Trust in society and cluster program design in RussiaEvgeniy Kutsenko

Parallel 2.2 Cluster implementation in different parts of the world

11 November 2014

Trust in society and cluster program design

in Russia

Evgeniy KutsenkoInstitute for Statistical Studies and Economics of Knowledge

National Research University Higher School of Economics

17th TCI Global Conference, 10-13 November 2014, Monterrey, Mexico

Plan

1. Cluster policy in Russia

2. Comparison with EU cluster

programs

3. Trust and sustainable cluster

development: role, signs, policy

implications

I. Cluster policy in Russia.1. Russian cluster policy is quite young one

• The campaign of the selection of so-called pilot innovative clusters was announced by the Ministry of Economic Development of the Russian Federation at 19 March 2012

• In total, 94 applications were received

• Just 25 was selected due to their potential and the quality of the application

4

2. Contest as a instrument of revealing the best innovative clusters

“Top-down-top” approach for the selection the pilot clusters

5

Federal authority hold a

contest

Local actors, who want to

apply, prepare a common

strategy and collaboration

projects

Regional government

should confirm

The role of federal

government is to select the best cluster

projects

Significant share of rejected applications. In Russia during one

month 94 applications from the regions were submitted.

Program Share of rejected applications, %

BioRegio 76

InnoRegio 95

Competitiveness poles 32

Russian cluster program 73

6

3. The volume of support is consistent with EU cluster programs

7

Evidence from the “Clusters are Individuals”: yearly

budget of the cluster program in EU

countries/regions

50 M euro in 2014 – federal subsidy to 25

pilot innovative clusters (Russia)

Source: Müller L., Lämmer-Gamp T., Meier zu Kôcker G., Christensen T.A. (2012) Clusters are individuals. New

findings from the European cluster management and cluster program benchmarking Vol. II. VDI/VDE Innovation

+ Technik GmbH (VDI/VDE-IT). Berlin.

4. Focus on consulting, marketing, networking, not on large infrastructure projects

Directions of federal government support for the pilot clusters in 2013:

• cluster management activities and external consultancy

• additional education and training

• consultancy for the preparation of investment projects in the sphere of innovation

• participation in international fairs, forums, round tables, etc.

• purchase of new equipment / engineering centers formation

Two main goals: Practice of collaboration + Success stories in the short-run (little quick wins).

8

II. Comparison with EU cluster programs.

A. Similarities

1. The concept of a cluster: cluster + cluster initiative

• objective endowment and relatively significant allocation of labor force (turnover, investment) in specific industry and region

• variety of participants: large companies, SMEs, universities and scientific organizations, organisations for collaboration.

• self-identification, common strategy designing, organizational efforts and collaborative projects.

9

2. Different types of initiators

10

Initiator / driver

Regional authorities

Universities / scientific

organizations

Business accociations

Large corporations

Information technology, radio-

electronics, instrument making and

communication cluster (Saint-

Petersburg)

Rocket engine building cluster “Technopolic “Noviy Zvezdniy”

(Perm region)

Aircraft and aviation cluster “Ulyanovsk-Avia” (Ulyanovsk region)

Cluster of Moscow Institute of Physics and technology (“Phystech21”) (Moscow region)

Information technology and biopharmaceutical cluster (Novosibirsk region)

Energo-efficient lighting technology and intellectual lightning control systems

(Mordovia republic)

Biotechnology cluster (Pishino, Moscow region)

Nuclear cluster (Sarov, Nizniy

Novgorod region)

3. High level of formalization of cluster initiatives

World (mostly EU) Russia

A) Share of CI with formal membership

All participants should have formal membership due to the terms of federal program

B) Legal status of the cluster initiative

All clusters that are planned to be subsidized must establish a legal entity.Due to the terms of the program regional or local government has to be the owner (at least one of the owners)

11

Lindqvist G, Ketels C., Sölvell Ö.

(2013) The Cluster Initiative

Greenbook 2.0. Stockholm. Ivory

Tower Publishers.

Lindqvist G, Ketels C., Sölvell Ö.

(2013) The Cluster Initiative

Greenbook 2.0. Stockholm. Ivory

Tower Publishers.

