Global innovation rankings: Is Russia 14th, 51st or 85th?

This op-ed by Adrien Henni, co-founder and chief editor of East-West Digital News, the first international resource on Russian digital industries, and a member of Marchmont's Advisory Board, was first published on the EWDN website.

A few weeks ago, Bloomberg issued a “Global Innovation Index” which ranked Russia as the world’s 14th most innovative nation – just between Norway (13th) and Belgium (15th) and well ahead of China (29th) and even Israel (32nd).

Here is how Russia ranked in Bloomberg’s determining factors:

• R&D intensity: 29th
• Productivity: 41st
• High-tech density: 2nd
• Researcher concentration: 24th
• Manufacturing capability: 38th
• Tertiary efficiency: 2nd
• Patent activity: 8th

Just months before, however, the country had been ranked 51st on INSEAD’s Global Innovation Index (GII) and stood 85th on the Global Competitive Index of the World Economic Forum for criteria related to “innovation capacity” – in a discouraging fall from 57th place in the previous edition (2010–2011).

True, these three rankings are based on completely different methodologies; and no one should expect converging results when comparing apples and oranges from different continents using different measuring instruments. With all due respect to the seriousness of the researchers and analysts behind these rankings, then, one should think it twice before drawing conclusions from any of them.

My personal opinion, stemming from a 25-year relationship with this country, is that Russia is not among the world’s most innovative nations. By such key parameters as Internet penetration (a bit more than 50%) or R&D investment as a proportion of national income (around 1%), Russia lags far behind the international leaders – and its technological retardation becomes obvious outside its largest cities.

The country’s economy remains fundamentally oriented towards exploiting natural resources and importing technology, while its industry still needs modernization
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These views are shared by the Russian authorities themselves. The government’s efforts to spur innovation in the country over the past few years have been praiseworthy, though not always efficient – which is likely to remain the case as long as decisive efforts are not undertaken to assert the rule of law, root out corruption and make the country more attractive to its most enterprising and creative citizens.

From “emerging” to “established”

Yet what Bloomberg’s optimistic 14th place for Russia tells us is that the country of Sputnik and Yandex is progressing at an unbelievable pace. Suffice it to look at the booming Moscow innovation scene. Only a few years ago, the city had just one business incubator, HSE Inc., founded in 2006 by students at the Higher School of Economics. Since then a plethora of incubators, accelerators and tech centers of all kinds have sprung up in Moscow, many of them integrating themselves with international innovation networks.

And while the local venture scene looked almost like a desert a mere three years ago, with hardly more than a couple dozen really active funds, domestic and foreign investors have now made an impressive pile of money available to Russian startups. State support has become a tangible reality too, from high profile nationwide projects to local initiatives in Moscow, Tatarstan, Novosibirsk and many other places.

But Russia is just one hot spot among many on the new global innovation map. The rise of innovative technologies, companies and even entire high tech industries in emerging countries now appears to be a major and irreversible trend of globalization.

The practice of innovation that was originally spawned in Silicon Valley and some other privileged areas in a few Western and Asian countries is now quickly spreading internationally, creating a global playing field from Berlin to Shanghai to Moscow to Rio de Janeiro, while more and more startups and funds tend to operate globally.

The rising status of countries beyond the G7 axis has just been quantified in a report by Thomson Reuters, encompassing data on R&D spending, human capital, research publications and patent filings. These are the key indicators of the sustained, diversified research innovation base enjoyed by many of the G7 knowledge economies, the news agency noted.

And this is how Brazil, Russia, India, China, South Korea and several other nations are now moving from “emerging” to “established.”

Thinking of rankings, Moscow factories and “Russia’s bane”

Russian business monitor RBC daily, the Petersburgskaya Politika Foundation and the Russian Academy of National Economy have prepared a new ranking of innovation activity in Russia’s regions.


It covers the months of spring and shows the Novosibirsk region as ranked number one. The region was number three in the previous ranking in late winter. Experts consider its innovation activity “balanced” and pay special attention to the region’s plans to create a Siberian analog of Skolkovo. The runner-up is Moscow, a region never mentioned among the top regions over the past 18 months. The rankers attribute Moscow’s second place to the “vast reorganization of its industrial sector.” The Krasnoyarsk region is number three now (it led the winter ranking). The Tomsk region, number four, is now on a Top-25 list of international innovation centers. Number five is the Kaluga region with its growing pharma innovation cluster.


Overall, the experts feel there’s a certain slowdown in the regions that have always been considered Russia’s innovation drivers, attributing this to a reshuffle in leadership following the presidential election, and to somewhat unclear government policies as regards modernization.

(Based on media reports)

Personally I don’t believe that those rankings change significantly month to month or even quarter to quarter. There are independent long-term trends for different regions such as Siberia, Tatarstan, Nizhny Novgorod, Kaluga and others, developing their own strategies toward the type of innovation cluster that’s going to create the most value for itself. Month to month different regions will have different success stories to present to the media and the investment community.

