sme and clusters in russian regions > cases and lessons...

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SME and Clusters in Russian Regions > Cases and Lessons for SME Policy

Alexey Prazdnichnykh

Bauman Innovation, Academy of National Economy

VII Knowledge Economy ForumAncona, Italy, June 17 – 19 2008

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Content

1. SME performance of Russian economy

2. Cluster specific barriers for SME development > 3 Cases from Russian regions

3. Lessons for SME Policy

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Industry structure of small business sector in Russia

Small business (<50 people) share of total employment, 2003

Source: OECD (2005), RCSME (2004), Rosstat (2007), analysis by Bauman Innovation* Employment data corresponds to the international definition of small enterprises (50 people or less). Industry statistics on small business in Russia

corresponds to the national definition of small business (excl. farm employment), which includes enterprises with 50-100 employment for some sectors

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Russia*

USA, 2000

Switzerland

Great Britain

Ireland

Finland

Germany

France

Sweden

Austria

Norway

Portugal

Spain

Italy

Agriculture15%

Manufacturing14%

Construction13%Wholesale and

retail trade37%

Real estate, renting and business activities

8%

Other industries

13%

SME underperformance of Russian economy is a challenge for the economic and industrial development

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Small business (<50 people) share of capital investment in manufacturing, 2002

Small business (<100 people) share of employment in manufacturing, 2002

Source: OECD (2005), Rosstat (2007), analysis by Bauman Innovation* Employment data refer to firms with 100 or less employed for all countries. Investment data for countries except Russia refer to firms with 50 or less

employed (international definition of small enterprises). Investment data for Russia refer to firms with 100 or less employed, excl. individual entrepreneurs

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Russia, 2005SlovakiaGermany

IrelandFrance

USA, 2001Austria

Great BritainFinland

HungaryCzech Rep.

PolandAustralia

NorwayJapanSpain

PortugalItaly

Korea, Rep.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Russia, 2005

Japan, 2003

Slovakia

Korea, Rep., 2003

Poland

Australia

Austria

Hungary

Czech Rep., 2003

Sweden

Great Britain

France, 2003

Portugal

Italy, 2003

Small business share of manufacturing employment and capital investment in Russia is also comparatively low

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Entrepreneurships

SME development

SME integration in cluster

Entrepreneurial activity, SME and cluster development are 3 important interrelated “ingredients” of Russian economy diversification and regional development

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Total entrepreneurial activity, 2006

Source: Global Entrepreneurship Monitor (2007), World Bank (2007)

Australia

Argentina

Belgium

Brazil

Great BritainHungary

Germany

Greece

Denmark

India

Indonesia

Ireland

Island

Spain

Italy

Canada

China

Columbia

Latv ia

Malay sia

Mexico Netherlands

Norway

UAERussia

SingaporeSlov enia

USA

Tailand

Turkey

Uruguay

Philippines

FinlandFrance

CroatiaCzech Rep.

Chile

Sweden

South Af rica

Jamaica

Japan

0%

5%

10%

15%

20%

25%

- 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000GDP per capita PPP, 2005

Tota

l ent

repr

eneu

rial

act

ivity

inde

x (T

EA

), 20

06

Low level of entrepreneurial activity in Russia can also explain low level of SME development

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Content




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Ecosystem of suppliers

Access to the market &

competition

Financial resources

Infrastructure

Human Capital

Technological capacity

Administrative barriers & regulation

• Access to the market • Access to raw materials• Competition • Structure of industry

• Relations with “anchor”company (i.e. OEM)

• Cooperation among SMEs

• Specialized service providers

• Production (industrial) real estate

• Logistic infrastructure • Incubators • Electricity supply

• Process technology and equipment

• Technological level of suppliers

• Administrative barriers • Industry and issues

specific regulation • Engineers • Skilled workers • Managers • Specialized educational

programs

1

2

3

4

5

6

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• Financial recourses for starting and development of company

Enabling environment is becoming more important for SME development in Russian regions…but now it is driven by “endowment” factors

Source: Bauman Innovation, “OPORA”

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Архангельская областьКластер продуктов издерева

Республика ТатарстанАвтомобильный кластер

КраснодарскийкрайАгро-пищевойкластер

Томская областьКластер информационно-коммуникационных технологий

Пермский крайХимический кластер

Agro & food processing cluster in Krasnod region

Forest products cluster in Arhangelsk region

Chemical products cluster in Perm region

Automotive cluster in Tatarstan region

ICT cluster in Tomskregion

• Interviews with companies (10-15)

