Московский экономический журнал 4/2019

УДК:
[338.246.2:001.895] = 111

DOI 10.24411/2413-046Х-2019-14008

Innovations
and prospects for the innovative development of the economy in the Russian
Federation

Mogilevich Ekaterina, Semenov Dmitriy, Financial University under the Government of the
Russian Federation, Moscow

Scientific advisor,
Senior teacher Moiseeva T.V.

Summary: The article reveals the essence of innovation performance and its economic implications which ensure a long-term steady growth of the nation’s welfare, labor productivity, as well as the country’s success in competing for major positions in global markets, as well as the necessary factors for ensuring and implementing the economic growth, creating  favorable environment conditions to innovation and correcting prioritization by areas of innovation policy support.

Key words:  innovation policy, innovation potential, labor productivity, employment, human capital, innovation pyramid, capital-labor ratio, economic growth, economic well-being, technological development.

The economic theory contains many fundamental works which show that
long-term economic growth is determined not only by an increase in production
factors, but also by technological innovations. Based on these works, four main
levers of influence on the long-term growth (15-20 years) of economic
well-being can be identified: the growth of employment; innovation
(productivity growth); improving the quality of labor (increase in labor
productivity); growth of capital-labor ratio (increase in labor productivity).
The term «innovation» comes from the Latin «novatio», which
means «update» (or «change»), and the prefix
«in», which is translated from Latin as «in the direction»,
if translated literally.  [1, P. 231.]

«Innovatio» — «towards change». The concept of
“innovation” first appeared in nineteenth-century research. The concept of
«innovation» received  a new
life in the beginning of the XX century in the scientific works of the Austrian
and American economist J. Schumpeter as a result of the analysis of
«innovative combinations», changes in the development of economic
systems. Schumpeter was one of the first scientists who, in the 1900s. put this
term into scientific use in economics. Innovation is not any  innovation, but only one that seriously
increases the efficiency of the current system. Now innovations are the main
possible levers of influence on the long-term growth of economic well-being for
Russia, since it is possible for three other of the four available to be significantly
limited: for employment — there is a rapid decline in the number of working-age
population; for the quality of the workforce 
— a deterioration of the situation is predicted as a result of a weak
state policy, for capital-labor ratio – because of  an outflow of capital, there is no stock on
the level of capacity utilization of the economy. The possibility of long-term
economic growth through innovations, especially in the countries that are not
leaders in innovations, has long been noted in the economic theory and
confirmed by macroeconomic data for Russia, China and South Korea over the past
20 years.

The main levers of growth of
economic well-being.
Economic theory contains many fundamental works showing that a long-term economic
growth is determined not only by an increase in production factors, but also by
technological innovations. A longer-term growth in economic well-being,
measured as GDP growth per capita, is determined in more detail by two factors
(see Fig. 1): employment growth and productivity growth. In turn, the growth of
labor productivity, based on the model of a long-term growth R. Solow (1957),
consists of three components: the growth of total factor productivity (Total
factor productivity, then TFP is a widely accepted paradigm for estimating and
forecasting long-term production dynamics) as changes in TFP reflect changes in
GDP that are not explained by changes in production factors); the growth of the
quality of the workforce (worker skills); growth of capital-labor ratio
(available capital per employee). The change in total factor productivity is
calculated as a change in GDP, not explained by changes in the factors of
production (labor and capital), and in the long-term horizon is mainly due to
innovations.

So, based on the factors determining the growth of well-being, and the ability to influence their changes, we can distinguish four main levers of influence on the long-term growth of economic well-being (see Fig. 1): the growth of employment; innovation (productivity growth); improving the quality of labor (increase in labor productivity); growth of capital-labor ratio (increase in labor productivity).