12

Specialization of a cluster Number of pilot clusters*

nuclear technology 5

aerospace and aviation 5

biotechnology, pharmaceutics, medical devices

6

information and telecommunication technology, electronics and lightning

6

new materials 3

chemical production including petrochemistry 4

*Some pilot clusters have broad specialization and are included in two specialization

categories simultaneously

II. Comparison with EU cluster programs.

B. Peculiarities

1. Specialization of the pilot clusters in Russia:

traditional Russian high-tech + popular industries

The comparison of foreign clusters’ and Russian pilot innovative clusters’ specialization

13

Industry sectors of the pilot innovative clusters

Source: Lindqvist G, Ketels C., Sölvell Ö. (2013) The Cluster Initiative Greenbook 2.0. Stockholm. Ivory Tower Publishers;

author’s analysis

2. Small number of participants in the cluster initiative. The critical mass VS manageability

0 20 40 60 80 100

New materials

Nuclear and radiationtechnologies

Aircraft and spacecraftproduction, shipbuilding

Chemistry andpetrochemistry

Pharmaceutical,biotechnology and medical

industries

IT and electronic

World (in accordance toGreenbook 2.0.)

Average Number of Clusters' Participants

14

The more cluster participants,

the more probability of the emergence of new ideas, projects, teams,

but structure is less managable

Average Number of Clusters’ Participants (the

world and Russian pilot innovative clusters)

3. A relatively small number of SMEs alongside with a significant presence of universities and research organizations

15The calculations are based on: Müller L., Lämmer-Gamp T., Meier zu Kôcker G., Christensen T.A. (2012) Clusters are individuals. New findings from the European cluster management and cluster

program benchmarking Vol. II. VDI/VDE Innovation + Technik GmbH (VDI/VDE-IT). Berlin. P. 18; programs for pilot innovative regional clusters development

Shares of various categories in the overall number of the

clusters’ participants in Europe and Russia, %

4. In some cases – lack of modern urban infrastructure

16

The competitiveness of clusters is built on developed,

diversified and open urban environment which provide high living standards and is attractive for talents and

capita.

There is a number of pilot clusters formed in

single specialisation cities with restricted access

and decreasing quality of life

5. Cluster organizations usually are owned and

lead by the regional government

17Source: pilot clusters’ survey data, the author’s calculations

1

1

1

4

8

0 1 2 3 4 5 6 7 8 9

regional development agency+ cluster development center

technology park

department in a corporation

cluster development center

regional development centre

Number of responses

Status of the cluster organization of the pilot innovative

clusters

International experience of cluster governance: the balance of

interests of different parties; pivotal role of business

18

Sectoral composition of main

governing board

The initiator of a cluster

Source: Lindqvist G, Ketels C., Sölvell Ö. (2013) The

Cluster Initiative Greenbook 2.0. Stockholm. Ivory

Tower Publishers.

6. Cluster initiatives in Russia usually are financed completely by the regional authorities

19

Russia World

Source: Lindqvist G, Ketels C., Sölvell Ö.

(2013) The Cluster Initiative Greenbook

2.0. Stockholm. Ivory Tower PublishersSource: pilot clusters’ survey data, the author’s calculations

1

1

3

9

0 2 4 6 8 10

Federal and regional budgets +Participants' fees

Loal budget

Participants' fees

Federal and regional budgets

Number of responses

Sources of cluster organization revenues

III. Trust and cluster sustainability: role,

signs, policy implications

“Virtually every commercial transaction has

within itself an element of trust, certainly

any transaction conducted over a period of

time. It can be plausibly argued that much

of the economic backward- ness in the

world can be explained by the lack of

mutual confidence.”

Arrow, Kenneth, “Gifts and Exchanges,” Philosophy and Public Affairs, I (1972), 343–

362.

1. The more innovative the interaction, the higher level of trust is needed

Concerning innovation issues the role of trust is even higher, as innovation performance is extremely sensitive to the regular "face-to-face" communication, local “buzz” and ideas exchange, involvement of different people and organizations in start-ups, venture capital inflow

2. Trust – one of key success factors for a cluster policy

Cluster policy requires a high level of trust

between

1. regional actors and the government,

2. regional actors representing different sides of

the "triple helix"

Role of trust in clusters: increasing the confidence in

local communities, increasing the activity of cluster

members, attracting new organizations, improving stability

of regional development, overcoming the conflict

"business-community“ / “business-government”

3. How to measure the level of trust in society?

a) “claiming government benefits which you are not entitled to”

b) “avoiding a fare on public transport”

c) “cheating on taxes if you have the chance”

d) “keeping money that you have found”

e) “failing to report damage you’ve done accidentally to a parked vehicle.”

