"Open Innovations" Forum presents a draft of the annual national report on innovations in Russia

"Open Innovations" Forum presents a draft of the annual national report on innovations in Russia

On 26 October 2016, a draft of the National Report "On innovations in Russia in 2016" was presented at the "Open Innovation" Forum. The document was the result of joint work of the Ministry of Economic Development of Russia, Open Government and RVC.

A distinctive feature of the 2016 report from its previous version has been a shift from general recommendations on the priorities of innovation policy to the development of concrete measures that will speed up technological development of the country.

The authors of the report notice that there have been some positive changes in the Russian innovation environment in the past year due to the efforts of the state. Russia improved its position in the "Global Innovation Index" rankings (growth from 48th to 43th place) and in Global Competitiveness Index (from 45th to 43th place), Russia's lagging behind the leading countries of innovation reduced by 12 out of the 41 indicators on the 'Management Panel', developed in the 2015 Report.

At the same time, the overall dynamics of the innovation activity in the country is ambiguous. Indicators on R & D spending, the number of innovative companies and patent activity are reducing, despite the growing demand for innovative products, as well as R & D expenditures in the public sector, and the indicator of the research cooperation level.

According to the experts, the key reason for the current state of innovation activity is the orientation of the state initiatives to the areas, which have a delayed effect, such as basic science, education, and institutional innovation environment. In addition, an important barrier becomes a model of the "open" innovation system, which provokes withdrawal of Russian start-ups to the foreign markets due to lack of support at the relevant stages of development.

Taking into account the economic structure of the country, the report's authors believe that large Russian companies should become the main source for the rapid development of innovations. Being focused on big business will allow directly affect the majority of the Russian economy, as the share of large companies in Russia is 79% against 42% on average in comparable countries. Mature business can become the main driver of demand for innovation and increase some venture capital investments and inventive activity.

Nevertheless, having a potential for the development and implementation of innovation, large companies are now showing a low innovation activity. In a number of sectors, the level of R & D expenditures and the number of registered patents is significantly lower than those of foreign companies, and the average citation of patents is close to zero.

The authors of the report distinguish the main barriers that hinder the development of innovation in large businesses. Thus, the orientation of large corporations solely to the current results and the short planning horizon lead to the fact that their leaders are not interested in innovation activity. As a result, these companies have virtually no competence and processes necessary for innovation. Taking into account the high level of vertical integration, this policy is reflected in the innovative development of potential suppliers and contractors that have very limited resources for independent investment. The negative factor is that the state is missing a strategic approach to industry standards and consistent policy of financial support for innovation.

"One of the key findings of the report is the need for an intensive involvement of large business in the interaction with the innovative segment. Now the gap is quite deep, we once called it 'open innovation cycle', when a start-up cannot find a place in the procurement of major Russian companies and is forced to go to other countries. How to "close" the innovation cycle, how to make large companies obtain a real effect on working with start-ups — these are fundamental questions. In this context, the task of the report is not so much to analyse the situation, rather to provide practical solutions to the organizational level of the state of innovation management system," says Acting General Director of RVC Evgeny Kuznetsov.

In accordance with the identified barriers, the report proposed priority measures that will strengthen the innovative activity of large businesses. These include the establishment of a long-term incentive for managers of large businesses, creating conditions for the development of innovative suppliers and regulatory incentives. In particular:

  • To create a long-term incentive arrangements, the proposed introduction for senior and mid-level executive stock option programs, the creation of motivation for top management of the profits of corporate venture funds, launching the program of reserve of administrative staff with a focus on innovation. Another necessary measure is the expansion of the list of companies included in the forecast plan for privatisation. 
  • For the development of export of high-tech products, it is proposed to develop a set of targeted support measures, as well as an audit of industry standards that can be harmonized with the international ones in order to facilitate access of Russian manufacturers on foreign markets. 
  • In order to stimulate the technological development of industries, it is proposed to establish working groups with the participation of the state and large businesses for the implementation of sectoral programs on the development of promising technologies and bridging the gaps in the production chain, making a list of advanced technological standards and methodology to assess the correct implementation of innovative development programs (R & D). 
  • To support high-tech component manufacturers and innovative suppliers, the authors of the report offer to stimulate the R & D localization of multinational companies and to increase foreign investment in the component manufacturers, to amend the law on state support of research and development, to introduce a mechanism of financing of the costs associated with the industry product certification. The experts also propose to allocate suppliers of the 2-3 level from the vertically integrated state-owned companies into the individual business units with responsibility for the financial result. 
  • For innovative development of companies in the system of defence procurement, it is proposed to adjust the pricing system with regards to the implementation of long-term contracts and changes in the rules determining the profits.

To evaluate the results of this program of changes, the authors of the report have developed a system of ten key performance indicators (KPIs), which, according to developers, are controlled, measurable and resistant to manipulation. Seven KPIs relate to production companies: the export of innovative products, the share of innovative products in the production, the share of spending on innovation in production, the share of innovative companies, investment in intangible assets, the number of PCT patent number of applications of PCT patents. Two indicators relate to science: the number of research and citation, another one — we fix the amount of venture capital investments.

The responsibility for the implementation of specific KPI in the report is distributed among three levels, each of which provides specific responsible departments and agencies. In order to achieve any goals in innovative development without a radical change in the control system, it is proposed to entrust a dedicated project office with the task of implementation of the proposed KPI system.

The expert community will discuss the draft of the National Report “On innovation in Russia 2016”, after which the document will be directed to the Government.

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