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Successes and Difficulties of Small Innovative Firms in Russian Nuclear Cities

Proceedings of a Russian-American Workshop

Committee on Small Innovative Firms in Russian Nuclear Cities

Office for Central Europe and Eurasia Development, Security, and Cooperation Policy and Global Affairs
National Research Council

In cooperation with the

Institute for Physics and Power Engineering
Obninsk, Russia

NATIONAL ACADEMY PRESS
Washington, D.C.



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Page i Successes and Difficulties of Small Innovative Firms in Russian Nuclear Cities Proceedings of a Russian-American Workshop Committee on Small Innovative Firms in Russian Nuclear Cities Office for Central Europe and Eurasia Development, Security, and Cooperation Policy and Global Affairs National Research Council In cooperation with the Institute for Physics and Power Engineering Obninsk, Russia NATIONAL ACADEMY PRESS Washington, D.C.

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Page ii NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. 20418 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by Contract No. DE-AM01–99PO80016, Task Order DE-AT01–01NN40254 A001, between the National Academy of Sciences and the U.S. Department of Energy. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number 0–309–08421–0 A limited number of copies of this report are available from: Development, Security, and Cooperation National Research Council, FO 2060 2101 Constitution Avenue, NW Washington, DC 20418 Tel: (202) 334–2644 Additional copies of this report are available for sale from: National Academy Press 2101 Constitution Avenue, NW , Lockbox 285 Washington, DC 20055 Tel: (800) 624–6242 or (202) 334–3313 (in the Washington metropolitan area) Internet, http://www.nap.edu Printed in the United States of America Copyright 2002 by the National Academy of Sciences . All rights reserved.

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Page iii THE NATIONAL ACADEMIES National Academy of Sciences National Academy of Engineering Institute of Medicine National Research Council The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M.Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I.Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M.Alberts and Dr. Wm. A.Wulf are chairman and vice chairman, respectively, of the National Research Council.

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Page v NRC COMMITTEE ON SMALL INNOVATIVE FIRMS IN RUSSIAN NUCLEAR CITIES Alvin W.Trivelpiece (Chair) Director (retired) Oak Ridge National Laboratory Eileen S.Vergino Deputy Director, Center for Global Security Research Lawrence Livermore National Laboratory Clifford G.Gaddy Fellow, Economic Studies and Foreign Policy Studies The Brookings Institution RUSSIAN ORGANIZING COMMITTEE Alexander P.Sorokin Deputy Chair, Obninsk Council for Science and Technology Valery I.Balanda Chief, Department of International Relations Institute for Physics and Power Engineering Mikhail V.Shubin Deputy Chief, Department of Regional, Social, and Personnel Policy Russian Ministry of Atomic Energy Yury K.Shiyan Chief, Office of Foreign Affairs Russian Academy of Sciences

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Page vi NRC STAFF Glenn E.Schweitzer Project Director A.Chelsea Sharber Program Specialist Kelly Robbins Senior Program Officer

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Page vii Preface In October 2000 the Department of Energy (DOE), the Russian Ministry of Atomic Energy (Minatom), and the National Research Council (NRC) agreed that a workshop on the successes and difficulties of small innovative firms in several of the atomic cities of Russia would be helpful in identifying business approaches and Russian governmental policies that should be encouraged through joint programs of the U.S. and Russian governments and through the efforts of Western nongovernmental organizations. The Nuclear Cities Initiative of DOE awarded a contract to the NRC to assume responsibility for organizing the workshop. Having previously conducted projects in Russia on commercialization of technology, the NRC was in a good position to design a workshop that would be relevant to the needs of both the Russian and the U.S. governments. Minatom selected the Institute for Physics and Power Engineering (IPPE) in Obninsk as the Russian counterpart to work with the NRC in organizing the workshop and to serve as the host for the workshop. IPPE has had extensive experience in organizing international conferences on topics related to technology commercialization. A workshop was held in Obninsk in September 2001. Twenty Russian specialists from five nuclear cities and Moscow, seven American specialists, and representatives of DOE and the technical assistance program of the European Union (Tacis) made presentations. An additional 20 Russian specialists attended the workshop and made useful comments on the presentations. The presentations addressed many aspects of the establishment and management of small innovative firms in Russia, including a