Sources of growth of economic well-being in Russia. Let us consider in more detail the current
possibilities of enhancing the economic well-being for Russia. The first lever
— the growth of employment of the population — is not able to provide a
significant increase in economic well-being due to the current and projected
dynamics of demographic indicators. Thus, the number of working-age population
is rapidly decreasing since 2006, and it is projected that by 2020 it will be
80.6 million people, which is about 10 million less than in 2006. [2; p 561]

The other three
levers — innovation, quality of work force and capital-labor ratio — directly
increase the productivity. Let’s look at the dynamics and absolute levels of
this indicator in Russia and developed countries. Labor productivity in Russia,
having shown a significant increase (by 60%) from 2000 to 2014, has practically
not increased in the last three years (see Fig. 2). At the same time, the lag
of Russia in labor productivity from most developed countries remains
substantial. Thus, the average labor productivity in the first ten of the
leading countries in this indicator is 2.8 times more than in Russia.

A significant lag in the labor productivity is
observed in all sectors, with the exception of the extractive sector of the
economy (see Fig. 3). Particular attention should be paid to the fact that
high-tech products, being the main driver of high performance in developed
countries, are the most problematic industries for Russia.

The third lever —
improving the quality of labor — is unlikely to be the source of a significant
increase in the labor productivity due to the significant inertia and moderate
dynamics of this indicator in the past few years. The main factors determining
the quality of the workforce are the education and experience of the working
population. Weak state policies in the field of education in the 1990s and the
impossibility of completely replacing the retiring experienced working-age
population only worsen the forecast for the dynamics of the quality of the
labor force in Russia.

The fourth lever —  an increase in
the capital-to-use ratio —  also does not
help to reduce a significant gap in the labor productivity, because the net
capital outflow since 2008 is in the range of 2–4% of GDP, or 10–20% of the
annual capital investment in economics [8; P.342-343]; the financial ability to support investments by the
state is significantly limited (for example, the total amount of the Reserve
Fund and the National Wealth Fund is 23% of the annual volume of annual capital
investments in the economy) [4, P.282]; capacity
utilization in the economy is approximately 67%, which is very close to the
maximum value over the past 20 years, equal to 73% (estimated, the load in a normal
operation can be up to 82%).

As it can be seen, the long-term growth of the economic well-being in
Russia, now due to the three examined levers — the growth of employment of the
population, the growth of the quality of the labor force and the growth of the
capital-labor ratio, is very limited. So, the only opportunity for a
significant increase in wealth for Russia now is innovations.

Economic growth through
innovation. The
possibility of long-term economic growth through innovations, especially in
countries that are not leaders in innovations, has long been confirmed in the
economic literature. It is argued that as soon as a society opens up for mutual
economic exchange with technology leaders, a fairly rapid process of reducing
the backlog through diffusion of advanced innovations begins to take place. It
is noted that this process serves as the main driver of the economic growth.

This statement has
been confirmed by macroeconomic data for Russia, China and South Korea over the
past 20 years (see Fig. 4). Thus, a substantial part of the economic growth of
25–50% in these countries accounts for the growth of the total factor
productivity, that is, mainly due to the product, process, marketing and
organizational innovations. [5; P.
121-155]

A significant increase in the total factor
productivity in Russia in the period from 1995 to 2009 was primarily ensured by
innovations in  the financial sector,
real estate operations, production of electrical, electronic and optical
equipment, production of rubber and plastic products, textile and clothing industry,
production leather products and footwear (see Fig. 5).

Thus, Russia has demonstrated a significant increase in total factor
productivity in most sectors of the economy over the last 15–20 years, and  a  significant lag in the labor productivity
indicates further opportunities for the long-term growth in the economic
well-being.The pyramid of innovation development. For the growth and
development of innovations in the country, it is necessary to have a favorable
environment for scientists, entrepreneurs and innovators. This widely
recognized and popular thesis is formulated in strategic documents of almost
all countries that have reached a high level of an innovative development. The
Russian state strategy of development, adopted in 2011, also pays a great
attention to the topic of providing a favorable innovative environment.

