In a public lecture at LSE in May 2014 Vladislav Surkov outlined plans to establish a Silicon Valley-inspired high-tech hub near Moscow. Alex Jaax takes a closer look at why we observe huge differences in innovative performance across Russian regions – and how it relates to the current sanctions battle.

My research focusses on innovation in Russia. To avoid any misunderstandings: I am not thinking of innovative ways to redraw national boundaries here. In a nutshell, I am examining differences between Russian regions regarding their capacity to produce new technology.

Most people will frequently come across the words “innovation” and “Russia” – though rarely in combination. Largely overlooked by mainstream economics for a long time, these days “innovation” and “knowledge-based economy” feature prominently in policy reports by organizations like the OECD.

While Russia currently dominates the headlines for very different reasons, its government has adopted a similar rhetoric regarding innovation. In a public lecture at LSE in May 2014, the then deputy prime minister, Vladislav Surkov, outlined plans to establish a Silicon Valley-inspired high-tech hub near Moscow. Such ambitious initiatives have failed to shift the country to a knowledge-based growth path: Russia’s economic structure today is less diversified than in Soviet times. Oil and gas accounted for nearly 70% of exports in 2010.

Hang on – aren’t we talking about the country that inherited the huge Soviet science system? Yes, we are. But looking at standard indicators, Russia’s innovative performance remains astonishingly low. This contrast between a relatively favourable starting position and disappointing innovation outputs has been termed the “Russian innovation paradox”.

The debate about Russia’s innovation system has focussed on factors at the national level. Most authors compare Russia with other countries, typically China or India. Huge differences within Russia – between its 83 regions – have received little attention. In a recent paper, we adopt a different perspective, trying to explain what drives differences in patenting at the subnational level.

Russia is the world’s largest country: its largest region (Sakha Republic) corresponds to approx. 5.6 times the area of mainland France! Work based on patent citations in the U.S. and Europe has shown us that large distances make it more difficult for knowledge to travel. That’s probably because we heavily rely on face-to-face contact to exchange complex knowledge. If you need to discuss a tricky methodological issue with your supervisor, in most cases you’ll try to arrange a meeting, I assume. From this point of view, Russia’s low population density and large distances between population centres are likely to hamper knowledge diffusion.

In our analysis, we use patent applications to (roughly) measure regional innovative output. In addition to geographical factors (e.g. urbanization) and classic innovation inputs (e.g. education), we also look at the role of foreign firms. To take into account recent history, we collected data on a region’s endowment with science infrastructure established in the Soviet era. The Soviets founded approx. 60 science cities where they concentrated large numbers of scientists. Some of these places were founded in remote parts of the country, often closed to foreign nationals and in some cases even to Russian citizens.

Our results suggest that different dynamics are at play in the European and the Asian part of Russia. Regions to the East of the Urals are less likely to benefit from neighbouring regions’ research efforts: in this vast, sparsely populated part of the country, knowledge is less likely to “spill” across regional boundaries. This reflects that new, complex knowledge does not easily “travel” across space – especially if that space is mostly empty.

In the current political context, one finding appears particularly noteworthy. Foreign firms seem to provide Russian regions with access to new knowledge, boosting their innovative capabilities.  This implies that any developments that jeopardize international linkages between Russian regions and innovative places outside Russia are likely to undermine the government’s efforts to boost the country’s innovative performance. Beyond gas prices and the availability of Norwegian Salmon in Russian supermarkets, the current sanctions battle is likely to impact the technological development of Russian regions.

Related articles:

Forbes (2012): Russian Regional Inequality: Tyumen is like the United States, Stavropol is like Sri Lanka

New York Times (2010): Innovation by Order of the Kremlin

Open Democracy (2014): Can Russia Stage a Comeback in Space? 

About the author:

Alex Jaax is a 3rd-year PhD student in Economic Geography. His research focusses on subnational patterns of growth and innovation in emerging countries. He recently visited Russia for the first time – and was impressed with the warm hospitality he experienced.