The experience of technological expansion into nearby markets was considered successful with reservations

The plans of the Russian government to develop technologies in conditions of isolation from developed countries for their export to “friendly” countries have received scientific justification. A study of China’s innovative activity published by the American association NBER showed that its scientific developments were in demand by countries with a similar level of economic development, while innovations from developed countries are often inaccessible to developing countries. The benefits of deglobalization in the technology sector, however, are sharply reduced with excessive government intervention in prioritizing developments – so far this is the path chosen in the Russian Federation.

A team of researchers from Harvard University, Harvard Business School, and the University of Warwick published a preprint in the NBER entitled “Relevant Entrepreneurship? The Rise of China and the Emerging Economies,” which examined the implications of China’s emerging innovation hub and the country’s dramatic growth in entrepreneurship and venture capital markets. The authors focused on the impact of this experience on the progress of other developing countries. Interest in the external effects of technological development in China is explained by the fact that for a long time venture investments were concentrated in the United States (in 2001, the United States accounted for 88% of the global volume, other developed countries – another 7%, in 2019 the share of China was already 38% , the US share is 42%). The strengthening of China’s position as a source of innovation, the authors believe, has influenced the nature of technology transfer in general in the world. The fact is that the concentration of innovation in the United States has led to the development of technologies that are “suitable” for rich countries and are of little use in other markets due to a lack of capital and skilled labor.

The authors studied 169.5 thousand venture deals involving 88.3 thousand companies in 152 countries (based on PitchBook venture capital data) and found that the growth of entrepreneurial activity in China was associated with a sharp expansion of business in other emerging markets, which is explained by similar socio-economic conditions in China and these countries and is consistent with the theory of “suitable technologies” being most applicable in conditions similar to those for which they were developed. In addition to the proliferation of business ideas, the rise of Chinese venture capital has supported increased development investment in similar sectors in these countries.

The results of the study may be in demand by governments of countries that are increasing innovation activity; in particular, they support the ideas of the Russian government to develop their own innovations in the face of loss of access to international ones and the hope of disseminating these developments in “friendly” countries. As in the case of China, we are largely talking about adapting existing developments to the specifics of other markets. But the benefits from this for the Russian Federation may be significantly less. Researchers attribute China’s success to market conditions for the development of innovation and the government’s policy of non-interference in the technological sphere. With a shift in approach in 2020, many venture capital firms have moved toward “politically correct” investing in technologies that align with government goals. The departure from market conditions is seen as the end of the “golden era” of technological entrepreneurship in the PRC – meanwhile, the Russian Federation initially chose the path of developing innovations “needed” by the government using budget money.

Diana Galieva