Innovating Higher Education in Russia: Implementing

Katerina Panarina, Andrew Hardin Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development Introduction Katerina Panarina, PhD Research Fellow, Management & Marketing Department, Perm National Research Polytechnic University Advisor: Andrew Hardin, PhD Associate Dean of Research and Director, Center for Entrepreneurship, University of Nevada, Las Vegas Today more than ever, researchers, businesses, and government leaders in Russia are searching for ways to promote economic efficiency, prosperity, and growth, that is, economic development. Economic development depends on many things, including entrepreneurship, collaboration, technological leadership, and innovation. In fact, innovation is increasingly becoming the foundation of the world's leading economies, economies in which longterm prosperity and development depend not on natural resources but on technologically based intellectual products. These new products make possible the creation of companies that can foster long-term sustainable economic growth—in short, new economic perspectives to create, harness, and leverage technology-based intellectual capital. Russia's potential for growth is recognized by the World Economic Forum's (WEF) Global Competitiveness Report 2012–2013;1 however, the report also acknowledges that the country is currently falling behind India, China, and Brazil (BRICS countries)2 in terms of competitiveness. Russia's assets are also acknowledged by a recent Ernst & Young survey. Russia 2013: Shaping Russia's Future3 points to a large and expanding consumer market, a solid telecommunications infrastructure, and abundant natural resources as being central to Russia's competitiveness. However, underdeveloped institutions, stifled competition, declining quality of education, underdeveloped financial markets, and low levels of business sophistication are the country's key competitive challenges. The lack of sufficient funding and a supportive environment for startups has translated into a shortage of new ventures. Russia has a need for new, scalable businesses. The development of new companies must become a key driver of economic and social growth, and technologically driven companies can provide new, more powerful tools required to help ensure a better future for all (“Moderating Risks, Bolstering Growth” 2012). 1 The Global Competitiveness Report 2012-2013: Full Data Edition was published in 2012 by the World Economic Forum within the framework of the Global Benchmarking Network. 2 BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China, and South Africa. The grouping was originally known as "BRIC" before the inclusion of South Africa in 2010. BRICS members are all developing or newly industrialized countries, distinguished by their large, fast-growing economies and significant influence on regional and global affairs. 3 www.ey.com/attractiveness. 1 www.irex.org • www.usrf.ru When building a comprehensive innovation system, Russia should focus on upgrading technological capabilities through higher public expenditures on research and development (R&D). This would enable the country to access its innovative potential, which to a large extent is based on strong R&D capacities and an innovative environment. But how should this be accomplished? One way is to partner universities with industry. Fostering collaborative university-industry partnerships to enhance commercialization efforts has emerged as a critical imperative to sustaining global competition (Making Industry-University Partnerships Work 2012). As shown by countries such as the United States, innovation and business competitiveness are greatly enhanced through the activities of research universities. US universities through their research (Graham and Diamond 1997) and the products of their research have assumed a vital role in growing vibrant economies (Cohen, Nelson, and Walsh 2002; Rosenberg and Nelson 1994; Mowery and Nelson 2003).4 The success of high-technology regional clusters in the United States such as Silicon Valley in California5 and Route 128 in the Boston area have connected a large number of companies and major research universities (in California, the University of California at Berkeley, Stanford University, and the University of California at San Francisco; in Boston, Harvard University and MIT). Many new firms in these regions have been created through efforts to commercialize technologies developed at regional universities. To build a knowledge-based economy, Russia needs to similarly integrate business elements into its education system, with the plan being to drive innovation by strengthening links between higher education, research, and business practices.6 4 The importance of university-industry partnerships is becoming well documented in the literature: see, among others, Mowery et al. 2003; Cohen, Nelson, and Walsh 2002; Colyvas et al. 2002; Santoro and Betts 2002; Katz and Ordover 1990; and Pertuze et al. 2010. 5 See Sturgeon 2000. 6 See Moisseev 2012 and “Can Russia Create a New Silicon Valley?” 