The Russian Federation: A New Innovation Policy for Sustainable Growth

Abstract

Over the last two decades, the Russian Federation has completed its transition to a market economy, and for a range of macroeconomic and social indicators it is now comparable to countries of the Organisation for Economic Co-operation and Development (OECD);1 its integration into global chains of production and knowledge f lows has become more established and has deepened along with the country’s economic and social changes. However, the model of such integration proves to be highly unsustainable: the emphasis on exports of raw materials makes social welfare strongly dependent on external economic conjuncture instead of depending on, and establishing, internal sources of growth. The country’s overall share of machinery and equipment accounts for just 13% of exports; the rest is represented mainly by raw materials.2 Under these conditions, even the large financial reserves spent to compensate for the 2008–09 global crisis effects appear to be insufficient to revitalize the country’s economic growth at pre-crisis rates. Global technology trends also challenge further socioeconomic development if that development continues within the traditional carbon-hydrogen paradigm that is based predominantly on oil and gas extraction. Widely endorsed contre-carbon efforts have already resulted in convincing advances in alternative energy technologies backed by large-scale national public procurement programmes, direct and indirect incentives for energyeff icient producers and users, corporate initiatives for technological and organizational innovation, and international actions. Disruptive technologies in these and other areas may damage the positions of companies in established markets— including specif ic high-tech niches such as nuclear energy, aircraft, space, armaments, and so on—both globally and domestically. Lower productivity and inefficient resource utilization have also been among the endogenous factors hampering the country’s economic development. In certain sectors of the economy, technological gaps with leading industrial nations have accumulated during the last decades. Furthermore, the monopolistic structures of most local markets that serve to suppress incentives to increase competitiveness, the persistent barriers to entrepreneurship and innovation, the achieved quality of corporate governance, and inadequate protection of ownership rights all limit the potential of extensive sources for improving the Russian Federation’s socioeconomic performance. The consequent def icit of trust results in lower incentives for encouraging a pragmatic coalition among business, state authorities, and society, and eventually decreases the effectiveness of public governance. The above-mentioned challenges demonstrate an obvious need for a new model of innovation policy aimed at strengthening nation’s positioning in the global economy and at knowledge f lows that would allow the Russian Federation to benef it from the available highquality human capital and scientific potential, while meeting tight constraints related to the demand for social stability and a GDP-per-capita ratio exceeding that of most rapidly developing economies.3

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