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EXECUTIVE SUMMARYCONTENTS

04. Can high-tech hubs help to modernize Russia? BY GEORGE GOGOlEV

08. A strategy for the development of Russian technoparksBY ANdREI ShpIlENkO

16. How to create a favorable environment for technology hubs in RussiaBY RUSSIAN MINISTRY Of TElECOM ANd MASS COMMU-NICATION

18. Can Russia become an innovation leader?BY OlEG BUklEMIShEV

22. Case study: Three centers for Russian innovation. #1: Skolkovo Innovation CenterBY AlEXEI SITNIkOV

23. #2: Bauman Moscow State Technical UniversityBY EVGENY STAROzhUk

24. #3: The Troitsk TechnoparkBY SERGEI ShARAkShANE

27. Russia’s long-term transition to an innovation economyBY kENdRICk whITE

28. Top 10 recommendations for Russian innovation entrepreneursBY kENdRICk whITE

28. Editor’s picks

New efforts to modernize the Russian economy have taken on even greater significance since the implementation of Western sanctions and recent volatility in global energy markets. As a result, a renewed focus on technological in-novation could be one way to diversify the Russian economy and insulate it from external economic shocks. Most im-portantly, the commercialization of new innovations could provide a long-term boost to Russian economic growth and consolidate gains for Russia’s emerging middle class. The federal government, which has always played an im-portant role in the development of Russia’s innovation sec-tor, now faces a number of critical strategic questions of how to develop regional innovation ecosystems in a time of

increased isolation from the West and decreased funding for science.One major initiative to bridge the innovation gap has been to channel resources – both financial and administrative – into the creation of new technoparks, high-tech hubs and innovation clusters.In the report below, we highlight the early successes and challenges of Russia’s modernization drive, with an em-phasis on the role of the state in guiding and supporting innovation efforts at the local level, primarily through the creation of new technoparks. In addition to highlighting several case studies of Russian innovation at work – includ-ing the Skolkovo Innovation Center in Moscow – the report analyzes the most important factors in Russia’s long-term transition to an innovation economy and provides multiple steps to help Russia realize its full potential for innovation.

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INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015

Sanctions and the growing isolation from the West continue to

infl uence the development of Russia’s innovation economy, at

least in the form of the deterioration of the investment climate

and increased economic instability. Mo dernization of the Rus-

sian economy, which is now cut off from Western foreign loans

and still heavily dependent on oil and gas revenues, becomes a

matter of survival.

In this report, we decided to look closely at the hubs where

Russian innovation is being developed today. In doing so, we

are trying to make sense of the most recent modernizing initia-

tives and sort out the vast array of new technoparks, high-tech

hubs and innovation clusters.

The co-authors of our report are on-the-ground practition-

ers and leading thinkers of the Russian innovation economy.

George Gogolev of the Russian Venture Company (RVC), a

joint-stock company created by the Russian government with

a mission to help set up Russia’s own venture capital industry,

writes about the challenges of transitioning to new models of

innovation in the country whose industry still largely relies on

old internal Soviet R&D supply chains.

Andrei Shpilenko of the non-profi t Association of Science

Parks in High Technology gives a detailed overview of Rus-

sia’s technology parks and provides a briefi ng on the newly

adopted framework documents in this fi eld. His analysis is fol-

lowed by a commentary from the Russian Ministry of Telecom

and Mass Communications, which sheds light on the Russian

government’s priorities in creating favorable environment for

technology hubs.

© Russia Direct 2015 All rights reserved.No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying, or by any information storage and retrieval system. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of Russia Direct.

FROMTHE EDITOR

Making sense of Russia’s modernization initiatives

Eugene Abov Chairman, Russia Direct, Deputy Director General, Rossiyskaya Gazeta Publishing House, Publisher, Russia Beyond The HeadlinesJulia Golikova Director for Development, Russia Direct, Deputy Publisher, Commercial and Foreign Partnership Director, Russia Beyond The HeadlinesEkaterina Zabrovskaya Editor-in-Chief Pavel Koshkin Executive Editor Dominic Basulto Executive Editor, U.S. Ksenia Zubacheva Managing Editor Alexey Khlebnikov Senior Editor Cameron Judge-Becker InternOlga Ivanova Publisher, Business and Product Development Director Maria Shashaeva Deputy Publisher, Circulation, Digital Strategy and Operations Antonina Osipova Marketing Director Ekaterina Olkhova Consumer Marketing and Promotion Director Helen Borisenko Research Manager Anna Sergeeva Account Manager, NY Olga Guitchounts Account Manager, DC Andrey Shimarskiy Art Director Andrey Zaitsev Associate Art Director Nikolay Shiyanov Designer Niyaz Karim Designer Nikolay Korolev Photo Editor Ilya Ovcharenko Production Designer

Ekaterina Zabrovskaya, Editor-in-Chief

Write to usSend an email to:

[email protected] for general comments, subscription and distribution questions;[email protected] for your submissions, article proposals, topic suggestions, and content-related comments;[email protected] for sales and advertising.

In addition, Oleg Buklemishev of Moscow State University

gives a highly critical assessment of the current eff orts to mod-

ernize the Russian economy. He insists on three alternative

ways to capitalize on Russia’s advantages in order to transform

the economy and create new breakthroughs in the fi eld of

innovation.

This Russia Direct report also contains three case studies of

Russian high-tech hubs and specifi c recommendations for

Russian innovation entrepreneurs from Kendrick White, a U.S.-

born entrepreneur with more than 20 years of investing and

management experience in Russia.

I hope you will enjoy this report. Please do not hesitate to send

me an email at [email protected] if you have

any questions or suggestions.

We value your feedback, especially as we are preparing to

launch a paid subscription model for all of our reports. For

more information about the Russia Direct paid subscription

model, please go to our website www.russia-direct.org.

RUSSIA-DIRECT.ORG

32 -

OLEG BUKLEMISHEV is an associate professor in the department of economics at Moscow State University. From 2000 to 2004 he was an assistant to the prime minister and

deputy director of the secretariat of the prime minister of Russia. From 2005 to 2012, he was chief analyst and member of the board of directors at NGO MK Analytics. He is author

of the book, “The Eurobond Market” (1999).

GEORGE GOGOLEV is head of the Innovation Ecosystem Development at Russian Venture Capital, a state funded agency which fi nances developments in Russian high-tech. He previously served in sales, marketing and PR positions in various fast-growing tech companies in Russia. Gogolev is also an active investor and holds a Ph.D. in geography from the Russian Academy of Sciences.

SERGEI SHARAKSHANE is the spokesman for the Russian Academy of Sciences (RAS). Holding advanced degree in mathematics and philosophy, he spent 40 years working in journalism

and served as an assistant to the Press Minister in two ministries during the Soviet Union. In addition to his work as a spokesman to the RAS, he is also a member of the expert council to the ‘A Just Russia’

party faction of the Russian State Duma.

ALEXEI SITNIKOV is the vice president of Institutional Development and Executive Secretary of the Board of Trustees of the Skolkovo Institute of Science and Technology. Prior to joining Skolkovo, Sitnikov served as vice president for operations and development at the New Economic School in Moscow and held the position of program coordinator for Russia at the Freeman Spogli Institute for International Studies at Stanford University.

EVGENY STAROZHUK, Ph.D., is provost of economics and innovation at Bauman Moscow State Technical University. An expert in fi nancial management and credit who

attended the Russian Federation Financial Academy, Starozhuk served as deputy director of the N.N. Andreyev Acoustics Institute (2007-2009). He most recently served as general

director of the Atoll Research Institute.

ANDREI SHPILENKO, Ph.D., currently serves as the director of the non-profi t Association of Technoparks in High Technology and chairman of the board of the Youth Innovation Center. Shpilenko is an expert and innovator in youth entrepreneurship, startup businesses, and partnerships between the public and private sectors.

KENDRICK D. WHITE is the vice rector for Innovation at the Lobachevsky State University of Nizhny Novgorod (UNN) and the director of UNN’s Technology

Commercialization Center. He is also the founder of Marchmont Capital Partners, LLC, and a U.S.-born entrepreneur who has built unique know-how in commercializing

early stage, high-tech investment projects over more than 20 years of investing and management experience in Russia.

AUTHORS


Can high-tech hubs help to modernize Russia?

The late 20th century has seen a major evolution of the innovation model from structured vertical corporate research and development (R&D) sys-tems to distributed startup ecosystems.

