Russia’s top-down Innovation Strategy, a legacy of USSR

The study aims to analyse a strategy, where innovations follow a top-down approach and the current Russia’s innovation structure has its legacy attached to the Soviet era.. Other aspect[r]

Russia’s top-down Innovation Strategy, a legacy of USSR

Dr Asma Kouser*

*Assistant Professor,

Bengaluru Central University, Department of Economics, Bengaluru, India *Ph.D Jawaharlal Nehru University, New Delhi, India

*Email: asmakouser005@gmail.com

Abstract

The term innovation came to the forefront of various national, industrial, science and technology policies across the globe The Russian’s were also adhering to this paradigm shift, which was germane to the transition of their economy post the Soviet collapse and following a resource dependent economic model However this is not a smooth or a fairy tale ride For more than a decade Mr Putin has dominated Russian economy, where the state directs the priority areas in innovation policy

The study aims to analyse a strategy, where innovations follow a top-down approach and the current Russia’s innovation structure has its legacy attached to the Soviet era Other aspects of state and innovation policy will be analysed A theoretical approach of systems of innovation (SI) shall be incorporated to study the Russian Innovation policy in terms of National Innovation System (NIS), Sectoral Innovation System (SIS), Technological Innovation System (TIS) and Regional Innovation System (RIS)

Methodology will be mainly based on analysing top-down innovation in terms of Input indicators and Output indicators of innovation While using the database of Annual Innovation Survey of Higher School of Economics (HSE), Russian government sources (ROSSTAT), reports of International Organisations and interviews with Russian Innovation experts

The study will be significant in understanding Russian Innovation System, having its links with the Soviet (USSR) Economic System Government policy being the base for innovations in Russia, with an ineffective network of innovation system in place It will analyse the structural imbalances prevalent in effective implementation of innovation policy Thus the choice that Russia makes, shall determine its economic development, modernisation process in the coming decades and its innovation policy

Keywords: Innovations System, Soviet legacy, Science & Technology, Top-down model, National Innovation Systems, Innovation

1 Understanding Innovation in Perspective

The innovations as a symbol of growth and ‘Economic-Darwinism’ have survived the vagaries of the post-war economy, the recessions and uncertain events like oil-shocks Joseph Schumpeter, the economists who first defined innovation and mentioned its significance to economy He also mentioned about the various types of innovation and differentiated the idea of innovation from invention While the neo-Schumpeterian economists (like Christopher Freeman, W Brain Arthur, Paul Romer, Robert Axtell, Elhanan Helpman, Richard R Nelson, Richard Lipsey, Igor Yegorov Michael Porter,) explained an economic model which speaks about knowledge economy and how economic growth could be achieved in such a economy

Innovation is implementation of, a product or process which is new or significantly improved and the term implementation here refers to when the product is introduced in the market Innovation also incorporates any new marketing or organizational method, which gets implemented as brought into actual use in firm's operations

1.1 Russian’s and Innovation

It is from the time of Soviet Union disintegration the country’s economy has seen a huge transformation by moving to an open economy where market forces play the dominant role and then transformed to economy integrated globally However, this was not a smooth or a fairy-tale ride And for more than a decade now, Mr Putin has dominated Russian politics; it was during his tenure there was much of growth in the economy was observed This brought a new age of Innovations in the Russian Economy, fuelling a new engine of growth Hence, the Russians maneuvered their economy from globally isolated and centrally planned system to the dawn of market based and globally integrated innovations economy

Though with an average economic environment, economy has failed to innovate attributing to factors which inhabit innovation such as, protections of intellectual property rights (IPR) are poor in Russia, small firms face difficulties in securing finances, poor economic institutions, and public research the dominant of R&D is inefficient with very little spillovers to rest of the economy Further the state is also dominant regarding funding which is publicly driven and finances top-down initiatives Among International ranking of economies in terms of innovation Russia scores relatively poor, where it stood good in innovation potential but outcomes were below actual potentials and creating a gulf between the policy objectives and realities on ground

