the economy (current sector portfolio) Loss of fundamental technologies (construction, infrastructure and transportation, health) Expansion of possibilities of emigration of Russian professionals and intensification of competition for human resources (increase in the quantity of universities in developing countries, increase in expenditures on R&D in developed and developing countries) Loss of the populations scientific literacy, pseudoscience (or rational way of thinking) Low level of attractiveness of the careers of scientist and engineer Freezing of the low level of entrepreneurial activity of the population (including scientists) Drop in prices for oil and reduction of possibilities for investment in development of the innovational system Relocation of orders for purchases of systems in the area of security and defense abroad Risks of technogenic disasters

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4. The History of the Development of Russias Innovational System


Then the divine sciences Stretched their hands into Russia Through mountains, rivers and seas, Saying to the monarch: We are ready to add to the Russian race new fruits of the purest mind. The monarch calls them to him. Russia waits already To see their useful works. M.V. Lomonosov

Stage 1. The Birth of Science in Russia (16871750) Copying European Experience


Up to the era of Peter I, there was no science or scientific sector in the Muscovite State as such, and the future Russian Empire fundamentally lagged behind the leading European states. The problem consisted primarily in the lack of factories of scientific thought of the time universities. There were not enough resources for the development of the sciences and arts in the 17th century Muscovite state, and, in addition, ideological limitations and the general conservatism and inclination to reservation of the ruling lite played an important role. It was only in 1687, that the first prototype of a higher school appeared in Moscow the SlavicGreek-Latin Academy, which indeed strongly recalled European universities, although in the form they existed in the 14th and 15th centuries. The rulers of the Muscovite State in the first half of the 17th century deeply esteemed the advantages of Western European civilization and began attempts to take elements of military science, culture, education, and the arts from the West. However, there was no thoroughness and persistence in the adoption of these borrowings, and given the presence of rather strong opposition from a whole array of social groups, they did not lead to real, large-scale changes. The situation completely changed during the reign of Peter I. On the one hand, more beneficial conditions for meaningful reform objectively took place an understanding of the impossibility of the old way of development and the necessity of learning from Europe penetrated deeply into Russian society. On the other hand, the key factor of success was the personality of Peter himself, who exhibited thoroughness and persistence in adopting changes in the everyday life of the state. It is sufficient to say that Peters primary influence in carrying out a series of vital transformations in Russia was Gottfried Leibniz the greatest European scientist of that period. It was Leibniz who suggested the creation of an Academy of Sciences in Russia. He worked out a detailed plan for the construction of the Petersburg Academy of Sciences, participated in inviting leading European scientists to teach at the academy, and attracted the brothers Nicolai and Daniil Bernulli and Leonid Eiler. In addition to the academy, Peter created a series of professional educational institutes, including the Sea and Navigation School in Moscow

and the Sea Academy in St. Petersburg. Attempts were made to create generally accessible public schools that taught mathematics and national sciences in all Russian gubernias, but after Peters death this project, which had aroused serious opposition from the nobility, was eliminated. On the whole, the Petrine period was characterized by extremely rapid development of an innovational system practically from nothing through colossal will and thoroughgoing effort from the government. The basic instrument used by Peter I were the attraction of leading foreign scientists and accelerated training of Russias young and talented people abroad, along with the transfer of models of training to Russian higher schools. In his construction of a scientific and educational system, Peter used Switzerland, the Netherlands, and various German princedoms as his models, and the regions from where he recruited most of his scientists. After Peters death, the period of growth ceased and a period of stagnation began, in which the academy lost its best foreign scientists; development stopped; and the mechanism of passing on the knowledge of foreign academics to talented Russian scientists practically came to a halt. Nevertheless, the knowledge obtained during Peters life continued to disperse through wider and wider layers of society, all the way to the provincial bourgeoisie and peasantry, with the result that, finally, a stratum of people appeared in Russia that became the basic national scientific system the intelligentsia, or the educated class. For this reason, we can combine the phase of Petrine reforms and the phase of subsequent stagnation into a single stage the stage of the appearance of the scientific system of the Russian Empire, unfolding in the period from 1700 to 1750.

greatest Russian scientist of the 18th century. The opening in Moscow of the Russias first full-fledged university in 1755 was a key event. The work of the Academy of Sciences, where it became increasingly common for talented Russian and foreign scientists to enter, became more effective. The opening of Moscow University was hardly the only success achieved by Russian science and education during the second stage. At this time, the general orientation of state policy on enlightenment of large masses of people had great significance. Reforms of government administration, including the system of territorial governance; opening of hospitals, schools, and cultural centers and theaters); support of national industry; and development of the practice of sending promising talented young people to Europe took place in Russia. As a result, this practice became a routine procedure, not requiring specific intervention by higher authorities, and this enabled broader layers of society to enter into scientific and engineering work. In the period of Catherine IIs rule, a whole class of autodidact mechanics appeared in Russia inventors, often from among the common people, who engaged in the creation of machines and adopted the results of their work in production and daily life. The clearest example here is the work of the famous Kulibin, but the real scale of the phenomenon was much larger people appeared in practically every city and factory, often with no formal education, but nevertheless creating innovational products. One of the important factors leading to the autodidact movement was the successful example of Lomonosov. People were persuaded that a commoner might, thanks to his knowledge, reach the greatest social heights and successfully bring his plans and ideas to life.

As a whole, the history of the development of the scientific and innovational sphere in Russia, our analysis shows, has seven basic stages:

Stage 1.

The birth of science in Russia (16871750).

Copying European experience.

Stage 2. The appearance of the Russias own scientific


system (17501800). The epoch of Lomonosov and the first Russian university.

Stage 3. The development of the Russian scientific


system (18001840). The formation of strong universities and technical institutes.

Stage 4. Competition of scientific systems (18401917).


Russia falls behind its competitors in the struggle for industrial development.

Stage 5. Mobilization and preparation for war


(19171945). Science in the conditions of communism.

Stage 6. Leadership and self-assurance (19451990).


A superpowers science gradually decreases its rate of development.

Stage 2. The appearance of Russias own scientific system (17501800) The epoch of Lomonosov and the first Russian university
The coming to power of Peters daughter Elizaveta has become a symbol of the beginning of a new stage of development of Russian science the formation of a stable system of specifically Russian science and higher education. This includes the reforms of education and science during the rule of Elizaveta, and then Catherine II. It is also, to a significant degree, linked with the name of Mikhail Lomonosov, the

Stage 3. The Development of the Russian Scientific System (18001840) The Formation of Strong Universities and Technical Institutes
The next stage of development of Russian science was initiated by the reforms of Alexander I, and led to a rapid pace in quality of Russian education and scientific work. The Russian scientific system became one of the worlds finest, leading in quality, but not in scale, and obtaining relatively solid, stable foundations for development. The first phase of this stage was connected to the reforms in the beginning of the

Stage 7. Collapse of the old system and unclear


perspectives (1991Present). Is the science needed in conditions of economic reform?

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reign of Alexander I. In the framework of educational reform, a whole system of enlightenment, and even preparation of personnel, was created. Church schools were created at the village level; provincial schools at the level of provincial cities; and gymnasia, which provided a classical education, at the gubernia level. In addition, a whole series of provincial universities were created in Kharkov and Kazan, and in Vilno, Warsaw, and Tartu on the basis of already-existing educational establishments of a European style. The university at the Academy of Sciences in St. Petersburg was also modernized. The crown of the whole educational system was the Tsarkoselsky Lycee, which was to prepare the ruling elite of the Russian Empire. However, the example of this reform shows that any institutional project demands the presence of a system of monitoring and corrective influence. Otherwise, changes may have only a nominal effect. An example of this is Kazan University, which from the moment of its establishment in 1804 to 1827, was inadequate, and operated under the control of a group of incompetent and corrupt bureaucrats and professors. Essential revision and correcting of the work of the university were required complete replacement of its leadership, significant investment in infrastructure for the university to acquire a new character and become one of Europes leading scientific centers. In the 1820s, a new phase began in the development of the Russian scientific system a phase of increasing attention to the real sector, and practical results provided by the educational system. The Technological Institute, designed to prepare engineers for the growing Russian economy, was created in St. Petersburg in 1828. The Moscow Artisan Study Center was founded in Moscow 1830 on the basis of the former Education House, and the Imperial Moscow Technical Institute became one of the main centers for preparation of engineers in the Russian Empire and Soviet Union. In 1839, the Russian gubernias created a system of real classes for temporary teaching of technical sciences that were then transformed into real schools a very useful borrowing from the German experience that not only widened the possibilities for education of the unprivileged classes by comparison with the system of gymnasia for the privileged, but also provided the possibility of preparing technical specialists in the provinces. In the same year, the largest scientific institute in Russia in the pre-Revolutionary period was created

the Pulkov Observatory. Russian reliance on France and Germany as models in developing educational institutions continued practically up to the Revolution.

Another problem was the still inadequate development of domestic industry, first and foremost manufacturing at what could be considered the technological level of the time metallurgy and machine building. State support was weak and ineffective, as the government believed that it should not interfere in private industry; thus leading to the purchase of the most complicated machines and mechanisms from abroad. However, the task of modernizing the economy and science demanded large-scale planning and contemporary production to catch up to the high rate of the economies and innovational systems of the United Kingdom, Germany, and the U.S. The second phase of the fourth stage of the development of Russias NIS (approximately from 1880 to 1917) was propelled by the following factors. First, the industrial development of the Russian Empire demanded an increasingly large amount of qualified personnel, which resulted in technical schools, technical institutes, and universities, both in the capital cities (i.e., the Imperial Electrotechnical Institute in St. Petersburg) and in the distant provinces, such as Tomsk University. At the end of the 19th century, there were 16 technical higher academies in Russia. At the same time, basic scientific and educational potential was concentrated in St. Petersburg and in Moscow, which fundamentally limited the possibility of using this potential in the economy to disperse scientific knowledge throughout wide strata of the Russian population. Second, the previous estate system of education was increasingly coming into contradiction with not only the demands of the Russian economy, but also with the values of Russian society and different groups therein. The opportunity to obtain a quality, multifaceted education for all layers of society was becoming an important demand of sociopolitical movements. Third, the first arms race in history has become a basic motivational force of scientific-technical progress in various countries. In the second half of the 19th century, it became clear that the work of scientists was not merely a hallmark of civilized states, but a critical factor in the national armys success in war. As a result, expenditures on financing of scientific development in the interest of the army significantly increased, and special ministries that coordinated work on developing new armaments were created. In Russia, which traditionally attaches a meaningful importance to artillery,

a significant role in coordinating scientific development was played by the Main Artillery Administration (MAA). The second-most important was the Sea Ministry, which included the Technical (later the Engineering) Academy of the Sea Ministry an important center of scientific-technical activity that was located in Kronstadt and also the Mine Officer Class, which at the time had the best electro-technical laboratory in Russia. Also, the General Headquarters held the Military-Science Committee, which, in addition to its own military science, taught and widely distributed the military knowledge of various engineering and technical developments and methods. The Sea Ministry possessed a Sea Science Committee. These organizations arose in the beginning of the 19th century, but did not begin to play a serious role in the use of scientific knowledge in military affairs until the second half of the century. Various voluntary scientific and scientific-technical societies became an important factor in the development of science in Russia. At the start of the 20th century, there were nearly 350, the largest of which was the Russian Technical Society. This social initiative was somewhat hindered by lack of attention to scientific and scientific-technical activity from the government, and the inability to sponsor scientific research and development by business, that is, the bourgeoisie. The gross indicators do not look bad as a whole: in Russia in 1916, there were 105 higher educational institutes, including, in addition to universities, 17 technical, 10 agricultural and forestry, and 6 medical institutes and higher establishments, as well as a series of veterinary, commercial, and military academies. On the eve of the Revolution, 127,000 students were enrolled in these institutions. This figure is often adduced as the main proof of the high level of development in pre-Revolutionary Russia. In fact, Russia exceeded France in this indicator. However, it did not produce concrete results in the scientific sphere: in number of scientists, Russia was far behind the U.S. and Europes developed countries. For example, on the eve of the Revolution, there were 15 times fewer chemists in Russia than in the U.S., even though Russia boasted world-class scientific schools. Russia also lagged in terms of the number of specialized scientificresearch institutes. State support of the scientific sector was fragmentary, and a unified policy practically did not exist. In conditions

Stage 4. Competition of Scientific Systems (18401917) Russia Falls Behind Its Competitors in the Struggle for Industrial Development
A fourth, new stage began in approximately 1840 in the development of Russias national innovational system the stage of development of an already formed, but still inadequate to the scale of the country, critical mass of the NIS. The basic factors that allowed the Russian scientific system to develop at that time were the positive effect achieved through the creation of universities, which became centers of scientific research at a European level; public opinion regarding the Academy of Sciences, which evolved in terms of an increase in status and resources devoted to scientific research; and the development of industry in the Russia territory through the efforts of private entrepreneurs. For example, a phosphorous factory in Perm was created by the merchant Tupitsyn without bringing in foreign partners, thus greatly decreasing Russias dependence on imports of phosphorous from the United Kingdom. The Perm soda factory Lyubimov, Solvier and Co. was created by Lyubimov in partnership with the Belgian engineer Solvier, and in time, the factory ended Russias need to import soda. Despite the earlier successes in creating scientific schools, laboratories, and industrial enterprises, the fourth stage reflected a regression relative to those of the most developed countries. The development of Russian science was still catching up in the 19th century while the worlds leading countries the United Kingdom, Germany, France, and then the U.S. were already working at full force and had acquired the critical mass necessary for the development of industry to make invaluable contributions to the creation of innovations. In Russia, particular universities and scientific schools were at a high level even by European standards, but they were few in number for the scale of the country. The estate systems barriers to development of education, limitations on obtaining an education at gymnasia and universities by the lower classes, and lack of generally accessible schools and professional academies had a significantly negative effect.

