Makarov Valery L. (CEMI, Moscow)

1
Knowledge Economy
(Case of Russia)
Makarov Valery L. (CEMI, Moscow) E-mail
makarov_at_cemi.rssi.ru Web http//www.cemi.rssi.ru
/
2
Plan of Presentation

• Indicators of Knowledge Economy
• Who measures knowledge.
• 3. Difficulties for cross countries
  comparisons
• 4. Growing competitive structure
• (Case of economics research institutions)
• 4. Examples of Empirical Studies.
• 5. Theory Economics of Knowledge vs Standard
  Economics.
• 6. Knowledge management.

Points of Attraction
1. Centers of Knowledge Production.
Concentration of intellectual capital. 2. New
institutional structure in the epoch of Knowledge
Society. 3. Generation of demand on Knowledge
direct function of state. 4. Tacit Knowledge
competitive advantage of Russia.
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Knowledge measurement

• Investments into Knowledge production grow faster
  then investments into production at large. (3.4
  per annum vs. 2.2 average)
• in 90-s years for OECD countries
• (See. OECD (2001))
• 90 scientists and engineers live at present.
• 90 quantity of knowledge is produced at the
  period of last 30 years.

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Investments into the sector
of knowlegde production
of GDP
Sector of knowledge OECD countries Russia
Higher education, RD Software i 1 4,7 1,6
All levels of education RD Software i 2 gt10 4,7
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Supply (production)

• Natural (physical) units number of pages,
  papers, articles, patents, inventions, new
  products, innovative firms etc.
• Expenditures on RD, higher education, computer
  software
• Cost of public goods.

Demand (consumption)

• Citations
• Publications in mass media
• Hits in Internet
• Indicators of patents and inventions
  application
• Value added in companies of high technology and
  science consumption sector

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Indeces, ratings
PPi ,Progressive Project institute, USA Annually
issued started by 1999 ???? The 2002 State New
Economy Index. 21 indicators across 50 states
of US as a base for Integrated index
Centers of Knowledge production
Production of Knowledge is located in few
centers. Consumption of Knowledge is distributed
evenly across states according to PPi
measurement.
OECD department, number of international
associations, government and private institutions
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Production of sectors with high rate of technology
in billions of PPP dollars
Russia 1999 data
RUSSIA
8
High technology's products plus services
in billions of PPP dollars
RUSSIA
9
Transfer of technologies
in millions of PPP dollars
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Examples of empirical studies
First phase collection of data, second phase
empirical analysis, third phase developing
theory

• 1. Porter M. E. and Stern S., (2000) measure
  knowledge by quantity of patents. The tree
  findingd of the paper are
• Annual flow of the patents is proportional to the
  stock of the patents in the country.
• There is negative relationship between total
  (international) stock of patents and national
  productivity of RD. It means that total
  international stock of knowledge press national
  RD in contrast to common intuition.
• Small but positive effect o the patents flow on
  TFP (Total Factor Productivity)

• 2. Keller W. (2002) Geographic Localization of
  International Technology Diffusion American
  Economic Review The paper based on data of OECD
  countries, including expentitures on RD and TFP
  for manufacturing industries at the period from
  1970 to 1995.
• Two conclusions
• High technologies (expenditures of which are
  concentrated in 5 countries USA, UK, Japanlt
  Germany, France) expand to other countries back
  proportional to (physical) distance (with
  correction to intercontinental dummy) Speed and
  amount of technology diffusion grow with time.

3. Bloom N., Griffith R., and Van Reenen J.
(2002) Do RD tax credits work Evidence from a
panel data of countries 1979 1997 Journal of
Public Economics 85, pp.1 31. The paper gives
an empirical proof that investments of private
sector to RD depend on tax holidays. The paper
based on data of 9 OECD countries for the period
of 19 years (1979 1997). The result 10 of tax
free adds 1 for RD investments in short run
and 10 in long run.
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Share of expenditures on basic research
in total RD expentitures ( )
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Distribution of generated profit

• Pazhitnov - 15 000
• Computer Center of Russian Academy of Sciences -
  4 mln.
• Company Nimtanda gt 1 bln

market value
Tobin's Q
book value
Average Q for Russian companies less then 0.3
Paragraph International Q 40
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Tacit knowledge
Introduced by Polanyi, M. (1966) The Tacit
Dimension, London Routledge and Kegan Paul.
Specific features of Russian culture tacit
knowledge must be competitive advantage of
Russia. Follow traditions, transfer of knowledge
on personal basis, less division of labor.
Informal (groups, family, firms, clubs) education.

• Tacit knowledge of institutions
• Design teams in military industrial complex.
• Submarines, nuclear ice break ships
• Bill Gates Knowledge Workers.

Measurement, capitalization of institutions
tacit knowledge

• Human capital
• Competence
• Experience
• Skill

• Structural capital
• Processes
• Information systems
• Data bases

• Customers capital
• Relations to clients
• Brands
• Trade marks

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An Example of Breakthrough
Fullerens

• Publications 480 (7 of total)
• Authors 750 ( 460 has one paper)
• Patents 44 5
• Grants of National Foundation 122
• Dissertations 15 (1997-98)
• 85 - Acad. Sci, 15 Universities

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New features of Knowledge Economy

• See, for example, Gibbons, M., Limoges, C.,
  Nowotny, H., Schwartzman, S.,
• Scott, P. and Trow, M. (1994) The New Production
  of Knowledge The Dynamics
• Of Science and Research in Contemporary
  Societies, London Sage Publications.
• Number of sites of (applied) knowledge
  production, grows rapidly. Distribution of
  publications says about it. Significant part of
  studies does not go to publications.
• Greater variety of institutions, involved into
  knowledge production. They are
• communicate with each other widely.
• New institutions appear in relation to a
  problem or substance, not in relation
• to standard classification.
• Emerged links are soft and volatile, its depend
  on a problem.
• In general the system of knowledge production,
  distribution, consumption is
• growing exponentially in terms of quantity of
  links.

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Traditional system
New system
Laboratory mediator consumer of
knowledge Explicit division of labor Market of
knowledge is organized by mediator
Knowledge consumer participates in creation of
knowledge Market of products (knowledge itself)
substitutes by market of services The concept
Knowledge Society perfectly fits into the new
system
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Competitive environment in the
field of economic research

• State universities National Academy under
  Federal government Moscow State university
  (Economics Department, Moscow school of
  economics) Higher School of Economics
  Plechanovs Academy Financial Academy State
  institute of management
• Russian Academy of Sciences 7 research
  institutes including CEMI
• Government research institutes Institute of
  macroeconomics, SOPF, bureau of economic
  analysis, center of reforms, center of strategic
  analysis and monitoring institute under ministry
  of economics of RF research group under ministry
  of finance of RF.
• Non-government research bodies New Economic
  School under CEMI, RESEP, CERIR, Gaidar
  institute, Illationov Institute, Shanins School,
  Institute of open economy under UCOS, EERC,
  research department in ALFA bank and others.

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Lessons for Russia

• 1. Leading Russian companies are going to be
  major players in Knowledge Economy. (Major
  investors in particular)
• 2. The government should provide
• incentives to develop high technology business
  including its export
• (taxes, tariffs, insurance, etc)
• 3. Protection of small business by big
  corporations, by local governments