According to OECD 2011 report on Russian economy says that, “However, Russia’s overall innovations capabilities remain far too low in view of the potential in terms of human resources and scientific tradition and what would be needed for sustained growth o f productivity throughout the economy in the long-term future Many of the standard innovation performance indicators (R&D inputs, trade, scientific output, patents) confirm the existence of an innovation gap” (OECD 2011)

For instance, the “Innovative activity of industry is hampered by limited systematic interaction between scientific and education organizations in Russia In addition, limited support for innovation at federal and regional level and the low willingness and poor capacity of R&D institutions to work with industry makes it difficult for firms to absorb, adapt and develop new technologies” (World Bank 2010) And firms themselves are not very competitive and less innovative in nature, the reason being easy access to economic rent providing less incentive to innovate

Along with the above said framework of Innovation economy of Russia and its strategy towards innovation policy The paper aims to analyze that the main components of Russia’s Innovation Strategy have its legacy from the Soviet Era (USSR) In terms of being a top-down innovation policy and other aspects of Innovation indicators (input and output indicators) having its traces of Soviet planning, this being reflected in current Innovation strategy

The paper incorporates a theoretical concept of Systems of Innovation, i.e understanding Innovations as a system concept Thus analyzing the process of Innovation Systems in specific to Russian Innovation System, through its various levels such as National Innovation System (NIS), Regional Innovation System (RIS), Technological Innovation System (TIS) and Sectoral Innovation System (SSI) Where the focus being on for a need of an effective innovation policy, keeping in light the Soviet legacy aspect for analysis Russia

It was Schumpeter who introduced the concept of Innovation, but he was silent on the process of occurring of innovation (Godin) It is here the concept of Innovation Systems (IS) came to light, and Edquist (1997), has defined systems of innovation as “all important economic, social, political, organizational, and other factors that influence the development, diffusion, and use of innovations” It is a sort of broad-spectrum definition that includes all the factors affecting innovation at one level or other “Where innovations system is now widely used to explore the innovation process and capacities at both national and international levels (Lundvall 1992; Freeman, 1995; Malerba, 2002) in both the developed (OECD) and developing economies” (Hall et al, 2002; World Bank, 2007)

2 Russian Innovation System: an historical analysis

2.1 Foresight and Innovation Systems in the Russian Scenario

Foresight activities followed a specific pathway in Russian Innovations System Foresight is a tool, which can be used for innovation policy objectives, and over years both developed countries and also developing countries have used foresight in policy for mulation and other innovation development studies and areas It was and is still influenced by both extrinsic (global financial crisis, oil prices, war or regional conflicts etc.) and intrinsic (socio-economic, political etc.) variables The main aim of the Russia’s innovation policy agenda is forecasting long-run economic development To achieve this, forecasting project were launched in the past years

The process of foresight in Russia can be classified into the following stages:

The ‘First Stage of Foresight’ had seeds of germination in the mature phases of cold war during early 1970s This era focused more on massive projects at nationwide scale with multitude of applications

It took the Russian Innovations system to brew the ‘Second Stage of Foresight’ by combining the academic oriented programs with national level planning Especially the years in 1980s were shaped under the ideological shell the then USSR This limited the scope and capacity of the foresight programs to benefit with rising spirit of globalization and collaborative networks which the other western nations and in the far east was harbouring on The essence of setting R&D priorities with national level laboratories in Russia saw a revived emphasizes but with limit output due to closed networks of collaboration during the years of 1990s

By the beginning of ‘Third Stage of Foresight’ in mid-2000’s the Russians built the strong foundations of designing and building innovations systems on the basis of foresight methods This also created a range of applications outside the initially decided range of applications in the technologies under focus in the form of ‘Spin- offs’ It culminated with transition from short range (up to years) to medium (5-10 years) turn foresight to the stage of long-range range foresight era by involving industry, academia and key ministries And this was the stage at which we can see the initiation of the third generation of foresight in Russia It emphasized on areas like R&D priorities, commercialization and diffusion of technology, and technology collaboration and transfer One of the main foresight projects in Russia was, Foresight of S&T development of Russian economy by the period of 2030 (supported by the Ministry for Science and Education of Russian Federation) Its main objectives were determination of technologies and technologic solutions with Russian economy sectors