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Cooperation and Competition: RussianAmerican relationship in scientific and technical sphere


Source: Bauman Innovation

in which Russian industry was unable to create significant demand for the findings of scientific research, there were practically no conditions for development of the scientific sector. On the whole, the reforms and reorganizations of the fourth stage of the development of Russian science had an indecisive character; many of them were not successfully completed, and those that were completed were insufficient for a country such as Russia. The general results of the pre-Revolutionary states of development of Russian science were relatively indecisive and contradictory: on the one hand, the scientific system of the Russian Empire was in general weak in comparison with the scientific systems of the leading countries of Europe, and was unable to compete with them in a whole spectrum of areas. It was unable to ensure domestic industry with the technologies necessary for successful competition with the multinational corporations that were then appearing in the Western countries, such as Siemens, ABB, General Electric, and General Motors. On the other hand, in certain areas and schools, Russian science was of first-class international caliber. It can be said that, in 1917, Russia had the necessary elements of a full-fledged national innovational system. However, to compete with the countries of the West in the areas of industry, science, and technology, it needed to carry out colossal modernization of Russias whole economic system, and add significant human and financial resources into the elements of that system in order to transform it into an effective working mechanism.

nounced mobilizing character, which left a significant stamp on the scientific system both in this period and in the following stage, as the structure of Soviet science had a clearly expressed defense orientation, which has been preserved up to our time. On the whole, the fifth period of development of the RussianSoviet scientific system was characterized by two opposite tendencies. The increase in attention by the Soviet government and readiness to render all possible support, with unprecedented measures, to industrialization and development of domestic high-technology industrial production gave the scientists of Soviet Russia meaningful opportunities for research and development albeit within the framework of the very limited possibilities of the state budget of those years. The continuing cold phase of the Civil War and the struggle between different political groups, which reached its apogee in the mass repressions of 19371938, made scientists hostages to political intrigues and very often victims of repressions organized by groups against their opponents. Despite all the problems, science in the early Soviet Union continued to develop under the action of these two contradictory forces. For example, as early as 1918, in an extremely indefinite political and extremely impoverished economic situation, the Central Aerohydrodynamic Institute (CAI) opened in Moscow on the initiative of N.E. Zhukovsky. Despite all of Zhukovskys efforts, such an organization had not been created in the rather more beneficial pre-Revolutionary period. It is unsurprising that the majority of scientists from naturalscience and technical spheres, earlier having been in opposition to the Tsarist government, now supported the Soviet state and began to participate very actively in the creation of a new Soviet science. The first phase of this stage, continuing up to the mid1930s, consisted of old regime scientists engaging in new opportunities for realizing their most adventurous ideas and plans. The CAI was not the only example of this: in 1918, on the initiative of V.I. Vernadsky, the First Division was formed in the Commission of the Academy of Sciences on Studying the Natural and Productive Forces of Russia, designated for research on rare and radioactive materials. And in 1921, the State Scientific Council of the Peoples Commissariat of Enlightenment founded the Radio Laboratory (in 1922, the Radio Institute) under the auspices of the Academy of Sciences.
The Russian Empire began to lag behind the U.S. in the scientifictechnical sphere in the middle of the 19th century. Although at the time the U.S. was not one of the most developed and leading states, it had a number of important advantages relative to the Russian Empire. First, the U.S. had started earlier. The Harvard University appeared more than 100 years before the first full-fledged Russian university MSU and almost 100 years earlier than the university at the St. Petersburg Academy of Sciences. Other universities, for instance Yale and Princeton, were created in the first half of the 18th century. The colonists who created the U.S. possessed all the cultural and scientific potential of the Europe of that time. Second, a key factor in the development of science and technology in the U.S. was the existence of entrepreneurship. If in the Russian Empire autodidact mechanics tried to find patrons from the ruling class or among the merchants to realize their ideas and, even if successful in doing so, were dependent on the will of these patrons, the U.S. inventors engaged in entrepreneurial activity and obtained commercial profit from their ideas, which, on the one hand, gave them greater independence and opportunities for further development of their inventions, and on the other, strongly motivated capable people to create innovations as an alternative to the standard career of a hired worker. Third, the U.S. was meaningfully richer in terms of natural resources than the Russian Empire. The confluence of beneficial conditions for development of the U.S. economy was unique in world history. As a result, there was more capital in the U.S. than in the Tsarist Russia, and some of this capital was devoted to the creation of inventions and new technologies. As a result, in the middle of the 19th century the scientific system of the U.S. exceeded in many parameters that of the Russian Empire, and at the same time, the U.S. was actively replicating the examples of other countries, including Russia, and putting them to practical use. Up to the 1917 October Revolution, there was practically no cooperation in the scientific, technological, or industrial spheres between Russia and the U.S. Although the Russian Empire had been actively buying equipment and technology abroad; attracting investment in industry; and cooperating with foreign universities, institutes, and individual scientists since the time of Peter I, this cooperation took place basically with the countries of Europe the United Kingdom, Switzerland, France, Germany, the Netherlands, and Belgium. The U.S. occupied a very modest position in the list of partner countries in technical and economy cooperation, despite the traditionally good relations between the countries. The character of the relations between the U.S. and Soviet Russia quickly changed after the Revolution. Formal relations between Soviet Russia and the U.S. were strained in the beginning. For example, the U.S. was one of the last countries to formally recognize the Soviet Union and establish diplomatic relations with it (this took place only in 1933), the result, largely, of internal politics. However, the ruling circles and big business of the U.S. were more pragmatically inclined: economic (including humanitarian) links and technological cooperation began almost as soon as the Civil War had ended, and it became clear that the Bolshevik government controlled the situation in Russia as a whole. The organization AMTORG (Amtorg Trading Corporation) began to operate as early as in 1924. AMTORG was a trade organization operating as a commissioner-middleman for exports of Soviet goods to the U.S. and imports of goods from the U.S. to the Soviet Union. It was created in New York as a private shareholders organization between the U.S. and Soviet Union; shareholder buy-in was $1 million. This organization was formed through the merger of two organizations that already existed in the U.S. Arcos America Inc. and the Products Exchange Corporation, which carried out export-import operations. The holders of the activity representing the Soviet Union were Vneshtorgbank of the Soviet Union and Tsentrosoyuz. The organization carried out a large amount of orders of Soviet external trade organizations in the U.S. Later, cooperation was significantly expanded. Soviet engineers and construction specialists spent time in the U.S. and studied the American experience, and American engineers and construction specialists helped to plan large industrial and infrastructural objects. In addition, although there was rich experience in the U.S. in the projection and construction of industrial enterprises and infrastructure, the U.S. was lacking in experience in the sphere of administrating a system of scientific organizations and the development of education that it would be possible to use in the Soviet Union. Although American universities at the time were among the best in the world, this leadership had taken place organically from the ground up, as the result of a long process of development with large-scale support of capitalist magnates. The innovational sphere in the U.S. had also been developing over a long time on the basis of private entrepreneurship, and at that time, a system of supporting institutes was already beginning to organically form around it. The Soviet Union did not have enough time to wait until science and university education developed in a natural manner, and there was also no experience in developing science and education in conditions of a socialist economy. When discussing the interaction between Russia/the Soviet Union and the U.S. in the scientific sphere, a very important factor needs to be mentioned that influenced the development of the scientific and technological spheres in the U.S.: the emigration to America of a number of Russian scientists and engineers in the years after the Revolution. Some

Stage 5. Mobilization and Preparation for War (19171945). Science Under Communism
The Soviet government did not begin from nothing it had a good basis for development of science and education but it was necessary to increase this to a scale appropriate to the worlds largest country. At the same time, the Soviet government had to use the examples of other countries in the scientific sphere, and it was necessary to invent a system administration and organization. The fifth stage of development of the Russian national innovational system, the first Soviet stage, began in 1917 and was concluded with the victory in the Great Patriotic War in 1945. For understandable reasons, this stage, beginning in a wartime economy and concluding during a war, had an extremely pro-

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Cooperation and Competition: RussianAmerican relationship in scientific and technical sphere

C o m p e t i n g

f o r

t h e

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To d a y : A

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o f

I n n o v a t i o n

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It is clear that the attention of the Bolsheviks to science had


of them, for instance, I. Sikorskii and V. Zvorykin, obtained clear and large-scale success; others are less well-known, but their contributions to the science and innovations of the U.S. were significant. During WWII, cooperation between the Soviet Union and U.S. was the most intense and friendly in the entire history of interaction between the countries. However, after the end of the war, cooperation was replaced by harsh and unfriendly competition between the two new superpowers for global domination. In the new conditions, the development of science in the Soviet Union and the U.S. was based on the following factors. First, the arms race began. It was extremely important for both countries that their military forces be supplied with armaments that were, as a minimum, no worse, and preferably better, than those of its competitor. Second, competition between the countries increased in (formally) nonmilitary spheres. The Soviet and American space programs are the clearest examples of such competition. Competition took place in other scientific areas as well medicine, biology, astrophysics, etc. and was the result of defense concerns. It was necessary to show the whole worlds scientific community that either the American or Soviet system had achieved greater successes in the scientific sphere than its competitor. Third, despite the rivalry, interest on the part of society arose in the Soviet Union and U.S. in cooperation, including in the scientific sphere. This factor began to operate later than others, and it obtained its greatest significance at the end of the 1960s and the 1970s, in the so-called period of dtente. It was believed that contacts between scientists would allow the two sides to better understand one another, move competition from the military to the scientific plane, and finally move from rivalry to partnership. The dual Soviet-American space program SoyuzApollo became a symbol of this factor. It is worthwhile looking more closely at the SoyuzApollo program, as it established an extremely important precedent. Countries that had before and during the war been allies and after the war began an intense struggle of two systems returned to cooperation, and in a very complicated sphere that was closely concerned with military needs. The program of the mutual experimental flight of the Soviet spacecraft Soyuz-19 and the American spacecraft Apollo was formalized on May 24, 1972, by an agreement that established cooperation in research and the use of outer space for peaceful goals. In 1975, this program was realized: on June 17, docking was completed between the two spacecraft. The ships crews even carried out several scientific experiments together. The realization of the program demanded a series of special efforts and solutions; for example, the life-support systems of the ships, such as the air supply, were initially incompatible. As a result, it was necessary to bring a special tube into space. Moreover, it was believed that the flight would be the first experience of larger-scale mutual programs of space research. But international, including Soviet-American, cooperation in research was not limited to one space program. An important role in this cooperation was played by the Academy of Sciences, which had great authority abroad, not only through the strength of the scientific research it conducted, but also through the strength of its (formal) independence and separation from political questions. By 1957, the National Academy of the Soviet Union had become a member of 69 international scientific organizations, with Soviet scientists beginning to be elected into the leadership of such organizations. On the other hand, Soviet scientific journals began to be published in the U.S. translated into English, which allowed Soviet scientists to compete in terms of publications cited.

