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The Role of Industrial Institutes in Creating and Maintaining Russia's Industrial Potential

S.S. Ivanchev

NPO Plastpolimer

Organizational Structure of Science in Russia

In the post-war period, only two national scientific structures—the American and the Soviet—have been able to conduct research over the entire scientific-technical spectrum and to advance substantially in science and technology. In the USSR, this was achieved by the high priority that the government placed on science.

In the USSR, scientific-research units were structured along two lines. First, institutes of the USSR Academy of Sciences and the Academies of Sciences of the union republics carried out basic research in various fields of science in accordance with each institute's profile. A second group of institutes—industrial institutes—conducted technological development work for their corresponding industrial branches and were responsible for the development of these sectors. In many cases, industrial institutes were granted rights as lead research units in given technological fields. Duplication of science and technology topics by the various institutes was not permitted. Both the basic science and industrial institutes were state organizations; however, they were directed by different branches of the government. The first group of institutes was financed through the Academy of Sciences system, while the second group was supported through the appropriate ministries.

The industrial institutes played a defining role in creating new technologies for all branches of industry. Although the Academy institutes elucidated new scientific principles and natural laws facilitating the creation of new industrial technologies, the industrial institutes bore responsibility for the actual development of these technologies. In fact industrial institutes carried out all design work, right down to the level of organizing production and providing the scientific documentation for the operation of the production facilities.

The industrial institutes represent a complex of technologically-oriented scientific-research organizations. The basic task of these institutes is to conduct



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--> The Role of Industrial Institutes in Creating and Maintaining Russia's Industrial Potential S.S. Ivanchev NPO Plastpolimer Organizational Structure of Science in Russia In the post-war period, only two national scientific structures—the American and the Soviet—have been able to conduct research over the entire scientific-technical spectrum and to advance substantially in science and technology. In the USSR, this was achieved by the high priority that the government placed on science. In the USSR, scientific-research units were structured along two lines. First, institutes of the USSR Academy of Sciences and the Academies of Sciences of the union republics carried out basic research in various fields of science in accordance with each institute's profile. A second group of institutes—industrial institutes—conducted technological development work for their corresponding industrial branches and were responsible for the development of these sectors. In many cases, industrial institutes were granted rights as lead research units in given technological fields. Duplication of science and technology topics by the various institutes was not permitted. Both the basic science and industrial institutes were state organizations; however, they were directed by different branches of the government. The first group of institutes was financed through the Academy of Sciences system, while the second group was supported through the appropriate ministries. The industrial institutes played a defining role in creating new technologies for all branches of industry. Although the Academy institutes elucidated new scientific principles and natural laws facilitating the creation of new industrial technologies, the industrial institutes bore responsibility for the actual development of these technologies. In fact industrial institutes carried out all design work, right down to the level of organizing production and providing the scientific documentation for the operation of the production facilities. The industrial institutes represent a complex of technologically-oriented scientific-research organizations. The basic task of these institutes is to conduct

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--> scientific research, engineering, testing, and design work aimed at the creation of industrial facilities, installations, and technologies and to provide scientific documentation for the work of these facilities and installations. In the chemical industry there were about forty such institutes, working in contact with institutes of the Russian Academy of Sciences (RAS) and institutions of higher education. In the USSR, the profile of each industrial institute was determined on the basis of the product principle and was connected with the development of materials closely related by the technological characteristics of their production (e.g., polymerization plastics, polycondensation resins, polyurethanes, polyepoxies, phenolformaldehyde resins, polyacrylates and polyvinyl chloride, and plastics reprocessing). All of these institutes, which were the only ones in the country carrying out their particular type of work, were assigned lead functions and responsibility for the development and application of these materials. For example, the lead institute for polymerization plastics (now the Plastpolimer Joint Stock Company Institute) was and is responsible for the development and implementation of technologies for producing four types of polymerization plastics: fluoropolymers, polyolefins, polystyrenes, and polyvinylacetate plastics. For the 52 years of its existence, the institute developed and implemented technologies for a broad assortment of fluoropolymers for the domestic market, including for the aerospace, aviation, and defense industries. The institute has helped to ensure that domestic demand for fluoropolymers in the Soviet Union and now Russia has been fully met, making the exportation of such polymers a possibility. The institute has developed several notable technologies. For example, the institute developed a technology for producing thin layers of polyethylene in a tubular reactor. Five production units have been built on the basis of this innovation. It also developed a technology for producing high-impact polystyrene and another for producing acrylonitrile/butadiene/styrene (ABS) plastics by mass polymerization, both of which have been put into production at several plants. The institute has made substantial improvements in production processes created on the basis of technologies purchased from foreign firms. For example, the institute worked out a domestic technology for the dimerization of ethylene in butene and created two production units for obtaining butene as a comonomer in the production of linear polyethylene by the gas-phase method using equipment purchased from the Union Carbide company. For its development work, the institute used a test facility featuring an entire arsenal of experimental equipment. It has used the equipment in such processes as the polymerization of olefins. (including under high pressure), fluoromonomers, styrene, and vinylacetate and in the creation of polymer composites. The plastics institute has always worked closely with RAS institutes, including the Institute of High-Molecular Compounds, the Institute of Chemical Physics, the Institute of Petrochemical Synthesis, and the Siberian Branch Institute of Catalysis, and with higher education institutions, including St.