2.2 Russia's History of Innovation

The spirit of Renaissance had its effect on Europe and its ripple were seen in Russia thereafter The transformation of the contours of modernity and industrialization saw certain demarcation between the basic and the applied sciences From historical point of view, Russia has a long tradition of sciences and has utilized the fruits of scientific prowess into an applied form to the knowledge economy The foundation for research in Russia was laid down in 1724 with inception of the Russian Academy of Sciences (RAS) was established by Peter I “The Great” The orientation for cooperation was international from the start with countries such as Sweden, Holland, France and Prussia In this era the focus was only on the education part and the universities were not influential in nature with regard to policy formulation The nature of research was mainly done by RAS or was privately sponsored The RAS, would mainly focus on the direction of the fundamental research and was concerned with appropriation of funds to be allotted by the state in different projects It consists of research institutes with vertical divisions and regional branches Thus one can see that the genesis of research was initiated by the state

During the span of Nineteenth and the Twentieth century, the political and the global affairs of that time demanded expansion of scientific frontiers to gain or maintain the territorial and economic strengths There arose a competition with the West in research and development and growth of the science and technology sectors Development in areas such as, industrial innovations, radio & TV, railway system, space and rocket science, aviation and military research Hence, the case of technological developmental cluster was more focused with large industries like mining, metallurgy, automobile and heavy vehicle and military technologies

power generation and the education sector is science fields It followed a centrally planned economy where the demand was created through the directions of the administration and thus the research was also conducted accordingly It was the visible hand of the state which played the major role in its research and innovation policy and no invisible hand of market operated thus the private sector contribution to its innovation economy then were very less "This system developed under the Soviet system had three special characteristics: it was very large; it was centrally directed, and it was government financed" (Gokhberg, L., et al., 1997)

With the collapse of the Soviet structure, the state constructed supply chains also collapsed such as chains of industrial production and supply and the market forces and its supply chains did not operate All this led to fall of the domestic market for innovations in Russia For example, in that when McDonalds happen to enter the Russian economy, in order to maintain its quality standards, the organisation had to create its own local supply chains for packaging materials and food supply

The collapse and the transition of the Russian economy happen very fast, so this had a radical change in its R&D system which was inherited from the ex-USSR "Initial expectations of the transition period were high that the powerful S&T, freed of the rigidities of central planning, would provide the basis for high-tech exports and economic growth Like some other rosy hopes for transition, the prediction was incorrect Many parts the innovation system still clung to the remnants of the centralised economy, while relevant and efficient policies were lacking" (Leonid Gokhberg 2003)

3 Russia’s Innovation System Indicators: Role of the Soviet Legacy Systems

The below sections discusses, few of the important innovation indicators (both input and output indicators) of the Russian innovation economy which have a Soviet legacy attached to it and thus making a huge impact on the current Russian innovation policy Therefore, forming a part of both problem and solution to its current innovation structure

3.1 Education and Workforce

One of the main Soviet legacies for Russia was its finest education system “In 1990s the quality of higher education fell, but the quality of science and engineering education is still high by OECD standards” (OECD 2011) Jim O’Neill (originator of BRIC acronym) has said that Russia “has strong human capital in terms of educational standards” This is mainly a Soviet legacy But today this resource of human capital has become an obstacle to achieve a modern innovative economy

As said by Blaney (2010), though the university enrolment is good, there is corruption and academic fraud in the system which is a major setback for the education sector to grow efficiently There are “instances ranging from plagiarism and violations of doctoral requirements at Moscow’s foremost universities” (Radyuhin 2013) “To distribution of fake degrees and diplomas, often in the company of employers complicit” (Payne 2010) “Universities lack from inward-looking research communities, are face an aging researchers who are underpaid Professors make a meagre $500 per month compared with that of $1,800 for military officers” (O’Keefe 2012)

