In the world of fierce business competition, technologies often become the principal source of competitive advantage for firms. Technological innovations have already become the basic measure of entrepreneurial growth and business success, but only firms that possess unique, inimitable technology resources can successfully outperform their competitors. State and policy support is crucial for the successful adoption of technologies by firms. The case of Russia is no exception. Russia possesses a sophisticated scientific and technology base, but the rates of adoption of technologies in Russian business remain formidably low. Only a broad government-based innovation policy can help Russian businesses to move forward and to become a part of the international high-tech business community.
Explaining how and why Russian businesses use technologies is impossible without understanding the nature of the Russian business climate. Decades have passed since the collapse of the Soviet Union, but Russian business remains a model of bureaucracy that reflects the legacy of Soviet politics and the historical hatred of the Soviet Union to private property and entrepreneurship. Russia has made considerable improvements in the sphere of business and business development, but the country is still characterized by political instability, rapid economic fluctuations, government overregulation, and an unfathomable system of taxation (Puffer, McCarthy & Peterson 24). Business infrastructures reflect the main inadequacies of doing business in Russia, and those who wish to create profitable ventures are bound to navigate through a long bureaucratic maze, with an underdeveloped legal system and a pervasive mafia at its bottom (Puffer, McCarthy & Peterson 24). Businesses in Russia operate in the atmosphere of economic instability and elevated legal risks, which makes successful adoption of technologies virtually impossible. Although the rates of technology adoption in Russian business are gradually increasing, the country is still an eternity away from creating a perfect and profitable business-technology synergy.
Russia and Russian businesses are characterized by the growing levels of technology adoption. Russian businesses rapidly expand their innovative capabilities (Gurkov 299). The more optimistic Russian CEOs feel about their business future, the higher the rates of technology adoption become (Gurkov 300). Almost every third entrepreneur and CEO in Russia that enjoys a good or excellent position in business reports intensive changes in their technological structures and infrastructures (Gurkov 300). The fact that Russia possesses a sophisticated technology base facilitates the adoption of technological innovations in Russian firms (Watkins 2). The professionalism of scientific and IT personnel facilitates the rapid advancement of technologies in Russian business. Russia’s technology and innovation potential is much greater than that of other countries with similar levels of GDP (Gianella & Tompson 5). Russian businesses benefit from a well-developed scientific and educational base (Gianella & Tompson 5). Nevertheless, the actual rates of technology adoption in Russian business and the scope of innovations reported by Russian firms remain disappointing, and there are several reasons for this.
The use of technology in Russian business exemplifies a unique paradox: Russian businesses spend considerable resources on technological innovations, but their performance on the majority of technology adoption and innovation indicators remains mediocre (Gianella & Tompson 5). Russian businesses perform relatively well on most R&D indices, but face considerable barriers to direct technical achievements (Gianella & Tompson 5-6). Russian CEOs and business owners report considerable difficulties on their way to accessing new technologies, including production technologies (Gurkov 305). 16.1% of CEOs reports that they face moderate difficulties in getting access to production technologies, but for 21.5% of Russian businesses this task is associated with extreme problems (Gurkov 305). The quality of research and technology spending in Russia does not meet the demands of a market economy, and most technological developments within Russia remain in the hands of the state (Gianella & Tompson 12).
Business expenditure on technological innovations remains extremely low and does not exceed 1.5% of the total industrial sales (Gianella & Tompson 7). Businesses operating in the field of innovations and technologies spend only 3.3% of their sales on innovations and new technological developments (Gianella & Tompson 7). Small businesses simply lack resources and spend only 0.4% of their sales on technologies (Gianella & Tompson 7). Technologies are used only in a small number of business sectors and even then, only a handful of enterprises choose to adopt new technologies (Gianella & Tompson 8).
More often than not, businesses spend their resources on the technological innovations that improve their production capacities and operations but do not result in the creation of new products (Gianella & Tompson 8). Business owners purchase and import new equipment and machinery, especially in the industrial sector. Technologies are adopted by acquiring patent rights; in this way, Russian businesses try to imitate the success of their foreign competitors, but fail to create their own innovative capacities (Gianella & Tompson 9). These technologies have the potential to drive further innovations in organizational culture and structure, but the current state of technology use in Russia leaves much room for improvements. This is particularly the case of the firms located far from the ‘technological frontier’: in these firms technologies can lead to the rapid and cost-effective productivity gains (Gianella & Tompson 10). Closer to the ‘technological frontier’, the adoption of technologies becomes costlier (Gianella & Tompson 10). It is no wonder that many Russian firms keep running outdated organizational structures and operations, being unable to cross the financial and resource line towards greater adoption of technologies.
Most businesses, especially in the manufacturing sector, are not motivated to adopt advanced technologies. The products of the state’s R&D activities have little market value, and firms do not want to invest additional resources and make these products suitable for use in real-life business conditions (Kuchukov 41). Simultaneously, Russian businesses are economically interested in investing in foreign technologies, but most technologies are adopted by firms simply to help them meet their ends (Kuchukov 41). More often than not, Russian products are manufactured by using obsolete technologies, and releasing funds to implement more advanced systems of production is virtually impossible (Kuchukov 41). “The current assets needed to modernize production and make the transition to new, innovative products are in short supply, and there are high risks involved in taking out loans” (Kuchukov 41). Most Russian manufacturing firms have a quick manufacturing cycle, which means that they adopt foreign know-how but have no incentives to develop domestic innovative capacities (Kuchukov 41). When the Russian government seeks to gain greater profits (read: taxes) from the Russian business sector, the latter has no resources left to invest in innovations and technologies (Kuchukov 42). The government does not make any predictions concerning the development of business in the nearest future, nor does it try to stabilize the situation in manufacturing and let Russian businesses invest their profits in modernization (Kuchukov 42). Thus, it comes as no surprise that the situation with technology adoption in Russian business is very close to a systemic crisis, and only broad state policies can help to improve the situation.
Russian businesses need government support to create a new technological system and be able to invest their profits in new technologies. Moreover, Russia needs a new system of economic and business incentives to let national and local manufacturers benefit from their intellectual activity (Kuchukov 42). The development of a new system of intellectual rights protection will play one of the central roles in advancing unique technologies in Russian business (Kuchukov 42). It should be noted that the rates of technology adoption by Russian firms also depend on broader factors and influences, including the Russian business climate and government’s attentiveness to the problems of the small and medium business sectors. Russia has everything needed to transform the profits obtained from natural resources into a knowledge based economy (Watkins 2). Russia must develop effective linkages between the biggest national and international firms and science-intensive small and medium enterprises, so that the technologies and innovations developed in Russia can be applied at a national scale.
Finally, to make sure that Russian businesses become technologically advanced, the country must motivate educated Russians to stay and work in the country. It is not a secret that brain drain has distorted the balance of creative resources in the Russian business landscape. Apparently, the issue of technology use in Russian business is closely linked to the economic, social, political, and cultural conditions of doing business in Russia. In its current state, Russia has everything needed to pursue its technological and business objectives, and the future holds a promise to improve the technological standing of Russian businesses.
In the world of competition, technologies exemplify one of the main sources of competitive advantage for firms. Unfortunately, the rates of technology use in Russian business are very low. More often than not, firms, especially manufacturing businesses in Russia, adopt foreign know-how to meet their ends but fail to develop domestic innovative capacities. Russian business has everything needed to transform its wealth into a knowledge-based economy, but the government must help businesses to create effective linkages with science-intensive enterprises and acquire new incentives, which should motivate Russian businesses to adopt new technologies and develop domestic capacities for innovation