2012. In 2012, Russian president Vladimir Putin announced in a formal address that Russia's universities must be revamped to become key players in the economy of the country. As a long-term strategy, higher education has to become a strategic asset that links with industry to strengthen the national economy by enhancing and accelerating technologytransfer initiatives. In this paper we propose that Russia follow the example of the United States by changing the way higher education is administered. In particular, we propose that Russian universities create what are known as Centers of Competence. These centers can be used to promote innovation and business competitiveness in the Russian economy. We argue for the establishment of stronger ties between education and industry. World-class research universities are at the forefront of creating such partnerships (Making Industry-University Partnerships Work 2012), and it is these partnerships that result in a broad range of beneficial activities that provide regional and national economic outcomes. As partners, educational institutions and industry can invest in technological advancement, plan strategically, and greatly affect the competitiveness of local and regional economies. Therefore, Russian universities should go beyond the traditional funding of discrete academic research projects and establish long-term strategic partnerships with industry to improve innovation in Russia. These initiatives will support innovation through the production of “deliverables” for commercialization (e.g., patented discoveries) and the development of regional economic “clusters.” Centers of Competence (CCs) will link innovative technologies developed by research universities with industry partners in an effort to target relevant market needs. Government agencies will also be a key component of these endeavors with supportive policy, as for example grants, reduced taxes, etc. We propose that the first CC be established at Perm National Research Polytechnic University— the home institution of the first author—to engage scholars, students, and community members with innovative ideas in the process of commercialization. 2 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development Coupled with government support and outside investment, these collaborations can help solve pressing social and economic challenges. The CC will be a hub for leaders in science, education, business, and government where R&D projects will be transformed into marketable high-tech products and services. The CC will help create regional innovation clusters in the Perm region and eventually lead to the advancement of the country's competitive position and economic growth. The Key Role of a Center of Competence for Economic Development move toward a modern, knowledge-driven economy. The country spends less on technology and innovation than other European economies. It ranked fiftyfirst (five places up in 2011) in the Global Innovation Index 2012, published by INSEAD and the World Intellectual Property Organization. This puts it above BRICS counterparts Brazil (fifty-eighth) and India (sixty-fourth), but behind China (thirty-fourth). Notable changes to Russia's innovation policy in recent years have put R&D at the center of the government's agenda. Policymakers have come to the idea that diversifying its economy, improving Table 1. Measures Most Needed to Improve Russia's Investment Climate The 2013 Global Competitiveness benchmarking study prepared by the World Economic Forum reveals that Russia has fallen to 67 out of 142 countries (Global Competitiveness Report 2012). When examining Russia's investment climate and innovation activity, one can readily see that the country is lagging behind the world's leading economies, making itself strongly dependent on imports of knowledge-intensive products and technologies. Russia's strengths as an investment destination are often obscured by its operating environment, which is marred by high levels of corruption and bureaucracy, in addition to the country's political, legislative, and administrative setup.7 Administrative burdens and the ineffective rule of law hamper the development of small and medium-sized enterprises (SMEs) in the country. Investors argue that the reforms most needed are to reduce bureaucracy, improve the effectiveness of the rule of law, and increase the transparency of business regulation (see table 1). As the latest reports indicate,8 Russia needs to focus on encouraging research and innovation, and 7 Ernst & Young's Attractiveness Survey: Russia 2013: Shaping Russia's Future. 8 World Intellectual Property Indicators 2013; Global Innovation Index 2012; Indicators of Innovation in the Russian Federation 2012; Innovation Activity Indicators 2012. 3 www.irex.org • www.usrf.ru the business environment, fostering entrepreneurship, and developing its innovation capacity are necessary to provide sustainable growth in Russia. The new government strategy “Innovative Russia 2020”9 foresees large increases in funding for research, commercialization, and innovation infrastructure. The strategy implies an increase of the share of innovatively active companies from the current 9.3% to 40–50% by 2020, as well as growth of Russia's share of the global hightechnologies market from the current 0.3% to 2%. Under these plans, by 2020 the number of patents registered by Russian companies in the European Union, the United States, and Japan is expected to reach about three thousand. Total budgetary funding on innovations in the next ten years is estimated at approximately $530 billion, which includes expenses on education, science, and a number of other fields. In April 2012 the government