As the corporate model gradually dissolved in the 1980s and 1990s due to in-creased global competition and falling margins, venture capital fi rms and start-ups have started taking over this niche.

However, the effi ciency of the new model depends on the critical mass of knowledge, business, capital and proper governance concentrated in certain geographical regions.

GEORGE GOGOLEV

Faced with numerous economic challenges, Russia needs a new strategy to boost its innovation development.

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The most successful ecosystems in the U.S., for example, developed around the best universities, in-cluding Stanford, MIT and Harvard.

These schools provide a good interdisciplinary knowledge base, as they host a diversity of schools (Science, Arts and Humanities, Medical, Law and Business, Engineering) and boost the ecosystem around them by attracting and providing the best human capital on the planet.

HOW RUSSIA TRIED TO KEEP UP WITH THE REST OF THE WORLD As the world was transitioning to new models of in-novation, Russia after the collapse of the Soviet Union was going through a major political and economic cri-sis and therefore was unable to go through a smooth transition to the new model.

The industry largely still relies on old internal Soviet R&D supply chains and is highly controlled by the

government. Embracing open innovation is therefore a grand challenge.

Moreover, Soviet universities for the most part were not involved in science and R&D activities, as R&D was done in vertically integrated applied research centers, and science was developed in the Russian of the Academy of Sciences.

As a result of this division, universities are dis-tanced from the industry as well as from the process creating the needed knowledge base to feed intel-lectual property (IP) into the innovation ecosystem. They are currently in the process of learning to do large volumes of scientifi c research and corporate R&D, but embracing entrepreneurship and the im-portance of building innovation ecosystems is still a distant concept.

If we take a look at the current development of regional innovation in Russia, we will notice that Moscow is the only region that has a more or less complete set of institutions to grow a proper ecosys-tem. This is a result of the centralized nature of all the

Technoparks are built as a catalyst

for the development of innovation

clusters. In all cases the main

purpose of technoparks lies in

creating favorable conditions for

innovative companies through

building the environment and

infrastructure they need.

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economic activity in the country. Other regions with high potential are St. Peters-

burg, Kazan and Novosibirsk, but they all lack criti-cal ingredients, such as venture capital and anchor corporations of global scale.

All of the existing regional innovation ecosystems are a legacy of certain Soviet, and in most cases, even tsarist science and industrial centers. Modern Russia, however, started moving in this direction rather early, opening the fi rst technopark in Tomsk in 1990 (during the Soviet era), and the program con-tinued through the 1990s.

Most of the early technoparks were associated with universities. In the mid-1990s, the government started an industrial park program bringing innova-tors closer to manufacturers. However, most of those early initiatives were not successful as they were ini-tially taken as a way to get additional state subsidies. This point was proven by a state accreditation of ex-isting technoparks completed in 2000.

THE CURRENT INNOVATION MODEL IN RUSSIA

The new wave of ‘modernization’ under president Dmitry Medvedev in 2008-2012 brought a new wave

of innovation ecosystem initiatives as well as new ap-proaches to creating techno and industrial parks.

A number of development institutions were cre-ated including Russian Venture Capital (a state fund of funds), Rusnano (a late-stage nanotechnology in-vestment fund) and Skolkovo (an initiative to create an innovation ecosystem from scratch near Moscow). These and other institutions started accumulating suffi cient expertise on how to develop innovation ecosystems and advise all levels of government and management teams on these issues.

This triggered a new wave of creation of tech-noparks of a diff erent sort, which were actually aimed at modern startups. One of the biggest pro-grams was run by the Ministry of Telecom and Mass Communications, which co-fi nanced the creation of 12 technoparks with regional authorities all over the country.

A year and a half ago, Russian Venture Capital commissioned a research project to Ernst & Young to study the current status of technoparks and busi-ness incubators. This study showed that Russia had slightly over 100 functioning technoparks and 110 business incubators. Most of those are owned by the state and a few are private. In terms of effi ciency, they are in general still far from global standards.

Statistics from the National Business Incubator As-sociation (NBIA) and European Business Network (EBN) are fairly similar and measure success rate by survival of companies after a certain period of join-ing a technopark or graduating from an incubator program.

Usually the survival rate is 85 to 90 percent after three years. Most of the Russian technoparks showed a survival rate of 27 percent. The top 5 percent of Russian technoparks, however, performed similar to global standards.

Diff erences between top performing and average technoparks were mostly in the rigor of the selec-tion process, the presence of independent admission committees and the services they provided to com-panies. The best admitted only 9 percent of appli-cants (compared to an 11 percent average in Europe), had independent admission bodies and provided ex-tensive consulting services to their residents.

Others mostly considered technoparks to be a real estate business, admitted 37 percent of applicants and had no independent admission panels. This was partly stimulated by KPIs they got at the regional and state levels, which did not stimulate long term growth, but required to show either number of resi-dents or workplaces created.

27%The three-year survival rate for most of Russia‘s technoparks.

Novosibirsk. Akademgorodok.

In the laboratory of the

Institute of Theoretical and

Applied Mechanics, Siberian

Branch of the U.S.S.R.

Academy of Sciences. 1978 TASS

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Russia Direct Report “The Future of Russia’s Innovation Economy.” Download at http://www.russia-direct.org/archive.

ALSO READ

Novosibirsk AkademgorodokAkademgorodok is a great example of the current state of the development of regional innovation ecosystems. Built in the middle of the Cold War as an isolated center for the most active scientists, Akademgorodok has long been seen as a success of the Soviet academic system. Even when faced with the economic turmoil of the 1990s it did not lose its charm, being located in a beautiful pine forest on the Ob’ river and populated by the children and grandchildren of some of the best mid-20th century Russian scientists. Some of them made good progress building IT companies, some made great high-tech niche pro ducts, but no large fi rms materialized. However, they created a critical ingredient — a generation of locally bred entrepreneurs. They pushed the local government to build a technopark, created modern prototyping facilities and started growing the local innovation ecosystem on the fertile soil of the highly educated population of Akademgorodok. Yet the progress has been terribly slow and it is rather clear why: Most of the city is still run by the Russian Academy of Sciences, which is distancing itself from any possible connections with real businesses. The local university had originally been built as a school to supply basic researchers to the Academy and it still sees itself this way, being wary of what is going on in the outside world and skeptical of what outside businesses want to do with their grads. Global companies love to place their R&D centers here and use the abundant high quality human capital of the region, but they are not willing to open up any markets or engage in local merger and acquisition deals. With the absence of major economic activity, local angel investors and venture capitalists are virtually nonexistent. This is a case of a region which has potential to become visible in the global landscape, but like many Russian innovation ecosystems, is handicapped by its past.

Lately best practices have been proliferating in the system and a lot of the existing and new technoparks are improving their management and strategy. Most of the technoparks and incubators are still either connected to or situated next to universities and are forming a larger innovation ecosystem.

There are only a handful of universities in Russia that have a chance of becoming global innovation hubs, and it is essential to develop the right services, governance and functionality around those.

If we look at universities with the potential to drive the local ecosystems in Russia, they too lack criti-cal ingredients either in leadership and governance, available land for development around them or in the complexity of the research and education they do.

For example, Moscow State University, being the highest internationally ranked Russian university, lacks an engineering school and has almost no art and design.

Moscow Institute of Physics and Technology, which is currently actively developing an entrepreneurial community driven by its successful alumni and ranks the highest among Russian schools in global science, technology, engineering and math (STEM) ratings, has no business, arts or medical schools. Therefore, it can only play a major role in IT and materials.

In order to transform any of these schools into real drivers for the knowledge economy and globally competitive innovation hubs, it is crucial to dramati-cally improve governance and leadership, diversify education and science and embrace high tech busi-nesses, global or local, willing to work in close prox-imity to these schools. As of now, the necessary vi-sion is only being formed and the current leadership burdened by the Soviet experience is not ready to dive into the new reality.

INITIATIVES FOR 2015 AND BEYOND

Faced with the challenge of global competitiveness, Russia is currently launching important initiatives, such as the Russian government project “5-100.” It aims at boosting the international ratings of Russian universities. Another one is the New Technological Ini-tiative, which forecasts the growth of future markets and develops ways in which the nation can play a role in those.