Figure 3.1: Comparison of Numbers of Top Universities in China, India, Brazil, and Russia Countries

Source: ARWU 2003-2011

As said by Rollwagen and Renkin “that Russia today has 28 million people with university degrees up from 15 million in 1990s, compared to 65 million in the United States and 58 million in China” (Rollwagen and Renkin 2012) We can see that the number has increased since 1990s but is less when compared to USA and China Though there has been an increase in the quantity but the quality of education system has fallen

3.2 Analysing Performance of the R&D sector

In the Russian R&D sector, the concept of state participation and organizational structure is a legacy of the Soviet institutional model It has R&D performing organisations which are independent of enterprises and universities The network of systems of innovation in not well established The sector is heavily biased towards the research institutes, where 80 per cent of GERD is concentrated in the hands of such organisations The universities involvement in the R&D is only near to 45 per cent, because the deterioration of public higher institutes of education and growth of private networks All this has affected the competitiveness of the university graduates in the labour market

Figure 3.2: Gross domestic expenditure on R&D by source of funds as percentage

It can be seen in the figure 3.2, that the major source of funding for R&D activities is provided by the government sources followed by the private sector and last by the funds coming from abroad There is very poor industry participation in R&D in Russia, as the main reason being weak intellectual property rights and protection And all the efforts in terms of policies taken by the government has not reversed the trend in the business sector

Gupta, Nayanee, et al 2013 contributes in his research that “Russia’s Research & Development main focus is on national security, and is the major driver of innovation R&D is mainly performed by state-owned national institutes and academies, while the universities are exclusively focused more on education The Russian Government continues to be the principal funder of R&D A fairly constant 60–66 percent of R&D expenditures are from public funds in each year (whereas in the United States, it is the private sector which accounts for two-thirds of R&D funding), and then the Russian national budget, and not state budgets, dominates overwhelmingly the system of public S&T funding”

3.3 Military Innovation

Defence industry constitutes as one of the high technology industry of Russia This carries the tag of being a legacy of Soviet past Also faces some issues with its development to full potential in regard to human capital Russia has traditional strengths in nuclear arms, missile technology, avionics, and transport vehicles New areas of focus will include nano-electronics, hypersonic, and unmanned aerial vehicles

“The defence industry is an important source of innovation in Russia In 2012, the government funded the Future Research Fund, a multibillion dollar Russian equivalent to the U.S Defence Advanced Research Projects Agency (DARPA), to develop cutting-edge Russian weapons through 2020 The goal is defence modernization through strategic leapfrogging i.e., a military Skolkovo Russia has traditional strengths in nuclear arms, missile technology, avionics, and transport vehicles New areas of focus will include nano-electronics, hypersonic, and unmanned aerial vehicles” (Kozubova 2012, Gupta, Nayanee, et al 2013) Thus one can see that even today, defence industry stands to be an important component of the Russian innovation economy Giving it a competitive advantage in international military equipment market and also help Russian state to maintain a strong political international presence with the leadership of Vladimir Putin

3.4 Business and Innovation

Russia’s industry product portfolio is mainly oil and gas, also strong in state supported defence sector, aerospace and space technology, nuclear arm technology sector Nanotechnology, biotechnology, energy efficiency, IT and communications are the sectors which have received recent emphasis Tourism, real state, gambling, grocery retailing are the products in which the service is dominated

There exists both private and state owned enterprises, but most industries in Russia remain in large and are mainly state-owned enterprises (SOEs) in Russia Ernst & Young (2011), “Even though the number of small and medium-sized companies is growing, the SOEs receive preferential treatment from the government” This hampers the innovation-inducing competition in Russia And the main focus of the SOEs is on natural resources based industries It is yet to downsize conglomerates inherited from the Soviet Union This includes de-monopolizing and privatizing SOEs The manufacturing sector is not very developed, producing low-value added goods its employment in the domestic manufacturing sector is declining

