Russian Industrial Firms Research Articles

The impact of special economic zones on industrial enterprises’ productivity in Russia

ABSTRACT This article explores the impact of Special Economic Zones (SEZ) on Russian industrial firms’ productivity, using propensity score matching to address heterogeneity issue. Our investigation contributes to the existing literature in several ways. First, our study fills a gap in the literature that evaluates the effectiveness of Russian SEZs. Besides, we attempt to solve the problem of self-selection and minimise the impact of unobservable effects by matching similar firms. Moreover, we reveal the role of SEZs in increasing productivity and competitiveness of Russian enterprises considering regional economic development and corruption. We take into account the factors that affect the firms’ performance both at the municipal and regional levels. An ambiguous effect of SEZs on productivity was found, but a positive significant influence of SEZs on productivity was revealed in regions with relatively higher corruption and with relatively lower GRP per capita.

How the adoption of industry 4.0 technologies is related to participation in global and domestic value chains: Evidence from Russia

This study explores the relationships among Industry 4.0 technologies, their application areas, and the involvement of Russian manufacturing firms in global and domestic value chains. We apply logit and multinomial logit regressions using an original survey dataset of approximately 1700 Russian manufacturing firms. We make a novel contribution to the literature by uncovering an asymmetry in adopting Industry 4.0 technologies among Russian industrial firms in domestic value chains (DVCs) and global value chains (GVCs). This asymmetry has the potential to impede GVC localization and DVC internationalization. Based on our results, software automation solutions are the only ones demonstrating statistical significance for firms participating simultaneously in GVCs, DVCs, and both GVCs and DVCs. Companies in DVCs demonstrate a broader utilization of Industry 4.0 technologies across various application areas. We also identify evidence of reshoring in DVCs, indicating that Industry 4.0 adoption encourages firms to establish enduring relationships with domestic suppliers. Highlighting that differences in technology adoption are influenced by external factors, including adherence to international standards and regulatory principles, we propose policy implications for developing countries. Recommendations encompass reducing entry barriers to DVCs, improving procurement transparency, and promoting competition in the digital solutions market to empower firms for seamless GVC integration.

The Impact of Global Crisis on the Innovative Processes in Sustainable Development of Russia as a Resource-Mining Country

The global crisis processes that began in 2008 are special, as they signify a change in the epoch shift – from industrial to post-industrial, with a radical reduction in the negative impact on nature and a careful attitude to non-renewable natural resources. The innovations arising during this period affect all spheres of sustainable development – from environmental and technological to economic and social ones. The penetration of global crisis processes into Russian economy has reduced the demand for innovative products, has reoriented investments to maintain output volumes instead of improving the environmental performance of production. The negative consequences of the crisis in Russia include reducing the chances of survival for emerging innovative enterprises, reducing the share of regions that have taken the path of sustainable development, when industrial output growth does not worsen the ecological situation. Therefore, the relevance of an accurate analysis of the factors influencing the global crisis on the innovative development of industry, defining prospects for reducing resource use and investing in environmental protection measures, is greater than ever. In this article, a factor analysis of the impact of the crisis on the innovation activities of Russian industrial firms in the crisis years of 2008 and 2015 was carried out based on data on the main indicators of the enterprises activities. The authors highlighted a number of independent factors influencing crises on sustainable development, with special attention paid to innovative human potential.

The evolution of corporate governance in the global financial crisis: the case of Russian industrial firms

In this paper, using a unique dataset of industrial firms obtained from enterprise surveys conducted across the Russian Federation in 2005 and 2009, we trace back structural changes in the corporate governance system before and after the global financial crisis. We also empirically examine the impacts of the crisis on the organization of boards of directors and audit systems. Our survey results reveal that, in the Russian industrial sector, the quality of corporate governance has been improved through the crisis. Furthermore, we found that, corresponding to the alignment hypothesis, in firms that decisively reformed their management and supervisory bodies in response to the 2008 financial shock, the total number of worker representative directors significantly declined, as did their proportion to all board members. On the other hand, we also found that, in firms that substantially reorganized their audit system to cope with the crisis, the independence of the audit system was undermined remarkably, corresponding to the expropriation hypothesis. Findings that management behaviors predicted by the two conflicting hypotheses are simultaneously detected—and that their targets are significantly different—deserve special mention.

Costs and Benefits of Land Ownership: The Case of Russian Firms

Private ownership confers numerous benefits, including stronger performance incentives, better use of privately owned assets, and improved access to finance. We argue that privately owned land could be both an asset and a liability, and overall net benefits of land ownership are contingent on the quality of surrounding institutions. We present a simple model and empirical evidence based on the Business Environment and Enterprise Performance Survey (BEEPS) in Russia, which clearly demonstrates such conditionality in the case of land ownership by Russian industrial firms. Consistently with earlier literature, land ownership facilitates firms’ access to finance (the “de Soto effect”), but at the same time entails additional risks and obstacles to doing business. When the quality of property rights protection and other key institutions is poor, land ownership could have an adverse effect on firms’ performance.