These initiatives are pushing the system in the right direction and bringing positive change. However, still more focus is needed on certain high potential ge-ographies to build self-sustaining innovation growth engines of a global scale. SL

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A strategy for the development of Russian technoparks

Until relatively recently, Soviet science cities were rightly considered by russian legislators as highly desirable in many industries and sectors. the technoparks that replaced them, with rare exceptions, lag far behind simi-

lar structures abroad both in terms of creating the best environment for innova-tive startups and commercializing the output of resident companies.

What is being done to effectively treat the afflictions of russia’s homegrown technoparks? What are the results so far, and what can we expect them to de-liver?

Why does Russia need technopaRks?

As international experience shows, every technopark in the developed world is created with specific goals in mind. one of the main goals is to generate scientific breakthroughs and knowledge. to achieve that at one site requires a combination of fundamental and applied science with cutting-edge research centers, either industry-specific or diversified across sectors.

In some cases, the goal is to create small innovative enterprises, thereby pro-viding regions with new jobs.

One of the key questions here is: Why create technoparks in the first place?

Andrei ShpilenkO

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In Russia today, 97

percent of tech-

noparks are in the

embryonic stage,

and are hence at

risk of being nipped

in the bud.

Russian economist Alexander Auzan

“ W h e n p e o p l e t a l k a b o u t t h e “ i n n o v a t i o n s t o r m , ” i t s h o u l d b e r e m e m b e r e d t h a t f o r w i d e - s c a l e i n n o v a t i o n s t o e m e r g e , d i f f i c u l t c i r c u m s t a n c e s a r e n o t e n o u g h . Y o u n e e d a s o u n d i n s t i t u t i o n a l e n v i r o n m e n t . “

Lastly, technoparks are built as a catalyst for the development of innovation clusters. In all cases, ho-wever, the main purpose of technoparks lies in cre-ating favorable conditions for innovative companies through building the environment and infrastructure they need, and providing resident companies and research organizations with a host of benefi ts and privileges.

THE GROWTH OF RUSSIA’S TECHNOPARKS

The new technoparks are all rather reminiscent of So-viet science cities. And it is no coincidence that the fi rst wave of Russian technoparks, built in the early 1990s, appeared as part of technical colleges and public research centers in academy towns and sci-ence cities.

Unfortunately, a good number of these parks are no longer functioning — a sad consequence of the lean years when science, innovation and industry were all pushed to the periphery of government atten-tion. Nevertheless, the goals they set and conceptual building blocks they created are one of the ingredi-ents required to turn technoparks into healthy living organisms modernized and adapted to the specifi cs and challenges of today.

Hence, the objectives of today’s technoparks also include diversifying the economy of the Russian Federation, changing its structure, developing pro-duction in high-tech areas, and raising national self-esteem. Technoparks are also the basis on which to build future industrial and innovation clusters.

Today, all bets are on clusters to create the environ-ment for the “new industrialization.” To meet these expectations, every cluster must have a core and a catalyst for development in the form of a technopark as a generator of new projects and new kinds of products. Without such a generator of ideas, clusters risk becoming regressive manufacturers of a single product. As the fi rst attempts at cluster develop-ment show, clusters must always aim to improve the competitiveness of its member companies and their products in terms of R&D. Doubtless that is also the prerogative of technoparks.

We are talking here about fairly advanced tech-noparks. As the experience of the world’s best technoparks demonstrates, it takes six to ten years to get a technopark up and running, i.e. to provide the requisite technical facilities and make the park attractive to businesses. That implies creating a technological, engineering and institutional infra-structure, and, more importantly, implementing mechanisms and programs to make doing business in technoparks better than anywhere else. Full rec-ognition takes about 30-40 years of operation at full capacity. Whereas many technoparks outside Russia have celebrated at least their twentieth anniversary, inside the country only three such organizations are more than 20 years old, while one is 10-20, a hun-dred are 3-5 years old, and sixty-fi ve are 1-3 years old. The upshot is that in Russia today 97 percent of technoparks are in the embryonic stage, and are hence at risk of being nipped in the bud.

THE GOVERNMENT’S ATTEMPTS TO DEVELOP TECHNOPARKS

In the mid-2000s, a new impetus to set up tech-noparks came from the adoption of the “Concept of long-term socio-economic development of the

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Russian Federation to 2020.” This document identi-fi ed, among other things, the need to implement a national system of innovation, providing for the crea-tion of technoparks. In the same period, a substantial amount of public money was allocated to the estab-lishment of technoparks under a series of dedicated programs, including a comprehensive program to create technoparks in Russia in the sphere of high-tech, a similar program under the auspices of the Ministry of Economic Development, and a program under the Ministry of Education and Science to de-velop innovative infrastructure at universities.

Consequently, in the period 1990-2015, Russia saw the establishment of 179 techno parks. The record year was 2013, when 200 were registered.

RUSSIA’S MOST SUCCESSFUL TECHNOPARKS

The best Russian technoparks are not far short of world-class in many categories, including availability of infrastructure for launching innovative startups and range of services on off er.

The most famous example in this regard is the high-tech park in Khanty-Mansiysk Autonomous Okrug-Yugra, which formed the basis for the Regional Engi-neering Center. Many interesting startups have been

brought to fruition at the technopark in Novosibirsk Academy Town in Siberia and at Zhigulevsk Valley, a technopark in central Russia in the city of Samara.

Among the country’s most developed tech-noparks that fully meet their stated objectives are the IT park in Kazan, Mordovia Techno Park, Tomsk Nanotechnology Center, and Sarov Techno Park, which is home to a supercomputer simulation cent-er. The multisectoral Technopolis Moscow is also developing rapidly.

WHAT IS HINDERING THE DEVELOPMENT OF TECHNOPARKS?

The examples given so far achieved success mostly “in spite of” rather than “thanks to.” Post-2013 the num-ber of techno parks in Russia began to decline, a trend that still persists. The main reason was the lack of an established legal framework defi ning the goals, tasks and principles of technoparks, as well as their role in the national system of innovation.

There is still no precise system of fi nancing and government support measures, or criteria for evalu-ating performance. The attempts to overcome this regulatory backwardness have largely come about through the persistent eff orts of the Association of Technoparks in the sphere of High Technologies.

© ALEXANDER KRYAZHEV/RIA NOVOSTI

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Moscow

Saint Petersburg

Perm

Kazan

Yekaterinburg

Barnaul

Krasnodar

Nizhny Novgorod

Rostov-on-Don

Ufa

Vladimir

Novosibirsk

65%

11.7%

5%3.3%

3.3%1.7%

1.7%

1.7%1.7%

1.7%

1.7%1.7%

Top 5 IT companies, data for 2014

% - share of all IT companies in Russia located in a given city

$2.4billion

$1.6billion

$802.2million

$675.6million

$591million

4,241employees

5,998 employees

2,712 employees

2,610employees

2,747employees

National Computer Corporation

LANIT group of companies

Technoserv Softline ITG Source: Association of Innovative Regions of Russia/RIA Rating

0.69 0.350.410.48

The level of innovation activity by region

STEPS TO IMPROVE THE SITUATION

Taking into account the best Soviet and foreign ex-perience, combined with modern approaches to set-ting up technoparks, the past two years have seen the drafting and adoption of a number of framework doc-uments in the fi eld of technoparks. They include the “Requirements for technoparks for their infrastruc-tural facilities, their activity and operation, and the list of services and their provision to techno parks in the sphere of high technologies,” and the “Guide-lines on the activity, goals and tasks of technoparks, and the composition, management, property, equip-ment, land plot, engineering structure and range of services of technopark residents.”

At the end of last year and the beginning of 2015, public consultations were held on drafting a new na-tional technopark standard, which is expected to be approved by late June and published as the “Tech-nopark Requirements” national standard (GOST).

Since 2014 there have been eff orts to campaign for voluntary accreditation of technoparks. Accredita-tion means that a technopark contains all necessary infrastructure to promote innovative business, and implements cost-saving programs and measures. It sends an important signal to startups and venture companies, too. Accreditation helps the managing company of a technopark state its case more con-vincingly in the dialogue with local heads in the joint

resolution of issues such as providing tax breaks and creating business incubators, thereby eliminating any shortcomings revealed during the accreditation process.

Not all technoparks that apply undergo accredita-tion. It is a matter of principle for our Association that the ranks of technoparks should not contain “simulacra” that allow federal agencies and regional authorities to paint an overly rosy picture of prosper-ity in the fi eld.

COMMERCIALIZING NEW INNOVATIONS

If all illusions are put to one side, the problem of in-novation commercialization looms large. The govern-ment allocates quite considerable funds to the devel-opment of technoparks, but recipient institutions do not always utilize them eff ectively.

