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Institutional development of Industrial Firms in Transition Economy

Priority areas of development: economics
2013

The current report concludes a three-year research project on modernization processes in Russian industry. The research object is industrial firms, primary in the manufacturing sector.

The main goal of the project was to analyse the behavior and internal organization of Russian firms and their evolution under the influence of institutional transformations, the business environment and other specific features of certain stages of Russian economic development.

The research results of this project may be of some use for Federal and regional authorities while developing and implementing different instruments of the state industrial policy, measures to improve corporate governance practices, programs to facilitate competition, the development of new legislation and regulation norms.

The report is focused on revealing and analysis of firms’ institutional development trends in the transition economy in the post-crisis period. Empirical analysis is based on different available databases, in particular RUSLANA (part of European AMADEUS database by Bureau Van Dike), data of BEEPS survey of EBRD and the World Bank. Though the significant part of our analysis is based on case-studies for particular firms and corporations, mostly with the use of in-depth interviews with top managers and Board members. The use of qualitative analysis allowed us to access the changes in behavior and strategies of companies not yet reflected in quantitative empirical data.

The report consists of several analytical studies which provides new research results.

The first chapter describes the results of an empirical study of international certification (by the International Organization for Standardization standards) impact on the behavior and financial performance of firms in Russian manufacturing. The analysis was conducted using a recurrent event model. The results show that on average the certified firms are better performing than similar but uncertified ones. Nevertheless, the proper analysis demonstrates quite clearly that, actually, certification has no impact on the growth of firms or the growth of their market-share. The relatively better performance is due to the self-selection effect: companies which decided to certify had been performing better for a long time prior to the certification itself. But the positive effects of certification are more prominent in case of profit-margins and operational costs.

The second chapter deals with the issue of the composition of the Board of directors (including the personal characteristics of members) and its influence on the performance of a company. Using both empirical econometric analysis and case-studies methods the authors show that some personal features do seem to influence performance.

Chapter three of the report analyses empirically the relationship between foreign ownership (or rather a foreign-owned stake in the capital) on some features and practices of management. This study is based on BEEPS-Russia database (4200 firms surveyed in 2012) and on comparing results for the similar database of 2009 in order to reveal changes. The empirical study shows the positive and sustainable interrelation between the presence of a foreign entity in the capital of a firm and some indicators of the quality of management. In particular, this positive correlation is revealed for certification, personnel training system, with the use of imported technology. There is empirically supported evidence that in the post-crisis period foreign co-ownership is correlated with higher export activity (no such links discovered for 2009 data). One of the conclusion we made concerns the increasing gap in the post-crisis period between foreign owned and domestically owned firms in the quality of management.

The report includes some new findings on the impact of institutional factors on innovative activity in Russian firms. The study is devoted mostly to the impact different components of the business climate have on innovation behavior with the focus on corruption. The new element of the study is in measuring impacts separately for different types of innovations. The administrative barriers are shown to be having a negative effect on product innovations and R&D activity. They are a less significant factor for international certification activity.

A separate – fifth – chapter of the report deals with the influence of globalization (in particular WTO accession) on the transparency policy and strategies of Russian firms. The results are mainly based on four case-studies and interviews. The main conclusion is that WTO accession in itself, in spite of being an important institutional transformation, has almost no impact on the transparency of Russian firms, excluding publicly traded ones. The general strategy is still to keep the company closed to external investors and the public and to try to close the markets as well by facilitating different entry barriers.

The last chapter of this part of the report is an analysis of different approaches to modeling the investment activity of firms. The modification of a Stochastic Frontier Model is suggested and the approbation is done for the sample of firms in the food processing industry. The results suggest that the main drivers and obstacles for investments in the food industry in 2004-2012 were the growing demand on one hand and interest rates on the other hand. The profit-margins of a company were also an important factor, as well as the level of tax burden.

In line with the TOR for the project the second part of it includes a methodological approach and different materials for implementation in 2014 of a large-scale survey based project on Russian manufacturing competiveness, barriers and drivers of firms’ growth. This part of the report consists of three chapters, describing the concept of the future project, approaches to defining sampling strategy and a large chapter with analysis of 11 face-to-face interviews with top managers and owners of different manufacturing enterprises in several Russian regions. Interviews were conducted in 2013 in order to get actual knowledge about the most acute problems for the development the firms face nowadays. This analysis provides a base for improvement of the survey instrument (for development of a questionnaire) and to formulate a research hypothesis.

The conclusion summarizes the main results of research presented in the report. The several annexes to the report mostly include Tables with estimation results for different models.

Publications:


Баранов А. Ю., Долгопятова Т. Г. Эмпирический анализ инновационного поведения фирм при различных институциональных условиях / ГУ ВШЭ. Series WP1 "Институциональные проблемы российской экономики". 2013. No. WP1/2013/02. 
Ружанская Л. С. Государство и закрытый тип экономического поведения российских корпораций, in: Новые тенденции в развитии российской модели корпоративного управления: посткризисные уроки и выводы. Екатеринбург : Уральский Государственный экономический университет, 2011. С. 65-79. 
Долгопятова Т. Г. Концентрация собственности на российских промышленных предприятиях: динамика и факторы, in: Системное моделирование социально-экономических процессов: сборник докладов 35-й Юбилейной международной научной школы-семинара, Кострома, 18-23 сентября 2012 г.. Кострома : КГТУ им. Некрасова, 2012. 
Винарик В. А. Системы менеджмента качества в России: востребованы и результативны? // Менеджмент и бизнес-администрирование. 2013. № 2. C. 118-135. 
Долгопятова Т. Г. Глава 7. Эволюция структуры и динамики концентрации собственности, in: Очерки модернизации российской промышленности: поведение фирм. Москва : Издательский дом НИУ ВШЭ, 2014. С. 143-166. 
Долгопятова Т. Г. Глава 8. Развитие корпоративного контроля: внутренние практики и инструменты рынка, in: Очерки модернизации российской промышленности: поведение фирм. Москва : Издательский дом НИУ ВШЭ, 2014. С. 167-194. 
Баранов А. Ю., Долгопятова Т. Г. Деловая коррупция и внутрифирменные инновации: эмпирический анализ, in: Системное моделирование социально-экономических процессов: труды 36-й Международной научной школы-семинара, г. Воронеж, 29 сентября – 4 октября 2013 г.. Воронеж : Издательский дом ВГУ, 2014. С. 201-204. 
Баранов А. Ю., Долгопятова Т. Г. Инновационная активность фирм и деловая коррупция в странах с переходной экономикой: эмпирический анализ, in: XIV Апрельская международная научная конференция по проблемам развития экономики и общества: в 4-х книгах. Книга 3. Москва : Издательский дом НИУ ВШЭ, 2014. С. 328-337. 
Baranov A., Dolgopyatova T. G. ..