constraining the development of entrepreneurship, government policy and the political situation are cited as significantly more important limitations (see Figure 30 of the report, which is based on the views of experts). 28 For the flavour of recent discussions, see, among others, EBRD (2008), Rodrik (2008) and World Bank (2008).
88 chapter 08 / Financing innovation weighed against the large body of experience in this field. That experience has been mixed at best – and at worst, disastrous. With the present arrangements, the Russian government has effectively decided that market and/or coordination failures have warranted the use of “vertical” policies that target particular types of activity or sector. Yet much of this report has also shown that factors associated with the business and investment environment, as well as the extent of competition, are some of the key impediments to firms investing (including investment in innovation) and are certainly not facilitating the entry of new and dynamic firms operating in high-productivity sectors. All available evidence continues to show that entrepreneurial activity remains highly limited. While there have been a number of attempts to focus policy on “horizontal” or “framework” issues, such reforms have so far proved difficult to implement and/or sustain, as discussed in previous chapters. Seventh, a further issue concerns the impact of public policies on private funding and investment. At this stage, it is not possible to see with any accuracy whether recent policies have led to additional investment in R&D or crowded out private investment and funding. Given the scale of the resources allocated to Rusnano, it is unlikely that no crowding-out has occurred. However, this experiment with public venture funding is a relatively recent development and has not been set up in a way that lends itself to evaluation. Designing and carrying out a rigorous evaluation of publicly funded venture funds’ activities should be a key priority for the future. Moreover, the ultimate goal should be to make initiatives such as Rusnano and RVC commercially viable without any public funding. The government could signal this intention by committing itself to selling a majority stake in Rusnano to private investors in the medium term. Lastly, Russia is continuing to miss out on one of the most powerful sources of innovation owing to the relatively limited presence of multinational companies in its economy. Experience elsewhere shows that multinational firms can play an important role in supporting and financing innovation. This ranges from the spinning-off of ventures to the provision of key services to new entrants and sectors. These effects continue to be largely absent in Russia. The recently created Direct Investment Fund is an attempt to use a public funding vehicle specifically to promote foreign investment in Russia. It is still too early to assess the effectiveness of this initiative.
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