This practice harbors two extremes that eff ectively nullify the eff ect of investing in innovation. At one extreme, specifi c innovation projects are given pin-point support, for example, through grants. But this support is not evenly distributed across all stages of the chain of commercialization in the project lifecy-cle. As a result, certain stages remain “blind spots.”

More often than not areas such as mentoring, as-sistance in prototyping and business acceleration are left out, and they represent the key services

The map shows the

level of innova-

tion in Russia by

region and provides

an overview of

where the most IT

firms are located

(with 65 percent

of them located in

Moscow). The main

characteristics of

the top 5 Russian

IT companies are

provided below.

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that must be provided to innovators. At the other extreme, support institutions, lacking suffi cient re-sources, try to maintain a number of additional busi-ness streams over and above their basic activity of supporting innovative startups. As a result, the funds are squandered. For instance, Russian Venture Com-pany (RVC), rather than focus squarely on creating venture capital funds, additionally undertook expert, consulting and other projects. Thus, we have yet to build an eff ective system of project support at all stages of the life cycle with the necessary concen-tration of resources at each stage.

This is one of the stated functions of technoparks, but very often poor goal-setting forces their man-aging companies to focus on generating revenue, which is most readily achieved by renting out fl oor space. It turns out that Russian technoparks have prospered primarily thanks to that practice.

But leasing should not be a technopark’s main ser-vice. The chief objectives of their managing compa-nies should be to increase the amount of revenue and the number of innovative companies and jobs generated by technopark residents.

The eff ectiveness of managing companies should be properly assessed. If up to 70 percent of revenue is made up of leasing payments, it means that the technopark in question is failing to meet its intended purpose, since at least 50 per cent of the managing company’s revenue structure should come from pro-viding services to residents and managing projects.

In order to ensure such revenue structure, tech-noparks should have their own business incubator, prototyping center, laboratories, engineering center,

etc. By no means do all Russian technoparks have such technological infrastructure at their disposal.

In addition, it is impossible to imagine a foreign technopark without venture capital funds. But Rus-sian technoparks have virtually none. Shared know-ledge centers at technoparks are few and far be-tween.

THE ROLE OF THE STATE IN INNOVATION DEVELOPMENT

It is inevitable for questions to arise about the role of the state in the development of technoparks. Today its involvement in this process leaves a lot to be desired. And that is despite the fact that public investment so far in the development of technoparks currently totals 54 billion rubles, or about $1 billion. About 60 percent of this sum has been spent on Skolkovo. The Rus-sian Ministry of Communications spent 25 percent of these funds as part of its now implemented core program, the Ministry of Education and Science 17 percent, and the Ministry of Economic Development 1 percent. The investment is more than considerable, which, however, cannot be said of the eff ect it has produced.

Now the situation has slowly begun to change. The resolution of the government “On the selection of constituent entities of the Russian Federation having the right to receive state support in the form of sub-sidies for reimbursement of expenses on infrastruc-ture for industrial parks and technoparks,” adopted on October 30, 2014, identifi ed four key departments dealing with the creation and development of tech-

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noparks. They are the Ministry of Economic Devel-opment, the Ministry of Education and Science, the Ministry of Communications (responsible for high-tech technoparks), and the Ministry of Industry (in charge of industrial technoparks). Thus, the fi rst step has already been taken towards creating an entry point inside the government for resolving issues with technoparks and submitting and discussing propos-als for improving effi ciency.

The next step should be to set up a single authorized body at the level of the government to coordinate the activities of the federal center and the regions in the creation and development of technoparks. The absence of such coordinator with broad powers is hampering the development of program-based actions, as well as the formulation and approval of budgetary expenses, including at the level of Russian Federation constituent entities.

It is also necessary to overcome the departmental fragmentation on matters pertaining to technoparks. It must be said in their defense that this disunity of technopark “curators” is not so much their fault as the unfortunate consequence of the prolonged lack of a common government strategy in this area.

As a result, each department tries to create its own rules of the game and use its own set of tools to tackle industry-specifi c tasks. One is focused on developing business incubators, another on pro-moting techno parks and techno-innovation special economic zones (SEZs). Collectively, they essentially perform one and the same task — creating mecha-nisms to commercialize innovative projects. But ul-timately their eff orts and government resources are spread too thin.

WHAT OTHER MEASURES ARE REQUIRED TO SUPPORT TECHNOPARKS?For its part, the Association of Techno Parks in the sphere of High-Tech has produced a number of pro-posals aimed at improving legislation in this area of activity. In particular, it is proposed that the RF law “On technoparks” and the “Development strategy (creation) of technoparks” be drawn up and adopted by 2020. It is also necessary within the framework of the Interdepartmental Commission for the im-plementation of the Innovation Development Strat-egy of the Russian Federation to 2020 to defi ne the place, role and function of technoparks in the na-tional innovation system with a view to actualizing this document.

We have often stated from various platforms that in order for technoparks to meet with their intended purpose, they require legislation on preferential tax treatment and other privileges currently off ered to industrial parks. The activity of the latter is governed by a separate law under which they receive state support, including interest rate subsidies on loans, measures to support private industrial parks through the Ministry of Economic Development, etc. Without creating a similar environment for techno parks, they will not be able to generate new innovative compa-nies. In their present form, techno parks are simply unable to carry out this key role.

The first step has already been taken towards creating

an entry point inside the government for resolving

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proposals for improving efficiency.

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CEO, Russian Venture Company

Software technologies today have become the platform for technological development. Information technologies are at the foundation of all current industrial breakthroughs (from traditional industries to new in-dustries). It seems that Russia has great human potential here as mathematics has always been one of the main fi elds of focus in Russia. And it is math-ematics that provides the basis for software development and information systems manage-ment worldwide. The leading countries in math-ematics are the U.S., France and Russia, which is evident from the number of winners of the Fields Medal (considered by many to be the Nobel Prize of mathematics). The Russian leadership in this area has a long history, back to the pio-neering Swiss mathematician and physicist Leonhard Euler, who spent almost half his life in Russia and essentially became the founder of the Russian mathematical school. In the 20th century, the main achievements of Russia were not in the area of applied sci-ences, but rather in theoretical sciences – in math and physics. This background should be lev-eraged by today’s higher edu-cation institutions, thus helping Russia to boost its technologi-cal development and join in the global technological growth.

Igor Agamirzian

CAN THE GEOPOLITICAL CRISIS HELP REJUVENATE RUSSIAN INNOVATION?

The Russian economy faces the formidable task of becoming competitive in the new technological paradigm and simultaneously upgrading manufacturing in the old. This can be achieved only through modernization of production.

A couple of years back, many Russian companies bought up not only equip-ment in Europe and Asia, but also other companies and fi rms, acquiring in the process modern R&D centers and new market niches.

The ensuing crisis and political ramifi cations actualized the topic of import substitution, including in the segment of R&D and the production of innovative products. Here, too, the value of technoparks as a tool in the unassisted front-line development of next generation fundamental technologies on the basis of scientifi c and technological groundwork unique to domestic industry is multiply-ing. After all, the economy is built on a specifi c model: R&D followed by imple-mentation and production on an industrial scale.

Logic suggests that all phases of this essentially single process should be unit-ed by a common system and methodology of control, and a single algorithm that provides a clear sequence of actions and eff ectiveness at each stage. Ide-ally, startups nurtured in technoparks should grow in stature and expand into industrial parks, where the current state support package will enable them to carry out industrial-scale production of high-tech products. That is the knowl-edge economy in a nutshell.

In no way does import substitution imply autarchy, or economic self-suffi cien-cy. Russian industry thrives on collaboration with foreign investors and joint large-scale international projects.

As technoparks develop and residents become suffi ciently large-scale to move into industrial parks and clusters, the ability to partner with foreign investors seems set to rise to a qualitatively new level.

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The Russian government today attaches great importance to the development of advanced technologies. This is seen in the gradual crea-

tion of favorable conditions for Russian companies via new legislation and in the provision of fi nancial support for centers carrying out innovative research. The government is also taking measures to simplify conditions for foreign players to operate in the Rus-sian market. Supporting technoparks (“technology parks”) in this connection is one of the Russian gov-ernment’s key priorities in the near future.

