|
Items in cart [0] |
Questions? Call 888-624-8373 |
| Copyright © 2009. National Academy of Sciences. All rights reserved. Terms of Use and Privacy Statement |
Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 88
Page 88
Development of Small Innovative
Companies in Obninsk to Serve the Russian Market
Yevgeny A.Pashin *
Obninsk Center for Science and Technology
INTRODUCTION
Since 1991 an active process of new enterprise creation has been
under way in Obninsk. About 6,000 firms under various forms of
ownership have been created as of mid-2001. Of these, about 300
could be considered as being in the scientific-technical sphere
based on various characteristics. Actually, today there are
about 50 small- and medium-sized innovative enterprises
operating in the market. Their fields of activity, including
both development and production, vary widely: oxygen gas
analyzers (Ekon Closed Joint-Stock Company), milk filters
(Conversfilter Research and Production Enterprise), feed
additives (Medbiopharm Research and Production Enterprise), car
rear-view mirrors (Intech Limited Liability Company),
information technologies (Modeling Systems Limited Liability
Company), trace gas analyzers (Eridan-1 Science and Technology
Center Limited Liability Company), thermal meters (Flow-Spectrum
Research and Production Enterprise), pure gallium
(Conversfilter), spraying technologies (Powder Spraying Center
Limited Liability Company), microfiltration systems (Express-Eko
Research and Production Enterprise), power electronics
(EnergoElectrica Closed Joint-Stock Company), and aerosol
filters for the nuclear industry (Obninsk Center for Science and
Technology [OCST]). This list could be continued, but in
general, the fields of activity of innovative enterprises are
related to the basic areas of research of Obninsk institutes:
the nuclear power industry,
* Translated from the Russian by Kelly Robbins.
OCR for page 89
Page 89
nuclear equipment and radiation technologies, nonmetal materials
technologies, ecology, medical radiology, and meteorology.
Considering the successes and difficulties of innovative enterprises,
we can see that they share many common problems of regular small
enterprises but also have some specific ones. As an example, let us
look at the following enterprises: Ekon, Conversfilter, Intech,
Eridan-1, EnergoElectrica, and OCST.
MAIN CONDITIONS FOR SUCCESS AND REASONS FOR
PROBLEMS
For all the above-mentioned enterprises, the primary condition for
success was a combination of competitive technologies embodied in
their products and the prices at which they offered these products
on the market. However, these elements represent only part of the
successes enjoyed by these companies. Let us briefly analyze each
enterprise individually.
First, let us look at EnergoElectrica, a closed joint-stock company
that manufactures power electronics. The first reason for their
success lies in their serious efforts to market their products. For
about a year the enterprise operated with heavy losses, having
devoted all its efforts to studying the market and searching for
customers with the ability to pay. The second reason is the
enormous amount of work the company devoted to developing high
production standards and ensuring that its facilities were
technologically well equipped, both of which are important since
the enterprise is engaged in manufacturing electronic devices.
However, being founded by a group of engineers, the company
encountered the problem of lacking management experience in
production issues. They are learning, but still mainly by their own
mistakes. The next problem is the lack of qualified staff. To solve
this problem, the company plans to set up a training minilaboratory
with four to six computers. There they will provide highly tailored
training for advanced undergraduate students from the local
Institute of Nuclear and Power Engineering. In general, the
enterprise is a success. They see their development prospects in
the diversification of their products and the development of new
and improved devices.