In the case of Russia, it has been the Soviet legacy, private enterprises is still considered a suspicious activity which has to be kept in check with undue rules and regulations to follow This delay the Russian technology company’s competitiveness in the international market Dealing with customs is a major hurdle in order to export technology products And the senior executives are products of Soviet era and the younger generation lack in experience with less interest in science thus making relations with international partners difficult It can further be said that to tackle the issues in commercialization of technologies one has to deal with systemic problems (such as red tape), skill gaps, cross-cultural and language skills should be covered, and lack of international contact networks has to be improved for proper diffusion of an innovation economy in Russia The economic borders between domestic and international business has to become fluid with less room for protectionism

Other aspects of Business and innovation are further analyzed in below areas

tax, health, or labour inspections that can lead to violations Private ownership and wealth are generally perceived to be the result of political connections, not entrepreneurship” (Porter and Ketels 2007)

Russian Innovation Strategy (SWOT Analysis)

Figure 3.3: Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis of Russia’s Innovation System

Source: Institute for Defence Analyses (2013)1

Venture Funding and Access to Capital: The private banking system is not well developed in Russia, they cannot accumulate enough capital and are thus less competitive The government policies not encourage investment and therefore as a result capital flight occurs They are very few venture capital sector players in the market, the main source of venture capital funding is the government and private capital is not developed It is mainy in the IT sector that the private venture funding is developing with growth of communit ies such as

Startup point, October Center and online start up community

“In the area of public venture funding, the earliest stage of funding is provided by the Skolkovo Innovation Ecosystem, the Russian Venture Company (RVC) provides middle stage funding, and Rusnano (a joint-stock company created and owned by the government of Russia and aimed at commercializing developments in nanotechnology) has a $10 billion budget for later stage funding” (RUSNIC 2008)

Business Climate Measures: “Senior managers in Russian companies spend more than 20 percent of their time dealing with the bureaucracy; obtaining a permit requires more than 60 days of administration time” (WEF 2011) “As a result, Russian companies, including Kaspersky, Yandex, Qiwi, Dressformer, Cardiowave, mail.ru, and Kernel, incorporate in Delaware to avoid doing business in Russia Incorporating in Delaware also helps with investor relationships as many investors are reluctant to invest in Russia because of the corrupt judicial system Finally, declaring bankruptcy is difficult in Russia, increasing the risk for start-ups and new ventures” (Ortmans 2012)

Business Expenditure on Innovation-Related Activities: The overall firm's expenditure on R&D in Russia is low, when compared to international standards, with US and China being way ahead And the nature of investment is focussed on services with over 85 per cent and very less in high technology manufacturing activities There is very poor industry participation in R&D in Russia, as the main reason being weak intellectual property rights and protection And all the efforts in terms of policies taken by the government has not reversed the trend in the business sector

Multinational and Transnational Corporations: “Russia’s business economy is heavily dependent on foreign corporations Several large multinationals such as Boeing, IBM, Motorola, Cisco, and Microsoft have R&D centres in Russia In addition, many of the foreign companies are investing in local production facilities to make their penetration into the local market more cost- effective and to overcome legal restrictions on imports The broad trend is to keep the company’s R&D and manufacturing base in Russia but move marketing and sales to the United States Some of the high-technology multinational companies use the scientific expertise of Russian research institutions by establishing R&D centres and contracting with them on long-term basis” (Sokolov 2010)

3.5 Expenditure of Innovation activity

The nature of Russian industry is large scale and state owned enterprises, the large enterprises have more potential to invest funds in R&D and other innovation activities “However the demand for innovations by Russian large companies is low, and skewed towards updating of manufacturing equipment instead of research and product development activities This is one of the key reasons for the low degree of commercialization of innovations made in research institutes, which is traditional for the Russian science community This problem was inherited from the Soviet economy, where R&D activities were performed at state research institutions with no linkage to the enterprises” (Päivi Karhunen and Riitta Kosonen 2011)