an amount of scientific research and corresponding areas as possible, while increasing the overall number of researchers and improving the conditions of their work and daily lives. Later, strengthening itself and beginning to cross over to a planned and relatively totally controlled economy, the Soviet government began to incorporate planning in the area of scientific research. This initiative met with much opposition from the scientific community, which believed that non-specialists would not be able to understand the difficulties of the scientific process and the pressing tasks facing scientists and, accordingly, no plan of work can be filtered down to scientists from a higher authority. Nevertheless, in 1928, general tasks for the science sector were included in the schedule for the First Five-Year Plan, and in 1931, the first detailed yearly plan of work for the Academy of Sciences was formulated. The Great Patriotic War had special significance for the development of Soviet science. First, demand from the Party leadership for new research and development rose sharply that could be used for production of weapons and military vehicles. Second, the evacuation of scientific institutes, universities, and high-technology manufacturing from Moscow, Leningrad, and the European part of the Soviet Union to the Urals, Siberia, and the Central Asian Republics resulted in a strong transfer of scientific potential to these regions of the country. Perm, Sverdlovsk, Chelyabinsk, Omsk, Tomsk, Novosibirsk, and other cities of the Urals and Siberia, Tashkent, Alma-Ata, and other cities of the Union Republics of Central Asia, which formerly were not among the leading scientific and educational centers, received a colossal influx for their innovational development. Although many researchers returned to their home cities after the war, the local personnel they had trained continued the research and development begun during the war years. The equipment evacuated in the first months of the war also often remained in the rearguard cities, and it became necessary to restore all of the infrastructure and supply the buildings with new equipment. As a result, the scientific potential of the country practically doubled in the course of a few years after the war, although this increase was accompanied by huge strains on the strength of the Soviet population. Unfortunately, the growth of potential had more of an extensive than an intensive character, but at that point in time, it was enough it was necessary to increase the productive capacities of Soviet science. Increasing the effectiveness of their use was a task that fell to the next stage of the development of the Soviet scientific system.

a deeply pragmatic character, and its basic principle engendered hope among the leaders of the Soviet state that some panacea would be found in science for solving economic, social, and political problems with the greatest effectiveness and smallest expense. If charlatans had appeared to V.I. Lenin and A.V. Lunacharchsky in 1918 promising to create a perpetual motion machine or a chemical method to make gold from lead, they would probably have received resources to carry out the research. In fact, among the research carried out in the 1920s and 1930s in the Soviet Union and financed from the state budget, completely pseudoscientific projects can be found, such as several attempts by O.B. Lepeshinskaya to obtain newly forming cells from undifferentiated living matter. However, due to a beneficial combination of circumstances, there were very few charlatans among the scientists of that time. Alongside an increase in attention to the development of science, the Soviet government cast its attention to the development of generally accessible peoples education. As early as November 1917, almost immediately after the seizure of power, the Bolsheviks created the Peoples Commissariat of Enlightenment, Narkompros. In 1920, general education was introduced in the country, including courses to liquidate illiteracy in adults. At the same time, professional (factory-plant) academies were created that taught not only general, but also professional, skills, a certain analog of the German Fachhochschuele. The network of universities expanded, and universities and specialized institutes were created in the provinces. In 1917, the sphere of science passed into the administration of Narkompros and, partially, the Supreme Soviet of the Peoples Economy. The SSPE was given primarily areas of scientific research that were important for peoples agriculture, for which a Scientific-Technical Division was created, the task of which was the development of applied science. In the summer of 1918, all universities passed into the control of Narkompros. To manage scientific and higher educational establishments, a special Scientific Division was created in Narkompros. In turn, the State Scientific Council was created as an advisory body. In 1921, the Main Administration of Scientific Institutions (Glavnauka) was created on the basis of the Scientific Division, also in the structure of Narkompros. The Academy of Sciences at that moment was also subordinate to Glavnauka and, correspondingly, Narkompros. Each of these organizations devoted great efforts to increasing the number of institutes subordinate to them, developing as large

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The Evolution of the Russian Academy of Sciences


The history of Peters founding of the Academy of Sciences is inseparably bound up with the history of all Russian science, but it cannot be said that the Academy has always played an unambiguously positive role. In the beginning, the scale of the activity of the Petersburg Academy of Sciences was not great. The idea of raising the status and increasing the resource base of the Academy was widespread in Russian society as early as the 1830s, but serious reform and elevation of the formal status of the Academy did not take place until 1917. Nevertheless, the Academy gradually began to acquire definite features of a future super-ministry of science. For example, the Academy of Sciences spent more than half of all the resources allocated by the Ministry of Peoples Enlightenment on scientific goals. At the same time, society considered the then-existing structure and organizational resources of the Petersburg Academy of Sciences to be rather critical both outmoded, not corresponding to the real needs of the economy and the life of society, and focused on an outmoded classical approach to education and science in which the main attention was directed to disciplines in the humanities, especially classical ones. In the structure of the Academy in the beginning of the 20th century, there were five laboratories, seven museums, the Russian Archaeological Institute in Constantinople, the Pulkov Astronomical Observatory, and the Main Physics Observatory. The staff of the Academy of Sciences in 1912 consisted of 153 people, including 46 academicians, a large proportion of whom were representative of astronomy, mathematics, geology, and an array of humanities. About half of the entire scientific budget of the Ministry of Enlightenment was spent on the work of the Academy, which indirectly gives an idea of the general number of researchers in Russia at the time. The key peculiarity of the first stage of development of the Soviet science and the Soviet innovational system was a strengthening of the role of the Academy of Sciences. This ministry had managed relatively successfully to survive the Revolution and Civil War, and find a common language with the Soviet government as scientists in the technical and natural sciences in general related positively to this government, seeing new opportunities for development of research. As early as 1918, the old Petersburg Academy of Sciences signed an agreement on cooperation with the Bolsheviks, and as a result, it became part of the Narkompros system and began to receive financing. Later, the Academy of Sciences, using its independent expert status, its fame in the international scientific community, and its policy of noninterference in questions of politics and ideology, was able to become a super-organization, playing a key role in the Soviet system, being responsible for all scientific questions and factually independent from all ministries and departments, with the exception of the Party

The Evolution of the Russian Academy of Sciences

Stage 6. Leadership and Self-Assurance (19451990) A Superpowers Science Gradually Decreases Its Rate of Development
The next stage began approximately in 1945, after the end of the Great Patriotic War, when it became clear that the victorious countries, despite all the contradictions between them, would find possibilities for peaceful coexistence. This understanding finally came to the leadership of the two superpowers the Soviet Union and U.S. after the Cuban Missile Crisis of 1962, but the foundation of the new model was being formed already in 1945. In these conditions, competition between the two systems had a more peaceful character, with the war becoming cold, and in this war a key significance was had not by direct military encounters, but by demonstrations of military power and scientific-technical accomplishments, including ones not directly tied to any military theme. This situation enabled phenomenal in world history rates of growth of science and machinery both in the Soviet Union and in the U.S., as science and innovation became the main weapon of the new war. Innovational activity in the Soviet Union was not limited to just the sphere of fundamental, classical science. The pragmatism and technocratic nature of the Soviet leadership, in combination with the already pressing task of industrial modernization, created demand for applied science that would be more directly applicable in production. This task went beyond the bounds of the sphere of competency of the Academy of Science, and, moreover, it was necessary to ensure intense cooperative work with the branch ministries that were directing the real manufacturing sector. In the years of the war, all these tasks were handled by the State Committee of Defense; however, in peacetime, a new organ of government better suited to the tasks of peaceful construction was needed. To solve these problems, the State Committee on Implementation of Cutting-Edge Machinery in the Peoples Economy (Gostekhnika of the Soviet Union) was created in 1948 under the auspices of the Government of the Soviet Union. The basic mission of this organization was assistance in the large-scale and accelerated application of new technologies in industrial manufacturing construction, and other branches of the economy. In the future, Gostekhnika, after undergoing a series of reforms and being transformed as a result into the State Committee of the Soviet Union on Science and Technology (SCST of the Soviet Union), became one of the key state organs coordinating the sphere of applied science and technology. The experience of the SCST has been used by many countries, including the U.S. and China.

Central Committee. In the period from 1918 to 1935, relatively rapid growth took place of the staff and resources of the Academy, first and foremost in connection with the new tasks given to the Academy by the Soviet government; for example, development of recommendations on rational allocation of industry according to territory. The Academys laboratories began to become full-fledged scientific institutes. In 1925, the 200th anniversary of the founding of the Academy of Science was officially celebrated, and a new charter was drawn up in which the Academy received the status of supreme scientific institute with the same Soviet Academy of Sciences. The position of president of the Academy of Sciences became electable, and the organization became self-governing and independent. The number of acting members of the Academy in 1928 was practically doubled from 45 to 85 people by a decision of the Council of Peoples Commissars. The decision in 1928 was even more important, because specialists in the technical sphere would become part of the structure of the Academy, creating special, technical chairs. As a result, in 1935, this movement was formalized in the creation of a special Division of Technical Sciences of the Soviet Academy of Sciences, which would become important for technical and quasi-technical (physico-technical, chemo-technical, etc.) solutions in Soviet science. The most serious changes in the real status of the Academy of Sciences began in 1934, when the Academy was moved from Leningrad to Moscow, next to the main ministries of the government of the Soviet Union. The Academy was able to become the exclusive organization for coordination of all scientific work while at the same time, retaining formal independence and right to self-administration. The Academy of Sciences was able to unite a whole array of disciplines that were critical for the Soviet government its own scientific research in various areas, applied and technological developments, and social sciences. Growth of this system proceeded not only through increasing the number of scientific institutes and laboratories or incorporating previously independent organizations within the Academys structure, but also as a result of penetrating into areas through organization of divisions of the Academy of Sciences in Union Republics and areas of the Russian Soviet Federated Republic. As a result of the marked growth of the Academy of Sciences, the status and real role of universities were reduced, including those of very old ones Leningrad, Kazan and universities created in the provinces. Moreover, the tendency that had arisen already during the time of Nikolai I toward preferring technical schools to universities only increased in the Soviet era. Moscow Lomonosov State University can be named as almost the only classical university that partially preserved its high sta-

tus and prestige in the Soviet era, using the model of research university in its work. However, the role of non-university institutes, first and foremost technical institutes and academies, grew. In Moscow, the N.E. Bauman MVTU and its affiliate institutes, and consequently the Moscows Physical Technical Institute, became key forges of personnel for the Soviet industry and government departments. The complicated political and economic events of the 1990s increased the influence of the former Soviet Academy of Sciences the current Russian Academy of Sciences. First and foremost, the RAS obtained complete independence of work, not only formally, as in the Soviet era, but in reality. In the conditions of a weak state and weak social structures, the RAS obtained relatively strong lobbying power. In conditions of political opposition between the new Russian authorities and supporters of the old political system, the RAS, as an independent organization with a neutral political position, was able to obtain support, both moral and material, from all sides of the conflict. The formal appearance of competitors in the form of new academies also in the end strengthened the RAS positions. Society very soon came to the conclusion that the majority of new academies do not inspire confidence. In such a situation, the authority of the old Academy, remaining in the inheritance from the Soviet Union and glorified with the name of old and new Nobel laureates and general designers, only grew. Society confessed that only the academies of the RAS can count on societal respect. If in the political sense the RAS won more in the situation of the 1990s, in the economic sense it lost out: government financing dropped dramatically, and a significant amount of the real estate that had passed into the Academys management could only partially be used for commercial goals, as the formal owner was the government. In the 2000s, the situation changed again: the RAS began to obtain much greater government financing, but the level of independence and freedom of action fundamentally diminished. At the present time, broad discussions are being held in government ministries and society regarding the necessity of seriously reforming the Academy of Sciences.

