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Effectiveness factors and directions of competitiveness improvement for Russian manufacturing enterprises under current conditions

Priority areas of development: economics, management
2020

Goal of research

To identify the factors and directions of increasing the efficiency of Russian manufacturing enterprises in terms of internal processes and external relations.

Methodology

Research methodology combines quantitative and qualitative methods, as well as case-study. The majority of research directions within the project use methods of econometric analysis.

Empirical base of research

The empirical base includes dataset of Russian Manufacturing Enterprises Competitiveness Monitoring 2018 by the Institute for Industrial and Market Studies (IIMS), database of Russian Firms in the Global Economy 2014 (RuFIGE) project by IIMS as well as the dataset of Russian Federal State Statistic Service (Rosstat).

Additionally, the research includes the collection of data on the characteristics of projects supported by the Russian Industrial Development Fund in order to create a database for further analysis.

Results of research

In terms of interfirm cooperation of Russian manufacturing enterprises the following research results were obtained:

  • Firms established in Soviet period (before 1992) are more likely to have long-term relations with suppliers and consumers; there is no difference in interfirm relations of these firms whether they are active in innovations or not;

  • There is no difference between firms established in the Soviet and post-Soviet time in terms of strategic partnership with Russian and foreign companies;

  • Firms that are a part of a holding have a larger share of long-term relations with consumers and are more likely to have foreign and Russian strategic investors;

  • Foreign companies usually have a lower share of long-term relations with consumers and are less involved into strategic relations with Russian companies, which limits the potential of positive externalities of foreign companies presence in the Russian economy;

  • Small business is generally poorly involved in the value chains in Russian economy.

The analysis of the variety of work experience of board members in Russian companies and its effect on business development and effectiveness showed that:

  • Boards of directors in Russian companies vary a lot in terms of work experience of its members; there are no universal combinations of work experience;

  • There is a robust positive connection between the variety of work experience of board members and sales profitability;

  • For companies with lower profitability the number of categories of work experience and the number of work experiences by one stakeholder turned out to be significant, while for firms with higher profitability the relative index of variety of work experience showed significance;

  • Foreign stake in firm’s capital is negatively related to the effectiveness of firms which have higher return on sales that the sector average.

According to the results of the analysis of individual characteristics of CEOs impact on the investment in innovative activities:

  • There is no correlation between investment and the age of the CEO;

  • Mixed results were obtained for gender factor, however in 2011-2013 women showed significantly greater propensity to innovate than men;

  • Ownership of shares by CEO or/and by his/her family (as opposite to an external CEO) is positively related to investment in innovative activity, but the relation is not linear;

  • There is a positive relation of innovation investment probability with firm size, sales profitability and market coverage.

The analysis of the effect of business localization and regional economy diversification on the effectiveness of Russian firms showed that:

  • Generally there is a positive effect of localization and lower diversification on business effectiveness;

  • Due to high heterogeneity of manufacturing industries no effect of localization and diversification on sales profitability was found in the sector; the same result obtained for extraction industries;

  • Empirical analysis has shown a significant relationship between firm size and spatial characteristics: there is a significant relationship between regional economic diversification and profitability level only for small and micro-firms; while the localization effect was more significant for medium and big businesses.

In terms of the analysis of effectiveness of state support of Russian industrial enterprises the following results were obtained:

  • Creation of a database of projects supported in the framework of the Russian Industrial Development Fund (IDF) in 2014-2016;

  • The primary analysis of the database;

  • Preliminary collection and codification of additional information on the affiliation of firms supported by IDF with the government authorities, on the participation in business associations activities and innovation activity.

The research on adaptation of Russian manufacturing firms to geopolitical shocks (international sanctions) in terms of import strategy shifts showed that:

  • In 2014-2018 there was no significant reduction in the share of importers on the raw materials and components market; despite ruble devaluation the share of importers of equipment grew from 25.6% to 31.9%;

  • During 2014-2018 import strategies (choice of materials, components or equipment) showed sustainability, raw materials have the highest potential for import substitution;

  • In terms of components, equipment, technologies and services about 1/3 of importers can potentially switch to Russian substitutes available on the market;

  • The share of firms importing raw materials and components from China already exceeds the share of firms importing from European countries;

  • The hypothesis about the relation between export and import for Russian manufacturing enterprises is confirmed, however, import of raw materials and components has no relation to exporting to the countries-members of Customs union and CIS, China and other Asian countries;

  • Equipment import is crucial for the technological modernization of Russian industry and it is related to the exports of large Russian enterprises to Europe.

Publications:


Yakovlev A. A. On Big Cycles in Development of Global Capitalism, in: The Post-Crisis Developmental State: Perspectives from the Global Periphery.: Palgrave Macmillan, 2021. С. 33-51. 
Яковлев А. А. Куда идет глобальный капитализм? // Мир России: Социология, этнология. 2021. Т. 30. № 3. C. 29-50. doi