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--> Petersburg University, the Technological Institute, Moscow State University, and Kazan Chemical Engineering University. Current Condition of the Industrial Institutes Beginning in the 1990s, the situation was substantially altered for scientific institutes. The position of industrial research and development changed in the wake of the breakup of the USSR, various economic reforms (including a change in the management of production and the liquidation of Gosplan [the USSR State Planning Committee]), a change in the responsibility of ministries and the subsequent elimination of several ministries, the granting of independence to industrial enterprises, and the privatization of organizations and enterprises as well as strategic and tactical mistakes during the transition to a market economy. Under their new organizational structure, privatized industrial institutes were almost totally deprived of state financing. State affiliations were maintained only by Academy of Sciences institutes, several large scientific institutions which had performed most of their work for the defense complex before receiving the status of Russian Scientific Centers (a total of 56, of which 5 are in the field of chemistry), and a few industrial institutes. The industrial institutes were supposed to obtain work and finances through contracts with enterprises in their particular branches of industry. In the first year, these structural changes seemed acceptable. Freed from state guardianship, factories had an interest in receiving help from the industrial institutes in updating their technical documentation, retooling their facilities, analyzing marketing data, and creating new production capacities. However, the political and economic changes soon began to have a significant impact on the financial and economic condition of industrial enterprises. A general decline in production began in practically all industries, including the chemical industry; this resulted in a fall in plant capacity utilization, widespread nonpayment for products, and other well-known features of the crisis. The changes in political boundaries also contributed to the collapse of production. The breakup of the USSR resulted in the drawing of new borders, geographically isolating raw material suppliers from processing plants, the introduction of customs limitations, increases in the cost of energy and transportation, and the opening of the market to major foreign firms. All of these events, for which producers were unprepared, were detrimental to the work of factories and hindered the sale of their products. In the chemical industry, the collapse in production also was brought about by the orientation of the chemical industry towards the military-industrial complex, the tradition of using relatively cheap raw materials and human resources, the unjustifiably isolated locations of certain facilities, and centralized planning and distribution. Together these factors led to a sharp reduction in the production of goods and, consequently, to an extremely low rate of profitability. In some cases,

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--> factories and plants went bankrupt. In the chemical industry, which produces about 7 percent of all industrial output, employs 6 percent of the industrial-manufacturing personnel, and possesses about 10 percent of the total value of Russian assets, the level of production in 1996 was less than half of the 1990 level. The efficiency of many factories had fallen both in terms of energy consumption and specific expenditures in the cost structure. The proportion of worn-out equipment rose sharply, and profits fell to a third of the previous level. Many enterprises ended 1996 with losses. Utilization of production capacity fell to an average of 36 percent between 1991 and 1996, which naturally led to an increase in production cost and a reduction in market competitiveness. Finally, the lack of preparedness to respond to new financial and tax policies led to a shortage or complete absence of working funds at enterprises and a halt to research and development activities. Having no profits, factories could provide their industrial institutes with neither work nor financing. Given shortages in the funding of science as a whole and sectoral science in particular, industrial institutes found themselves in an extremely critical situation. Left without financing, the institutes began to cut personnel and lose test bases and facilities created with great effort. They were unable to update their equipment and instruments. Some of them ceased to exist or are on the verge of collapse. Stabilization Measures Undertaken by the Russian Government Issues involving the stewardship of science are now handled by the Ministry for Science and Technology, which was created to replace the Soviet-era State Committee on Science and Technology. The ministry prepares the appropriate government decisions on science and creates legislative proposals aimed at maintaining and encouraging scientific activity and protecting intellectual property. While basic science is given priority in the activities of the ministry, industrial institutes are also the focus of the ministry's concerns. The ministry works actively to improve the legal and economic climate for increased investment in science and technology. For example, it has modified financial and tax policies and created additional sources of financing for scientific-research organizations. The Ministry of Science also conducts a great deal of systematic work to help industrial institutes adapt to market conditions. The ministry has granted the status of State Scientific Center of the Russian Federation to a number of large institutes that work in fields of great importance to the state. This status provides them with financing, significant tax advantages, and organizational assistance in restructuring themselves and attracting foreign and domestic investors. Working with the Russian State Committee on Standards, the Ministry of Science has done much to create a system of certification for chemical products