In this report we
want to go a step ahead  and, first, to
reveal in more detail the very concept of the medium — to show what elements it
consists of and how it is structured, and secondly, turn the thesis about the priority
of a favorable environment into quantitative analytical tool that could be used
in the  policy of innovations. We propose
to structure the concept of the environment in the form of a pyramid of an innovative
development, or shortly — the pyramid of innovations. This pyramid, by analogy
with Maslow’s pyramid, defines the hierarchical sequence of the needs of the
innovations environment. These needs, in turn, determine the main blocks of
state policy instruments and their priorities (see Fig. 6).

Please, also note that we have drawn  an analogy between the theme of innovations
and  that 
of  the football. You can find a
column entitled “Analogs with football”. The football allegory will help to
relate the highly specialized theme of innovations to the theme of the struggle
for the world leadership in football, one way or another understandable to most
of us, the football fever that has engulfed the world in recent decades looks
like an innovative fever, no state can afford to stay away. In football, as in
innovations, that player is good who 
does  not only scores, but scores
more than others, that team is good, which is not only famous for traditions or
names, but wins in the current championships and the country cannot be
considered a football country whose team has not participated in the final
games of the world championship for a long time — whatever the circumstances.  They prevented the game, but then how can we
win the World Cup? We have seen different  solutions all over the world, including inviting
a dear foreign coach, giving citizenship and money to high-class foreign
players. and so on, but no coach will teach a team that has no talented
players, no legionaries will be able to firmly establish the country in the
list of football powers, and the only way — difficult, long and ungrateful for
current football functionaries — is to create  good football traditions and facilities in the
country, that is a favorable  environment:
infrastructure, schools, clubs, game culture, fans, related business. And to
make it all better than in Brazil, Germany, Spain, Italy and so on.

In addition to providing a favorable environment, an important component
of innovations policy is also to direct financial support for research and
innovative projects. This type of policy is attractive for the state, because
it is concrete, measurable, promises fast positive results and makes available  a pool of «wards» to the state.
Creating the environment is a long process, poorly structured and not having a
specific recipe.

However, only by providing a favorable environment, the state can expect
direct support to be effective. In this case, firstly, the projects themselves
will appear that did not grow in the hostile environment, and secondly — the
channels of an effective distribution of funds. Thus, if the principle of the
pyramid is applied to the “environment” and “financing” blocks, the first one
should be placed in the “foundation”, and the second — on the “upper floors”
(see Fig. 6).

The state of innovations in
Russia. The development of
the innovative  sphere in Russia can be
divided into two stages. Until 2014, the state’s efforts were mostly aimed at
creating basic elements of the innovative infrastructure, developing the
professional competencies of the system’s participants, encouraging the
development of new promising markets and supporting innovative projects,
reorganizing the scientific sphere and developing state programs aimed at
development of high-tech sectors of the economy.  Now, there is a stage of rethinking the
functioning of the current system. In the framework of the execution of the
list of instructions D.A. Medvedev on the development of innovations from
09.08.14, the central projects for the development of the innovation system are
increasing the efficiency of government bodies, promoting the development of
companies with state participation and private business, further developing and
increasing the efficiency of the system of research and development  institutions. The priorities for the present
time  are the analysis of innovative
programs of state-owned companies, the assessment of R & D  institutions, investment in research and
improvement of the R & D base (research, development and civil engineering
work carried out by in the framework of a complex project), national projects
with a high innovative components. Among the main results, there are the development
of competences on the economic growth, the adoption of the Federal Law of
December 29, 2012 No. 273-FZ “On Education in the Russian Federation” the  launch of practice-oriented undergraduate
(applied  Bachelors ) programs, as well
as dual education programs, oriented on training in the conditions of real
production and taking into account modern professional standards.

