Christoph M. Schneider Research and Development Management: From the Soviet Union to Russia With 46 Figures Physica-Verlag A Springer-Verlag Company Series Editor Werner A. Muller Peter Schuster Author Christoph M. Schneider, Ph. D. International Institute for Applied Systems Analysis (IIASA) SchloBplatz 1 A-2361 Laxenburg, Austria ISBN 3-7908-0757-5 Physica-Verlag Heidelberg ISBN 0-387-91481-1 Springer-Verlag New York CIP-Titelaufnahme der Deutschen Bibliothek Schneider, Christoph M.: Research and development: from the Soviet Union to Russia I Christoph M. Schneider. - Heidelberg: Physica-Verl., 1994 (Contributions to economics) ISBN 3-7908-0757-5 This work is subject to copyright. All rights are reserved, whetherthe whole or part ofthe material is concerned, specifically the rights of translation, reprinting, reuse of illustration, recitation, broadcasting, reproduction on microfilms or in other ways, and storage in data banks. Duplication ofthis publication or parts thereofis only permitted under the provisions ofthe German Copyright Law ofSeptember 9,1965, in its version ofJune 24,1985, and a copyright fee must always be paid. Violations fall under the prosecution act ofthe German Copyright Law. © 1994 International Institute for Applied Systems Analysis, Laxenburg, Austria. Printed in Germany The use ofregistered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. 8812202-543210 - Printed on acid-free paper Preface In the past, intensive interest in Soviet research and development has been sporadic both in the West and in the USSR. The end of the 1980s coincided with the demise of the Soviet model of economic development. As a result, a surge of attention has been given to the factors driving the motor of Soviet growth and development, as well as R&D. The opening, first, of the Soviet and, subsequently, of the Russian economy, finally exposed it to global stan­ dards. The long period of international isolation with respect to scientific and technological exchanges made it difficult for scholars and policy makers at home and abroad to measure the status of Soviet advances. Consequently, some overrated the levels, while others underestimated them. Now it comes to light that, although the Soviets put the first satellite in space (Sputnik) and developed their own hydrogen bomb, these were more the exceptions of innovation from research results rather than the rule. Therefore, as the management of the entire economy increasingly malfunctioned, so did the management of R&D in contributing to economic growth and development. There is no denying the incredible investment of the former Soviet state in domestic science and research. The R&D community was one of the largest, if not the largest, in the world during the second half of the twentieth century. Now, Russia has inherited not only this enormous resource, but also the inadequate organization, management, and structure. There is a fear of losing some of the valuable potential but a need to rationalize, increase productivity and efficiency, and reorient according to market signals. Russia is in a unique position. The transition to a market economy at a time when research and technological processes are becoming more international than ever provides great opportunities for reorganizing and restructuring the R&D sector to be representative of and conducive to such a transformation. The impact on economic benefits for the domestic and world economies could be substantial, and should not be underestimated. The purpose of this study is to provide a clear picture of the R&D resources and management that were created under the former Soviet-style system and of the roots and prospects of the present reform movement. Contents Preface v Abbreviations xz List of Tables xiii List of Figures xv 1 Introduction 1 1.1 The Topic 2 1.1.1 Research and development 2 1.1.2 R&D and growth in the Soviet/Russian context 4 1.2 The Study 6 1.2.1 Major objectives 6 1.2.2 Organization of the book 8 2 Research and Development and Economic Theory 11 2.1 Characteristics of R&D: The Theory 12 2.2 Characteristics of R&D: The Empirical Evidence 21 3 Technological Development, Growth, and R&D Management in the USSR 31 3.1 Technological Development, Growth, and R&D Management 32 3.1.1 Technological development 32 3.1.2 Growth and development 33 3.1.3 Research and development management: Does it make a difference? 