Innovating for Profit in Russia: Summary of a Workshop (2006)

This chapter highlights important themes that emerged during the formal and informal discussions at the workshop in Yekaterinburg. The workshop presentations identified some degree of success in transferring technology to industrial customers, but this success is limited by past practices, absence of incentives, and long-standing attitudes that inhibit communication and cooperation. While the workshop did not consider a plan of action to address these perennial issues, the themes identified below should provide useful guidance in developing such plans, either within Russian organizations or within external funding organizations.

1. Much of the basic and applied research in Yekaterinburg is of high quality, but it is often driven by historical and internal considerations with limited attention to the interests of potential funders and users of research products. With a few exceptions, there is limited interest within the research institutions in specific market and customer needs. This lack of customer orientation does not encourage industry to look beyond its own specialists for satisfying research needs.

2. “Market pull” is a western concept that emphasizes the importance of conducting research designed to provide results that should be of direct interest to specific customers or types of customers. Few Russian R&D organizations have fully embraced such an approach. Case studies of successful market-pull approaches that have been pursued by research organizations in Russia and in the United States can be useful in demonstrating to Russian research managers

that employing the market-pull approach as part of their R&D efforts can increase the likelihood of successful commercialization of research products.

3. “Technology-push” approaches can sometimes be an important complement to a market-pull orientation. However, investing heavily in development of a new or improved technology without having identified specific customer needs could be costly and counter-productive. Research organizations will benefit from a careful assessment of the likely commercial interest based on technical and financial trends in the relevant industrial sector, competitive technologies and their costs, and the costs of R&D through the pilot stage.

4. In general, Russian researchers have a limited understanding of technology needs that will enhance the profits of companies operating in their fields of interest. Few researchers spend significant amounts of time interacting with company representatives and visiting industrial facilities. As demonstrated by the conference on industrial innovation sponsored by the regional government in Yekaterinburg, there are unrealized opportunities for developing and nurturing contacts.

5. Many Russian research institutions perceive their missions as primarily supporting academic research. Far fewer give priority to attracting customers for the results of their research.

6. There is a lack of strategic planning within Russian research institutes and university-sponsored technology centers for effective use of their core competencies in supporting commercial activities in the Russian and global markets. Such planning is best done in collaboration with government and industry partners.

7. Applied research at many research institutes is distributed across a diverse range of topics, resulting in an absence of critical mass for achieving technological leadership in specific fields.

8. In building customer bases for R&D products, Russian institutes and universities will benefit from considering both Russian and foreign clients.

9. Government support for R&D, which in the Soviet era had been tied in large measure to defense needs, has declined dramatically. There are no indications that it will increase substantially in the near future.

10. The difficulty in finding investment capital is a significant barrier for entrepreneurs interested in pursuing attractive innovation activities in Russia. There are however new sources of financing slowly emerging in Russia, as well as cost-sharing arrangements between industry, and various sources of capital, including venture capital.

11. There is a lack of technology transfer managers in Russia with experience working in a market economy. While very limited, the training programs sponsored by the U.S. and other foreign governments are helpful in this regard.

12. There is considerable uncertainty among R&D managers about the significance of intellectual property rights and the procedures and costs associated with acquiring such rights.

13. It is difficult for research institutes to persuade companies to outsource work to them when the companies have more highly qualified specialists than do the institutes due to higher pay levels within the companies.

14. Russian companies have little appreciation of the technical capabilities of scientists and engineers in the nuclear cities. Some companies assume that the costs of outsourcing innovation tasks to specialists in these cities would be unreasonably expensive due to the need to support expensive laboratory facilities. “Open houses” and joint research-industry workshops in the nuclear cities might help improve mutual understanding of technological opportunities, technical capabilities, and pricing that would be attractive to potential users of research.

In general, the strong technical capabilities of the research institutes and universities stand in marked contrast to their limited business experience and financial capital. While financial capital in the immediate future may be more likely to come from abroad than from Russian companies, the long-term interests of Russia and the stability of research programs are dependent on business relations between Russian companies and Russian research institutes. The Nuclear Cities Initiative has taken limited steps to facilitate such relations, and the observations presented at the workshop should be helpful in expanding these initial steps, recognizing that the road ahead will continue to offer many challenges as well as opportunities to Russian enterprises and researchers.

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