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Coordination of Policy in the Area of Science, Technology, and Innovations: Gostekhnika the State Committee of the Soviet Union on Science and Technology

Goskomitet played an important role in science and technology in the economic and technological development of the Soviet Union in the 1950s and 1960s. However, as early as the 1970s, the results of the work of the Soviet Academy of Sciences and SCST were insufficiently satisfactory, to which the decree of the Central Committee of the Communist Party of the Soviet Union of August 18, 1983, On Measures to Accelerate Scientific-Technical Progress in the Peoples Economy bears witness. In this decree, the work of the Academy of Sciences and SCST was criticized as insufficiently dependable and insufficiently good results of its scientific activity. One of the consequences of this decree was a new managerial method the creation of scientific-productive mergers (SPOs) and, in a number of cases, inter-branch scientific-productive mergers, in which scientific and productive divisions from various branches of industry were grouped in one place to receive a maximal effect and reduce losses and delays in inter-organizational interaction. It can be said that SPOs were a predecessor to high-technology clusters in the system of the Soviet economy. The phase of the 1970s and 1980s was connected to a rather intense search for new models and paths of development within the framework of the Soviet economy and science. The problem was that the time for searches had already passed the quantity of demands of the new economic epoch, new situations in the external environment, and new needs of society greatly exceeded the resources and managerial potential that the government possessed. However, the dissolution of the Soviet Union was connected to a larger extent with political factors than with economic problems or lack of success in the scientific system. As a result of the complicated political situation unfolding in the Soviet Union at the end of the 1980s, the Soviet Union was dissolved into the former Union Republics, which were now newly independent states.

in rare cases, fulfilling of orders of those branches of industry that had been retained in the new economic conditions for instance, the fuel-energy complex. It is important to note that at the end of the 1980s, a widespread idea existed in society regarding the potential commercialization of scientific ideas and developments that had been accumulated in NIIs and universities. It was considered that after the commercialization of ideas was allowed, scientific centers would be able to evolve into self-financing, and the most talented developers would engage in successful commercial activity. Practice, however, showed that these ideas were unrealistic. In the absence of working institutes (infrastructure) for commercialization during conditions of large-scale economic crisis and a drop-off of industrial productivity, ideas and developments in themselves were not needed by anyone. Nevertheless, many scientific workers and university teachers tried in the period from 19891993 to commercialize technology and create their own business. The majority of these attempts were unsuccessful, and in some situations, former workers in science engaged in ordinary commercial activity (trade, construction, the finance sector, etc.). In specific cases, science workers were able to create successful enterprises based on Soviet innovational developments. It is interesting that the majority of enterprises existing at present in Russia that work in the innovational sphere and having achieved stable success were founded precisely during the period from 19891993 on the basis of Soviet innovations. The strengthening of the Russian state and general economic growth of Russia beginning in 19992000 led to important changes in the sphere of science. Government financing of higher schools of education rose markedly. The area of dealing with objects of intellectual property became somewhat more orderly, including in the area of state secrets. The increase in industrial productivity began to form a basic demand for scientific research and development, not only in the fuelenergy complex. The increasing income of the population enabled a rudimentary appearance of so-called business angels who invested their own resources in commercialization of ideas and developments. Attempts were made to create an innovational infrastructure, such as centers of technology transfer and commercialization, venture funds, business incubators, technoparks, and special scientific-implementation economic zones. The Foundation of Assistance in Development of Small Forms of Enterprises in the Scientific-Technical Sphere, receiving wide renown as the Bortnik Foundation, played an important role in stimulating innovational activity.
On February 15, 1948, a new state department was created under the auspices of the Council of Ministries of the Soviet Union that was responsible for technological improvement of production in Soviet peoples agriculture the State Committee on Implementation of Cutting-Edge Machinery in the Peoples Economy, or Gostekhnika of the Soviet Union. The former Division of Machinery of Gosplan of the Soviet Union, which came from another, analogous division in the Supreme Council of Peoples Agriculture (SCPA), which had arisen shortly after the Revolution, came into the structure of Gostekhnika. This organization was created mainly on the initiative of A.V. Malyshev, a graduate of the N.E. Bauman MVTU. Malyshev was the peoples commissar of heavy machine building in 1939, in the years of the war peoples commissar of the tank industry. Beginning in 1946, he served as the minister of transport machine building and simultaneously, an assistant to the representative of the Council of Ministers of the Soviet Union. Malyshev became the first representative of Gostekhnika and then returned to a ministerial post, being at the beginning minister of machine building, then minister of ship building, and then in 1953, the first minister in the Soviet Union of medium machine building, i.e., the creation of the atomic industry. The creation of Gostekhnika was connected to the reorganization of Gosplan of the Soviet Union, in the course of which Gosplans previous structure was split into two new organizations the State Committee on Supplying Peoples Agriculture of the Soviet Union (Gossnab) and Gostekhnika. Gostekhnikas first large-scale project was construction of the Volga-Don canal (19501952). Goskomitet prepared a recommendation that foresaw a colossal savings of labor expenditure on the project through use of more powerful earth-moving machinery. New models of excavators, trucks, and other specialized machines were developed and introduced especially for the project in an extremely short period of time. As a result, only about 200,000 people were used in the project instead of the planned 500,000; i.e., less than half, and the project was successfully completed on time May 31, 1952. In status, the head of Gostekhnika was simultaneously a vice-premier, as we would say today, i.e., assistant to the representative of the Council of Ministers of the Soviet Union. Initially, also the All-Union Committee on Standardization was included in the structure of Gostekhnika, but starting in 1951, an independent Administration of Standardization was formed under the Council of Ministers of the Soviet Union. Another important element of Gostekhnika was the Administration of ScientificTechnical Cooperation (ASTC) (with socialist countries), which played a key role in the realization of programs of technical help to developing countries by the Soviet Union. In particular, the ASTC made a meaningful contribution to the technological development of the Peoples Republic of China in the period of friendly relations between the Soviet Union and China. From the beginning, the tasks set before this organization were large-scale and made up a complex area of work; thus, carrying out one task assisted in another. Gostekhnikas sphere of work included: Creation of provisional and yearly plans on technical and technological improvement of all branches of the peoples economy; Control and independent expertise over the plans of all ministries and departments in the area of research and development of new machinery; Organization of government experiments on models of new machinery and reports to the Council of Ministers on the results of the experiments; Support of inventors engaging in patenting and licensing and defense of authors rights (the State Committee on Inventions and Discoveries was part of Gostekhnika); Guaranteeing of information for scientific-technical work; Development and implementation of policy in the area of standardization and technical regulation, development, and control of government standards (as has been discussed above); and International scientific-technical cooperation and technology transfer to less-developed countries. After the fact, Gostekhnika had to become the headquarters of innovations and new technologies in the Soviet Union. The principles of Gostekhnikas work were cutting-edge for their time on the levels of both the Soviet Union and the world. This ministry had to coordinate the work of all ministries and departments in the area of science, technology, and, we would say today, innovations. However, Gostekhnika was unable to make decisions on its own it was able to only influence the decisions of the Council of Ministers of the Soviet Union or those of branch ministries/departments. In addition, Gostekhnika worked along with Gosplan in working out state plans for the peoples economy, and then the carrying out of these plans was done by separate ministries. Despite all the administrative reforms and reorganizations of the government, which took place in the Soviet Union rather often, especially during the Khrushchev era, after its work was restored in 1955, Gostekhnika lasted through the whole Soviet period to 1991, although its name was changed in 1957 to the State Scientific-Technological Committee of the Council of Ministers (SSTC). In 1961, it became the State Committee on Coordination of Scientific-Research Work (SCCSRW). Finally, in 1966, the ministry was named the State Committee of the Soviet Union on Science and Technology (SCST). The role of

Stage 7. Collapse of the Old System and Unclear Perspectives (1991Present) Is the Science Needed in Conditions of Economic Reform?
In the new economic and political conditions, the wide-scale reforms in the sphere of managing science and technological development initiated in 1983 could not be realized. Science and the high-technology industry themselves, deprived since 1992 of the previous state financing, were on the verge of dying out. The basic resource that could be used by high-technology enterprises and scientific institutes to survive became contracts with foreign organizations and charitable grants from foreign organizations or,

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All of these measures, however, did not lead to an adequate


the SCST was to a large degree one of coordination and planning: the committee did not concern itself with the direct financing of promising developments. Nevertheless, the SCST possessed a reserve fund that was formulated every year through deductions of 1.5% off the top of the ministries funds for development of new machinery. It should be noted that, in the period from 1955 to 1966, Gostekhnika was the real coordinator of all the scientific-innovational work in the Soviet Union. It is enough to say that even the Soviet Academy of Sciences was subordinate, and had to carry out its activity in coordination with government plans developed by the SSTC/SCCSRW. In the beginning, the SSTC/SCCSRW recruited from the engineering milieu. The last engineering leader of the SCCSRW has been a participant in the rocket-space Soviet program, former Director of Tulsk NII no. 88, K.N. Rudnev. The restored SCST was headed by V.A. Kirillin, an energy scientist and Party functionary who in 1966, become one of the vicepresidents of the Soviet Academy of Sciences. No further engineering personnel entered into the leadership of the SCST; Kirillin was replaced by Academician G.I. Marchuk, who had come from fundamental science, and was a former president of the Soviet Academy of Sciences. Soon thereafter, the Academy of Sciences reverted to formal independence from the SCST. The key task of the SCST after the reorganization in 19661967 was the creation of Basic Areas of Development of Science and Machinery and Basic Scientific-Technical Problems in a five-year period and, later, on the basis of these two documents, The Government Plan for Scientific Research Work and Use of the Achievements of Science and Technology in the Peoples Economy became part of The Governmental Five-Year Plan of Development of the Peoples Economy. These documents were worked out on the basis of scientific-technical prognoses covering a period of 1015 years that the SCST had to draw up together with the Soviet Academy of Sciences and other relevant key ministries (Gosstroi, Gosplan). The system of documents going into the five-year plan, in turn included a series of plans of a lower level in different areas, including in the area of science: Coordinated plans for solving basic scientific-technical problems; Five-year plans of scientific-research work and the use of the achievements of science and technology in production (in branches of the peoples economy); and Yearly plans of scientific-research work and the use of the achievements of science and technology in production (in branches of the peoples economy). The needs of the peoples economy were assessed on the basis of prognoses, five-year general government plans were drawn up to satisfy these needs and solve tasks of development, and then these plans were detailed to the level of concrete enterprises in plans of a lower level and short-term (yearly) plans. Within the bounds of its competency, the SCST reacted relatively well to the arising problems in the economically planned peoples economy. Alongside coordinated plans, which took place in a natural fashion, the so-called program integration method of directing the development of science and technology was suggested by Goskomitet and adopted for use, which foresaw the formulation of a limited list of scientific-technical integrated programs. A management model was predicted such that management of typical sectors and enterprises would be realized on the basis of an intersector balance and that the program integration method would be used for realization of innovational, breakthrough projects.

Scale has meaning. Despite the fact that certain areas of science in pre-Revolutionary Russia were first-class by world standards, as a whole, its scale poorly corresponded to the tasks before the country and to the size of the economy. As a result, this first-class science played no role in national industry. The Soviet state, even after reducing for a time the level of scientific schools in leading areas, through simple expansion of the scale of scientific activity was able to make science an important factor in the development of the economy, with the result that it ensured great scientific achievements in the long-term. Science relies on the system of education. Another problem of pre-Revolutionary Russia was a small share of the population with general, higher, and middle education. By ensuring general education, the Soviet Union was able to create a broad basis for recruiting researchers and engineers. Many famous Soviet scientists who achieved meaningful success had come from distant regions and underprivileged layers of society who would not have been able to obtain access to education and a scientific career in the conditions of pre-Revolutionary Russia. The solutions that were successful yesterday become useless today, and harmful tomorrow. The clearest confirmation of this thesis is the late Soviet period, when the system of the System Academy of Sciences, having received as a reward for previous services full independence, freedom from control, and colossal resources for scientific work, ceased to produce adequate results. In a number of cases, it actually became a hindrance to the work of competing organizations and ministries. Science is more stable and vital in universities. Despite the small influence of the government on scientific research, in pre-Revolutionary Russia, in particular areas, scientific schools, based mainly on universities, were some of the best in the world. The Soviet system of isolated scientific centers was able to exist in conditions of constant control and stimulation by the government. In the new post-Soviet conditions, when science was left on its own, these scientific centers degraded, while university science was partially able to preserve itself. In this way, NIIs can be a more effective instrument of scientific research in the case of focused attention and support from the government, and in the case of lessening this attention, university science gives the best results.

increase in the results of scientific and innovational activity. The Russias national innovational system has continued to lag behind those of its key competitors, including not only traditional ones the U.S., Germany, France, the United Kingdom, Japan but also new, ambitious rivals Finland, South Korea, Israel, China, and even Brazil and India. *** Studying the history of Russias experience in creating and developing its scientific system allows the following conclusions to be drawn that are relevant for our time: The person who is catching up needs to run faster than the person with whom he is catching up. The Russian government has always found itself in the position of catching up in the scientific sphere relative to the more developed countries of Western Europe (and later also the U.S.). The reason for this is that, for various reasons, the epoch of Enlightenment took place in Russia not in the 15th 16th centuries, as in the countries of Europe, but in the 17th 18th centuries. At the same time, only vigorous and thorough-going efforts to develop the domestic scientific system lessened the stagnation. As soon as the situation was left without control in the belief that the impulse had already been imparted and the national innovational system would henceforth develop on its own, the stagnation and malaise grew at disastrous rates. Constant comparison with the better is the pledge of success. Taking into account its position of catching-up, the Russian government has in several periods used foreign experience (for instance, in the era of Peter I), and in other cases has developed its own, previously nonexistent instruments and organizational structures proceeding from the tasks before the country (for instance, during the creation of the Goskomitet of the Soviet Union on Science and Technology), and, third, combined the best international experience and its own solutions (the work of Lomonosov, the organization of science in the early years of the Soviet state). At the same time, it must be noted that some of these methods clearly turned out to be better than others. However, it can be said unambiguously that freezing in place of developing mechanisms and organizational structures, without comparison with the international dynamics and with the dynamic of the tasks before the country, has never led to success.