adopted a list of innovative territorial clusters (mostly in the central area of Moscow and St. Petersburg) that would receive public support until 2018. The first establishment of an innovation cluster is noteworthy: the Skolkovo, which is an innovation hub built near Moscow to provide researchers, entrepreneurs, and investors with a platform to focus efforts on IT, energy efficiency, biomedicine, space, and nuclear technologies. However, unfortunately, these initiatives so far have had only a limited impact on enabling sustainable economic growth in the country. Respondents who participated in Ernst & Young's attractiveness survey Russia 2013: Shaping Russia's Future suggest that a shift to a more collaborative approach would help to improve Russia's innovation and technological capacity (table 2). Their top recommendations are as follows: • Facilitate R&D collaborations between foreign and local companies. A number of these partnerships have been forged in the recent past, for example, Alcatel-Lucent signed an R&D pact with SC Rostechnologii, Russia's largest high-technology cor- 9 See a project of “Innovative Russia 2020” at http://www.economy.gov.ru/ minec/activity/sections/innovations/development/doc20111020_1. Table 2. Measures Most Needed to Improve Russia's Technology and Innovation Capacity poration, to accelerate the deployment of advanced long-term evolution (LTE) or 4G mobile services, new network systems, and groundbreaking transmission technologies. • Strengthen links between universities and industry. Encouraging collaboration between industry and academia would help to improve Russia's innovation climate. This would strengthen the foundation of entrepreneurship and innovation. Russia's economy in 2013 was estimated to represent 2.9% of global GDP (figure 1). In comparison, China's and Brazil's were 12.2% and 3.0%, respectively. 4 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development Figure 1: World's twenty largest economies in 2013. Source: International Monetary Fund, World Economic Outlook Database, October 2013. According to The Global Competitiveness Report 2012–2013, Russia is 47th in the world for competitiveness in terms of infrastructure, but it is 136th for the quality of roads, 104th for airline infrastructure, 93rd for port infrastructure, and 30th for railway infrastructure. Russia clearly needs to develop its supporting infrastructure, such as transport, energy, utilities, and communications. In 2013, the United States, China, Japan, and Europe (excluding Russia) accounted for about 80% of the total $1.6 trillion invested in R&D around the world.10 For instance, in 2013, the amount that Russia spent on R&D as a percentage of GDP was a mere 1.5%; the percentage of total exports that were innovative products, works, and services was 3.8%; and only 9% of Russian organizations 10 The figures in this paragraph come from The Global Competitiveness Report 2012–2013, the World Investment Report 2014, and Indicators of Innovation in the Russian Federation: Data Book, 2012. 5 www.irex.org • www.usrf.ru were involved in innovative activities. Despite the existing potential in the sphere of human capital and research activities, the level of innovation in Russia is very low. The United States remains the world's largest R&D investor with a projected spending of $465 billion in 2014. At the same time in 2013, for the first time, China accounted for the largest number of patents filed throughout the world. The intensified global competition for factors driving the competitiveness of entrepreneurial ecosystems—i.e., a highly educated and trained workforce, innovative technologies, flexible infrastructure for commercialization, financing of innovative companies, the system of scientific research, universities and research institutes, and intellectual property—has forced policymakers to look for new models of economic growth, including in Russia. The current Russian model, which is based on the exportation of natural resources (primarily oil and gas), has become increasingly obsolete. Today, to achieve growth targets countries must move from redistributing mineral resources to intensifying innovation activity and developing technology-intensive products. The relevance and significance of innovation to the Russian economy has driven the search for a viable model of economic development. Universities and industry are two partners of the entrepreneurial ecosystem that can connect to merge the discovery-driven culture of universities with the innovation-driven environment of industry (Godin and Gingras 2000; Hicks and Hamilton 1999). When companies and universities work together to push the frontiers of knowledge, they can become a powerful engine for innovation and economic growth. The success of Silicon Valley is a dramatic example. For over five decades, a dense web of rich and long-running collaborations in the region has given rise to new technologies at a breakneck pace, technologies that have transformed industries while modernizing the role of the university. National and local governments in many countries stimulate their economies by forming “Science Parks”11 or “Technology Centers” or what we call “Centers of Competence” (CCs). Based on a review of the relevant literature, for the purposes of the present research we have developed the following definition of a Center of Competence: an