Public Support for Innovation in Russian Firms: Looking for Improvements in Corporate Performance Quality

This research focuses on the efficiency of Russia’s policy to foster innovation. We conduct an empirical analysis of how policy instruments impact firms’ behavior. The analytical data are obtained from a survey of more than 650 Russian industrial firms in 2012. The analysis shows that state support for innovation clearly targets successful companies and does not target laggard or insider (i.e., partially state-owned) firms. Comparing innovation effects on firms with and without state support, we found no strong improvement in corporate performance as a result of state-supported innovation. A significant positive correlation with state support existed for only one characteristic of firm performance: export volume. Considering specific effects of tax incentives and public subsidies on companies’ innovation behavior, we found out that direct public funding was more likely to mitigate risk and facilitate the launch of new innovative projects. Simultaneously, both tools lead to public funds crowding out private funds.

Cooperation between Russian Research Organizations and Industrial Companies: Factors and Problems

The study is focused on the cooperation of Russian companies with research organizations in implementing R&D projects during technological innovation. Taking into account behavioral changes, authors carry out a micro-level analysis based on empirical data of executive survey of over 600 Russian industrial firms (2011—2012) and about 350 research organizations and universities (2012). The authors emphasize the key factors of firms’ demand for outsourcing R&D reveal the main barriers to the development of university-industry cooperation and their particularities for different cooperation actors. The analysis shows that there is a positive relation between the size of a company and R&D outsourcing. As for the factor of age, the highest cooperation activity of Russian firms is observed among enterprises founded over 20 years ago. As far as concernes cooperation activity of research organizations, large ones are significantly more likely to cooperate with business. A common prerequisite for research organizations' R&D cooperation with business is sufficient academic ranking. Business and science evaluate differently various obstacles to effective cooperation. For firms, the main problems are the inflated costs of national R&Ds, insufficient research organizations’ orientation at company needs, and low quality of developments. As for representatives of research organizations, they mention as barriers primarily the lack of companies' receptivity to innovation and inadequate information about promising developments. Businesses are more optimistic about cooperation with science if they already have a relevant experience of interaction. In the case of research organizations we observe a different pattern: most problems seem more significant to organizations conducting R&D in business interests.

R&d cooperation between russian firms and researchorganizations: is there a need for state assistance?

The study is focused on the cooperation of Russian companies with research organizations in implementing R&D projects during technological innovation. Taking into account behavioral changes, the authors carry out a micro-level analysis based on empirical data of executive survey of over 600 Russian industrial firms (2011-2012) and about 350 research organizations and universities (2012). The authors emphasize the key factors of firms’ demand for outsourcing R&D, reveal the main barriers to the development of university-industry cooperation and their particularities for different cooperation actors. The study examines how Russian innovation policy toolkit affects partnerships with regard to changes in the actors’ cooperative behavior.

Coping with Uncertainty: The Role of Contracts in Russian Industry During the Transition to the Market

Russia's transition to the market was tortuous. The literature presents the 1990s as a period when contracts were largely irrelevant due to the inadequacies of the substantive law and the inability of courts to protect property rights. This article explores how contracts were, in fact, used by Russian industrial firms through a series of in-depth case studies. At all of the case study firms, management had developed standard form contracts. Their willingness to rely on them when problems arose was dictated primarily by the nature of their relationships with their trading partners, not by a lack of faith in the legal system. Where the relationships were grounded in personal trust, managers were reluctant to invoke their rights under the contract. Where relationships were grounded in calculative trust (mutual need intertwined with mutual suspicion), managers did not shy away from legalistic remedies. Enterprises that relied on in-kind exchanges had little need to rely on written contracts due to the ephemeral character of these transactions. The lack of reliable information about the credit-worthiness of prospective customers combined with the lack of reputational sanctions for contractual violations made life difficult for all of the case study firms.

Global financial crisis, corporate governance, and firm survival:: The Russian experience

Using a unique dataset obtained from large-scale panel enterprise surveys conducted in 2005 and 2009, we clarify the survival status of Russian industrial firms before and after the global financial crisis and empirically examine the determinants of firm survival. The estimation of the Cox proportional hazard model provided evidence that the independence of company’s governance bodies, their human resource abundance, and influence over corporate management are statistically significant factors affecting the survival probability of the surveyed firms. In particular, the board of directors and the audit committee are likely to play a vital role in reducing the potential exit risk. We also found that there is a significant difference in the viewpoints of economic logic for firm survival held by independent firms and group companies.