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This approach will offer a general understanding about the composition of national innovational systems in the leading countries, illustrate the specificities of their birth and development in various historical-economic conditions, and provide real examples of political and economic solution and methods that allow the innovational climate to be radically improved. In the sections devoted to each country, a description of the structure and evolution of the national innovational system is provided and the key specificities and basic instruments of its Within the framework of the project, the experience of the innovational policies of 25 countries were studied, developed and practically used. Below are presented findings of analysis of the innovational policies of three countries that we chose for more detailed description: two that have achieved very impressive results in a relatively short span of time while at the same time being at different stages of development of the innovational system (Finland, China), and also the experience of the U.S., which has long been a recognized world leader in this area. policy are distinguished.

The extremely effective methods of work of the American state structures (agencies and foundations) responsible for support of science and technologies have been successfully incorporated into the arsenals of many countries. The national innovational system of the U.S. is not only the largest in the world, but also leads in diversification. An unprecedentedly wide spectrum of possibilities for support of innovations is the result of this combination. The U.S. occupies the first place in our rating of the competitiveness of national innovational systems. The profile of the U.S. NIS is shown in the figure below.

the 19th century. American companies began to create their own research laboratories, and in 1920, there were approximately 400. A significant amount of these laboratories were created in the chemicals industry. Several industrialists spent significant sums on creation of new universities and foundations to support scientific research. At the time, the basic source of financial help to universities and colleges was private investment; the federal government financed only a very limited spectrum of research, for the most part, agricultural. The path of development of the U.S. innovational policy in the 20th century can be divided into four stages. The period between the First and Second World Wars can be identified as the time of the formation of the national innovational system and important changes in approaches to financing science. The beginning period of the Cold War (19451957) was characterized by growth of state financing of R&D and the formation of state policy in the sphere of scientific research.

5. International Experience of Development of National Innovational Systems and Policy in the Area of Science, Technologies, and Innovations

The National Innovational System and Policy in the Area of Science, Technologies, and Innovations in the U.S.
The U.S. rightly prides itself on its very high achievements both in science and in its developed system of the commercialization of its findings. American innovational clusters have long provided textbook examples.

Stages of Development of Innovational Policy in the U.S.


To understand the current composition and structure of the American innovational system, it makes sense to begin with a short overview of the history of its development. The U.S. had already become a leading world industrial power at the end of

Figure 57 Figure 56 The Geography of International Experience BRIC


better
1 4 8 7 1 1 6 11 16 17 23 16 18 6 5 9

Profile of the Competitiveness of the National Innovational System of the United States OECD
1 3 9 1 5 7 3 1

USA

26

27

26

38

supplemental

worse

talented people and ideas

commercialization

innovational potential of companies


capability of taking knowledge from others capability of generating new knowledge obligatory standards and regulation technological level of production

clusters and technological infrastructure

conditions of demand

institutes and effectiveness of government administration


independence of courts freedom from corruption quality of government administration protection of property rights

natural-science education in school

availability of electrical energy

availability of talented people on the labor market

resources for scientific research

quality of scientific research

mobility on the labor market

quality of higher education

availability of infrastructure for commercialization

availability of traditional financing

availability of venture financing

voluntary standards

defense of intellectual property

level of development of traditional clusters

level of development of IT

access to the consumer market

level of development of innovational clusters

Source: Analysis by Bauman Innovation

Examples of countries in which innovational strategies have been developed

Source: Bauman Innovation

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government purchases

factors

military purchases

critical mass

level of equipment production

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The critical moment signaling the beginning of the next stage (19571989) was the launch by the Soviet Union of the first artificial satellite in 1957. The new policy in the areas of science, education, technologies, and innovations born from measures taken to return the U.S. to technological superiority allowed the country to strengthen its leading positions and laid the foundations for the achievements of the current state of development (19892010).

according to contracts between universities and companies, while in the period before the war, practically all resources were given to federal research institutes. It was at this stage that a full-fledge state policy in the area of scientific research arose. In 1950, the National Science Foundation (NSF) was created, the methods of work of which are still today considered a model of organization of financing of fundamental scientific research.

budget obtained the possibility of choosing to obtain a patent. In its turn, the receiver of financial help was obligated to take upon itself definite obligations allowing the state to effectively influence the process of commercialization of inventions. The BayhDole Act changed the interrelationship between the government, universities, and the private sector in the sphere of transfer of property rights and encouragement of licensing of federal inventions to the private sector in a fundamental way. On the whole, the BayhDole Act is one of the most important instruments of governmental policy in the area of commercialization of innovations. The StevensonWydler Technology Innovation Act of 1980 gave wide powers to the Department of Commerce of the U.S., and tasked it with initiating processes of adoption of innovations in the state and private sectors, as well as providing multifaceted support to technology transfer to the general national level. Considering that federal laboratories had a significant amount of commercially valuable technologies that could assist in increasing the competitiveness of U.S. firms, the law demanded that every federal laboratory create an office for announcing commercially valuable technologies and the subsequent transfer of them to the private sector (an Office of Technology Licensing or Office of Technology Transfer). The policy of technology transfer inserted into the basis of the StevensonWydler Act conceptually coincided with the positions of the BayhDole Act. Both laws increased the effectiveness of processes of adoption by the private sector of the results of scientific research and development obtained with the support of the federal government.

between the state and private sectors, were aimed at ensuring as much as possible full use of the findings of R&D in practice. The further development of the relationship of the federal government to the problems of innovations can be characterized as cyclical periods of high activity were replaced by periods of idleness. This took place partly because innovations, as a rule, have only secondary significance in relation to such questions as defense and national security, the budget deficit, taxation, health, and social security. Thus, after the period of high activity of the 1990s the result of which was the reorganization of the Department of Commerce of the U.S., which as a consequence caused the Department to play a fundamentally more serious role in the innovational system was followed in the beginning of the 2000s with something of a decline. In the middle of the 2000s, a realization and consideration took place in the scientific and sociopolitical circles of the U.S. of the unfolding world economic processes of globalization that were accompanied by an intensity of international competition. Rapid growth of the national innovational potential was recognized as one of the most important conditions for advancing in a number of areas and once again maintaining the lead position of the country in the economy, education, technologies, science, and national security. As a result, a series of practical steps were taken, such as the COMPETES Act passed in 2007, which significantly increased financing for science education, and initiated a wide spectrum of new programs and new organizational structures designed to ensure that the U.S. holds dominant positions in technology, education, and science.

Stage 1: The birth of the innovational system (19141945) The period between World Wars I and II
WWI had a significant influence on the organization of American science and its role in the countrys economy. The basic engine of these changes was the mass adoption of the findings of scientific research into real production. The effect was so strong that the birth of industrial R&D took place as a meaningful factor of economic development, as well as, in the opinion of many experts, that of the entire innovational system of the U.S. The period between the World Wars was characterized by a certain fall in the interest of the federal government in research and development. Nevertheless, it was at this time that important changes took place in financing science. For instance, in 1930, the National Institutes of Health (NIH) were created a federal medical research agency with a large research budget that is part of the U.S. Department of Health and Human Services. During WWII, the government increased its investment both in science as a whole and in fundamental research in particular. The growing needs of the defense industry led to the creation of national physics and engineering laboratories financed by the Department of Energy. If at the beginning of the 20th century, American scientists went to Europe to increase their level of knowledge, in the course of WWII and after American science was becoming stronger due to an inflow of scientists from Europe.

Stage 3: A splash of activity in innovational policy (19571989) The period of the Cold War after the launch of a Soviet satellite and the disappearance of the socialist camp
The Soviet Unions satellite launch in 1957 had enormous influence on the further development of the American innovational system. The National Aeronautics and Space Administration (NASA) was created in July 1958. In addition, the position of scientific advisor to the President was restored, and the Defense Advanced Research Projects Agency (DARPA) was created. Around 1960, the share of the federal investment in financing of academic research reached 60%. Financing of research in the civil sector significantly rose as well, particularly in medicine. From 1950 to 1960, the U.S. military expenditures grew from $12.9 billion to $39.2 billion. However, from 19601970, the opinion that American science was excessively militarized became increasingly widespread in society. As a result, in the mid-60s, the share of financing of defense research shrank to half of the general federal expenditures on R&D. The role of the Department of Defense in academic research also shrank from 44% of federal expenditures on R&D in 1958 to 21% in 1965, and a mere 9% in 1980. After Ronald Reagans election as President in 1980 and the beginning of another twist in the arms race, defense expenditures again sharply rose to 75% of the general federal budget on R&D. The Strategic Defense Initiative program adopted in 1984 played a major role. The activity of the federal government in the sphere of innovational policy also increased. In particular, in the 1980s, a whole array of key legal measures were realized by the government that had a large influence on the face of the U.S. NIS. For example, the BayhDole Act passed in 1980, guaranteeing universities, noncommercial organizations, and small enterprises property rights to inventions created with government financial support. Organizations that received financing from the federal

Stage 4: Change of orientations and refinement of the innovational system (19892010) The current period
The crisis in the Soviet Union and other socialist countries of Europe and the ensuing destruction of the basic military and political competitor to the U.S. again transformed the situation as the attention of the majority of federal agencies switched to the development of the American economy, increasing its competitiveness and processes of commercialization of the results of university scientific research and technology transfer. At the end of the 1980s, the Omnibus Trade and Competitiveness Act of 1988 legally strengthened the process of creating centers of transfer of industrial technologies and industrial services. The centers, formed on the basis of close cooperation

The Structure of the U.S. Innovational System


On the federal level, the innovational system has several hubs. The White House and U.S. Office of Science and Technology Policy (OSTP) coordinate the basic federal initiatives. Headed by the scientific advisor of the presidential administration of the U.S., the OSTP provides consultations on questions of scientifictechnical policy, coordinates inter-ministry budgets for research and development, and is responsible for solving general problems in the area of innovations. The Presidents Council of Advisors on Science and Technology (PCAST) and the National Science and Technology Council (NSTC) advise the President and the administration on questions of science, technologies, and innovations.

Stage 2: Growth of government financing of R&D (19451957) The beginning of the Cold War
With the beginning of the Cold War, the role of the government in the sphere of scientific research began to quickly increase national defense required serious investments. As a result, the share of government financing of R&D grew to 75% from less than 20% in less than five years. At the same time, a greater percentage of federal resources were allocated

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The Office of Management and Budget (OMB), also acting under the auspices of the White House, evaluates the effectiveness of programs and processes in different agencies, as well as their needs, and determines the priority areas of financing. The President uses this information to plan budget expenditures. The White House leads the executive branch of the system in the structure overseeing the agencies of various functions. Many of them are active participants in innovational policy. For example, one of the main players in the innovational system is the U.S. Department of Commerce, the U.S. Patent and Trademark Office (USPTO), National Institute of Standards and Technology (NIST), Census Bureau, and Internal Trade Administration. Beginning with WWII, the American innovational system was deeply intertwined with national defense. The primary organization engaging in coordination of defense research is DARPA. This agencys main task, which was initially formed to prevent technological surprises such as the Soviet satellite, evolved over time and at present can be briefly defined as ensuring that the U.S. occupies leading positions in new military technologies. It is important to note that a series of military developments initially funded by this agency such as the creation of the first computer networks, which eventually led to the development of the Internet have exerted vast influence on the character of current civilization. A flexible and transparent organizational structure (there are 140 regular scientific employees and only two levels of administrative hierarchy in the agency), constant search for and hire world-class specialists (with special attention focused on project management staff), and a culture of teamwork and concentration of attention not on evolutionary, but on more revolutionary, vanguard research and development are particular characteristics of DARPA that lie at the basis of the effectiveness of the agency and its ability to always be at the forefront of science and technology. Recently, proposals have been examined to create other federal agencies based on the successful model of DARPA. However, serious doubts exist that the DARPA model can be replicated for the stimulation of commercial research and development. In the area of defense research, the state is simultaneously customer and consumer. The basic markets, conditions of use of intellectual property, and possibilities of access to information about current promising research are different. Another unique aspect of the innovational system of the U.S. is significant expenditures in the area of health research.

