Goal of research: to investigate factors that characterize business environment in Russia on regional level and contribute to the emergence and development of high-growth firms (HGF) in Russian regions. The research project includes two main directions characterizing business environment in Russia. The first one analyzes the influence of such factors as business climate differences, the quality of institutions in Russian regions, governmental support of innovations and research activities and support through public procurement on the emergence and development of HGFs (“gazelles”). The second direction investigates the mechanisms for collective interest promotion of foreign companies through different channels of interaction with the government, including business associations, in developing countries such as Russia and China.
Methodology: combines qualitative and quantitative methods. With regard to the investigation of the HGF’s emergence and development factors in the regions of Russia we have implemented inter-regional comparative analysis and standard statistical and econometric methods. Qualitative analysis is based on the series of in-depth interviews with HGF’s leaders as well as on the analysis of open-access information about HGF’s activities. Referring to the second research direction – analysis of the role of business associations in the organization of interaction with the government and the collective promotion of their interests in Russia and China – based on the analysis of a series of in-depth interviews with the representatives of firms, business associations and expert organizations we have implemented methods of qualitative and comparative analysis that were designed and applied in the preceding project of 2015.
Empirical base of research: includes several data sources. The analysis of HGFs emergence and development in Russian regions is based on two empirical data sources: the first one is a sampling of HGFs, created on the basis of Ruslana database (Bureau van Dijk) according to the “soft” selection criteria (OECD- Eurostat methodology) that allows a broader interpretation of the “high growth” concept. The “soft” criteria is based on the requirement of three years of firm’s revenue growth at the level of 20 (30)%. This approach solves the fundamental problem of ignoring a significant number of successful companies due to restrictions of the "hard" selection criteria approach (4 years of revenue growth of 30% and more for each year). The second source is information on the activities of HGFs in Russian regions form open-sources and the materials of qualitative interviews with the leaders of HGFs focused on the identification of the most significant regional factors stimulating or constraining the activity of HGFs in the Russian regions.
The analysis of foreign business-government interaction mechanisms and collective interest promotion in Russia and China is based on the materials of the interviews with the representatives of foreign firms, business associations, expert organizations and governmental institutions.
Results of research: we identify the estimated effect on the emergence and growth of HGFs in Russian regions of such factors as business climate characteristics; quality of regional institutions; measures of innovation activities and research institutions support; support through public procurement; and such non-market factors as affiliation and the availability of administrative resources. In addition, we carry out a comparative analysis of the effectiveness of the main channels and mechanisms for dialogue between foreign business in Russia and Russian government in the framework of evolution of these mechanisms. We also define the role of foreign business associations in the organization of interaction with the government and the collective interest promotion by foreign firms in China.
The analysis of the factors of HGFs emergence and development in Russian regions showed that:
- there is high concentration of HGFs in three regions: Moscow, Saint Petersburg and Moscow region with a predominance of firms in knowledge-intensive industries, manufacturing industries, the service sector, financial sector, trade, construction and transportation. In other regions HGFs are concentrated in most developed industries. Correlation of the number of HGFs with the development level of industries that they represent may be the indicators of cluster effects.
- there is a positive correlation between indicators of a favorable business climate in the region and the number of HGFs, however, governmental measures of support of innovation and research teams do not have a statistically significant effect on the percentage of HGF. This may indicate a low effectiveness of the governmental innovation policy as well as a development of HGFs in Russia due to the proximity to the production-possibility frontier on the basis of borrowed technologies.
- the participation of firms in public procurement in general reduces the long-term investment activity of companies, but not the overall investment activity. Unlike state-owned firms, private firms, especially HGFs and foreign firms, do not replace investment activity with the participation in public procurement, they follow their investment strategy regardless of the volume of public procurement contracts.
- It is common for HGFs to seek rents based on administrative resources, but it is not determinative for their competitive advantages and for retaining their market positions.
The analysis of collective action of foreign firms in Russia and China showed that:
- political factors (rather than general economic or institutional factors) play a key role in the explanation of the changing effectiveness of the collective action of foreign firms in Russia. Current political restrictions significantly reduce the effect of the existing instruments of collective action of foreign firms.
- decreasing demand of top political level for new initiatives from foreign business leads to a strengthening trend of foreign firms to cooperate with the Russian business community in order to jointly promote a pragmatic agenda of economic policy. Foreign business associations (FBA) open to the membership of local companies were the most successful in this process.
- in a crisis situation FBAs represent a more stable and therefore more effective mechanism of the dialogue between foreign business and government than other forms of collective interest promotion, because they are less dependent on global political constraints and to a large extent integrated in the local social and economic context. The degree of flexibility of FBAs largely depends on the relationships of FBAs with their home government and their ability to maintain a constructive dialogue with it.
- the dialogue between FBAs and the Chinese authorities and ministries has become more constructive and organized in recent years. The activities of FBAs are very important for foreign investors in China. The largest FBAs in China focus on the economic policy issues, contributing to the improvement of business conditions not only for foreign but also for Chinese companies.
- there are examples of interaction between FBAs in China, at the same time the opportunities for cooperation between foreign and Chinese business associations in recent years has become very limited in recent years.