Russia: knowledge intensive entrepreneurship under conditions of superior foreign competition in a liberal transition/market economy

The main specific feature of knowledge-intensive entrepreneurship (KIE) in Russia results from the combination of traditionally high educational and scientific potential of the nation and extremely low level of current R&D expenditures. Public R&D expenditures in the last two decades were practically non-existent. The comeback of the government in the last few years to the modernization process of the economy is just starting, and national innovation system is still under construction. In private sector original R&D activity was constrained by powerful globalized competition. In an open liberal economy imitation or even direct use of Western finished goods has proved to be much more efficient than innovation. To escape from competitive traps Russian entrepreneurial firms developed many asymmetric responses. Indeed the link between KIE in Russia and formal R&D is relatively weak. Entrepreneurial firms grow mainly not because they introduce technical innovations (such cases are also observed), but because they are unique in a way that adds value. Their type of innovation manifests itself in product and market diversification as well as in innovative marketing methods and organization of business processes. In general KIE in Russia has many common features with Western «gazelle-firms». This concept proposed in the 1980s by David Birch, has now become a widely accepted name for firms demonstrating rapid growth over a long period of time. The international experience suggests that formal R&D expenditure is not a necessary precondition for rapid growth of gazelles. Gazelles have a strong impact on national economic development, which is why they are intensively studied all over the world. Post-socialist countries, including Russia, constitute a serious gap in this research. The purpose of this paper is to present the results of the first empiric study of gazelles in Russia. The percentage of gazelles in the population of Russian firms is higher while their relative contribution to national economic growth is lower than that of similar Western firms. At the same time, they play an exceptional role in structural changes in the Russian economy. It has also been established that the rapid growth of Russian gazelles tends to follow an exponential law. The exponential nature of gazelle growth evidently provides empirical support for the hypothesis, that the growth of entrepreneurial firms, and especially of KIE, depends to a greater extent on the firm’s ability to create internal specific assets (including knowledge) rather than on demand constraints.