Financing takes place through the National Institutes of Health (NIH), a federal medical research agency with a large research budget that is under the aegis of the U.S. Department of Health and Human Services (HHS). The agency was created in 1930, and contains 27 institutes and research centers carrying out research in different areas of health, including the problems of aging, and childrens and adolescents health, with a budget of over $40 billion. Financing of defense R&D and biomedical research, as a rule, is allocated for achieving concrete goals, for example, reinforcing national security or increasing lifespan; however, such programs may include large-scale fundamental research as well. The only federal agency that supports fundamental science is the National Science Foundation (NSF). The Foundation finances promising developments in universities and scientificresearch centers, alongside programs of natural-science and technical education and applied initiatives, such as the creation of engineering-research centers or industry-university centers. In addition, NSF is a reliable source of information necessary for realization of policy on the current condition of the U.S. innovational system. At the head of the Foundation stands a group of 24 well-known scientific and social figures appointed by the President of the U.S. with the agreement of the Senate for a period of six years. The Small Business Administration (SBA) is an important agent of commercialization. The SBA coordinates one of the largest federal initiatives in the area of financing innovational activity Small Business Innovation Research (SBIR) as well as the Small Business Technology Transfer Program (STTP). In 2005, a decision was made within the framework of the programs of the SBIR and STTP on financing the innovations of small and mid-sized companies with a total sum of $2 billion. The U.S. Congress plays an important role in the innovational system as a legislative body, allocates budget resources, carries out public hearings on problems, and exercises necessary control over business. Congress acts via a committee structure. The basic committees in questions of the innovational system are the Committees of the Chamber of Small Business and Science and Technology, as well as the Senate Committee on Trade, Science, and Transportation. The Senate also appoints leading figures (for instance, the Secretary of Commerce of director of the NIST). Local state governments, as a rule, participate much more actively in the innovational process than does the federal government; first and foremost, because of their proximity to the needs

of the concrete sectors that form the bases of regional economies. Many recent federal programs have their historical roots in long-term initiatives of states or regional innovational initiatives. A large amount of innovations in the U.S. are realized by the private sector. According to the data of the NSF, over 2,000 private enterprises annually financed more than 70% of expenses on applied research and development in the U.S. In the last 20 years, companies in the private sector have engaged in applied research and development to the sum of over 80% of expenditures on these goals in the U.S. Innovations in the private industrial sector are stimulated both by large transnational and national corporations and by high-technology small enterprises. A developed sector of venture capital engages in significant support of high-technology start-ups. A whole array of intermediary organizations plays an important role in the national innovational policy. In the 1980s, as a result of concern over the competitiveness of the processing industry of the U.S., which was dropping relative to those of Japan and the Federal Republic of Germany, the Council on Competitiveness was created. The National Academies also exist to provide consultation on questions of science and technology. These organizations carry out research and also, with the goal of simultaneously discussing current problems and evaluating the effectiveness of innovational policy, organize conferences and working meetings and ensure the work of forums of different subjects of American innovational policy. The private sector and universities, along with government institutes, play an important role in selection and planning of areas of policy. In addition, a series of specialized organizations exist that are responsible for training and exchange of innovational practices between states. University science is a very important element of the innovational system of the U.S. Fundamental research is conducted mainly in universities and colleges (about 60% of the total volume of all fundamental research), mainly using resources allocated from the federal budget. Such a division of labor has shown itself to be highly effective university professors are traditionally far from the demands of the market, and private enterprises, in turn, do not have enough resources to carry out fundamental research and do not have the broad vision necessary for science on this level. Moreover, the very nature of fundamental research often entails the impossibility of assessing the commercial value of its findings in the early stages of work, making it too risky for

private enterprise. Universities also play an important role in technology transfer, and are centers of the formation of business incubators. The system of national laboratories and scientific research centers (Federally Funded Research and Development Centers (FFRDCs) have great significance in the area of R&D. FFRDCs are financed from the federal budget. Nine ministries are connected with this system. The U.S. Department of Energy has the largest and most geographically branching network of national laboratories; four of which are run by private companies, four by noncommercial organizations, and another eight by universities. In the last few years, national laboratories have placed much emphasis on transfer of technologies and innovations, including through their bureaus of technology transfer, as well as encouraging licensing creation of technology incubators. The Federal Laboratory Consortium for Technology Transfer (FLC) is a pan-national organization created to reinforce cooperation between different agents of the innovational system, provide various services to federal laboratories and research centers, and assist in transfer of technology. In addition, a large number of collaborative projects and initiatives with the participation of ministries, agencies, and the private sector exist.

The System of Instruments of U.S. Innovational Policy


The basic instrument of the policy of the U.S. in the area of scientific research is open competitive financing through the National Science Foundation. Medical research is financed in an analogous way through the National Institutes of Health. The NSF is an independent federal agency created by Congress in 1950 for development of the natural and technical science and the humanities. The basic priority of the NSF is support of individual researchers. Decisions to finance a project are made on the basis of an independent expert assessment, taking into account the potential influence of the project on achieving a number of strategic goals (increasing security, improving health, developing education, etc.). The NSF allocated financing in the framework of four strategic areas: scientific research (54% of the budget in 2008), research infrastructure (26%), instruction (14%), and administration of research resources (6%). This financing comes to all of 4% of total federal expenditures on research and development; however; more than 30% of total federal financing of nonmedical fundamental research takes places through the NSF. In specific

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areas, such as space research, the basic sources of financing are other financial agencies, such as NASA. In the others, financing takes place basically through the NSF. A large part (around 70%) of financing is provided to researchers in colleges, universities, and academic consortia. With the goal of strengthening the links between the educational, industrial, and research elements of the innovational system, the NSF implements programs on creation of industry/university cooperative research centers (IUCRCs) and engineering research centers (ERCs). The goal of the IUCRC program is assistance for scientific research with the participation of industrial enterprises, universities, and the government, as well as support of the development of scientific-research infrastructure. The program also offers scientific and educational opportunities to students. The NSF guarantees the starting capital necessary for creation of centers and then pays for administrative and other expenses over the course of five years. The annual budget of a typical IUCRC is around $12 million. By 2007, 55 IUCRCs had been created. In 1985, the ERC program a large-scale initiative of qualitatively changing engineering education and its role in the economy of the U.S. was started. Acknowledging that in the conditions of the modern world, a traditional increase in efficiency and quality is not enough to preserve competitiveness, the programs organizers implemented a series of measures to radically increase the innovational potential of the U.S. in the global context. In addition to strengthening the symbiotic relationships between different participants in the innovational process and the development of commercial technologies, a great deal of attention is directed to identifying talented students in engineering specializations, giving them opportunities to participate in R&D while still studying (including in collaborative international projects), and developing their creative abilities and motivation to achieve a higher scientific degree. The NSF annually offers each ERC financing of a minimum of $2 million. The possibility of extending financing depends on the results of an assessment carried out every three years of the results of the centers work. The maximum period of support is 11 years. The ERC budgets are around $10 million, and are formed from financing by the NSF and research grants of other federal agencies, contracts, state governments, universities, membership fees of private companies, and fees in the form of goods or services. By 2007, 20 ERCs had been created.

One of the basic federal programs of commercialization and development of small innovational business is Small Business Innovation Research (SBIR). This program demands that federal ministries with a notable R&D budget provide targeted financing of R&D in small business. One of the aims of SBIR is increasing the possibilities of small enterprises to satisfy federal demands for R&D. Eleven ministries with a total yearly budget for scientific research of $100 million or more need to reserve 2.5% of this financing for requests in the SBIR program. At the first stage, SBIR offers grants of up to $100,000 for setting up a technical-economic base, and at the second stage, grants of up to $750,000 for financing of further confirmation of the area of research. The SBIR model also includes a third stage commercialization of a product or technology on the market; however, at this stage, federal resources are not allocated. With the framework of the program, every year several thousand grants are dispersed to small companies. After the adoption of the Small Business Technology Transfer Act of 1992 (Public Law 102564), the task of assisting in partnerships between private firms and universities became included in SBIRs program. In addition, a new program of financing of collaborative research projects between small university enterprises and federal laboratories was initiated, the Small Business Technology Transfer (SBTT). Up to 2006, the total amount of financing of research for both programs was $20.6 billion; in all, 70,000 grants of the first stage and around 25,000 grants of the second stage were given out; over 16,000 companies participated in the program, and more than 57,000 patents being awarded. The participation in the program of outside partners can be characterized with the following figures: around 1,500 exchanges of venture investment were concluded with a sum of $26.8 billion; 597 companies were auctioned and went on the exchange; and 914 mergers and acquisitions took place with the participation of SBIR and SBTT grantees. Every year, SBIR grants make up less than a tenth of the investments of the American sector of venture capital. Nevertheless, SBIR fulfills two important functions in the innovational system of the U.S. First, SBIR serves as a supplement to venture capital, offering earlier financing and a mechanism of certification for beginning entrepreneurs engaged in development of innovational technologies that may later attract private financing. Second, SBIR can also serve as an alternative to venture capital, especially in regions were the venture sector is weak, and in cases in which entrepreneurs are working on the realization of

innovational ideas that did not possess sufficient potential for rapid growth to attract venture capital. As an example of government support of commercialization, the Advanced Technology Program (ATP), which was created in accordance with the Act on Commerce and Competition (1988), can be adduced. This program, realized by the NIST, enabled the creation of companies engaged in applied development by means of financing of the commercialization of the results of research accompanied with high levels of risk. The program was implemented by the mechanism of formal inquiries on financing from below that passed through an expert evaluation. In the framework of the program in collaboration with private companies, by 2005, around 770 projects with a total sum of $2.3 billion had been realized. A large amount of financing was offered to small high-technology companies working in such areas as electronics and photonics, information technology, biotechnology, and new materials. The program achieved positive results. Nevertheless, serious criticism was directed against it that raised doubts as to the need for the government to interfere in the stages of the innovational process, which could be more effectively realized by the private sector. In sum, despite support from the scientific and business communities, the program was closed in 2007.

Finland achieved success in the development of innovations, owing to an effective policy of development of science and technologies. The results of this today are companies that are competitive on the world level of production, as well as the technologies they use to reach that position. Finland is developing leading-edge technologies in many areas: information/communications, biotechnology, metallurgy, forestry and the chemicals industry, construction, energy, protection of the environment, and social security.

Stages of Development of Innovational Policy in Finland


Although the origin of Finlands scientific-technical policy was in the middle of the last century, the essential steps leading to significant successes were taken in the relatively more recent past. The evolution of Finlands innovational policy can be divided into three basic stages. In the initial stage of development, from 19601978, the creation of this policy took place against a backdrop of rapid and uninterrupted changes in the economy. In this period, the first technological programs were adopted and implemented. The next stage (19791989) was the decisive moment in Finlands innovational history, and developed the policy that became the basis for the success of the country in the following 20 years. In the current stage (19902010), Finland has attained impressive results in innovation, thanks to intelligent management of the development of the system.

The National Innovational System and Policy in the Areas of Science, Technology, and Innovation of Finland
Finland achieved leading positions in science and technology only at the cusp of the millennium. Although it would be impossible to imagine the success of the country without such companies as Nokia, analysis shows that it has deeper causes. The country achieved its current leading position, thanks to a professional technological policy that developed in the 1980s, the use of cutting-edge approaches to technological development in the 1990s, and ultimately, the great innovational abilities of its companies. Finland is one of the most intensely developing economies in the world in terms of competitiveness. It is considered one of the world leaders in development of innovations, and occupies leading positions in such indicators as level of scientific-research and technological cooperation, development and implementation of science-intensive technologies, and use of new information technologies.

Stage 1: The birth of the innovational system (19601978) Uninterrupted structural changes
Before WWII, Finland was primarily a country that exported raw materials. The industrialization of the country began with development of the extractive sectors, forestry industry, and branches of heavy industry. In 1950, it was as before an agrarian country with a large rural population. However, beginning in 1960, a rapid and uninterrupted process of structural changes took place in the economy and society. The success of contemporary branches of industry has deep roots in the achievements of traditional sectors. For example, the kernel of the forestry clusters, the productive chain of the forestry industry, expanded from manufacture of cellulose to the creation of factories for manufacturing paper, production of control and measurement instruments, new chemical and biotechnological by-products, and a system of electricity supply for large-scale production.