THE BUILD-OUT OF RUSSIA’S TECHNOLOGY PARKS

Today in Russia there are many technoparks, innova-tion clusters and special economic zones for develop-ing the country’s future high-tech businesses. And, at the federal level, a series of measures is being imple-mented to support the establishment of additional technology parks. Previously, the Russian Ministry of Telecom and Mass Communications oversaw an in-tegrated program called “Establishment in the Rus-sian Federation of Technology Parks in the Sphere of Advanced Technologies.” It operated for eight years from 2007 to the end of 2014.

At the end of this program’s implementation, 12 technology parks had been established in 10 Rus-sian regions, which today accommodate more than 775 companies and have created almost 19 thousand jobs. The annual income for technopark companies in 2014 was more than 40.5 billion rubles ($712.7 mil-lion). Investment from the federal center comprised 13 billion rubles ($228.6 million), while the regions in-vested 18 billion rubles ($316.8 million). This is argu-ably one of the most eff ective programs for creating an innovation infrastructure with support from the federal budget.

In 2014, the Russian government developed a new support mechanism for establishing technol-ogy parks. It is intended to give Russian regions the opportunity to reimburse part of the financial cost spent on establishing the technology park infra-structure using federal taxes paid by companies lo-cated in technoparks. It also creates the opportunity to reimburse some of the expenses for the payment of interest on loans, which had been taken for the construction of facilities and their infrastructure.

How to create a favorable environment for technology hubs in RussiaToday Russia has about 200 registered technoparks. Thanks to new government initiatives, that number may increase in the near future.

THE MINISTRY OF TELECOM AND MASS COMMUNICATIONS OF THE RUSSIAN FEDERATION

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One of the main problems in developing the IT industry in Russia remains the lack of staff. There are steps being taken by the Russian government to narrow this gap.

The problem of the ‘brain drain’ becomes increasingly important for Russia in relation to global workforce mobility. Find out what Moscow is doing to reverse the outflow of talent. Download our special report “From Brain Drain to Brain Gain” from our website: www.russia-direct.org/archive

ALSO READ

Russian tech hubs by area of specialization

A LEGAL FRAMEWORK FOR THE IT INDUSTRY

Besides infrastructure, it is important to establish at-tractive conditions for running an IT business in Russia.At the present time the Ministry of Telecom provides the following benefi ts for accredited IT companies:

• Reduced rates for insurance contributions (con-tributions to pensions and medical insurance) — up to 14 percent of payments for individuals (compared to 30 percent common rate in Russia);

• The opportunity to use a simplifi ed process to recruit highly qualifi ed foreign specialists;

• The right to include in expenses the cost of elec-tronic computing technology as material expenses in their full amount;

• Reduced to 15,5 percent profi t tax for companies in Novosibirsk and Penza regions (compared to 20 percent common profi t tax rate in Russia).

The total number of IT companies accredited by the Ministry of Telecom is currently more than 5 thousand. Those paying a lower insurance rate dur-ing 2011-2014 had more stable growth in revenue and federal tax payments at a higher rate than the aver-age for the economy as a whole.

The total amount of tax on personal income, listed by these organizations for 2014 exceeded 17.8 billion rubles ($313.4 million), excluding tax deductions, the amount of income accredited companies reached 311.6 billion rubles ($5.5 billion), the average salary of employees was 84,000 rubles per month ($1,480).

This is several times greater,1 than the average in-

come in Russia, and shows that developing the IT industry is a serious starting point for balanced, sci-entifi c growth in the country’s economy.

THE TALENT GAP

On the other hand, as before, one of the main prob-lems in developing the IT industry in Russia remains the lack of staff . There are steps being taken by the Russian government, though, to narrow this gap.

As a result of joint work between the Ministry of Telecom and the Ministry of Education and Science, the number of budget places in universities for IT specialists for the 2016-17 academic year will be in-creased by 31 percent in comparison with the 2015-16 academic year.

In 2014, institutions managed to increase training for IT professionals from September 2015 by 34 per-cent. Over the past two years, government demand for IT professionals has grown by more than 70

percent, rising from 25 thousand to more than 42.5 thousand scholarship positions in universities.

BRICS AND RUSSIA’S FUTURE TECHNOLOGICAL DEVELOPMENT

Today, one country and just a few companies monop-olize the global software market. That could change as Russia expands its role within the BRICS. This year it is the chairman of the BRICS. On July 9-10, the annu-al summit of these countries will be held in Ufa. Since the start of the year, the head of the Ministry of Mass Communications Nikolay Nikiforov has personally held negotiations with minsters from Brazil, India, Chi-na, and South Africa, and they all are concerned about the current situation. Nikiforov suggested that BRICS should join forces to develop computer software. This, in particular, guarantees access for Russia’s future de-velopment in the appropriate BRICS markets, which account for half of the world’s market._____________[1] The average monthly wage in Russia at the end of April 2015 was 32,805 rubles ($579). Rosstat.

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The oft-repeated pronouncements about mo-dernizing the Russian economy and overco-ming Russia’s dependence on raw materials in

favor of new technologies have been almost a man-tra for years.

All kinds of innovative technoparks, clusters, in-cubators and start-ups have been discussed at the highest level of government, and the promises of full support for domestic scientifi c and technological de-velopments have not bypassed a single government program.

But what lies behind the sound and fury? Is Rus-sia’s innovation economy really moving in the right direction?

Can Russia become an innovation leader?The government must do more to make Russia a welcoming place for innovators and their new technologies.

OLEG BUKLEMISHEV

RUSSIA AND OTHER GLOBAL INNOVATORS

If you believe the offi cial statistics compiled by Rosstat, over the past decade the proportion of high tech and science-intensive industries has increased by 2.3 percentage points to nearly a quarter of GDP. Every tenth organization in the country is putting various innovations into practice. As a result, in 2013 innovative products, works and services were implemented to the tune of 3.5 trillion rubles (about $63 billion at today’s currency exchange rate).

But there are lies, damned lies and statistics. How does one know if the village is real or a facade?

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Unfortunately for Russia, it is most likely just a façade. The picture is far less encouraging both in terms of statics and dynamics when Russian science and innovation is compared internationally.

For instance, according to the Russian Academy of Sciences spending on science per capita in Rus-sia is 5-6 times lower than in the leading countries. The number of researchers per thousand employees is three times higher in Finland than in Russia, and more than two times higher in Korea, Japan, Den-mark, the United States and Sweden.

Russia’s share of global spending on R&D is less than two percent (the United States accounts for almost a third), and the fi gure is about the same in terms of patent applications — even lower than Rus-sia’s slice of global GDP.

Moreover, the current level of R&D funding in real terms is about half the level of 1990 (the Soviet Un-ion spent about 5 percent of GDP on R&D).

RUSSIA’S INNOVATION ADVANTAGES

The average Russian scientist, as acknowledged by President Vladimir Putin, is now 48 years old, and in some branches of knowledge (for example, the top-priority nuclear industry) much older than that. The “road map” of Russian science to 2020 may well en-visage an increase in the proportion of employees aged 39 or under to 41.5 percent by 2018 (currently 33 percent), but how it can be done at wages lower than in almost any other profession is unclear.

It is no coincidence that polls over the past decade by the non-governmental research organization Le-vada Center on parents’ preferred careers for their children have shown a steady decline in the populari-ty of science and engineering, and even the still pres-tigious job of computer programmer is beginning to lose its shine. According to Levada Center, for exam-ple, only 15 percent of Russians in 2014 wanted their children to pursue careers in computer programming or other high technology fi elds.

At the same time, Russia can still draw on a reserve of important groundwork needed to break into the innovation vanguard, namely, the well-earned repu-tation of Russian science and the country’s still active cutting-edge schools and technological know-how in several key areas. There are still talented young peo-ple who, despite everything, continue to be drawn to fundamental science and applied research; energetic Russian businessmen who still manage — even in ex-treme investment conditions — to achieve success; and the untapped potential of harnessing university

science to the practical needs of the national econo-my in terms of scientifi c and technical developments.

THREE WAYS TO CAPITALIZE ON RUSSIA’S INNOVATION ADVANTAGESThere are three important ways that Russia can trans-form these natural advantages into a genuine break-through in the fi eld of innovation.

#1. Introduce new government policies that encour-age innovation

First, it needs to be understood at the state level that economic modernization and diversifi cation is urgently required for the country’s development, and is not simply a half-forgotten political slogan from the time of Dmitry Medvedev’s presidency. Without a doubt, science and education is the cornerstone of successful modernization.