entrepreneurial, flexible, innovative eco-structure that integrates knowledge produced by universities with industry expertise, and utilizes the support of government and local communities to create strategic synergies that boost economic growth. As mentioned previously, we propose the creation of a CC at Perm National Research Polytechnic University. It would be the first CC in the Perm region and would be designed as a hub of science (knowledge produced by the university), industry (the major economic sectors), local government (funding and financial support through programs and grants), and society (the entrepreneurial community). The Perm CC-as would any subsequent CC established in Russia-will support innovations from the early stages of development to commercialization. Its mission will be to accelerate the commercialization of discovery-driven innovations from universities and to foster and accelerate the exchange of ideas between researchers on campus, through better access to informational, financial, technological, and human resources. Learning from the success of the US programs described below, we believe that establishing CCs in Russian universities will promote innovation and business competitiveness in the economy. Perm National Research Polytechnic University is well suited for the design and implementation of a CC. In 2009 the university received a status 11 Interestingly, there is considerable disagreement about exactly what a “Science Park” is and what it does; for one definition, consult the website of the International Association of Science Parks, http://www.iasp.ws/: “A Science Park is an organisation promoting the culture of innovation and the competitiveness of its associated businesses and knowledge-based institutions. ... A Science Park stimulates and manages the flow of knowledge and technology amongst universities, R&D institutions, companies and markets; it facilitates the creation and growth of innovation-based companies through incubation and spin-off processes and provides other value-added services together with high quality space and facilities.” 6 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development Case Study #1: University of Nevada, Las Vegas of a “national research university,” one of only twenty-nine other universities in Russia to achieve this status. Thus, Perm is an ideal location for an entrepreneurial center blending technology, engineering, applied science, and education. The center will become a catalyst for innovation through the integration of resources, and it will focus on launching innovative projects by utilizing state and regional programs and promoting entrepreneurial activity. CC initiatives will be focused on generating cross-disciplinary solutions, creating interdisciplinary knowledge, and developing new technologies and processes. We strongly support the implementation of a CC at Perm National Research Polytechnic University, as it will represent a significant step towards economic development and successful competition in the region and beyond. We collected and adapted best practices from a number of US universities where a collaborative entrepreneurial culture already exists to design the CC for implementation at Perm. What follows is a review of these collaborative efforts. • The Center for Entrepreneurship (CFE)13 resides The Best Practices of Innovative and Entrepreneurial Centers/ Incubators at US Universities • The The US university partnership initiatives discussed below are good case studies for learning how successful industry-university collaboration operates, and can help to form a perspective on how to establish in Russia bold, visionary partnerships between industry and universities that can accelerate innovation and economic growth.12 This new vision of a model of higher education should generate knowledge that can benefit Russian society. 12 The data to describe the following case studies was taken from official websites of the relevant universities and from interviews conducted with academic officials and administrators. The University of Nevada, Las Vegas (UNLV) has a strong ecosystem that creates an entrepreneurial environment for students and faculty. At UNLV there are three separate centers focused on entrepreneurship: in the Lee Business School and is focused primarily on the creation of new businesses through innovative curriculum development and close alignment with the business community. The center has been extremely successful in collaborating with the College of Engineering. This collaboration allows engineering and business students to build investor-quality business plans around innovative technologies. The Center for Entrepreneurship also enjoys a strong relationship with the local angel investment community, creating synergies in both curriculum and research. One example of the synergy created by this relationship is the implementation of an angel-investing certificate program, by all accounts the only one of its kind in the United States. Mendenhall Innovation Program is another center at UNLV focused on innovation and entrepreneurship. Housed within the Howard R. Hughes College of Engineering, the Mendenhall Program is responsible for a number of initiatives, including running the innovation laboratory and the senior design capstone experience. The program's innovation laboratory provides space for all engineering students to create, invent, and design prototypes for the senior design capstone experience. These projects frequently serve as the basis for the investorquality business plans developed in collaboration with Lee Business School students. 