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Cluster policy in Russia: on the way to economic diversification?

Cluster policy in Russia: on the way to economic diversification?. Igor V. Pilipenko Lomonosov Moscow State University Department Geography of the World Economy 2008 AAG Annual Meeting April 15-19, 2008, Boston, MA. С luster policy – definition (I).

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Cluster policy in Russia: on the way to economic diversification?

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  1. Cluster policy in Russia: on the way to economic diversification? Igor V. Pilipenko Lomonosov Moscow State University Department Geography of the World Economy 2008 AAG Annual Meeting April 15-19, 2008, Boston, MA

  2. Сluster policy – definition (I) • A new way of microeconomic policy implementation involving government, business, educational and scientific community. (discussed by Sölvell, Lindqvist, Ketels, 2003; Andersson, Hansson, Serger, Sölvik, 2004) • Clusters are new policy objects – 2 general types of clusters: • Non-spatial clusters (industrial, national) – a group of inter-related, adjacent industries and services that successfully specialise in the international division of labour; • Spatial clusters (regional, local, transborder) – groups of geographically concentrated enterprises in regions or localities from adjacent industries and services, which produce similar or inter-supplemental goods and services using mostly external economies of scale (local division of labour, local pool of labour force, innovation diffusion). Igor V. Pilipenko Lomonosov Moscow State University

  3. Сluster policy – definition (II) • Cluster policy involves tools from other policies or is a part of other policies at a regional/local level: • tax incentives, • regional branding (Standort-Marketing), • FDI attraction, etc. • Cluster policy genesis: (discussed by Ffowcs-Williams, 2004) • Top-down policy (initiated from government); • Bottom-up policy (started by business community); • Mixed policies (both parties initiate cluster policy). Igor V. Pilipenko Lomonosov Moscow State University

  4. Possible cluster policy targets in the Russian economy: • Stimulation of competition and exports diversification; • Fostering studies of firm development at the regional/local level and elaboration of specially focused programs; • Creation of favorable environment for SMEs development; • Strengthening cooperation between government, business, educational and scientific communities. Igor V. Pilipenko Lomonosov Moscow State University

  5. Competition in the Russian economyWorld Bank/HSE survey 2005/2006 ~ 1,000 enterprises • no competition – 20%: • max – wood processing 31%, • min – textile manufacturing 12%. • competition with only domestic enterprises – 30%: • max – food processing 42%, • min – chemicals 17%. • competition with only foreign enterprises – 13%: • max – textile manufacturing 25%, • min – food processing 5%. • competition with both types of enterprises – 37%: • max – chemicals 53%, • min – automotive industry 26%. Igor V. Pilipenko Lomonosov Moscow State University

  6. Russia’s exports diversification • The share of 10 leading export products in total exports (INTRACEN) has increased from 76 to 79% in 2001-2005; • The share of “mineral products” group (according to Rosstat’s definition) has increased from 53.8 to 65.9%; • The share of “vehicles and its parts” group (Rosstat) decreased from 8.8 to 5.8%. Igor V. Pilipenko Lomonosov Moscow State University

  7. Microeconomic approach and regional development (I) • Regional policies despite Russia’s vast territories have been surprisingly considered of second priority after macroeconomic stability; • Ca. 11 versions of “The Concept of regional development in Russia” were elaborated; the last proposed version was approved by the Government in 2005; • The role of regional development topics in the current strategic planning: • “The Concept of Social-Economic Development of the Russian Economy until 2020” (the version of October 2007) – 15 pages about regional development (171 pages in total); • “The Concept 2020” in March 2008 – 28 pages about regional development from 165 pages in total). Igor V. Pilipenko Lomonosov Moscow State University

  8. Microeconomic approach and regional development (II) The productivity difference between Ural FD and Southern FD: 2000 – 2.9 times; 2004 – 3.5 times. Igor V. Pilipenko Lomonosov Moscow State University

  9. Microeconomic approach and regional development (III) • The range between regions with highest and lowest overall productivity (GDP per person employed): 2000 2004 Nenets AO 21,485 Nenets AO 56,012 Rep. Dagestan 925 Rep. Adygeya 3,102 Range (times) 23 Range (times) 18 • The range between 10 regions with highest and lowest overall productivity(GDP per person employed): 2000 2004 10 leading regions 10,445 10 leading regions 26,577 10 lagging regions 1311 10 lagging regions 3,266 Range (times) 7.9 Range (times) 8.1 Igor V. Pilipenko Lomonosov Moscow State University