The budget cuts to research and education must stop, and Russia’s top scientists and talented young-sters who choose this challenging pursuit should be off ered competitive base salaries, allowing them to focus on scientifi c work.

However, material stimulus alone seems insuffi -cient. Scientists in the Soviet Union enjoyed prestige not just because of the decent salary, but also be-cause the image of researchers as doing something interesting and important was actively promoted in movies and on television. The same could be true today if TV stations in Russia swapped the endless tear-squeezing melodramas and stories of duels between ugly criminals and wise policemen with a good-quality serial about Russian scientists and the diverse, engaging work they do. The possible dip in ratings with the unscrupulous audience would be well compensated by the positive social eff ect, which is needed now as never before to support the industry of science and knowledge.

#2. Ensure the protection of property rights, in-cluding intellectual

Second, property rights need to be properly pro-tected, along with freedom of entrepreneurship, something that innovative industries need even more than traditional ones. And introduction of new technologies cannot emerge as a clear competitive advantage when everyone knows that hunting for government orders and privileges proves to be far more benefi cial for a company than any number of innovations.

Of course, one can create a dozen or two tech-noparks and incubators and give tax breaks or subsi-dies normally available only to those innovators able

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to hire special well-paid lawyers and lobbyists.And one can certainly be proud of what has been

achieved at the Skolkovo Innovation Center outside of Moscow, where entrepreneurs and researchers get by a little bit better than the rest of the country. But it would be much better from an innovation point of view if the eff orts were spent primarily on progres-sively improving the business climate and promoting competition not only inside special isolated zones, but everywhere. Only then can high tech output be actively commercialized, and such incubators and subsidies become genuinely productive.

Otherwise, the rest of the country will miss out on this positive experience, and the small number of is-lands of prosperity will sooner or later sink into the surrounding swamp.

#3. Abandon isolationismThe last but not the least, in the interests of mod-

ernization, the policy of isolationism and xenophobia needs to be abandoned once and for all. As shown too often in the course of human history, it is incom-patible with progress in the fi eld of science and in-novation, and with progress in general.

Above all, it hinders the fi ght against pseudosci-ence, which, despite the best eff orts of the scientifi c community in recent years to expose false disser-tations and infl ated degrees, continues to fl ourish. “Locked-in syndrome” is a typical feature of many Russian scientifi c communities, and the lack of real competition and clear-cut comparisons between genuine and phony science allows them to stand in the way of the next generation of Russian talent.

If someone wants to build a modern Russian inno-vation paradise on the basis of the sharashkas [the hard-labor experimental design bureaus vividly de-scribed by Alexander Solzhenitsyn in his 1968 novel

In the First Circle], you can be assured that noth-ing will come of it. When there is now a stigma at-tached to accepting a grant from a foreign organiza-tion, there will be an inability to attract the best and the brightest to science. Like it or not, but a diverse global marketplace of research ideas and results has already taken shape, and Russia is only a small and hardly the most advanced player.

No one can erect a barrier in the way of people’s desire to succeed through realizing their skills and talents. Therefore, Russia’s only chance to win the global competition is not to create a new Iron Curtain that only will accelerate the existing brain drain, but to create the best environment for Russia’s young talent to thrive, so that armed with new knowledge and experience from study and internships abroad, they always want to return home.

However, the case of the non-profi t Dynasty Foun-dation, recently declared a “foreign agent,” shows that in spite of everything, the Iron Curtain mental-ity and sharashka-style modernization are alive and well, and continue to march triumphantly across the country. Yet, it is precisely this foundation, set up by one of the nation’s most prominent tech entrepre-neurs, Dmitry Zimin, that did so much to discover and nurture young scientifi c talent in Russia. The fact that Zimin thought it wise to leave Russia sends a very loud and clear signal that drowns out the offi cial mantra of modernization.

Whatever happens in the long run, it will take a considerable amount of time and eff ort to expose the prevailing xenophobic notions that are patently false and deeply detrimental to the future of Russian science and innovation. But nothing less is required if we want to see Russia become a leading innovative power in the twenty-fi rst century.

15%of Russians in 2014 wanted their children to pursue careers in computer programming or other high technology fi elds. (Levada Center)

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The idea to wean Russia off its dependency on oil and gas exports is as old as the Russian market economy itself. Russian government

throughout the 1990s and 2000s have been experi-menting with several turnkey solutions to the prob-lem. A number of free economic zones, high-tech hubs and incubators emerged throughout Russia’s territory. All received government funding and had one purpose – to stir high-tech development and production. Yet against the background of high and rising oil and gas prices, these new creations were nowhere on the list of priorities for private investors.

Then the 2008 fi nancial crisis happened. The de-valuation of the ruble began to deplete the govern-ment’s hard currency reserves, unemployment levels started to impact consumer demand, and big corpo-rations found themselves near default on their dollar and euro-denominated debt. If before the crisis there was a belief that Russia had been the “island of stabil-ity in stormy waters,” the dynamics of the crisis have eroded this belief completely.

ALEXEI SITNIKOV

Skolkovo didn’t have a name fi rst. The idea was to create a science and technology enclave with special legal and regulatory regimes, fuel it with a sizable government subsidy and support research and de-velopment (R&D) and startups in one of two areas: Russia’s segments of comparative advantage (IT, space, nuclear) or high demand and large market (bi-omedicine and energy effi ciency). Principles applied to the enclave called for it to be globally competitive, free of corruption and equally friendly to the startup community and big transnational corporations.

Skolkovo Innovation Center has never been con-sidered by its founding fathers as a toy project, just a carbon copy of similar centers in other countries. Rather, it was a direct answer to the challenges of the 2008 crisis. The government could not aff ord to spend more, so the economy needed to make more.

The goal of Skolkovo was never to restructure the Russian economy; Instead, the goal was and is to test new approaches to R&D, as well as new busi-ness practices to be applied outside of Skolkovo. The Center today hosts about 1,000 startups. It has raised nearly 60 percent of development funding from the private sector. The startups came to Skolkovo from nearly 50 regions of Russia and already have gener-ated a turnover of about $1 billion.

These results show that the model works. Support-ing high-tech research with the right set of regula-tions, some funding and mentorship work just as well in Russia as in any other country. The experi-ence of Skolkovo also shows that the main challenge in developing the innovation center is not in the in-frastructure, regulation or funding. It is in the ability to source, engage and empower human capital. A nationwide transformation will occur only and if the models such as Skolkovo are fueled with the critical mass of human talent, hungry for challenge and dis-covery.

#1: Skolkovo Innovation Center#2: Bauman Moscow State Technical University#3: The Troitsk Technopark

Case study: Three centers for Russian innovation

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The activities of Bauman Moscow State Techni-cal University (BMSTU), a leading university for engineering education in Russia, has for a long

time been aimed at the scientifi c and technical sup-port of Russia’s defense industry and the superiority of the country in the aerospace industry. For this rea-son, the university’s cooperation with private com-panies in the sphere of innovation has only recently become a priority area for development.

Today, the leading role is given to cooperation with Russian companies. However, the university is also prepared to work with foreign companies. An exam-ple of this could be the recent agreement between BMSTU, Kaluga Region, and the Austrian manufac-turer of communications and navigation equipment, Frequentis. The purpose of the agreement is to co-operate in a range of areas, including development of micro-electronic components in the sphere of air traffi c management and fl ight safety.

Furthermore, BMSTU is collaborating with such in-ternational engineering giants as General Electric, Siemens, and Mitsubishi Electric.

In many cases, BMSTU’s partnerships with foreign companies are based in areas where the university traditionally has a high degree of expertise: in me-chanical engineering, instrumentation and micro-electronics. In the near future, priority areas for sci-entifi c and technical development and for expanding international cooperation include additive technology, composite materials, nanoplasmonics and complex functional systems, ion-plasma technology, robotics and supercomputers, information and communica-tion technologies, and biomedical equipment. These technologies are the precursors of future scientifi c and technical progress in the world, and we cannot allow ourselves to be left on the sidelines.

THE EFFECT OF WESTERN SANCTIONSThe recent exacerbation of the political situation that led to the introduction of sanctions against Russia by a number of nations could not help but aff ect BMSTU.

#2: Bauman Moscow State Technical University

EVGENY STAROZHUK

The most signifi cant changes were caused by eco-nomic instability. Prices increased for equipment pur-chased by the university, especially technologically advanced scientifi c machinery.

Investors have become more careful, especially in regard to expensive projects. This has aggravated the situation even more in the area of venture capital investments in advanced technology projects, which in Russia are still insuffi ciently developed.