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--> and accreditation for chemical plants. With the involvement of the State Scientific Centers, the ministry has established special organizations to improve the innovation activities of the industrial institutes. A great effort has begun on the accreditation of Russian scientific organizations. It has created industry associations to consolidate resources for carrying out complex projects—an effective means of attracting funds from enterprises to finance research. An example of such an organization is the Elastomers Association, whose members are producers of paint and varnish products. The ministry actively helps sectoral institutes to cooperate with foundations which might finance their work, including the Russian Foundation for Technological Development, the Chemistry for the Ecology Foundation, and the International Science and Technology Center. The ministry has introduced multi-channel financing through foundations accessible to any institute at the appropriate level of work. These organizations include the Russian Foundation for Technological Development, the Priority Research Foundation, and international foundations, such as the Soros Foundation and the International Science and Technology Center. It also has encouraged the participation of industrial institutes in international projects. By a special decree, nongovernmental scientific organizations have received equal rights to benefits granted by the state to facilitate the activities of scientific organizations. Measures Undertaken by Industrial Institutes There is a saying in Russia that saving a drowning man is a job for the drowning man himself. This saying underscores the idea that the solution to the crisis in which the industrial institutes find themselves will be determined in part by the enterprising steps that the institutes themselves take. Knowing their own characteristics, the nature of their work, and the scientific potential they have amassed over decades of work, the institutes often find interesting options for emerging from or easing the crisis. These options might be relevant only to a given institute, but sometimes they may be appropriate for other institutes as well. Consider the solution that the Research Institute of Polymerization Plastics (Plastpolimer Joint Stock Company, St. Petersburg) found to secure work orders after the cut-back of state financing and the termination of investments in the plastics sector. After reviewing its technological research priorities, the institute focused its efforts on developing new projects to improve technologies for producing plastics and polymer composites with enhanced properties or better economic characteristics. Given the temporary difficulties with investments in Russia, the institute proposed many projects to foreign firms for continuation on a contract basis. Leading firms from Europe, the United States, and now Asia have signed contracts with the institute to carry out these projects. In addition,

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--> the institute offered testing services to be carried out in accordance with the scientific programs of these foreign firms. Since the beginning in 1993, the offering of testing services and of scientific projects for joint continuation have enabled the institute to carry out $300,000 to $500,000 of work per year on a contract basis—at least one quarter of its annual volume of work. In just the past four years, the institute has initiated long-term contracts with such firms as 3M (U.S.), Dow Chemical (U.S.), Borealis, Neste Chemical (Finland), Akzo-Nobel and D M (Holland), and RSD (Austria). These contracts have enabled the institute, at least in part, to finance and maintain its scientific potential and to replenish its supply of instruments and equipment for research and technological work. In many cases, the terms of the contracts made it possible for the institute to retain the possibility of using the technologies it develops for other firms in its own enterprise. In recent years the institute has been able to license sales of fully developed technologies. It perfected several technologies by improving certain domestically invented stages in plastics production processes. For example, as a result of skillful selection of efficient new initiating systems at many plants, the institute has been able to increase the quality and assortment of thin polyethylene while simultaneously enhancing the economic efficiency of production. The institute also has begun to improve the technology for olefin polymerization by using new catalytic systems based on metallocenes. In addition to taking steps to secure contracts with foreign firms and profit from licensing sales, the institute has made other efforts to bolster its scientific potential. It has maintained the scientific council for granting academic degrees and its institute for training personnel at the graduate level. This effort to produce highly-skilled scientific workers also will enhance the institute's long-term viability. Together, these steps suggest that the institute will be able to overcome the crisis situation, positively influence the activities of the factories in its industrial sector, and ensure the competitiveness of domestically-manufactured products on the free market. What basic lessons have we drawn from the transition to a market system? First, industrial institutes should proceed with only those technological developments for which there likely will be a demand under market conditions. Second, they must carry out research and development work in a timely manner. If the time frame from project planning to commercialization is too long, a technological development can lose its novelty and, consequently, the interest of the market.