Through figure 3.4, it can be inferred that in category (i.e Mining & quarrying, manufacturing, electricity, gas and water supply) the expenditure of innovation is highest on the acquisition of machinery and equipment in the firm with a 63.9 per cent and next comes expenditure on R&D activities with 36.7 per cent For innovation to be more effective expenditure on R&D should be more And expenditure on technology and patents is less with 9.9 per cent and 6.4 per cent respectively Patents are a strong output indicator of innovation economy, which stands to be weak in Russian economy

Figure 3.4: Expenditure on technological innovation in industry by innovative activity, % - Mining and quarrying, manufacturing, electricity, gas and water supply (Category 1) (2014)

Source: Compiled by the Author from, Indicators of Innovation Activity: 2016, Higher School of Economics Database, Moscow

Figure 3.5: Expenditure on technological innovation in industry by innovative activity, % Communications, computer and related activities (Category 2) (2014)

Source: Compiled by the Author from, Indicators of Innovation Activity: 2016, Higher School of Economics Database, Moscow

Natalia Ivanova, First Deputy Director Institute of World Economy and International Relations Russian Academy of Sciences says that “Russian companies, being relatively young as private enterprises, are more engaged in the financial restructuring of their business, mainly with the idea of market capitalization growth, and tend to rely on foreign multinationals as a source of new technology and equipment In terms of their innovation mode they are rather technology adopters and innovate primarily by adopting innovations developed by other firms or organizations” (Natalia Ivanova 2011)

3.6 Innovation Financing

Financing innovation activities is a major component in the national innovation system linkages Finance plays an important role in innovations since it allows the companies for research and adopts new technologies which place a positive role in the output factor The figure 3.6 demonstrates the various stages of Innovation funding in the current Russian innovation economy Which is divided into three stages, such as the early stage in which research on inventions is funded, second stage called the advanced stage where commercialization of innovation is taken place and the final stage where technology diffusion happens to the larger economy But the finance availability at each of these stages in not sufficient and the system of innovation funding fails in one stage or the other

Figure 3.6: Various Stage of Innovation Funding

Source: Compiled by the Author

As per Richard Connolly (2011), explain four major reasons for the weak financial sector in Russia Firstly, the Russian stat e has huge presence in the banking sector and thus plays a large role in allocation of surplus savings Second, Russia has few large state controlled banks and many small but ineffective banks The large banks favour lending to big firms especially operating in selected regions and politically well connected Third, the sources of non-bank finance are not well developed thus it is bank centric in nature Lastly, the market penetration of foreign banks is low

3.7 Publications and International Co-Authorship

Figure 3.7: Trends in Number of Citable Documents Published in Scientific Journals for Russia and Selected Countries, 1996– 2012

Source: Chart created using SCImago, (http://www.scimagojr.com/index.php) 3.8 FDI and Innovation: Industrial catch up requires foreign firms

The share of FDI in Russian GDP is very low, in order to because a major technology transfer to Russia One should note that (particularly when one keeps in mind that at least a fifth of Russia’s inward FDI stock is Russian by origin.) Russia should more to attract foreign firms to invest in Russia; it would take too long for Russian industries to catch up with western firms alone

Figure 3.8: Barriers for Foreign Direct Investment in Russia

Source: FIAC, Foreign Direct Investment in Russia, 2008

3.9 Networking skill road to Russia’s Innovation

Oleg Luksha (2012) says that lack of networking skills among Russian technology and R&D organisations has been a challenge to translate Russia’s intellectual capital into economic opportunity An attribute followed in the Silicon Valley innovation hub Such a culture is crucial for bringing innovation to the market “Such a culture is crucial for successfully seeking and collaborating on international projects and bringing innovation to the market The current dynamics of Russia’s innovation culture are by and large the legacy of the Soviet system, which kept information centralized and closely guarded Many post-Communist researchers, professionals and policymakers – regardless of their talents and the sincerity of their efforts to build an innovation economy in Russia – grew up under this system and not have the necessary networking skills to leverage relationships both within Russia and, most importantly, beyond its borders Support is needed to nurture new ways of networking, sharing information, and creating an innovation infrastructure across Russia” (Oleg Luksha 2012)

