Russia's Innovation Facade

Walking across the Skolkovo village, a major innovation hub near Moscow, gives the impression of being at the midst of Russia’s booming innovation culture. The Russian Silicon Valley, as called by then-President Dmitry Medvedev in 2010, hosts a futuristic and expensive state-of-the-art business school campus with its design inspired by paintings of “Suprematism” by avant-garde artist Kazimir Malevich. But as with many things in Russia, facades might be misleading, with the opposite reality hiding behind the walls.

The 2016 Global Innovation Index (GII) elevated Russia by five positions to the 43rd place. Recent data from Russia’s largest job-searching platform, Headhunter, echoed the findings of the GII ranking. The website highlighted 21 more senior openings in innovations management advertised in 2016, in contrast to only eight positions a year earlier. State-owned corporations championed the demand.

One of the factors responsible for the rise is increased governmental efforts to allocate more funds and incorporate the innovations agenda into policy. Since 2010, the Russian government has adopted more than 50 official documents pertaining to technology, research, and innovation.

In 2016, Igor Shuvalov, Russia’s deputy prime minister, issued a directive for all top managers of state-owned corporations, requiring them to include metrics regarding the implementation of innovations into their Key Performance Indicators. For the companies in the oil and gas sector, the indicator had to equal at least 10 percent, with higher rates stated for other sectors.

In effect, there have been certain rates of improvements on innovation recently. Sberbank, a major state-owned Russian banking company, with its liberal and futurist-minded CEO Herman Gref, has its own innovative department consisting of the country’s top project managers, programmers, and engineers. According to Vedomosti, last year alone the department drafted 16 pilot projects with four successfully implemented. Gref is among the few people in the country actually working on transforming bureaucratic inefficiencies and even seeking to implement an agile organizational structure.

Overall, Russian officials envision the state as the sole force capable of boosting innovation and development; therefore they are not limiting but encouraging its expansion. The governmental sector already accounts for more than 70 percent of the national economy and its share does not seem likely to shrink despite publicly announced plans for the forthcoming privatization of state assets.

Directives from the government likewise ensure that state-controlled companies will continue to increase spending on innovation during upcoming years. For instance, the Russian state nuclear giant Rosatom plans to allocate at least 4.5 percent of its revenue to research and development purposes by 2020, with further hopes of boosting its output and share on the global nuclear market.

The achievements of state corporations are pompously boasted across state-controlled media. Russia 24 and others trumpet the right direction of the governmental policy for combating economic stagnation, with multiple reports presenting new inventions inside expensive new facilities from Akademgorodok near Novosibirsk to Innopolis in Kazan. The narrative echoes a nostalgic image of the Soviet style top-down directives and planned economy producing results in the modern environment.

But while loud statements keep dominating the state-controlled media agenda, with more officials announcing new pinnacles from brand new offices, the reality differs drastically.

A report from the Higher School of Economics suggests that the share of Russian companies implementing innovations has not gone over 9 percent for the past decade. The figure points to the persistent stagnation of innovative activities and comes in contrast with neighboring European nations. A similar indicator in Germany exceeds 60 percent while Bulgaria surpasses 20 percent.

The strict existing hierarchies within state organizations are some of the major hurdles blocking the implementation of innovations. There are few doubts about the talents and skills of Russian managers working in the area; however, few can flourish within thick governmental-style bureaucracies.

Even as more companies hire specialists in innovations, most of their ideas eventually remain lying on shelves, unused. Many disenfranchised managers prefer to leave rather than launching a “no-win” fight against the system.

Ironically, the desire to boost innovation, coming amidst uncontrolled expansion of the governmental sector and low competition throughout the economy, further hurts the sector. Thus, top managers are more eager to report fulfillment of the “innovations plan” to the controlling authorities than to actually produce empirical results.

There is even a popular joking acronym of “ИБД” (in Russian) to describe the current model of interaction with the officials. The full phrase literally translates into English as an “imitation of exuberant activities.”

One Russian major innovation hub, Innopolis, hosts conferences with top officials declaring advancements in national science, but few admit that almost half of its offices remain empty. Similarly, the Fund for Internet Initiatives, a major state-supported venture capital fund, continues to receive lavish governmental support but few to none of its companies have succeeded internationally.

Many in Russia yearn to see native versions of Google or Tesla, but few are ready to acknowledge the reasons behind these companies’ successes. Out of the country’s most innovative companies to date, such as Yandex and Mail.ru, none achieved these heights under governmental patronage.

With the demand for innovation high, displaying facades of ritzy and expensive buildings continues to remain more important than actually innovating.