Explaining the “Ilya Muromets Syndrome” of Business Innovations in Russian Industries

This article provides an explanation of the reasons for the low intensity of innovative behavior in the vast majority of Russian industrial companies found in a survey of corporate executives administered in 2011. I found two major causes for the situation when companies possess sufficient innovative capabilities but lack the motivation to use such capabilities for real innovative actions: the positive perception of the CEOs about the already achieved competitive positions of their companies and the unwillingness of shareholders who act as dominant stakeholders of most Russian industrial companies to bear additional risks associated with innovations. I labeled this “Ilya Muromets syndrome”: Like the youth of the Russian hero Ilya Murmonets, Russian industrial firms seem to be trapped in their bed of complacency, and only exceptional circumstances can stir them to heroic innovative actions.

The impact of market orientation on the development of relational capabilities and performance outcomes: The case of Russian industrial firms

The article investigates the role of market orientation as an antecedent for the development of relational capabilities and performance in Russian industrial firms. We test the direct role of different aspects of market orientation on business performance in comparison to an indirect and mediated influence via improving a firm's ability to become embedded in relational structures. The results of an empirical study demonstrate the differential impact of components of market orientation – customer orientation, competitor orientation, and interfunctional coordination – as direct and indirect antecedents of relational capabilities and thus subsequently of overall firm performance. It can be shown that in Russian industrial markets competitor orientation directly and positively impacts on performance, while the other two components of market orientation have only a mediated effect on performance via the development of relational capabilities.

Stuck between Surplus and Shortage: Demand for Skills in Russian Industry

AbstractIn order to remain competitive, firms need to keep the quantity and composition of jobs close to optimal for their given output. Since the beginning of the transition period, Russian industrial firms have been widely reporting that the quantity and composition of hired labour is far from being close to optimal. This paper discusses what kinds of firms in the Russian manufacturing sector are unable to optimize their employment and why. The main conclusion is that the key issue is an excess of non‐viable firms and a shortage of highly efficient firms because of weak selection mechanisms. The major solution is seen in creating institutional conditions that stimulate a more efficient reallocation of labour. The analysis presented in this paper is based on data from a large‐scale survey of Russian manufacturing firms.

The Composition and Interests of Russia’s Business Lobbies: A Test of Olson’s 'Encompassing Organization' Hypothesis

Why are some lobby groups less benign in their external effects than others? Nearly three decades ago, Mancur Olson (1982) proposed that less-encompassing lobby groups with their constituents collectively representing a narrow range of sectors are more apt to seek the types of subsidies, tariffs, tax loopholes, and competition-limiting regulations that impose costs on the rest of society. To the best of our knowledge, Olson’s oft-cited hypothesis has yet to be actually tested, due perhaps to the absence of adequate data on general policy preferences of various types of lobbies. Thus, we examine a pair of surveys from 2003 and 2004 which were targeted at managers of business associations (lobby groups) and their enterprise constituents to directly test Olson’s hypothesis. Managers from a diverse array of Russian industrial firms and business associations were asked similar questions regarding their attitudes to policies that explicitly benefit well-defined sectoral or regional interests and, implicitly, impose external costs. The pattern of responses is striking. Managers of less-encompassing associations and the constituent firms of such groups are much more apt to see such policies in a favorable light. In contrast, more-encompassing associations and their member display greater skepticism toward narrowly targeted government interventions. Our results strongly support Olson’s hypothesis.

Non-Wage Benefits, Costs of Turnover, and Labor Attachment: Evidence from Russian Firms

Just as in established market economies, many Russian firms provide non-wage benefits such as housing, medical care or day care to their employees. Interpreting this as a strategic choice of firms in an imperfect labor market, this paper examines unique survey data for 404 large and medium-size industrial establishments from 40 Russian regions. We find strong evidence that Russian industrial firms use social services to reduce the costs of labor turnover in the face of tight labor markets. The strongest effect is observed for blue-collar workers. We also find that the share of non-monetary compensation decreases with improved access to local social services.

Market Competition and Firm Performance in Russia

The report is based on the test, which measures whether foreign and domestic product market as well as domestic factor market competition affect firm efficiency, using a 1992‐1998 panel of 14,961 Russian industrial firms, covering 75 percent of industrial employment in 1992. The results provide strong evidence that domestic product market competition, import competition, and local labor market competition have strong positive effects on firm efficiency. The impact of liberalization appears only gradually in the domestic product market, taking about four years to attain 90 percent of the long‐run value, but we find no such lags with respect to import competition or labor market competition. The degree of local competition appears to have more of an effect than national competition, suggesting that markets are geographically segmented. Better transportation infrastructure appears to turn potential product market competition into actual competition, while at the same time reducing firms' monopsony power on the labor market by facilitating worker mobility across municipalities. We also find that non‐state firms outperform state enterprises, even after controlling for selection bias in the determination of ownership. The results suggest that a reduction in import barriers, investment in transportation infrastructure, and elimination of interregional administrative trade barriers would stimulate industrial growth.