In regards to the eff ect sanctions are having on for-eign companies’ cooperation with BMSTU, one must take into account that business needs to develop competitive advantages by developing technical in-novations to prevail over unstable political trends. Ultimately, if the mutual benefi ts of cooperation be-tween companies and the university are obvious to both parties, the company will take the necessary steps to establish cooperation.

Furthermore, it should be noted that the economic policy that has been implemented in Russia is aimed at replacing imported products with those from the domestic market.

This cannot be achieved without the participation of scientifi c-research organizations. The policies for import replacement will lead to localization of ad-vanced technological products in Russia. One can hope that this will create the foundation for long-term development of Russia’s scientifi c-research and educational organizations.

We cannot allow ourselves to be left on the sidelines.

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The economic transition toward innovation and import substitution raises the problem of de-veloping small innovative enterprises. The crux

of the matter is that, as a result of the reforms of the 1990s, almost 80 percent of industry-based ap-plied science was eliminated, engineering bureaus perished, pilot production dried up, and the manu-facturing sector was largely destroyed.The only optimistic conclusion to be drawn is that the country must learn to work in real-world condi-tions, i.e. to recreate a system that would enable many achievements of academic research to be put into practice.

Nevertheless, retracing the last century’s path of applied science would be a mistake. New experience is needed, along with fundamentally new organiza-tional, scientifi c and commercial forms and intercon-nections between them.

The country needs a clear market-oriented model of scientifi c and industrial infrastructure that covers

#3: The Troitsk Technopark

SERGEI SHARAKSHANE

the initial phase of the innovation process, in which small and medium-sized businesses (including start-ups) implement scientifi c ideas.

The testing ground for this solution is the Troitsk Technopark at the Lebedev Physical Institute (LPI) of the Russian Academy of Sciences. This world-class scientifi c institution has produced seven Nobel lau-reates. The key component of the technopark model lies in the search for ways to connect fundamental research to practical applications.

THE RUSSIAN SILICON VALLEY?

Stroll around the technopark campus, created in 2008 outside Moscow, and every 20-30 meters you will literally stumble across new innovative enterpris-es, known as “residents.” Despite being described as small, they create products in high demand both at home and abroad.

The reason for that is the organic bond between the technopark and the research institution. Part of this intrinsically new model is that the technopark is a subdivision of the LPI, in which regard, new resi-dents have to meet special criteria.

Every organization applying for residency is obliged to state its case before the LPI scientifi c council and

As a result of the

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demonstrate the extent to which it is knowledge-in-tensive. As a result of the strict fi ltering process, half of the resident employees registered here are them-selves LPI scientists: they work on the implementa-tion of scientifi c ideas up to and including product commercialization.

What immediately catches the eye is the high level of global competitiveness, the “overtaking without catching up” ethos, and the great prospects for im-port substitution. There is no escaping the fact that if production is based on imported technology, back-wardness is built in from the start, which only intensi-fi es as the creator of the technology moves forward in the meantime. But if innovation proceeds from a fundamental research laboratory, a business incuba-tor, it forces global competitors to play catch-up.

THE REQUIREMENTS FOR BUILDING A WORLD-CLASS TECHNOPARKIt is worth noting that the Troitsk Technopark found its feet in just seven years. Practice shows that the activi-ties of this young venture are in tune with the coun-try’s top priorities: rearmament, Arctic exploration, and the creation of 25 million high tech jobs. Hence, the Troitsk hub can serve as a model in the implemen-tation of the government’s strategic objectives.

On the topic of Troitsk Technopark, it would be amiss not to mention its founder, Professor Vladimir Nevolin, LPI deputy director, doctor of physics and mathematics, and Honored Scientist of Russia. He has visited a host of countries, including many fact-fi nding trips to technoparks in the United States, Germany and Britain.

Based on this experience, Nevolin set about creat-ing the Moskovrechye Technopark at the Moscow Engineering Physics Institute — generally considered to be the fi rst technopark in Moscow. He took into account the Soviet Union’s rich experience of imple-menting technological innovations in industry. That was where the concept of the “science-education-industry” triangle took hold as the basis for shaping an innovative infrastructure.

Here, then, are the basic requirements resulting from this concept. For an industrial park set up un-der a scientifi c institution (as in the case of the LPI), it makes no sense to create a symbiosis with an ex-isting industrial enterprise. There is no large contin-gent of qualifi ed employees, and no expanded pro-duction base. That is not a minus, but a plus. Many technoparks in Russia (Kazan, Naberezhnye Chelny, Pereslavl, and elsewhere) would be labeled “industri-

al parks” in Western terminology. They are generally set up on the basis of former industrial enterprises.

However, the experience of Western Europe and the United States shows that if technoparks are al-lowed to operate without constant communication with the scientifi c “founding father,” they quickly degenerate and die. A technopark will function bet-ter and — more importantly — longer if it maintains contact with an academic institution. That is why the entire Troitsk technopark is bound to the LPI through the activities and research of the latter.

Not only the technopark benefi ts, but also the in-stitution, whose staff can work in transitional areas from pure science to applied engineering. Their sci-entifi c ideas turn into technological solutions, and become either devices or technologies that can then be implemented in the wider industrial sphere.

Furthermore, the technopark is a kind of trinity: it combines not only science and innovation, but also training, providing an infl ow of young people into science. For students at leading physics institutions, the technopark has turned out to be a valuable train-ing base.

LEGISLATIVE OBSTACLES FOR RUSSIA’S TECHNOPARKS

The LPI’s technopark represents the most promising model for the entire system of the Russian Academy of Sciences, since despite all the upheavals of the last quarter century, Russian science still possesses great development potential.

Of course, in isolation, the research institute can-not shoulder the weight of such a technopark. Nev-ertheless, the LPI is the largest institute of the Rus-sian Academy of Sciences, and home to very many professionals carrying out research in diff erent areas.However, clusters of institutions, for instance, can already adopt the practice of the LPI. One example is the science city of Troitsk itself — with its eight in-stitutes under the Russian Academy of Sciences and two non-academic research institutions.

Each houses a lot of interesting developments. The LPI made them an off er: Let’s create a Troitsk Sci-entifi c Center Technopark on the basis of the LPI’s Troitsk hub with due regard to its organizational and methodical achievements. All agreed.One legislative “but” remains. The executive authori-ties are fond of repeating that an academic institution should be engaged in pure science, and if something innovative comes from it, it should be taken from you because it’s not part of your brief. For some reason it’s

The Russian Academy of Sciences (RAS), headquartered in Moscow, is the highest scientifi c institution of the country and the leading center for basic research in natural and social sciences. The Academy includes 9 departments, 3 regional branches, and 14 regional scientifi c centers.

ACADEMY OF SCIENCES

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necessary to prove time and again that a generator of high tech projects can only be created on the basis of a major research institution.

Unfortunately, that widespread belief is refl ected in a law adopted by the Moscow City Duma, in ac-cordance with which a technopark can operate only under the aegis of a commercial managing com-pany. As a non-commercial organization, the LPI is categorically opposed to the bottom line having pri-macy in the development of its scientifi c technopark. The institute makes no attempt to maximize revenue from resident companies, since it would quickly turn

1 A micromachine with femtosecond lasers for surface treatment of materials at the nanoscale;

2 A powerful femtosecond

laser complex — 10 terawatts (more than the capacity of all the world’s power plants in the world combined);

3 Coordinate-temporal fi eld generators for the GLONASS system with the highest level of

precision anywhere in Russia;

4 Ultra-large capacitors — an original LPI brainchild. Charging such capacitor for 10

hours, the stored energy can power a smart home for 10 hours, or start a haulage truck in Arctic conditions at -50°C;

5 Silicon carbide, which is used to store spent nuclear fuel and create large gamma-ray

telescopes for studying black holes etc., and which can also be used to view Earth from space at ultra-high resolution. Roscosmos and Rosatom are very interested in such products. Silicon carbide is used to make so-called “foam glass” — an environmentally friendly thermal insulator used in construction, superior to all other such products by a factor of 10;

6 Tools with diamond cutting surfaces, and milling cutters more than a meter in diameter

used to cut through and recycle huge disused concrete structures. These can be applied to replace the surface of runways for next-generation aircraft; only this tool can remove such high-strength concrete. Several airports in Russia have already been modernized in this way. The tool is needed for diff erent kinds of drilling, e.g. during the construction of subway systems.