  10. Microeconomic approach and regional development (IV) Igor V. Pilipenko Lomonosov Moscow State University

  11. SMEs definition in Russia • Prior to 2007 no definition of SMEs in statistics; • Since 1995 - definition of small enterprises: • No. of employees varied between 30 and 100 depending on industry, • Government/religious organizations’ share < 25% • Self-employment is included. • Since January 1, 2008 – definition of SMEs: • Medium-sized – less than 250 employees, • Small – less than 100 employees, • Micro-enterprises – less than 10 employees. • Self-employment is included. • In 1980 in USSR an average employment in manufacturing was ca. 330 employees (Baklanov, 1986). • In 2005 in Russia an average employment in the whole economy was less than 15 employees (Rosstat). Igor V. Pilipenko Lomonosov Moscow State University

  12. Small business (SB) demography in Russia • SB share in: employment – 17.8% (2006); national value-added – 11.8% (2004). • SB distribution by industry, as of January 1, 2007: Source: Ministry of Economic Development and Trade Igor V. Pilipenko Lomonosov Moscow State University

  13. A region Implementation of a regional innovative policy Implementation of innovations in technology, science parks, etc. Innovative production in clusters of small and medium enterprisers Creation of knowledge in educational and scientific institutions innovations goods Influence of TNCs Influence of TNCs Value-added chain A transnational corporation A transnational corporation The model of spatial interaction between government, SMEs, large enterprises, education and scientific institutions within a regional innovation system Igor V. Pilipenko Lomonosov Moscow State University

  14. Challengesfor cluster policy implementation in Russia • Notions “cluster” and “cluster policy” are often incorrectly interpreted; • No final goals settings (i.e. raising productivity, exports, creation of new jobs); • No drivers of SMEs competitiveness identified (external economies of scale, etc.); • Confusion of notions – • cluster vs. territorial-production complex (often in regional development strategies); • cluster vs. technology park or industrial districts; Igor V. Pilipenko Lomonosov Moscow State University

  15. Development of the theory of territorial-production complexes (TPCs) • 1920s – Creation of theory of economic region economic region = TPC • 1950s – Creation theory of energy-production cycles as basis of TPCs • 1970s-1980s – Paradigm “Shift to East”, practical spatial application of TPC models in Eastern regions of USSR • Late 1970s-1980s – Application of TPC models in developing nations and countries of Central and Eastern Europe Igor V. Pilipenko Lomonosov Moscow State University

  16. Timan-Pechora North-Tyumen’ West-Yakut Noril’sk South-Yakut Lower Angara Kursk Magnetic Anomaly Bratsk-Ust’-Ilimsk Middle-Ob’ Irkutsk-Cheremkhovo Kuzbass Krasnoyarsk Sayany Main territorial-production complexes in Russia, since 1980s 10 Siberian TPCs accounted in 2006 for 17% in country’s manufacturing and 25% in national exports (Bezrukov, 2006) Igor V. Pilipenko Lomonosov Moscow State University

  17. Developed themselves / localization economies I a • Marshallian industrial district • Italian industrial district • Regional cluster • Local cluster • Hub-and-spoke industrial district • State-anchored industrial district • Regional cluster - Satellite platform district - Vertically integrated industrial plants (often in old industrial regions) Created artificially by state authorities II a • Technology park • Science park • Business innovation centre • Innovation technological centre • Technopolis • Territorial-production complex • Territorial-production complex • Territorial-production complex The classification of spatial forms of R&D and production organization Prevailed size of enterprises Type of creation Small and medium enterprises I b Small, medium, and large enterprises II b Medium and large enterprises III b Large enterprises IV b Igor V. Pilipenko Lomonosov Moscow State University

  18. Four directions of cluster policy towards four various objects: • Non-spatial clusters – already exist and can be easily identified: oil&gas industries, metallurgy, military complex, aerospace industry; • Territorial-production complexes – already exist (the plants are mostly private-owned) or were planned in USSR; • Spatial clusters – possible emerging within agglomerations with scientific and basic infrastructure in new industries developing since 1991 with a larger share of SMEs – ICT, services, new construction materials, consumer-oriented industries; • Cluster initiatives – some examples. i.e. in automotive industry are found. Igor V. Pilipenko Lomonosov Moscow State University