36 3.2 R&D in the Soviet Centrally Planned Economy 39 3.2.1 An introduction to the Soviet Union 39 viii Contents 3.2.2 An introduction to Soviet science and technology 50 3.2.3 The R&D sector in the Soviet Union: Science and Soviet-style socialism 54 3.2.4 Actors in Soviet R&D policy 60 3.2.5 Science, research, development, and technology before 1985 66 3.2.6 Science, research, development, and technology after 1985 70 4 Inputs to the Soviet R&D Sector 83 4.1 Education 83 4.1.1 General education and literacy: The foundation for a scientific culture 84 4.1.2 Enrollment in higher education 87 4.1.3 Higher education and fields of study 93 4.1.4 Functions and status of higher education and its role in R&D 95 4.2 R&D Personnel 99 4.2.1 Total numbers of scientists and engineers 100 4.2.2 Scientists and engineers as a percentage of the labor force 102 4.2.3 The role, status, and activities of scientists and engineers 106 4.3 R&D Financing 113 4.3.1 Funding R&D activities 114 4.3.2 GERD as a percentage of GNP: A comparison 118 4.3.3 Sources and character of R&D funding 123 5 Internationalization of Research and Technology 135 5.1 International Research and Development 138 5.1.1 Foreign direct investment as a measure of R&D internationalization 138 5.1.2 Involvement in international scientific activities 141 5.1.3 Transnational corporations and R&D 148 5.2 International Development of Technology 154 5.2.1 Technology agreements 157 5.2.2 Transfer of technology 162 5.2.3 Joint ventures and TNCs in technology transfer 170 C;ontents ix 6 The Burdens of Abundance: R&D, Technological Change, Resource Allocation, and Productivity 177 6.1 The Burdens of Abundance 180 6.2 Natural Resources 184 6.2.1 Fuel resources 184 6.2.2 Nonfuel resources 187 6.2.3 Techno-economic efficiencies 190 6.3 Human Resources 193 6.3.1 Employment and labor productivity 193 6.3.2 Labor productivity and the R&D sector 198 7 R&D Management in the Transition: From the Soviet Union to Russia 211 7.1 Rejoining the World 213 7.1.1 From the scientific perspective 213 7.1.2 From the enterprise perspective 216 7.1.3 The international aspect 218 7.2 The Role of R&D in Russian-style Growth 221 7.3 Prospects and Prescriptions for R&D Management and Technological Advance in the Transition to a Market Economy and Beyond 224 7.3.1 Reform, transition, and R&D 224 7.3.2 The survivability of R&D 228 7.3.3 (Pre-)Conditions for successfully restructuring R&D 228 7.3.4 Areas for restructuring R&D 230 8 Summary and Conclusions 235 8.1 Summary of Major Points 235 8.2 Concluding Remarks 239 References 245 Abbreviations AIK Advances in Knowledge CEE Central and Eastern Europe CMEA Council for Mutual Economic Assistance COCOM Coordinating Committee on Multilateral Export Controls CPE Centrally Planned Economy CPS Centrally Planned System EME Emerging Market Economy FDI Foreign Direct Investment FZU Factory training schools, USSR GERD Gross Expenditure on Research and Development GFCF Gross Fixed Capital Formation GKNT USSR State Committee for Science and Technology GDP Gross Domestic Product GNP Gross National Product GOSKOMSTAT USSR State Committee for Statistics GOSPLAN USSR State Planning Committee GOSSTANDARD USSR State Standardization Committee JV Joint Venture KGB USSR Committee for State Security MIC Military Industrial Complex MNTK Inter-sectoral scientific and technical complex, USSR NIC Newly Industrialized Country NPO Scientific Production Organization, USSR NSB National Science Board OECD Organisation for Economic Co-operation and Development PTU Technical trade school, USSR R&D Research and Development R&T Research and Technology S&E Scientists and Engineers S&T Science and Technology SEL State Enterprise Law, USSR (1987) SPTU Secondary technical trade school, USSR SSUZ Secondary specialized school or technicum, USSR TNC Transnational Corporation VINITI All-Union Institute of Science and Technical Information VUZ University, USSR List of Tables 2.1 Early studies on technological change and GNP growth. 22 2.2 Shares in the growth rate of national income (selected countries over various periods, 1948-1971). 25 2.3 Studies on productivity increases and R&D expenditures. 27 3.1 Change in socioeconomic measures, 1900-1988 (in %). 44 3.2 The former Soviet Union in the world economy. 47 3.3 Soviet productivity in the late 1980s (as a percentage of the average of the top five producers in the world). 48 3.4 The age structure of the USSR Academy of Sciences. 64 3.5 R&D expenditures of nonstate organizations (in billion rubles). 72 4.1 Education: USSR versus USA, 1900-1990. 89 4.2 Scale of education in selected countries, 1989. 89 4.3 Soviet graduating students by sectoral affiliation (in %) and growth in enrollment, selected years. 92 4.4 Total number of scientists and engineers (S&E) engaged in R&D (1965-1987) and annual growth rates (selected countries and periods).