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Such rapid changes took place in the beneficial environment of an industrial structure in which a few large corporations dominated and the state and private sectors were highly collaborative. In the postwar period, large state corporations played a basic role. In addition, there was great influence from external trade, especially the two-way trade relations with the Soviet Union, which enabled successful industrial growth. Later, the same large corporations that were responsible for industrialization in the 1950s and 1960s began to play a leading role in the birth of new branches of industry and the birth of an innovational economy at the end of the 1980s and beginning of the 1990s. Cultural homogeneity, egalitarian values, and relatively small socioeconomic differences between the different groups of the population, as well as low barriers to social mobility, are often mentioned among the factors that paved the way to Finlands rapid modernization. In addition, two traditional Finnish values played a part: a strong belief in technological solutions for overcoming the problems of nature, and a stubborn belief that culture and education are the primary sources of social and economic success. The political figures of the 1950s ware able to create a longterm program of stable growth of the national economy, with a solid partnership between the government and the private sector. At the same time, Finland was proceeding along the path of creating a state model of general well-being. The creation of a sociopolitical context on the labor market beneficial for the creation of a new innovational system enabled the formation from 19601979 of a flexible contract system that allowed mutually advantageous compromises to be made between workers and employers. It was the concrete political decisions made in the course of the postwar decades that established the foundations of the innovational system. One of these was the creation of the National Fund of Research and Development (Sitra) in 1967, which later played the vital role of a pan-national venture fund. Another important decision was the widening of the national basis of scientific-research resources. To achieve this goal, a structural policy was worked out in detail and developed over the course of decades. Regional universities were opened, and the system of professional education was improved and expanded. Moreover, large-scale migration of the population (including a large quantity of young people) from rural areas enabled rapid growth of both urban regions and regional and local industrial centers. At the end of the 1970s, a new technological policy was formulated and enacted in Finland.

Stage 2: Formation of innovational policy (19791989) The decisive moment


At the end of the 1970s, the European labor market was to a large degree paralyzed by strikes by unions over automatization of production and adoption of new technologies. Finnish politicians reacted to this through the creation of one of the largest government committees, the Technological Committee. Its goal was the development of a national vision of the countrys technological future. The committee consisted of representatives of all interested parties and was supported by all the available national research resources. The committee developed a large-scale research program oriented toward the industrial-technological development of the country. The work was accompanied by public debates and reinforced by advertising campaigns, especially among the political left and unions. The leaders of these organizations were also active participants in the work of the Committee. It less than two years the Committee proposed for consideration a long-term program that had been worked out through general efforts on adopting new technologies in the Finnish economy and increasing the countrys general technological level. The main idea was a systematic increase of investment in research and economic development with the goal of catching up to other developed countries. The basic reliance was on three areas: electronics,

develop scientific and technological policy was supported by all interested sides. In 1987, the Council on Scientific and Technological Policy (STPC) was created on the basis of the former state Committee on Scientific Policy. The STPC became a platform for searching for a political and social consensus as to the new stage of development of the country in a period of economic decline caused by the disappearance of Finlands main trading partner the Soviet Union.

ditions for attracting financing from abroad, especially from transnational companies and the European Union. In 1998, foreign financing was already more than 5% of all expenditures on research and development, which exceeded the 1990s level by tenfold. In the 1990s, a mechanism was perfected for managing technological policy and a cluster approach to economy development was used. The ideas of network, cluster, and national innovational system began to be used in everyday politics. It was believed that these ideas more precisely reflected the essence of the system and its functional characteristics. This new rhetoric marking the occasion of the appearance of a knowledge economy and underlining the importance of knowledge, know-how, and high-technology as basic factors of competitiveness on the international market, seems to have been used in Finland earlier than in any other country. By means of technological programs realized by Tekes and thanks to the growth of venture financing from Sitra, Finland was

Stage 3: Formation of the contemporary innovational system (19902010) The contemporary stage
At the beginning of the 1990s, state financing of R&D, despite the deep economic decline, continued to increase without any negative political or social reaction to this growth. Expenditures of R&D in Finland grew without interruption over the next two decades, both in an absolute sense and as a percentage of GDP. In these years, Finland was able to create con-

Figure 58 Profile of the Competitiveness of the National Innovational System of Finland BRIC
better
2 7 6 2 5 8 11 19 22 25 19 22 27 9 9 1

OECD
3 7 8 2 5 8 10

Finland
3 6 1 7

biotechnology, and materials. The basic indications of the Committees program were adopted, which, among other things, allowed mass strikes to be avoided in Finland. However, a more important long-term result was the beginning of the creation of an effective system of raising the countrys technological potential. In 1982, a government Decree on Technological Policy was enacted. the agenda during the whole decade of the 1980s. In 1983, the
supplemental

21

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Changes in the structure of government institutes were on National Technological Agency (Tekes) was created, the task of which was the coordination and expansion of the technological program that had earlier been created by the Technological Committee. The first technoparks in Finland were created. From 19891990, new efforts were exerted by the Technologthere no such wide discussion on strategies of development more practical goals of creation, expansion, and perfecting the mechanisms of realization of technological policy were pursued. At the same time, the government increased the financing of R&D a political priority. The commitment in political circles to
factors

talented people and ideas

commercialization

innovational potential of companies


capability of taking knowledge from others capability of generating new knowledge obligatory standards and regulation technological level of production

clusters and technological infrastructure

conditions of demand

institutes and effectiveness of government administration


independence of courts freedom from corruption quality of government administration protection of property rights

natural-science education in school

availability of electrical energy

availability of talented people on the labor market

mobility on the labor market

resources for scientific research

quality of scientific research

quality of higher education

availability of infrastructure for commercialization

availability of traditional financing

availability of venture financing

voluntary standards

defense of intellectual property

level of development of traditional clusters

level of development of IT

access to the consumer market

level of development of innovational clusters

ical Committee to developed technological policy. This time,

Source: Bauman Innovation

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government purchases

military purchases

critical mass

level of equipment production

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able to integrate the spheres of R&D, education, and commercialization to rapidly form a highly developed regional innovational infrastructure. In the essence of its activity, Sitra is a state venture fund and, in distinction from Tekes, finances not R&D itself, but new companies. Finnish firms were some of the first to realize new knowledge, adopting it in practice, and developing new technologies. Organically included in the network of innovational activity, Finnish companies were ready to produce the needed goods at the needed time and conquered a meaningful share of the quickly growing world market.

a wide range of services, such as technological support of R&D, venture financing, guaranteeing access to the international market and establishing international links, training, education, increasing qualifications, development of entrepreneurial and technical talents, and consulting services (for example, for creation of optimal organizational models). The foundation of todays Finnish innovational system is a developed system of support of innovational activity, the elements of which are both government structures and private companies that closely cooperate with them, including distribution of significant resources for applied research and development. The system is characterized by high stability and sharp division of the functions of each of its components. A characteristic feature is the full informational transparency of the participants of the innovational system, which opens possibilities for cooperation both between state institutes and private companies, and between different territorial formations.

sities, and research institutes coordinated through the programs of the Tekes agency is an important distinctive characteristic of Finlands innovational system. The basic government organizations financing R&D in Finland are the Tekes agency and the National Academy of Sciences of Finland. Tekes is responsible for identifying problems and raising the technological level of companies, while the Academy is responsible for fundamental scientific research. The Academy implements financing of research through concrete projects, research programs, and Centers of Excellence, as well as focusing resources into increasing the qualifications of researchers. Financing from the Academy for the most part goes to projects that are proposed by scientists themselves. The programs of the Academy cover all areas of science. In the recent past they have increasingly been acquiring a targeted character, and adoption of achieved results is becoming an important criterion for making decisions about financial research. In this way, to develop a program or project, more attention is directed to the process of analysis and assessments of the structure and perspectives of research, as well as to questions of the usability of the obtained findings and the ability to transform them into a market product. In addition, leading Finnish universities have their own research programs; however their total contribution to the development of scientific-research programs remains insignificant. On the other hand, it is important to observe that the research groups and centers created on the basis of universities can carry out research much more effectively in the intersections between various branches of knowledge. The Law on Universities adopted in 1998 meaningfully increased the authority of several universities, thus increasing their potential to flexibly react to the rapidly changing needs of the external environment. The potential of universities to attract outside financing also grew, and as a result, the research of universities is inclining to the side of applied research. Finland is actively developing international cooperation in the area of fundamental research. In addition to a large number of all-European programs in which Finnish scientific organizations and foreign partners participate in Finnish national scientific programs, the Academy, along with Tekes, offers financing for work in Finland to leading foreign scientists within the framework of the special program FiDiPro. The financing of the work of these scientists for a period of two to five years is allocated according to the results of a selection of applications of Finnish universities and research institutes.

Active support of the processes of commercializing the R&D findings take place by means of grants and programs of Tekes. The participants and grant recipients are both scientificresearch institutes and private companies. Thus, beginning in 2008, the agency has been allocating grants according to the Tuli program for commercialization in amounts from 5,000 to 200,000 thousand euros at different stages of project realization, which are given to Finnish universities, polytechnic colleges, and to individual students and researchers. These grants allow financing of work on a project and compensating for expenditures on materials and components for the creation of prototypes, and also may be used for attracting professional managers or payments for consulting services. A leading role in the system of support of commercialization is played by the Sitra Foundation, which offers venture financing. At the end of 2009, Sitras portfolio of venture investments included 60 companies and a total investment of 126 million euros. A multitude of private funds also carrying out venture financing in Finland: in 2001, there were over 400 of them (with a total sum of investment on the order of 350 million euros). Centers of technology transfer under the auspices of Finnish universities play an active role in commercialization, with their role observably growing after the legislative changes of 19902000. Amendments were introduced into the university legislation in 1998 that encourage the participation of universities in disseminating the findings of scientific universities and their use by commercial enterprises. And in 2006, new legislation came into effect regarding the intellectual property rights of people who work at universities, reinforcing cooperation between universities and enterprises. Targeted financial support of increasing the technological level of companies is a powerful motivator in Finlands innovational policy. Tax advantages are not used in Finland for support stimulating R&D; it is only since 2009 that proposals to introduce them have been discussed at the state level. Instead, companies receive direct financial support. Thus, the Tekes agency finances companies R&D by means of special targeted programs, as well as offering loan or grant financing for projects. An important condition for offering financing in these projects and programs is the cooperation of universities and small and midsized companies. Development and transfer of technologies are included. As a result, more than half of state financing of R&D in companies goes to small and midsized business.