3.10 Sectoral Innovation System (SIS)

Russia being a resource dependent economy, diversifying the economy to high technology sectors than sectors dependent on commodity markets and vulnerable to global prices is of importance Russia has a world-class strength in various sectors mainly inherited by the Soviet era It would have to deepen its capabilities in such sectors Which include, nuclear reactors, aerospace, defence equipment and advanced materials At the same time has weakness in high technology sectors such as consumer electronics, pharmaceuticals, etc And it will be difficult to compete globally in such sectors as others nations are highly competitive in these sectors Thus Russian economy has a resource dependent industry, along with low-technology and service sector industry with less of high- technology industries But to focus on an innovation policy only on high-technology sector would be a narrow policy approach ‘High-Tech Myopia’ should be avoided in policy making And the innovation policy should also aim to upgrade and bring more efficiency in service sector and low-technology sectors for the holistic development of all the sectors in the economy

3.11 Regional Innovation System (RIS)

For analysing innovation indicator in terms of regional coverage in Russia The regional-level coverage of data is still very limited in Russia Russia’s territory is subdivided into 83 regions The regional dimension of R&D, Russia’s research and innovation activities are concentrated in specific geographical areas only These areas are in main population centres of Saint Petersburg, Moscow, and Volga district These regions account for a population of 57.4 per cent and perform majority of Russia’s GERD which is around 82.3 per cent The reason being Moscow, a part of Central District acquires a dominant position in the political and economic space of the Russian Federation This region alone contributes more than half of Russia’s GERD, majority of its R&D personnel and also applies for half of Russia’s patent applications This data reveals the disparity in the regional innovation system of Russia

For instance, with respect to Patent Cooperation Treaty (PCT), in 2011 Moscow and St Petersburg, where 11.4 per cent of Russians live, accounted for nearly 51 per cent of all Patent Cooperation Treaty (PCT) applications; down from 68 per cent in 1995

4 Conclusion

After the collapse of USSR, with the opening of Russian economy the rigidities of Soviet-era were carried forward as a part which now seems inbuilt in todays Russia’s National Innovation System The current Innovation strategy is a top-down centric model, where the government formulates the policy Since from the time of Peter I the Great, to the Soviet era and till the present times The research in S&T is driven by the government The private sector contribution in its Innovation economy exists, but main is the visible hand of the state which plays the major role in policy making and its implementation Thus an effective innovation policy though formulated time and again by its leaders fail to create larger diffused innovative economy

Top-Down innovation model a Soviet legacy means, that it is a centrally planned economy Where the policy and research directions are laid and formulated by the government and its machinery The role of private business sectors is very less in policy formulation in Russia Since, with time the innovation policy implementation has not been very effective the state has already realized that the top-down approach is not the best approach to modernize via innovations And Putin has stated that with time the state's direct presence in the economy will diminish step-by-step

Thus the scope and rationale behind building a stronger innovations system relies on certain essential features The elements like stable and appropriate regulatory framework pertaining with tax regime, market orientation, trade and intellectual property rights (IPR) policies decide about the macro-economic stability of an innovation based economy This incentivizes the innovators with confidence to position their ideas into the existing innovation system (IS) even with a specific quantum of risk

Because of its Soviet legacy limiting factors, Russia need to catch-up in most of the areas Russian Innovations system need more effective foresight studies to fathom deep the critical technologies and design the future systems This shall open new windows for exports and self-reliance in technology guided future markets Which will help in Innovation diffusion in the larger economy Thus the choice that Russia makes, shall determine its economic development, modernization process in the coming decades and its innovation policy

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