• Survey of companies (35-50)• Structured meeting/workshop

with key companies

Barriers for SME development are cluster and regional specific and regional and local administration can play important roles

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Case 1 - Agro & food processing cluster in Krasnodar region

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Access to the market & competition

1 • Availability and quality of raw materials

• Distributors and efficiency of market channels

• Market power of buyers (consolidation)

• Availability of skilled workers

• Availability of engineers and related specialists

• Availability of business development educational programs

• Availability of short term financial resources (less than 1 year)

• Availability of long term financial resources (more than 5 years)

• Availability of leasing services

Human Capital

2

Financial resources

3

Enabling environment for agro & food processing cluster in Krasnodarregion (1/2)

Positive assessment Negative assessment

Source: interviews and survey of companies in the cluster, Bauman Innovation, “OPORA”

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Infrastructure

4 • Quality of logistic infrastructure

• Availability of production (industrial) real estate

• Availability of land

• Availability of new process technology and equipment

• Technological level of companies


• Level of administrative barriers

• Quality of tax administrative processes

• Customs procedures


5


6


Enabling environment for agro & food processing cluster in Krasnodarregion (2/2)


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Goals for cooperation Intensity and efficiency of SME’scooperation

Cooperation in agro & food processing cluster in Krasnodar region

New product development

Human capital

Joint promotion on national market

Quality improvement & cost reduction

Joint procurement

Joint promotion on int. market

SME’scooperation

with…

Anchor company

Research Institute

Technical School

University

SMEs


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Case 2 – Automotive cluster in Tatarstan region

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1 • Availability and quality of raw materials

• Procurement policy of the anchor company (OEM)

• Availability of foreign customers

• Availability of skilled workers



• Availability of short term financial resources (less than 1 year)

• Availability of long term financial resources (more than 5 years)


Human Capital

2

Financial resources

3

Enabling environment for automotive cluster in Tatarstan region (1/2)Positive assessment Negative assessment


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Infrastructure

4 • Availability of production (industrial) real estate

• Quality of transport infrastructure

• Quality of electricity supply


• Availability of new process technology and equipment


• Level of administrative barriers


• Industry specific regulation


5


6


Enabling environment for automotive cluster in Tatarstan region (2/2)


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Human capital



Joint procurement


SME’scooperation

with…

Anchor company

Research Institute

Technical School

University

SMEs

Cooperation in automotive cluster in Tatarstan region


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Case 3 – ICT cluster in Tomsk region

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1 • Government procurement

• IPP regulation

• Availability of foreign customers



• Quality of Life in region for human capital retaining

• Availability of venture capital

• Availability of financial resources for commercialization of technology (seed and pre-seed)


Human Capital

2

Financial resources

3


Enabling environment for ICT cluster in Tomsk region (1/2)


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Infrastructure

4• Availability of production (industrial) real estate

• Availability of office space

• Availability of business incubator space

• Quality of technology transfer/commercialization office


• Availability of new product and process technology

• Level of administrative barriers and industry specific regulation


• Customs procedures


5


6


Enabling environment for ICT cluster in Tomsk region (2/2)


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Human capital



Joint procurement


SME’scooperation

with…

Anchor company

Research Institute

Technical School

University

SMEs

Cooperation (with partners in Russia) in ICT in Tomsk region


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Content




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…Lessons for SME policy

• Differences in enabling environment across Russian regions and clusters are key challenge for national SME policy

• Some of regional differences can be explained be efficiency of SME policy of regional administration

• Regional and local governments will play more important role in SME development

• Regional SME policy (short and medium term) can be focused on some important issues: infrastructure (i.e. industrial/suppliers park), availability of financial resources, regional innovation infrastructure and administrative barriers

• Two different models of regional SME policy is emerging in Russia (“less involvement” and “more dirigistic”)

• National SME policy should be more focused on stimulating and supporting regional SME policy

SME & clusters in Russian regions and…

• Low level of SME development in Russian economy in general and in manufacturingsectors

• Entrepreneurship activity, SME and clusterdevelopment are 3 important interrelated “ingredients”

• Current SME drivers in Russian regions are based on “endowment” factors like market size

• Regional specific enabling environment is becoming more important for SME & cluster development

• Competitive strategy of SMEs in Russia is more regional and national market oriented

• Intensity and efficiency of SME’s cooperation is low

• Access to the market (i.e. market channels, OEM procurement policy and government procurement) is important enabling factor

• Availability of financial resources and cluster specific infrastructure is also important

Short and medium term challenges for SME policy in Russia

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