The development of science (pyramid layer — knowledge) includes  the implementation of the reorganization of
state academies of sciences, the creation of the Federal Agency for Scientific
Organizations, the Russian Science Foundation and the Advanced Research
Foundation, the approval of the Program of the fundamental scientific research
in the Russian Federation for a long 
period, the  approval of the
Forecast of scientific and technological development of the Russian Federation
for the period up to 2030.

The infrastructure development (pyramid layer — infrastructure) consists
of the development of state programs of the Russian Federation “Economic
development and innovative economy”, “Development of science and technologies”,
“Development of the industry and increase of its competitiveness”, “Information
society” and a number of other government programs aimed at the development of
high-tech sectors of the economy; forming a system of development institutions
in the field of innovations, in particular, for the last five years, the
creation of Skolkovo (2010), the Association of Innovative Regions of Russia
(2010), the Fund for Infrastructure and Educational Programs (2010), the VEB-
Fund Innovations ”(2011), Russian Direct Investment Fund (2011), Industrial
Development Fund (2014), EXIAR OJSC (2014); adoption of a new version of the
Federal Law “On Economic Partnerships”, which formulates an agreement on
partnership management, within the framework of which  necessary conditions and procedures for the creation
of funds, including  the implementation
of venture investment, are determined.

The development of innovation territories (pyramid layer —
infrastructure) means financing for the creation in the constituent entities of
the Russian Federation of the infrastructure of innovative entrepreneurial
activity. In the framework of the Support Program for small and medium-sized
enterprises in the subjects of the Russian Federation for the period 2010–2015.
8.4 billion rubles were allocated for these purposes; formation of 26 pilot innovation
territorial clusters, for the provision of subsidies which provide 1.25 billion
rubles,  the creation of a special economic
zone «Innopolis», the formation of a cost recovery mechanism for the
creation of technology  and industrial
parks; implementation of pilot programs to stimulate the demand for innovative
solutions at the regional level, one of the programs is “Innovative
Procurement”, the goal of which is to increase the volume of procurement of
effective solutions by companies with state participation.

The export development and international cooperation (pyramid layer —
markets) embraces the formation of an export support system, including
high-tech products in the “one-stop” mode, allowing Russian exporters and
foreign buyers to electronically fill in and submit primary documents, the
formation of mechanisms for cooperation in the field of innovations  with the BRICS countries, organizing an open annual
forum for all parties interested.

The development of innovative business (pyramid layer — financing of
innovative companies) includes the  creation of the Agency for Strategic Initiatives
to promote new projects,  the approval of
the “roadmap” in priority areas of technological development,  information technologies, photonics, the
production of composite materials, biotechnology, engineering and industrial
design, the introduction of innovative technologies in the fuel and energy
sector, the  approval of the innovative
development program of 60 largest state-owned companies, the  adoption of a sectoral plan for import
substitutions in industry, the legislation on the best available technologies
and the introduction of modern technologies has been predominantly formed [1, P. 231.]

Comparison of innovative
development and the potential of Russia with the countries — leaders and
“geeks” of innovation.
To analyze the innovative development of Russia, we need an international base
for a comparison. In order to get maximum information from such a comparison,
we are interested in putting Russia on a par with the following groups of
countries: with the countries that are leaders of innovations in order to know
exactly what is good, what worked and works, with those  ones similar to ours in size and structure of
the economy, so that the conclusions are applicable, and with those ones  included in the list of leaders relatively
recently, so that the conclusions are relevant.