The second enterprise, the OCST Closed Joint-Stock Company, is more
a scientific enterprise than a production one. It was founded by
the city's institutes to commercialize discoveries and
inventions made in the city. Now, however, OCST has established a
whole production section for manufacturing pilot samples of
high-tech products: aerosol filters for the nuclear industry, water
purification filters, devices for disinfecting medical wastes, and
feed additives for removing radionuclides from livestock and
raising their productivity. The history of OCST's production
section features the same successes and failures as regular
innovative
OCR for page 90
Page 90
enterprises. Let us look at the successful field of aerosol filter
production. The reason for OCST's success is that by relying on
the powerful team of researchers from the State Science
Center—Institute of Physics and Power Engineering (IPPE), the
enterprise could offer consumers filters that significantly exceeded
currently available filters on a number of parameters. Having a
research and development base, the enterprises will soon be able to
offer next-generation systems. This competitive advantage, combined
with its price policy, will allow the firm to be ahead of its
competitors for a long time to come. This enterprise has successfully
solved intellectual property questions with IPPE thanks to a special
licensing agreement. The main difficulty that OCST encountered is the
extremely aggressive practices of its competitors. Being unable to
beat OCST on quality, they use every possible means of discrediting
the firm's products in the eyes of the consumer. At present the
enterprise is developing a policy of countermeasures to neutralize the
actions of its competitors. Today OCST produces more filters than a
number of other innovative enterprises combined. Therefore, they plan
to spin off this product line into a separate enterprise; but to do
this, they must first increase their standing in the Russian market.
Despite these positive notes, the enterprise also provides some
examples of actions that were not completely successful, especially
with regard to the production of water purification filters. Having
applied advanced technology based on research to create purification
systems for submarine heat exchangers, the company devoted its efforts
to producing single filters for household use. However, although in
general this market is quite large, the prices turned out to be too
high for the average Russian customer, and the design was not
completely perfected. Sales of filters for large-volume corporate use
were much more successful. Hence, the enterprise is currently focusing
its efforts on obtaining certification for its high-capacity filters.
The third enterprise under consideration is Conversfilter. It is a
young enterprise, only one year old. It develops and manufactures milk
filters. The enterprise got a successful start thanks to the financial
support of OCST, one of its founders. OCST allocated some of its
profits to provide a loan to the enterprise with a rate 50 percent
less than that offered by the Obninsk Fund for the Support of Small
Business. As a result, the enterprise could create the necessary
stockpile of materials for its first months of operation. Also, OCST
rented office and production space to the firm at a low rate. The
company sells its product rather actively to Belarussian farms.
However, the enterprise has encountered serious problems in selling
its products in Russia, even though there are no similar filters on
the market. In fact, Belarus has established strict standards for the
purity of milk, while Russia abolished such standards back in the
revolutionary period. The majority of farms do not care about the
quality of the milk
OCR for page 91
Page 91
they produce, as it is bought regardless of quality. Therefore, the
company managers have to pursue a policy of explaining the situation
to regional agricultural departments. Recently, the company has placed
its hopes on the major dairies, since they have all set up their own
dairy farms, and the market economy requires quality products along
the entire production chain. Sample batches of filters have recently
been supplied to the dairies for testing. Considering the difficulties
encountered in selling its milk filters, the enterprise ties its
prospects for future development to the diversification of its product
line (filters for wine, oil, etc.).
The next enterprise to be considered is the Ekon Closed Joint-Stock
Company, a manufacturer of hard electrolyte gas analyzers for
monitoring boiler exhaust gases. Established in 1997, its customers
are power, metallurgical, and oil- and gas-processing plants and glass
and ceramics factories. The enterprise has relied mainly on the
effective performance and quality of the devices it manufactures.
Pursuing an active marketing policy, the company is slowly but surely
expanding its customer base both at home and abroad. However, in
export sales, the company is encountering a number of problems with
customs operations. Involving external consultants is very expensive,
which is why the board of directors is focusing its efforts on hiring
a specialist in this area, as export shipments are increasing. Another
serious problem faced by the enterprise is the shortage of production
and office space and the high cost of its existing space. To solve
this problem, they are studying opportunities for building facilities
of their own. The constant growth of account reporting is having a
negative impact on the enterprise's operations, so they are now
taking measures to automate their accounting systems. Expansion of
sales to Europe led to the problem of International Organization for
Standardization (ISO) certification of the products. Therefore,
preliminary work is under way to prepare certification agreements with
licensing companies and to search for investors.
Having scientists and researchers on staff, Ekon links possibilities
for its further development with a number of objectives: developing
new products, improving quality and decreasing costs, expanding
production, and obtaining certification of their products according to
international standards to facilitate entry into foreign markets.