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Page viii number of specific examples of the activities of small firms, as well as lessons learned in establishing commercially viable firms in the United States. While there are great differences in the business environments, in the training and experience of entrepreneurs, in the communication and physical infrastructures, and in the availability of financial resources in the two countries, some principles concerning management, marketing, and general business strategies are relevant in both countries. This report includes the presentations made at the workshop, with many of them reflecting general principles that enhance the likelihood of profitability of firms in both countries. Prior to the workshop the American participants visited three small firms in Obninsk and several state research institutes that have had experience in encouraging the establishment of firms based in part on technical capabilities developed within the institutes. These visits helped orient the American specialists to the realities of doing business in Russia and highlighted various approaches that have been followed. At the end of the first day of the workshop, the participants received the news of the terrorist attacks on New York and Washington. Since the American participants would be unable to return to the United States for several days, they collectively proposed continuing the workshop and completing the planned program. Our Russian hosts agreed with this approach. So, despite the uncertainties concerning events in the United States, the workshop was completed as scheduled. I would like to express my appreciation to the other members of the NRC committee who assisted in the preparations for the workshop and reviewed these proceedings. We are indebted to the Russian organizers of the workshop, particularly Alexander Sorokin and Valery Balanda, who assembled an excellent group of Russian participants and made all the arrangements for a successful workshop. Also, we commend William Desmond of DOE, who had the foresight to support this workshop and who assisted in navigating the bureaucratic hazards in Washington and Moscow that constantly threatened to result in its cancellation. The Americans attending the workshop were deeply grateful to their Russian friends for the outpouring of sympathy and support they expressed to us regarding the terrible tragedy that befell the United States during our visit. None of us will ever forget what we were doing and whom we were with in Obninsk, Russia, on September 11, 2001. ACKNOWLEDGMENTS These proceedings have been reviewed in draft form by individuals chosen for their technical expertise, in accordance with procedures approved by the NRC's Report Review Committee. The purpose of this

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Page ix independent review is to provide candid and critical comments that will assist the institution in making its published proceedings as sound as possible and to ensure that the proceedings meet institutional standards for quality. The review comments and draft manuscript remain confidential. In addition to the members of the NRC Committee, I wish to thank Blaine Gibson, Siberia Pacific Company, for his review of selected papers in this proceedings. We wish to thank Kelly Robbins for her translation of the Russian language papers into English. Special thanks also to Jan Dee Summers, Kelly Robbins, and A.Chelsea Sharber for their editing of the proceedings. —Alvin Trivelpiece Chair, NRC Committee on Small Innovative Firms in Russian Nuclear Cities

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Page xi Contents Nuclear Cities Initiative: Interests of the Program George D.Pomeroy 1 Analysis of the Results of the Targeted Program for Promoting Employment for the Population of Minatom Closed Administrative-Territorial Zones for 1998–2000 Irina V.Yefimkova 8 Technobusiness in Russia's Atomic Cities Glenn E.Schweitzer 22 Innovation Activity in Russian Higher Education Sergei A.Mitrofanov, A.A.Kharin, I.L.Kolensky 24 Challenges at the Zelenograd Technopark Vladimir Leontyev 39 States' Efforts in Small Business Development: Two Models David N.McNelis 48 Development of Small Innovative Companies in Sarov to Serve the Russian Market Vladimir I.Zhigalov 57

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Page xii Contents Development of Small Innovative Companies in Snezhinsk to Serve the Russian Market Aleksei A.Kholodov and Yury Rumyantsev 68 Development of Small Innovative Companies in Zarechny to Serve the Russian Market Yevgeny N.Loguntsev 79 Development of Small Innovative Companies in Obninsk to Serve the Russian Market Yevgeny A.Pashin 88 Companies Based on Technologies Developed at U.S. National Laboratories Alvin W.Trivelpiece 97 The Creation of Sustainable Business in Russia's Nuclear Cities Juan Matthews 101 Russian and American Business Practices and Laws: Advice to Businesses in Russian Nuclear Cities Blaine A.Gibson 111 Support for Innovation Activities by the City Administration: Review of Innovative Firms in Zheleznogorsk Pavel V.Yakushin 114 Steps Taken by the Zarechny City Administration to Support Small Innovative Companies Yury I.Kvachev 139 The Role of Foreign Partners as Investors or Customers in the Development of Small Innovative Businesses in Snezhinsk Vladimir V.Klimenko and Andrei G.Kruglov 148 Steps Taken by the Sarov City Administration and Most Important Organizations in Support of Small Innovative Businesses Aleksandr V.Belugin, Yelena S.Dyakova, Vladimir I.Zhigalov, P.G.Smirnov, and Olga N.Arkhipkina 157

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Page xiii Contents Activities of the Obninsk City Administration Aimed at Supporting Small Innovative Firms Igor M.Mironov 167 Small Business and the Macro Economy: Some Observations Clifford G.Gaddy 182 Steps Being Undertaken by the Snezhinsk City Administration to Support Small Innovative Companies Andrei G.Kruglov 190 The Role of Foreign Partners as Investors or Customers in the Development of Small Innovative Firms Igor I.Rakosei 200 The Role of Foreign Partners as Investors and Customers in the Development of Small Innovative Companies Yelena S.Dyakova and Vladimir I.Zhigalov 209 The Role of Nongovernmental Approaches to Business Development Eileen S.Vergino 216 Small Innovative Business in the Nuclear Cities Aleksandr P.Sorokin 223 Highlights of Presentations and Discussions Glenn E.Schweitzer 230 Appendix A:     Committee Members and Participants 233 Appendix B:     Russian Science Cities 239

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