World Values Survey: Generally speaking, would

you say that most people can be trusted?

4. How could we measure the trust level of a cluster initiative?

Characteristics of trust What is measured?

1. Number of participants willingness and ability to cooperate with other members of the regional community

2. Level of involvement of private organizations

trust of private business to the initiatives of the government

2.1. Level of involvement of SMEs power distance in regional communities

3. Presence of internal competition the possibility of coexistence of several influential interest groups in one cluster; stability VS growth; the level of risk avoidance

How could we measure the trust level of a cluster initiative? (2)

Characteristics of trust What is measured?

4. Possibility to influence on cluster organization’s performance

Democratization VS strong hierarchyTrust between the regional authorities and the members of a cluster

5. Transparency of decision-making in a cluster

6. Membership fees

5. Many of trust characteristics are included

in the EU cluster excellence system

6. Example: “Poles of competitiveness”

program in France

27

Start-ups and SMEs can effectively affect the

strategy of the cluster, its management bodies, promote their own joint projects or participate

in projects of other cluster members

Unequal voting weight: start-up has

5 votes, small or medium enterprise has 3 votes , large

has 1 vote

A little less than half of the votes of supervisory board are not shared, but

held by regional and local authorities

7. Mechanisms of balancing of private and public interests in

the activities of the cluster organizations of the pilot

innovative clusters (Russia)

28

cluster organisation is appointed by

cluster participants at the general

meeteing

Respondent could

select several

answers

0

0

1

2

3

4

8

9

0 1 2 3 4 5 6 7 8 9 10

cluster organisation is appointed by localauthorities

cluster managers are appointed or confermedby the cluster participants

the director of a cluster organisation is electedtaking account the opinions of cluster

participants

cluster organisation is appointed by the boardof directors

regular general meeting held, at least every 12months, allowing cluster participants to express

wishes and to provide inputs to the aims,…

cluster organisation is appointed by regionalauthorities

the director of a cluster organisation isappoined by the regional authorities

cluster organisation is appointed by clusterparticipants at the general meeteing

3

5

1

cluster organisation is appointed by cluster participants at thegeneral meeteing

cluster organisation is appointed by cluster participants at thegeneral meeteing + the director of a cluster organisation isappoined by the regional authorities

cluster organisation is appointed by cluster participants at thegeneral meeteing + cluster organisation is appointed byregional authorities

Source: pilot clusters’ survey data, the author’s calculations

8. Implications for the policy

There is a risk of decreasing the efficiency of a cluster policy when its formally imported from the EU countries to the societies with less level of trust.

Cluster policy design should include special instruments to develop and maintain the trust in local communities which lay on the basis of the supported clusters:

Requirements and technical assistance to cluster management organizations

Formal rules of cluster governance

9. Formal rules of governance at clusters

balance the composition of the main governing boards of clusters toward greater conformity to the composition of its participants (large corporations, SMEs, universities, etc.)

develop procedures of the involvement of all stakeholders in the formation / correction of the action plan of a cluster organization;

implement the practice of making annual reports by the cluster organization to the cluster members

establish open procedures and formal criteria for the selection of the projects applying for public funding as well as provide information and ensure participation of the maximum number of cluster participants in the projects

develop formal procedures to enter and exit a cluster, institute the membership fees (eventually) to ensure the financial independence and stability of a cluster organization

10. Principles of cluster governance (similar to the

principles of corporate governance)

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Cluster governance should

• ensure equal attitude to the participants , including small and medium-sized enterprises

• provide efficient control over the cluster organization from the highest authorities of the cluster (the board, the board of the cluster, and so forth.), as well as the accountability of the higher authorities to its participants

• allow mechanisms of improving stakeholder participation in the activities of the cluster

• provide timely and accurate disclosure of information made on all important questions concerning the activities of the cluster

Participants have the right to

• obtaining the necessary information about the activities of management on a timely and regular basis

• participation and voting at general meetings of members of the cluster

• participation in the election of members of the highest managerial body of the cluster

• participation in making decisions about the selection of projects applying for the support from the federal government