The last innovative enterprise to be considered is the Eridan-1
Science and Technology Center. This enterprise began work on the
innovation project Trace Gas Analyzers in 1995, but these efforts
especially accelerated in 1998– 1999 thanks to financial support
from the Sberbank savings bank, which provided targeted credits not
only for export orders, but also for the entire project itself. When
the first Sberbank loans were obtained, the key role was played by the
Obninsk Fund for the Support of Small Business, which operates under
the auspices of the city administration. The fund provided guarantees
and risked its own assets for the benefit of the enterprise.
OCR for page 92
Page 92
Eridan-1 is encountering significant difficulties in the further
development of export activity and the implementation of the trace gas
analyzer project for three reasons. First, all its loans are short
term, lasting generally three to four months but no more than one
year. With such short loan periods, there can be no question of
long-term innovation projects or any long-term development. Second,
the interest rate is rather high, so the loan can be paid back only
with highly profitable projects. Third, opportunities for placing
material assets as collateral are very limited.
The point is that, according to the completely justifiable demands of
the commercial banks, of which Sberbank is one, a company must provide
collateral in the form of an asset that could be liquidated if
necessary. To produce any instruments or equipment that could be sold
or given as collateral, a company needs credits to carry out all the
work necessary to transfer an idea or a patent into certified
manufactured products—devices, equipment, or technological
processes. So, the enterprise is caught in a vicious circle. The bank
has no right to lend to any enterprise without collateral, and
innovative enterprises most often lack it.
The lack of solid collateral often hinders the rapid development of
Eridan-1. They were able to obtain loans only on the basis of the
devices and equipment they owned, which were insignificant in cost, or
special targeted loans for export orders under contracts with
certified letters of credit. To achieve optimal growth, they need much
more credit. With regard to the investment project on trace gas
analyzers and other devices, which could be profitably produced and
sold, the enterprise must have even more of its own assets or an
independent sponsor, both of which are very difficult to find.
The problem can be solved by giving unsecured venture capital loans to
innovative enterprises with a good credit history, well-founded market
prospects, and good financial and staff capabilities.
However, doing this involves many difficulties. It is very hard for a
small company to place its equity in a stock exchange (due to the
underdeveloped stock market in Russia), and there are no serious
private investors who want to get involved in this most interesting
work of seeking, selecting, and supporting innovation projects. This
evidently occurs because many serious investors underestimate the
economic efficiency of innovation projects and their ability to bring
potentially high profits.
THE MOST IMPORTANT LESSONS
In 2000–2001 an analysis of the overall status of innovation
activity was conducted in four Russian cities, including Obninsk,
within the framework of the Tacis Innovation Centers and Science
Cities project. The study highlighted the main problems in the city
that currently complicate
OCR for page 93
Page 93
or hinder the commercialization of products, services, and
technologies. These problems included the following:
lack of working laws on intellectual property
negative attitudes on commercialization among a number of
research institute directors (the institutional owners of
intellectual property) and the failure to focus on
commercial results when conducting research and
development work
lack of specialists in the field of commercialization and
other professional staff for innovative companies and
projects
insufficient entrepreneurial initiative among the authors
of projects
high financial barriers in the search for necessary
facilities, equipment, and so forth
lack of business incubators for innovative companies
the Russian mentality (innovative companies wish to carry
out their activities by themselves to the maximum possible
extent)
distrust of innovative companies in the quality of work
and prices charged by innovation infrastructure
enterprises
low overall level of entrepreneurial culture
Among the problems that hinder the operation and growth of small-and
medium-sized technology-based enterprises are the following:
lack of sufficient operating capital for research and
development activities, equipment upgrades, and capital
construction aimed at expanding production and improving
product quality
lack of necessary office and manufacturing space
insufficient awareness among firms of information about
the innovation infrastructure in the city and its
capabilities
the high cost and not always high quality of consulting
services
unsettled issues of intellectual property
Based on a survey of small enterprises, estimates were made of the
need for various services, including in the areas of technological
development, business development, financial issues, information
support, and start-up support. The survey indicated that only 10
services on the list were of interest to less than 25 percent of
respondents: consultation on matters of selling or buying licenses,
preparation of documents for privatization and postprivatization,
consultation on resolving nonpayment issues, estimation of the value
of property and company assets, restructuring, technology audits,
consultation on technology transfer issues, consultation on securities
operations and the stock market, and training on issues of crisis
management and the securities market.
