INNOVATION SYSTEM FAILURES IN RUSSIAN RESOURCE-ABUNDANT REGIONS

Abstract

Since the “resource curse” phenomena was first mentioned in literature, it has received a significant empirical confirmation both on national and regional scales. However there are several exceptions of the economies that obtained advantages from resource wealth. Among the reasons of inability to turn a resource curse to blessing scholars identified weak institutes, the neglect of education, and poor manufacturing crowded out by high-yielding extracting sector. These effects generate a system of innovation failure that is slowing down economic growth. This paper aims to obtain further empirical evidence of the resource curse hypothesis from Russian regions. Secondly, we examine innovative system failures that slow down the pace of economic development. Our econometric calculations provided another proof of resource curse. We discovered a negative relationship between economic growth and resource wealth of Russian regions. Then we analyzed the case of Krasnoyarsk Krai, a Russian resource-abundant region. We used the survey response by executive directors of small and medium enterprises to identify innovative system failures. The most significant systemic failures in resource-rich region were corruption, hindered interactions between actors and institutions, a high level of taxation and natural monopolies’ prices. Our study contributes to adjusting policy development to the specific conditions of resource-dependent counties.