Top 6 innovations of Troitsk Technopark

A technopark will function better and — more importantly — longer if it maintains contact with an academic institution.

into a wheeler-dealer seeking to “sell” its premises to the highest bidder. The Troitsk hub’s managing organization, therefore, is the LPI itself, which has proven its capacity to act as such. Regrettably, there is no federal law on technoparks at present, although attempts have been made to draw one up.

DEVELOPMENT OF THE INNOVATION ECOSYSTEM AROUND THE RUSSIAN ACADEMY OF SCIENCESThe Troitsk hub eff ectively shows how the innovation ecosystem around the Russian Academy of Sciences’ fundamental research institutes should develop. Moreo-ver, the LPI is ready to point the way through dissemi-nating organizational and methodological ideas, con-ducting seminars on the basis of the technopark, and sharing best practices. In fact, the technopark is itself a startup on the scale of tomorrow’s national economy, and represents the embryonic phase of the transfer of technology from the sector of science to the sector of industry, design and implementation of new tech solu-tions. Today Russia boasts a number of innovative in-stitutes, but their approach is too one-sided: They give consideration only to ready-made projects. The LPI, on the other hand, seeks to create an incubator of new in-novations, i.e. a place where they are conceived and nur-tured. Such technopark literally points the way forward to becoming an innovative country.

RUSSIA-DIRECT.ORG

27-26

Russia’s long-term transition to an innovation economyThere are growing signs that Russia’s youngest entrepreneurs are creating the basis for a new innovation-based economy.

KENDRICK WHITE

#1: Open Innovations Forum and Technology Show This fi ve-day forum dedicates each day to a different aspect of technology’s impact on human life, with guest speakers and demonstrations showcasing cutting edge innovation. When/Where: October 28 – November 1, 2015, Moscow, Russia.

#2: Russian-American Innovation Technology Week (RANIT)The 20th annual meeting of RANIT seeks to build mutually benefi cial partnerships between the U.S., Eurasia, and Russia through the development of pharmaceutical and biotech innovations. When/Where: June 11-25, 2015 in several locations in the U.S.

#3: Russia-U.S. Innovation WeekRussia-U.S. Innovation Week is an invite-only conference whose aim is to establish American-Russian business cooperation in the sphere of innovation development. The event brings together an elite group of business and government representatives from both countries. When/Where: TBA.

#4: 2016 IASP ConferenceThe International Association of Science Parks and Areas of Innovation (IASP) World Conference is a key platform for heads and senior offi cials of science parks of various countries to meet and share experiences. When/Where: TBA.

TOP U.S.-RUSSIAN HI-TECH FORUMS

In spite of the negative impact that sanctions have had on Russia’s economy, there is in fact a certain paradox at play here. In business plan competitions across Russia over the past year, more and more op-portunities were visible which involve domestically developed new technology discoveries that are better able today to attract local angel investors, as well as interested corporate investors and partners. The Lobachevsky State University of Nizhny Novgorod, for example, has seen a dramatic increase in interest on the part of the corporate and invest-ment communities, including both domestic and in-ternational partners, seeking to cooperate and bet-ter understand what technology solutions Nizhny Novgorod can off er.Many local Russian enterprises were historically able to make off the shelf purchases of high tech solutions from Western suppliers. Today, these markets have been closed to them. There’s evidence that they are fi nally turning to the vast scientifi c community within Russia to satisfy their technology demands. It is even possible that the sanctions may be a sort of blessing in disguise for much of the Russian research community as funding will surely continue to support these eff orts as enterprises fi nd their traditional channels closed.Those not afraid of the short-term unpredictabil-ity and risk inherent in Russia’s long-term transition from a commodity driven economy to an innovation-driven economy must understand that this process only started 22 years ago, and will require another 20 years to complete. Keeping the long-term nature of this transition in mind is essential for any of Russia’s partners to keep in mind. There will always be periods of advancement and re-treat in this complex transition, and for most foreign-

ers, it is not entirely clear why Russian leaders often make the choices that they make. Russia is primarily interested in protecting its independence, even if this means that sometimes decisions can appear to be il-logical to outsiders. This desire for independence ex-tends to banking, telecoms, minerals and mining, and many other spheres.While it may appear to be self-defeating, there is cer-tain logic in Russia’s approach to development, and for any sincere partners willing to take these nuances into consideration, there can be great rewards for the long-term development of business partnerships in Russia. There is reason to believe in the future of Russia’s younger generation of innovation driven entrepre-neurs. If all goes according to plan, they will eventu-ally establish Russia as a leading innovation economy in the global economy.For example, there are great opportunities in Russia’s biomedical and diagnostics segments. Advances in 3D modeling, early-stage cancer detection, on the spot wound healing and resolution enhancement represent signifi cant breakthroughs worthy of being introduced into global markets in the nearest future.

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1.�Loren Graham, Lonely Ideas: Can Russia Compete? Cambridge, MA: The MIT Press, 2013.

2.�Doren Chadee and Banjo Roxas, Insitutional Environment, Innovation Capacity and Firm Performance in Russia. Critical Perspectives on International Business 9 (1/2), 2013, pp. 19-39.

3.�Zhanna Mingaleva and Irina Mirskikh, On Innovation and Knowledge Economy in Russia. International Journal of Social, Education, Economics and Management Engineering, 4 (6), 2010, pp. 169-178. http://waset.org/publications/12397/on-innovation-and-knowledge-economy-in-russia.

4.�Chun-Yao Tseng, Technological Innovation in the BRIC Economies. Research-Technology Management 52 (2), March-April 2009, pp. 29-35.

BOOKS AND ARTICLES ON RUSSIAN INNOVATION

@nnikiforov Nikolay Nikiforov is the Minister of Telecom and Mass Communications of Russia, which is one of the government bodies fostering the growth of technoparks.

@IASPnetwork Updates from the International Association of Science Parks and Areas of Innovation (IASP).

@USRIC_en The U.S.-Russia Innovation Corridor connects start-up companies and universities.

@EWDN_Russia East-West Digital News (EWDN) is an international information company dedicated to Russian digital industries.

@i_regions Tweets from the Association of Innovative Regions of Russia.

TOP 5 TWITTER ACCOUNTS FOR RUSSIAN #INNOVATION

TOP 10 RECOMMENDATIONS FOR RUSSIAN INNOVATION ENTREPRENEURS

EDITOR’S PICKS

By Kendrick White

1 Entrepreneurs should consider their projects, from the outset, to be driven by global market

demands. Experienced, smart money investors are keen to see not just local market potential, but also international market expansion potential.

2 Pay attention to your project’s unique intellectual property and ability to solve

specifi c problems with a unique approach. Having a plan in place to protect one’s intellectual property, through either secret know-how or patent protection alternatives, is also critical to maximizing the value of any new innovation idea.

3 Be ready to tell potential investors about your track record and past success stories

and lessons learned. Sometimes an entrepreneur’s greatest failures proved to provide the greatest insights.

4 Talk about your partners and those that currently are supporting you. In other words,

show that you have built a team around you that supports what you are doing. There is nothing more risky for an early stage investor than to back a lone horse who tells that he can do it all, all by himself.

5 Prepare your business model canvas as the fi rst step in your project development. What’s

your core value proposition? What’s your core market of buyers? Have you already talked to them and confi rmed that your solution is actually a key problem for your market? What’s your business model? What’s your IP protection and commercialization roadmap?

6 Practice pitching your idea to your friends and family and then keep developing your pitch

to potential partners, buyers, and investors. Your pitch can be customized to your audience and you should continuously get feedback on your pitch and constantly update this.

7 Be prepared for your team to “pivot.“ What this means is that what you start out with as your

initial project idea is very likely to change many times prior to your securing funding and start-up capital. Even after that, you will likely alter your business model and initial business plans many times before you achieve a certain critical scale of operations.

8 Entrepreneurs must seek out smart money investors, meaning these who also know your

product and market segments, and who can help to advise you, not just throw money at your project.

9 Don’t be afraid of failure and mistakes. Way too many entrepreneurs become afraid

that their projects might not be competitive and therefore are afraid to start in the fi rst place.

10. Seek out the local leaders of the innovation ecosystem, and partner with them in order

to secure successful long-term opportunities. Local business angel clubs, local universities, local venture fund managers, local high tech enterprises led by experienced Russian entrepreneurs. Global enterprises should work to align themselves with the future generation of innovation driven leaders.

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