Table 1 shows estimated needs for services
among small enterprises based on the results of a survey of 44 such
firms.
OCR for page 94
Page 94
TABLE 1 Needs for Services among Small Enterprises
Service
Percentage of Enterprises Needing the Service
In technological development (audit, expert review, etc.)
10
In business development:
Product promotion
40
Market research
40
Legal support
40
Patent and licensing support
40
Business planning and investment projecting
30
Certification
50
Consultation on restructuring issues
5
Organization of advertising and public relations companies
40
Assistance in staff recruiting
40
Educational and training activity
20
In company finance:
Promotion for external financing
70
Tax optimization
20
Consulting on arrangement of financial activity and accounting, auditing
40
Credits and preferential loans
50
In information support for innovative business:
Databases on regulations
10
Information on standards and patents
10
Partner searches, access to information about demand and supply
50
Automation and information technologies
15
Web design and other Internet-related services
40
Organization and holding of seminars and conferences
10
At the company startup stage:
Assistance in organizing start-up funding
100
Consultation on issues of company establishment
20
Supply of space for companies
100
Support for activities in the initial period
80
Equipment supply
50
Other activities aimed at supporting innovative companies and authors of innovation projects:
Project management
5
Pilot production
10
Design and graphics
30
Construction and maintenance of office and manufacturing space
30
Editing and publishing
30
OCR for page 95
Page 95
The survey has shown that among the most necessary services for small
enterprises are the following: assistance in seeking customers and
subcontractors, assistance in obtaining certification and
standardization of products and services, and provision of information
about the market, competitors, and potential customers. About a
quarter of the companies surveyed consider the following services to
be necessary for their development and are ready to pay for them:
computer networks; Internet service; publishing and advertising
services; provision of information about new technologies; assistance
with business law and taxation issues; preparation of patent and
trademark applications; organization of exhibitions, presentations,
and business meetings; assistance with licensing; personnel
recruitment; patent searches; and training in accounting.
Payment for other types of services is possible only with support (50
percent) either from existing funds or from city, oblast, or federal
government sources.
The quantitative need of small enterprises for the services is as
follows:
low interest rate loans (10–15 percent): in the sum
of up to 100 million rubles annually
experienced specialists: up to 150 persons per year
rental of office and manufacturing space with information
infrastructure: up to 3,000 square meters
ACTIVITIES AIMED AT IMPROVING
BUSINESS OPPORTUNITIES
In the opinion of innovation infrastructure specialists and the
innovative companies themselves, a number of effective measures
should be taken to assist in the development of high-tech business
and promote the transfer of high technologies into production to
earn profits in the market environment in the coming years:
provide incentives for research and production
companies that produce marketable science-intensive
products that conserve state resources. To do this, it
is necessary to work out criteria for tax cuts
according to the marketability of the product and the
economic impact of its introduction.
institute certain incentives for the rental or purchase
of production facilities and equipment, as well as
incentives regarding communications and utility
services
invest in the advertising and exhibition activities of
such companies
train personnel for the innovation sphere with
knowledge of effective methods for managing innovative
enterprises and promoting new technologies and products
to the market
OCR for page 96
Page 96
create marketing structures that could promote the most
marketable products of high-tech companies and finance these
structures from city and regional budgets
create conditions under which innovative companies can
receive consulting services on preferential terms. This can
be done by giving subsidies to the most professional
enterprises making up the innovation infrastructure of the
city. For example, such subsidies could be paid from the
Obninsk Science City Program.
ensure that new commercially advantageous projects are
discovered and promoted for financing
create an effective legal mechanism for transferring new
technologies from research institutions to small high-tech
enterprises
develop a mechanism for insuring the venture capital of
investors, high-tech product developers, and manufacturers
create an attractive investment climate in the city to
attract outside investors.
Representative terms from entire chapter:
innovative enterprises