I think it’s a useful process to rank the regions simply as an indicator of observing the success stories. And it’s no wonder we once again have three Siberian regions highlighted here. I feel there’s long-term, very strong development for Siberia as a regional innovation cluster—much as you might have along the entire coast of California going all the way from San Diego up to Seattle with their culture of innovation, entrepreneurship, openness, collaboration and so on between the different universities and different cities there.

I believe the culture in Siberia is different from the culture in St. Petersburg or Moscow, or the Urals. The Siberians are very independent-minded; their culture is very exploratory and creative. Different leaders in the region are coming to these conclusions that their population and their regional competitive advantages leave them to promote themselves as innovation clusters, and therefore the process will continue.

Has there been any type of stagnation over the previous six months? Absolutely! If government budgets are put on hold because of political uncertainties, then clearly budget financing for different regional budget organizations becomes tight. People get more conservative and more concerned about the future; you don’t have the same cash flows, which subsequently translates into fewer success stories and highlighted new initiatives because people are holding back until they are sure of their budgets.

Does it mean the regions are slowing down and they are not going to continue to develop innovation strategies? Absolutely not! Of course, they are going to continue with innovation strategies; they absolutely have no other destiny except to pursue this. Russia itself has no other destiny except to develop itself as an innovation economy. Russia cannot compete against the United States or any other post-industrialized country in the 21st century as a commodity economy. And if the geographical, cultural and other competitive advantages of Siberia mean that this is one of Russia’s leaders—well, I don’t think it’s going to change over a short term.

There’ll be continued development in Novosibirsk, Krasnoyarsk and Tomsk. I think this competition between the regions will stimulate independent development regardless of what Moscow initiatives are or what Moscow support comes. This competitiveness is similar to what we have in California. From San Diego to Santa Barbara or San Francisco, the competitive nature of young entrepreneurs drives everyone to work harder and to be more creative.

Moscow factories and creativity hubs: moving out, moving in

Some would wonder if the “vast reorganization of Moscow’s industrial sector” cited by the ranking makers as the reason for placing the Russian capital as the runner-up is a true driver of innovation there. Indeed, some more vibrant phenomena like Digital October may seem a stronger contributor.

But in fact, I believe it is a strong enough driver. In the reorganization, a number of companies have been either moved out or pushed out of the city center. I personally was an investor a few years ago in such a company which makes industrial products; we moved out of the center of the city as there were significant incentives and advantages for us to do so. It freed up space inside the city center to be used for other purposes, which might be more oriented toward the creation of additional projects—such as Digital October.

Digital October is a wonderful example, but there’re also other places in Moscow developing their independent creative centers. I could mention Winzavod, a very creative center for contemporary art and design. It’s a venue completely different in its atmosphere from Digital October, but it’s also developing.

I would also ask a question: what is going to happen to ZIL? Are they still making cars there? I think not. Are they going to do something else with this space? It seems to me that smart people like Alexei Komissarov are thinking of new strategies of how to create additional competitive centers like small innovation clusters within Moscow. There are dozens of industrial companies that have vacated the center to move to more economically efficient space outside of the center, meaning that the center is allowed to create new hubs of creativity and innovation, business incubators, design centers. I believe that once Moscow is restructured, it will be a very positive result for the city. Moscow has always been and will always continue to be a magnet for the best and brightest from around the country. I think that the government of Moscow is actively trying to develop this strategy, and part of it is the restructuring of industrial assets.

Approaching Russia’s point of no return

Today, just months after the presidential election, government policies as regards modernization may still be unclear. I think that over the course of this year the administration will probably change a few faces and policies. My personal opinion is that these changes will inevitably, in the long run, accelerate the drive toward innovation.

This society cannot operate as a commodity economy indefinitely. As a macroeconomist I can say that the general commodity cycle of the past ten years is coming to a close and the generally high prices of commodities will probably begin to fall.

China, the largest commodity prices driver over the past 25 years, cannot sustain its eight-to-ten percent growth rate and in the next 20 years China’s economy will consume fewer commodities. The European Union is at a point of stagnation and cannot be expected to grow more than one or two percent per annum. The US economy is at a point of potentially growing at a two-to-three percent rate, but it’s not clear if it’s going to achieve that or not; it depends politically on what happens with the election in November. But generally, the prognosis is that the commodity-driven economies will suffer over the next 20 years.

Russia, in my opinion, has no choice but to diversify its economy and modernize as rapidly as possible. One of the key steps to be taken over the next two years should be to incentivize medium and large-scale Russian companies to invest in themselves. This will subsequently create a greater-scale market for innovation inside of Russia. If more Russian companies buy Russian innovation and prove to the rest of the world that Russian technologies can save money and improve efficiency, it will lower the risk for foreigners to buy those technologies.

