– Viсtor, how do things stand with the culture of technological entrepreneurship and generally the culture of entrepreneurship in Russia today? Compared with the United States, where do we lag behind the most?

– To me, it would be better to talk about the culture of entrepreneurship on the whole. Of course Russia does have entrepreneurial culture but compared with many other countries, the USA and euro zone above all, it is still in an embryo stage. This could be best illustrated by figures describing the small and medium business sector contribution to Russian economy. If I am not mistaken, the figure is 21 percent of Russia’s gross national product and the number of SME-employed people is in the area of 20 percent as well of the total able-bodies population. If we are to compare these figures with the USA, France, Germany, even China, we will see that SME is a key sector there, contributing about 60 percent to the overall economy of those countries and employing just as many people, three times more than in Russia.

So the Russian figures speak for themselves. We do have a culture of entrepreneurship, and we do have progress in its development, but the development itself is regretfully still very slow. Sure enough, the figures describing SME contribution to the country’s GNP are but some of the parameters of the entrepreneurial culture development level. Other factors to be taken into account include methods of corporate governance and the general level of business transparence, and so on. Hence, if we witness quite a high level of corruption in Russia, this points to the unhappy fact that entrepreneurs often try to get advantages for their businesses not by increasing the transparence of the business or improving the methods of running it but by finding the “right” official who will do something beneficial for the corporation and thus help it “develop” the business. Sadly enough, a lot of Russian entrepreneurs prefer this way of thinking and operating, disregarding other possibilities.

– Can this be changed? Can the trend be reversed? And what’s the trick: a certain government policy or the Soviet mentality?

– The government policy is officially targeted against corruption. But Russia has such a bureaucratic and multi-level, branched system of government officials, with rather low salaries, too, that this fact is a corruption driver in itself. The psychology of people, no doubt, plays an important role as well.

How can this be changed? Strange as it may seem, I don’t think it’s a matter of repression, rather it’s a matter of education, teaching and learning which can give people positive rather than negative examples to follow. This is what can be done and must be done. One of our events was dedicated to business transparence and, more importantly, its cost to the entrepreneur. Some time ago lots of people here would talk about transparence, corporate governance in business, but no one explained how much it cost and what the benefit was. For that event, we used what seemed to us a very good and positive explaining example when we invited a Nizhny Novgorod entrepreneur to Moscow to tell the story of his company. Let me briefly describe it. He had a network of supermarkets and realized the benefit of business transparence. To make everything transparent and clear (accounting, bookkeeping, etc.) he spent around $90,000, quite an amount for a regional entrepreneur. The result was that he approached a U.S. private equity fund, then managed by Delta Capital Management, which, in turn, invested several million dollars in his company to ensure business growth. A few years later, the network and the fund exited the market successfully by selling the supermarket network to Perekrestok, a well-known network retailer. The entrepreneur himself got a profit of several million dollars.

So I think this kind of an example, the comparative analysis of business transparence advantages, and the analysis of profitability of investing in transparence made a lot of people think (we arranged the event precisely for Russian entrepreneurs): Is it worth looking for that sought-after official doing “good” for the company at all, and not for free into the bargain? Obviously, the “sought-after official” way may not only lead you to the dock but also is unable as such to let small and medium businesses earn millions. We believe such positive examples, cases as it were, like the one I just described, to be very useful; we believe that printed and electronic media should write and talk about them more than they are doing. If that becomes a fact a lot of people are sure to follow the track.

– What are the factors do you think that hamper Russian small and medium businesses’ deeper involvement in innovation activities like the U.S or EU countries?

– Some time ago, a lot of attention was paid to this issue by Opora Rossii which made a survey discovering numerous findings. To me, however, one of the biggest problems is rooted in the drawbacks of the Russian system of higher education. For illustration purposes, let me use a U.S. example, namely MIT, the Massachusetts Institute of Technology. Quite recently, the Kansas City based Kaufman Foundation, a leading institution promoting entrepreneurship globally, published their research findings suggesting that the totality of the companies set up by MIT graduates would be a No. 17 economy in the world (if counted conservatively, under a more liberal counting method they would rank 13th). This is graduates of just one educational institution, I emphasize. The conclusion made by the expert group is evident: the MIT, with the fundamental research school that it has, has built a successfully coexisting unique entrepreneurial ecosystem. They’ve got a Center for Entrepreneurship with proper laboratories. All students get training in entrepreneurship, a separate subject. They have an invention registration division. They have established an excellent relationship with the venture capital community. Here is a real operating model of an innovator or if you wish innovation institution.