  19. Cluster policy direction 1:non-spatial clusters • Responsibility: federal government; • Type of policy: creation of a favorable and innovation-stimulative framework, promotion of cluster companies abroad; raising educational and technological standards; • Form of realization: mostly lawmaking; • Theoretical background: the schools of the competitiveness theory. Igor V. Pilipenko Lomonosov Moscow State University

  20. The theory of international trade The location theory The human capital theory We analyzed ca. 40 theories and concepts elaborated by scholars from 10 nations The analysis of the competitiveness theory creation The problem of national competitiveness Igor V. Pilipenko Lomonosov Moscow State University

  21. We identify three main schools of the competitiveness theory: 1. The AmericanSchool – M. Porter, M. Enright, et.al. The most practically-oriented school: the diamond of competitive advantages, industrial and regional clusters 2. The British School - J. Dunning, R. Kaplinsky, J. Humphrey, H. Schmitz, C. Freemanet.al. Division of labour between developed and developing countries: value-added chains, clusters, transnational corporations, techno-economic paradigm 3. The Scandinavian School - B.-A. Lundvall, B. Johnson, B. Asheim, A. Isaksen, E. Reinertet.al. The social-economic school: national systems of innovation, regional innovation systems, the learning economy, learning region, types of knowledge Igor V. Pilipenko Lomonosov Moscow State University

  22. First steps in cluster policy realization towards non-spatial clusters • Creation of large government-owned enterprises in highly monopolized industries in the world economy: • “OAO United Aircraft Corporation” (11 enterprises) in 2006; • “OAO United Shipbuilding Corporation” in 2007; • Creation of State Corporations (as legal entities – nonprofit organizations) in 2007: • Russian Corporation of Nanotechnologies; • Russian Technologies; • ROSATOM; • etc. Igor V. Pilipenko Lomonosov Moscow State University

  23. Cluster policy direction 2:territorial-production complexes • Responsibility: • federal government – strategic planning; • regional government – project realization. • Type of policy: creation of new TPCs, diversification of already existed TPC, realization of infrastructure projects; • Form of realization: mostly public-private partnership; • Theoretical background: TPC-approach. Igor V. Pilipenko Lomonosov Moscow State University

  24. Cluster policy direction 3: spatial clusters • Responsibility depending on cluster size: • regional government; • local government. • Type of policy: creation of firm networks, broker policy, regional branding, educational and training programs, diversification of demand, creation of favorable conditions; • Form of realization: public-private partnership, lawmaking, promotion of cluster companies abroad, exhibitions; • Theoretical background: the schools of the competitiveness theory. Igor V. Pilipenko Lomonosov Moscow State University

  25. Location of Novosibirsk Igor V. Pilipenko Lomonosov Moscow State University

  26. Local ICT-cluster in Novosibirsk Year of formation – 1992 Number of firms – over 20 from total 150 enterprises Number of employees – ca. 2,000 Turnover of cluster firms – over$30 mln (2003) Specialization – offshore programming, software production, consulting and OEM In largerscientific centres as Moscow (over 70 ICT-enterprises) andSt.-Petersburg (over 50 ICT-enterprises) – also potential ICT-clusters Igor V. Pilipenko Lomonosov Moscow State University

  27. Main characteristics of a local cluster in Novosibirsk: • Cluster firms: • are from one industry; • are geographically concentrated; • have close contacts with research institutes from the Scientific city of Novosibirsk (Naukograd); • have close contacts with Novosibirsk State University; • have close contacts with Novosibirsk Technology Park. • Intensive information and know-how exchange between firms and their personnel; • Decision-making centre was in this cluster – the leading firm “Novosoft”. Igor V. Pilipenko Lomonosov Moscow State University

  28. Cluster policy direction 4:cluster initiatives • Responsibility: mainly local governments; • Type of policy: creation of firm networks, deepening cooperation between government, enterprises and academia, broker policy, regional branding, educational programs, diversification of demand, creation of favorable conditions; • Form of realization: public-private partnership, promotion of cluster companies abroad, exhibitions; • Theoretical background: the schools of the competitiveness theory. Igor V. Pilipenko Lomonosov Moscow State University

  29. Thank you! Igor V. Pilipenko Lomonosov Moscow State University Department Geography of the World Economy igor_pilipenko@yahoo.com www.i-pilipenko.narod.ru

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