Another step is restructuring the Russian tax policies to encourage angel-level investors to take risks investing in early-stage technology projects to bring them from the innovation laboratory into commercialization and into markets.

Siberia on its way to create its own analog of our Silicon Valley

One of Russia’s leading business monitors, RBC daily, pooled efforts earlier this month with the St. Petersburg Politics Foundation and the Russian Presidential Academy of National Economy in putting together a ranking of Russia’s regional innovation activity for the first two months of this year. The four leaders in this ranking are the Krasnoyarsk, Tomsk and Novosibirsk regions and the Republic of Tatarstan.

My first thought upon looking at RBC’s publication was, “Such an interesting ranking! The first three are all Siberian!”

I think it’s very difficult to determine which regions out of Russia’s 83 are the top ranked. In my opinion, any type of ranking certainly involves a lot of objective economic statistics and investment indicators and numbers that can be tracked, but there’s also a certain amount of subjective emotional assessments.

The most current ranking clearly shows the importance of Siberia as a leader in Russia’s development as an innovation economy. Placing the Krasnoyarsk region ahead of Tomsk, last year’s indisputable number one, might be questioned, though, but the overall trend is clear.

Perhaps, psychologically this is because of the independence of much of the people in Siberia. I recall several years back meeting an economist on a flight from Moscow to Novosibirsk, and the economist was a woman my age. She had studied economics in the former Soviet Union in Novosibirsk at the same time that I had studied economics in the United States. And we compared notes.

I was shocked to understand that they were teaching almost exactly the same things in Novosibirsk at that time about realities of market economics and failures of the Soviet Union as I was learning in my own studies at Stetson University in the mid-1980s.

From this example I understood that the people in Siberia were very far away—not only geographically but perhaps also culturally—from Moscow and from Gosplan and other structures of the Soviet Union. And this independence was perhaps relegated to the far-away regions of Siberia during the time of the Soviet Union. With the crash of the USSR and the country’s opening, as the economy has become globally integrated, new technologies have allowed this to only strengthen.

That woman explained to me that the books that they read in Siberia in the 80s were open although they were on black lists in Moscow. In Moscow, the knowledge that they were learning openly in Siberia was not allowed to be taught.

For me it was shocking to see that. Today it’s not shocking to see that Siberia is becoming one of the leaders in Russia because the true innovation economy is a bottom-up driven economy. The regions that have allowed their young innovative entrepreneurs to thrive and to grow, and to develop themselves, are naturally going to become the leaders in any emerging innovation economy in Russia.

Any global economist can demonstrate the importance of top-down macroeconomic strategies on the part of the government to develop very large-scale government priority projects. This is clear and historically obvious; you can see the results in the space race to put the first man in orbit and then on the Moon, for example. These top-down programs significantly accelerated human development. But taken alone top-down economic initiatives and macroeconomic programs are not enough to create an innovation economy. They must be met by bottom-up initiatives of individual people proposing their own ideas, which can solve specific market related problems.

Therefore it seems to me absolutely non-surprising that three top regions in Russia, Krasnoyarsk, Tomsk and Novosibirsk, are all based in Siberia. And I believe they are going to create their own analog of our Silicon Valley, a very strong innovation clusters system. And perhaps what will emerge is a network of open collaboration between these different cities as exists in different parts of the United States, for example. Silicon Valley is a very long geographically spread out place with different base structures, which are interconnected by human capital and infrastructure and government programs and private programs. So I expect that to develop also in Siberia.

The inclusion of Tatarstan in the list is very exciting to see because I think as a region it deserves this high ranking. I’ve seen for myself the efforts that the local government has put into such organizations as Techno-Park Idea, technopolis KhimGrad and IT Park. These macro top-down investments, including the development of the Alabuga SEZ, have been instrumental in attracting investors, and not only Western manufacturing investors but also financial investors. The emergence of Tatarstan’s Clean Tech Fund has been a very positive development showing Tatarstan as a region to be extremely proactive in attracting financial investments in clean tech and hi-tech industries.

This doesn’t mean that other potentially attractive innovation clusters in Russia, surrounding certain regions of Moscow and St. Petersburg and Nizhny Novgorod and Samara, aren’t also developing rapidly. I think they are, but they may be working ‘below the radar.’ I think what sets apart those regions in Siberia is firstly the very strong independent nature of the local people who are promoting themselves and their regions. I think the same can be said of Tatarstan; the region has been promoting itself throughout the world for five years through different chambers of commerce in the United States, the UK, in Moscow—all over the world Tatarstan representatives fly out to business associations around the world and present themselves. This has created a certain image of the region as very progressive, and it’s well deserved.

I think that in the next few years other regions will more and more begin to do exactly that, and they should do that.