We applied the
following six criteria for selecting countries for comparison: current
leadership in recognized international innovation development ratings (we took
into account our position in the four largest innovation indices — the Global
Innovation Index (GII), the Global Competitiveness Index (GCI), The Bloomberg
Innovation Index (BII) and Forbes World’s Most Innovative Companies (FWMIC). In
addition, we only considered OECD member countries and partners (40 countries
altogether), because we want to compare Russia with economically developed
countries).  The market is up in the ratings,
made over the past five years (for example, China made a spurt up by sixteen
places in the GII index (from 43 in 2010 to 29 in 2015), Great Britain — 12
places, Ireland — by 11 places, Italy — by 7 places, the USA — by 6 places;
Russia, by the way, made a breakthrough by 16 places — that is, more than all
developed countries and BRICS countries. Our country showed  an  active participation in international trade in
intellectual property. We take into account the trade turnover, that is, import
plus export, based on the fact that countries with a greater turnover are included
in the global innovative 
environment,  the large size of
the economy — nominal GDP in US dollars. This criterion allows us to choose for
comparison with Russia only large-scale economies that have a corresponding set
of problems that are not driven by small countries, including the manageability
of the economic and financial system, often the size territories, population,
etc.,  the three largest economies  — the USA, China and Japan, Russia — on the
9th place, high level of economic development: nominal GDP in US dollars per
capita, Russia — at a modest 58th place,  a certain dependence of the economy on the
rent received from the export of natural resources. We also selected three
additional countries that were not included in the final list because of the
aggregate of the previous selection criteria, but, nevertheless, interesting
for us from the point of view of innovative development experience in
conditions of   the natural rent. These countries are Canada,
Norway and Chile.

The selection
procedure and the final list of countries are shown in Figure 7. In each
subsequent list, the countries from the previous list change places and are
partially eliminated, reflecting the accumulated rating on the totality of the
criteria. The final list includes 15 countries for comparison — from the USA to
Chile — and the list turned out to be prioritized, that is, the policy pursued
in the United States is more interesting than the policy in Switzerland,
Switzerland is more interesting than the United Kingdom, and etc.

Such a technique
allows to judge whether a state or a lot of resources are invested by the state
in each of the layers of the pyramid, since this can be said only in relation
to other countries. These results can be demonstrated in the form of a “heat
map”, where top-down countries are the leaders of innovation (in descending
order), and from right to left — the layers of the pyramid (from the foundation
to the top), and the values are painted in the color range from green
(“excellent”) to red (“losers” with twos and ones).  Figure 9 shows the results for 15 countries of
our target list and Russia.

Each country has its own
peculiarities, but in general the legitimacy is obvious: almost all countries
of the targeted list are “excellent students” in the layers of institutions and
markets, “good” in the layers of knowledge, culture, infrastructure and
financing of fundamental research, but remain committed «losers» in
the layer of financing commercial projects. That is, countries — leaders of
innovation are leaders of the environment but are far from the top of the list
in terms of financing commercial projects. Interesting exceptions are South
Korea (“five” for state financing of commercial projects) and China (low marks
for fundamental layers).

In Russia, which places in the ratings according to the relevant
indicators are presented in the bottom line of the “heat map”, the situation is
the opposite: our country is an absolute honored student of targeted state financing
of commercial innovative projects, but at the same time has an un-innovative
environment.

The main directions of
innovative policy in Russia and innovations as a lever of influence on the
economic well-being of the Russian Federation. Now innovations are the main possible lever of
influence on the long-term growth of economic well-being for Russia, because
the possibilities of the rest are significantly limited. In recent years, the
basic elements of the national innovations ecosystem have been formed in
Russia, the implementation of large-scale transformations continues, but it
should also be noted that the results achieved do not meet expectations.

For Russia, in order to reach the world level of innovative development and compete with the leading countries, it is necessary to reform the current innovations policy,  which must be carried out in accordance with the primary tasks: first, the main task is to optimize the innovations management system  to improve the coordination of innovations politicians, secondly, the development of common agreed cross-cutting priorities of innovative  policy, thirdly, the elimination of the reasons for the “openness” of the innovations system (in terms of increasing the return on R & D costs and increasing the quantity, availability and competitiveness of ideas and inventions), fourthly, the introduction of a unified monitoring system of the innovative system, including measures for detailing and introducing a system for monitoring innovations.

List of sources

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