Now about what they have and we haven’t? Certainly, Russia has lots of excellent institutions of higher learning, some of them with a long research record. The problem is not that we don’t have technical specialists, the problem is that are not taught to know entrepreneurship, a subject that is only beginning to slowly establish in our education. In the U.S., on the contrary, entrepreneurship is taught to students majoring in all subjects, from maths and engineering to history and journalism. They are perfectly well aware that in the future this will help them look for an alternative way of self-employment, self-development, self-realization, not necessarily in a “specific” area but maybe in their own business. And the task of teaching entrepreneurship does not at all boil down to teaching students how to write a business plan. This is just a tool. The task is much more complex, namely teach the student to think “out of the box”, i. e., not in formulaic terms, look for opportunities to implement interesting ideas, take reasonable risks, be responsible, in other words develop qualities that an entrepreneur needs. Therefore, the biggest chair at the Harvard School of Business is the chair of entrepreneurship which practises a case-based method, that is, analyzing success stories of specific companies. This sort of training, using positive examples, is in my opinion very helpful in developing entrepreneurial thinking. What is always very important for the younger generation is success stories, successful people, and talking to them. That is why one obligatory element of such training is inviting successful businessmen as lecturers.

We have a long way to go before we get there. In this country there lots of talented researchers and inventors. But nobody teaches them to commercialize ideas, convert them into business projects, get them to the implementation stage and, eventually, to profit. One possible factor which could reverse the situation is a proper infrastructure within educational institutions, such as business incubators and technoparks, but according to numerous independent opinions, most of the existing Russian technoparks is simply business centers letting their spaces, which very often is their only business model. By and large, there is nothing innovative about them. Also, there are apparent imbalances, at least regional: according to media, the Chechen and Karachai-Cherkes Republics have 11 technoparks while the Krasnodar Krai has only one (obviously not enough for Krasnodar). As I mentioned before, even if a region has a technopark its “content” does not always match its “form”. At our end, we are trying to help change the situation; in particular, together with Intel we are developing a training program for technopark and business incubator managers to make sure they work for real innovations, not just profit from letting out their spaces.

– But it’s not everywhere like this, is it?

– No, it isn’t. Luckily, there are good examples as well. For instance, the Economic Department of Moscow State University has a well-functioning Center for Entrepreneurship, which operates in close cooperation with the Innovation Studio set up with Intel support. They really develop entrepreneurship: we have attended presentations of three companies set up with their assistance and owned by former or current students of the University’s Economic Department. One of them has reached a turnover of $350,000 per month and has created 300 jobs. All the three companies are indeed innovative IT entities. Another company which originated there has now set up a branch in Virginia, and the Americans are happy to see jobs created by Russians. On the whole, I think, the Economic Department of Moscow State University is seeing the birth of the “right” educational-entrepreneurial ecosystem like the one at MIT.

– What’s your perception of our technoparks in general, from the western perspective?

– By definition, a technopark is a place where innovations are born. They only come to exist where there is an appropriate climate for interchange of ideas, concepts, cultures. Innovations always emerge at a junction of sciences and competencies. Therefore for every technopark, interaction of various experts is vital because an unprejudiced look, say of a biologist and chemist may solve a problem which is unresolvable for a team consisting of say physicists only. This is what innovations are about, an intersection of ideas and knowledge.

– What is the role of government support in the field of innovation entrepreneurship development?

– In this field, the government plays a very important role. Recently, a lot of important positive steps have been made towards the development of innovative technological entrepreneurship. One of the biggest of those steps is the creation of the Russian Venture Company (RVC). Through RVC and other similar institutions, quite considerable money is invested in the development of small and medium businesses, something that did not exist five years ago. Ironically, we partially owe this to the crisis. It was during the crisis that it became clear that the economy badly needed diversification and could not rely on the mining sector alone. The crisis pushed the government and the economy towards innovative development to resolve the existing problems.

