Innovation Policy and Economic Actors: State, Market and Enterprise

Abstract

The paper analyses the contemporary Russian innovation policy and innovation system, and posits that Russia needs to overcome considerable barriers in order for it to become a sound innovative society. After its transformation, Russia changed its innovation policy from government-led to market-led. In the midst of weakened international competitiveness and economic decline, however, its policy has spontaneously changed to one of 'governmentalization', showing path-dependent evolution. Throughout the 2000s, the government introduced a succession of innovation modernization programs, but the results appear limited, and the macroeconomic indicators explain how the country continues to be mired by its traditional backwardness, as evidenced by its heavy dependence on energy exports, poor high technology exports, outdated equipment, and other such factors. As a theoretical framework for understanding the innovative society, I apply the 'market quality theory', in that market quality determines the content of innovation institutions and barriers they face. Market quality can be measured by institutional arrangements (infrastructure, strength of the 'rule of game', and its enforcement), institutional complementarities, and transaction costs. The specificity of the Russian market indirectly characterizes its weakness in market quality, as seen in international rankings such as the Global Competitiveness Index, Corruption Index, and so on. Thus, Russia's innovation institutions have their specificities and instabilities, and owing to the weak market quality, misuse of institutions, and government failure, its innovation policy has become 'govemmentalized' instead of following the path of marketization with high quality. Market quality and state/government quality are one and the same. The quality of its state/government is poor owing to its present form of governance and social mistrust. In order to overcome these barriers, I stress on the need for social innovation as a key measure for enhancing the quality of the market/state.