The Structure of Finlands Innovational System


One of the key elements of Finnish economic policy is technologies. The need to stimulate their development is recognized at the highest level of the Finnish government. The basic questions of high-technology development are regularly discussed by the Council on Scientific and Technological Policy (STPC), which is the center of administration of the Finnish innovational system. The STPC is responsible for strategic development and coordination of national policy. The prime minister is the head of the Council. The members of the STPC are heads of key ministries and companies, participants in the national innovational system: several representatives of the Council of Ministers, the Ministry of Science and Technology Affairs, and the Finance Ministry; heads of universities, state scientific-research centers, and technological institutes; the private sector; and unions. The Ministry of Commerce and Industry (at the present time, united with a series of other ministries in a single Ministry of Economics and Employment) carries out monitoring of the countrys technological policy. The main acting body of the Finnish government engaging in practical realization of the national technological policy is Tekes, which carries out promotion and coordination of scientific-research projects and programs. On the regional level, technological policy is implemented by 14 centers of employment and economic development (T&E Centers). The basic organizations that participate in the innovational system are the National Academy of Sciences of Finland (Academy of Finland), Tekes, state and private scientific-research organizations, agencies of technology transfer, and financial organizations. United in the framework of the national innovational system in a single organism, these organizations provide companies

The System of Instruments of the Innovational Policy of Finland


The characteristics of the innovational policy of Finland are: Stimulation of collaboration between universities and companies in the framework of different scientific and technological programs; Large government investments in science and the innovational sphere, and attraction of national private capital; Complex integration in international innovational networks; and Stimulation of initiatives on development of regions and cluster programs. In the opinion of the majority of experts, the transformation in the 1990s of the standard process of carrying out R&D into general innovational research and technological programs was a critical moment for the scientific and technological policy. These programs became an effective instrument of state policy for coordinating the interests of science and business, and an important result of their implementation was an intensification of cooperation between all participants in the innovational process. The sector clusters of the Finnish economy are characterized by strong interaction between participants and are extremely concentrated, with their development depending on internal suppliers. In Finland, cluster programs are being realized that are aimed at the creation of permanent network links between industry and science. Strong cooperation between firms, univer-

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The National Innovational System and Policy in the Area of Science, Technology, and Innovation in China
In the last 20 years, China has also demonstrated impressive innovational-technological growth. As in Finland, the basis of this growth was strategically established in 1980 by the countrys leadership. If ten years ago, it would have been difficult to talk about Chinas role in the development of cutting-edge technology, today Beijing and Shanghai are important as centers of innovational activity, on scale with London and Paris. China is especially distinguished as a leader in development of innovations against the backdrop of the other BRIC countries. The history of China in the last quarter of the 20th century represents one of the best examples of rapid development of an innovational system and progress in reforming all of its components. Relying on its rich internal resources and intelligent political leadership, the country has been able to transform itself from a supplier of a cheap work force into a scientific-technological leader. China has been able to successfully overcome both the multitudinous weak sides of its innovational system, such as, for example, a low quality of education and scientific research, and political and institutional barriers.

been possible to talk about a new course of development of science and technology in China a policy directed to a wider use of innovations in the development of the national economy.

institutes, productive enterprises, and research divisions of universities. At the same time, the Ministry of Education was responsible for the university activity and the corresponding branch ministries for the work of research institutes and industrial enterprises: machine building, the chemicals industry, and others. The development of links between NIIs and production was also carried out by ministries. In 1956, the authorities worked out a ten-year plan of national development of science and technology, the bases of which were atomic energy, electronics, and the space program. Thanks to the centralized system of research and production, many largescale projects were successfully realized, including the creation of nuclear and hydrogen bombs in 1964 and 1967, and the launch of the first Chinese satellite in 1970. However, this system had essential drawbacks. The centralized system of administration implemented large-scale projects at any price, regardless of the connection to effectiveness or increasing productivity. The lack of stimuli for independent development of innovations for Chinese enterprises threatened a degree of backwardness relative to South Korea, which had begun its development in the 1950s practically from the same level, but had been able to achieve significantly higher indicators of effectiveness. Thus, a number of technologies in China did not change in course of 40 years after their adoption from the Soviet Union in the beginning of the 1950s. It is especially worthwhile to distinguish a sub-stage that took place in the period of the Chinese Cultural Revolution of 19661976. Many universities and scientific-research institutes were forced to dismiss their employees and send them away for agricultural labor. As a result, a whole generation of professors and scientists was lost. In addition, the Chinese government placed a strong emphasis on foreign policy on increasing autonomy and sovereignty. This led to stressed diplomatic relations with Western countries and conflict with the Soviet Union after the cooling of relations in the 1960s.

of a so-called socialist market economy and openness to the outside world. Reform of the scientific-technical policy began with an approximately two-year period of planning and evolved into several successive stages; the beginning of each was marked by a National Scientific-Technical Conference during which strategic decisions were made. The reform possessed a tentative nature characterized by gradual accumulation of experience and a deepening understanding of necessary systemic changes and use of the knowledge obtained in practice. The conference of 1978 was the first step along the path of reforming the innovational system. During the course of the conference, the fundamental influence of science and technology on growth of labor productivity and the economy as a whole was evaluated. This approach was distinguished from the earlier widespread view of science and technology as purely intellectual spheres divorced from practice. From this moment, up to 1985, the government of China ensured the necessary conditions for the appearance of initiatives of the research community from below. The basic organizational novelty was commercialization of the results of research obtained by government research organizations and shrinking of the gulf between the science sector and industry. The simultaneously occurring reform of higher education included stimulation of fundamental research and the opening of new educational programs. However, scientific-research institutes and the principle of direct financing underwent few changes in comparison to the pre-reform period. As before, imports of technologies dominated, but the spectrum of sectors developing by means of adoption of technologies widened. Automobile and textiles industries began to develop. Alongside this, from the point of view of foreign policy, China was once again becoming a more open country. The next stage featured more profound institutional changes of the innovational system that began in 1985 with the start of new reforms of science and education. In this period, the basic goals of the government consisted of closing the gap between R&D carried out by institutes and industrial production, and in the development of high-technology sectors. Several programs were adopted to support high-technology sectors with the goal of expanding productive abilities and increasing the share of domestic enterprises. However, in the majority of sectors, China still has not succeeded in weaning itself from imports of technologies and high-technology components.

Stage 1: Creation of the Innovational System (19491976) The epoch of Maoism and the Cultural Revolution
After the formation of the Peoples Republic of China in 1949, the goal of the Chinese authorities became restoration and modernization of the productive forces that had been destroyed in the course of the previous 20 years during the Japanese invasion and Civil War. To achieve the set tasks, the government of Mao Tse-Tung, who was at that time the leader and ideologue of the Peoples Republic of China, began to import and adopt technologies, to a great extent relying on subsidized imports from the Soviet Union. During the realization of the first Five-Year Plan at the beginning of the 1950s, China imported technological systems primarily for heavy industry, energy production, extraction of useful minerals, the refining and chemicals industry, and machine building. In addition, the Chinese authorities founded 400 research organizations, first and foremost, for the purpose of copying models given by the Soviet Union and acquired in other countries. These organizations can be distinguished into three groups: institutes of the Chinese Academy of Sciences engaging in fundamental research; scientific divisions in universities responsible for preparing personnel and carrying out research; and institutes that specialized in applied research for industrial enterprises. To bring their plans to life, the Chinese authorities used the experience of a centralized organization of industry in the Soviet Union. The most influential body of government planning was the State Planning Commission (SPC), which developed economic plans and engaged in control over their implementation and distribution of resources. The SPC every year prepared fiveyear plans incorporating projects in the areas of science and technology, determining the division of capital and labor between sectors, targeted productive indicators, setting of prices, and division of income. The Commission also coordinated the work of the second-tier state bodies that formed narrower aspects of innovational policy and divided functions of control between themselves. The State Science and Technology Commission (SSTC) regulated and controlled the innovational work of scientific-research

Stages of Development of Innovational Policy in China


The contemporary development of Chinas innovational policy began in 1949 with the formation of the Peoples Republic of China. The beginning of each stage was connected to the arrival to power of new leaders or a change of political course. The initial period of development (19491976) encompassed the creation of the innovational system in the epoch of Maoism (19491966) and the Cultural Revolution (19661976). The coming to power of Deng Xiaoping was a critical moment both for the Chinese economy and for the national innovational system. The stage of the formation of an innovational policy (19761995) included the development of a new economic course (19761978), carrying out reforms of the economy and system of scientific research (19781985), and development of high-technology sectors (19851995). The beginning of the rule of Jiang Zemin and the ensuing reform of state institutes and the administration of Chinas innovational system (19952006) was a stage of new reforms and capitalization on achievements. The structure of administration of the innovational system as a whole was formed at the cusp of the 21st century, and since 2006, it has

Stage 2: The critical moment (19761995) Creation of the basic institutes of R&D and orientation to high technology
In 1976, Deng Xiaoping came to power in China, leading to the beginning of radical changes in the foreign and domestic policies of China. A pan-national program of reform was initiated the Policy of Reform and Openness, directed to the creation

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The tasks of the reforms were changes in the mechanism of distributing state resources and transformation of the R&D organization into commercial enterprises, or merging them with large industrial enterprises. In 1986, with the framework of expanding the programs of financing of science, the National Foundation of Natural Sciences was formed. In 1988, the Chinese authorities began to create hightechnology zones industrial parks and incubators. The instruments of financing R&D of high-technology firms began to intensely develop by means of grants and subsidized interest on bank credit. In ten years, there were already 53 high-technology zones at the national level, and the number of enterprises registered in them was 65,000. The question of reforming the management of personnel in state scientific-research centers became urgent. Programs were introduced covering expenses on training of Chinese specialists abroad and attracting specialists who had gone to Western countries. At the same time, the Chinese government began to work on attracting direct foreign investment, for the most part, in the home electronics and automobile construction sectors.

As a whole, the reforms enabled gradual introduction of market mechanisms. The most significant of these changes were the launch of various government programs in the R&D sector and the appearance of a technologies market and private industrial enterprises. The basic achievements were an increase in the share of nongovernmental financing in the R&D sector and universities obtaining dominant positions in scientific research.

The basic task was to increase the Chinas competitiveness in world markets. In the course of ten years, innovational policy concentrated on giving commercial enterprises, including small- and midsized businesses, a leading role in the innovational system of China with the goal of increasing their innovational potential and the volume of commercialization of technologies. The institutional changes included new schemes of financing research and the transformation of state institutions. The Chinese government began to employ the experience of the innovational policies of the OECD countries. Bureaucrats and analysts responsible for the development of innovational policy became acquainted with the leading conceptions of the structure of the innovational system in the West, and a specialist was appointed minister of science and technologies who had ten years of experience of work, and had received a candidates degree, in Germany. In this period, there were also many changes in the mechanisms of the administration of Chinas innovational system. In 1998, a special Administrative Group responsible for innovations was created under the auspices of the State Council of the Peoples Republic of China. In addition, a State Commission on

Stage 4: A new course of development of science and technologies (19952006) Using innovations for developing the economy
In 2006, the next stage of the development of Chinas innovational policy began. The Chinese government adopted a new mid- and long-term plan for development of the countrys innovational system that changed and emphasized several areas of the policy. First and foremost, the Chinese authorities cut expenditures on imports of technologies, thus enabling the increase of the negotiating strength of Chinese players in the technologies market; stimulating the innovational activity of private enterprises; significantly increase the share of GDP in R&D; and move to a qualitatively new level in protection of intellectual property. However, an insignificant amount of time has passed since the plan was adopted, so it is still difficult to evaluate the course and preliminary results of these changes.

Stage 3: Capitalizing on achievements (19952006) Perfecting institutes of directing the innovational system development
In the 1990s, Jiang Zemin began to conquer the leading positions in the Chinese Communist Party. Thanks to his initiative, in 1995 a new strategy was adopted of a rebirth of national science and the system of education based on the growth of international competition in the area of technologies. The strategy was reflected in Chinas intention to enter the WTO.

Structure of the Innovational System of China


The administration of the innovational system of China on the national level is implemented through the following government structures: The Administrative Group on Science, Technology, and Education of the State Council of the Peoples Republic of China, which is the key body and is responsible for strategic decisions; A series of ministries and agencies at the ministerial level responsible for development and realization of innovational policy: the National Committee on Development and Reform, the Chinese Academy of Sciences, the Chinese Academy of Engineering Sciences, the Ministry of Education, the State Committee on Intellectual Property, the National Foundation of Natural Sciences, and branch ministries, among which are the Ministry of Industry and Information Technology and the Ministry of Agriculture. The most important ministry in the innovational system is the Ministry of Science and Technology (MOST); A series of ministries and agencies at the ministerial level indirectly influence the development and realization of innovational policy: the Ministry of Finance, the Ministry of Commerce, and the Ministry of Human Resources. The Administrative Group on Science, Technology, and Education of the State Committee of the Peoples Republic of China is the highest body of administration of the innovational system

Figure 59 Profile of the Competitiveness of the National Innovational System of China BRIC
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3 2 7 15 19 23 29 30 30 37 36 44 48 45 42 44 43 44 49 43 41 42 28 21 9 16

Science and Technologies was formed in the Ministry of Science and Technologies, with broadened authority and increased financing. In 1999, the government institutes of the Chinese OECD China Academy of Sciences were reformed. Many of them became independent organizations or part of the research divisions of industrial enterprises. Analogous changes occurred with institutes that were part of the branch ministries, which were being reformed at the time. However, the Academy of Sciences remained the basic beneficiary of government resources for science, retaining within its structure 112 organizations, 84 of which were scientific-research institutes. In addition to this, an Innovational Found was formed in 1999 that allocated resources to technological enterprises of smalland midsized business. From this year on, expenditures on education sharply increased, and as a result, the average yearly rate of growth of the number of Chinese students and university graduates rose to approximately 25%. In 2001, China joined the WTO, and the government adopted a new plan of developing trade directed at increasing the volume of exports. Since that year, new tax instruments were introduced to stimulate innovational activity; specifically, tax breaks for expenses on R&D and imports of foreign technologies. Laws were also adopted on venture financing, and an association of venture companies was created.

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capability of taking knowledge from others capability of generating new knowledge obligatory standards and regulation technological level of production

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