It is noteworthy that the Ministry of Economic Development on the whole and its respective department are looking at the western experience, including U.S. experience, and doing quite a good job bearing real fruit. Also the Obama-Medvedev commission is working and its small and medium business subcommission, with useful experience interchange. For example, a delegation of Russian single-industry cities recently visited Pittsburgh, a typical former single-industry place which used to focus on steelmaking only. Owing to economic diversification and SME sector development, the city did not die after the key players of the region’s industry; undoubtedly we can learn from that lesson. Again, the government has made a large number of positive steps in the area of innovation activities development; but more is yet to be done.

– What do you think is the first thing to be done?

– No doubt, the financial component plays a huge role. I am not talking about direct investments, rather about developing an economic environment where credit resources are available to our innovation entrepreneurs at lower credit rates, for example. But the more important thing to me is support of training. Teach, teach, and teach again. Regretfully, there is often more money (judging by the regional program experience) and affordable credits available for entrepreneurs, more than there are people applying for them. And this fact brings us back to where we started, to the issue of entrepreneurial culture in Russia. At a recent meeting of the U.S. Small Business Administration and Moscow University students, after the audience of 200 people was asked if anybody wanted to become an entrepreneur only one hand went up.

In fact, in popularizing entrepreneurship and initiative an important role could be played by media, including government media: society and young people in particular badly need positive examples and success stories.

– What is the role of organizations like your Center in shaping entrepreneurial culture in Russia?

– Our activities can be divided into three areas. Area one is about entrepreneurship training for college, university and business school professors. For those who can be taught in English, we arrange trainings and trips in the U.S. and Europe; for those who can’t, we arrange foreign trainers’ visits in Russia. By now we have trained about 180 professors in Russia; I must admit, this is not much yet. We have a lot more work to do, but we work hard on this because we view current students as a critical foundation for the perception of ideas of entrepreneurship as such. In what concerns the development of youth entrepreneurship we cooperate with Rosmolodezh among others, offer entrepreneurship lectures at lake Seliger, act as an official organizer of the Global Entrepreneurship Week, represent Russia on the Young Entrepreneurs’ Alliance of G20, implement a mentor program together with the International Business Leaders’ Forum, support the Junior Achievement program, and a lot more.

Secondly, we have numerous educational programs for entrepreneurs themselves. When a business is developing, the owner needs new knowledge: he needs to know how to work with investors, banks, venture entities, correctly write business plans for a new development stage, and so on. We do not teach this to managers, our educational modules focus particularly on business owners only, i. e., entrepreneurs themselves. After he goes through 9 modules of our Fast Track Planning SM system, an entrepreneur is capable (which is proven by practice) of writing a new business plan for a new stage of his company’s development. I would like to emphasize, these are not programs for startup companies (where in my opinion government support must play a more important role), they are for growing businesses which make the biggest contribution to the gross national product and produce the biggest economic effect. We know from U.S. experience that during the business growth stage it is vitally important for entrepreneurs to communicate with peers, exchange ideas and experience. To this end, we sponsor a large number of business meetings, conferences, round tables, and so on. It is also important to nurture “a culture of success recognition”; in this field, we support numerous entrepreneurship awards and competitions, for instance the Ernst&Young competition of Entrepreneur of the Year. Since this year we’ve had our own award, For Contribution to the Development of the Entrepreneurial Ecosystem.

And finally, the third area of our activities – our own analytical and economic research studies which help organizations like Opora Rossii in lobbying changes towards a more favorable entrepreneurial climate in Russia.

I want to specifically note that our contribution to the development of entrepreneurship in Russia wouldn’t be so effective without the financial and strategic support of institutions like the U.S.-Russian Foundation for Economic Advancement and the Rule of Law (USRF), Ernst & Young, Intel, and others.

– Viсtor, thank you for a most interesting interview!

– Thank you. I would like to wish a merry Christmas and a happy New Year to all your readers. Hopefully, our joint effort will become a weighty, albeit small, contribution to society’s recognition of the importance of developing an entrepreneurial culture in this country.