13 http://web.unlv.edu/depts/cfe/. 7 www.irex.org • www.usrf.ru • The UNLV Startup Center provides another set of resources for new business creation by community members, faculty, and students. The Startup Center is associated with the Office of Research and Economic Development, and it provides assistance and consultations to start and grow businesses from concept to execution by offering free, practical business advice and assistance that can provide a path through the legal, regulatory, and business landscape. UNLV builds cooperation and participation among its stakeholders. For example, the Center for Entrepreneurship collaborates with the Mendenhall Innovation Program on entrepreneurship curriculum, fund raising, grant proposals, and new programs designed to help commercialize student and faculty innovations. The center works closely with the Technology Transfer Office, providing market analysis and business planning assistance to students and faculty who disclose their inventions. Collaboration with the UNLV Startup Center is also common. Bringing a unique twist to this collaborative environment, the Center for Entrepreneurship developed, implemented, and now currently manages the Rebel Venture Fund. This $500,000 fund is student-run. Students identify investments, conduct due diligence, and present their investment recommendation to the Venture Fund's management board. Together, the unique infrastructure comprised of the Center for Entrepreneurship, the Mendenhall Innovation Program, the Technology Transfer Office, the Startup Center, and the Rebel Venture Fund creates a significant and innovative entrepreneurial organism that is aiding UNLV in its rapid evolution toward economic diversification. Research and development is a critical component of any university's strategy. The UNLV Office of Economic Development seeks to promote privateand public-sector partnerships to support and develop economic growth, workforce development, industrysponsored research, and intellectual property. Active projects mapped to the economic development sectors are Aerospace and Defense; Business IT Ecosystems; Clean Energy and Water Technologies; Health and Medical Services; Mining, Materials, and Manufacturing; and Tourism, Gaming, and Entertainment. The established partnerships with industry are positively affecting economic development in Southern Nevada. Technology transfer plays a central role in bringing discoveries and inventions developed by the university to the marketplace to create products and services that benefit society. UNLV's Technology Development and Transfer helps to protect and commercialize inventions made on campus and establishes collaborations between businesses interested in new discoveries or technology and researchers at UNLV. Case Study #2: University of California In 1996 the University of California (UC) System launched an ambitious new approach to encourage collaboration with industry. Under its IndustryUniversity Cooperative Research Program (IUCRP) it used matching grants to catalyze hundreds of strategically focused partnerships, dramatically increasing the number of faculty, students, and companies participating in such joint collaborations. The IUCRP's grants initiative14 (now called UC Discovery Grants) began as a UC Berkeley program, operating only in the field of biotechnology. Funding went from $3 million initially to $60 million in 2000, with more than half of the money contributed from private sources. Later on the accent was made on Electronics Manufacturing and New Materials, Digital Media, Communications and Networking, and Information Technology Science. The grants bridged the gap between university researchers and California companies, advancing the scientific knowledge base, intensifying the relevance of research and education programs, and accelerating the application of new discoveries in the economy, and eventually strengthened California's competitive advantage. 14 Research Grants Program Office, University of California: http://www.ucop.edu/research-grants-program/programs/ industry-university-collaboration-and-innovation/. 8 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development At the outset, the university and state aimed to do the following: • Expand industry access to the university and increase discovery research that could form the foundation for entirely new technologies and products. • Leverage industry, state, and federal R&D investments. • Build a diverse science-and-technology portfolio relevant across a broad array of R&D-intensive industries. • Inform faculty and students about how R&D is planned and managed in the private sector. • Promote high-risk/high-impact research with rigorous quality controls. • A new funding stream for university research From 1996 to 2007 the IUCRP brought in $450 million in state and industry research funding to hundreds of faculty laboratories at all nine UC campuses. The Discovery Grants supported more than 2,100 research assistantships for graduate students working on sponsored projects. • Earlier-stage research by companies, with enhanced R&D performance The investment risk for companies was partially offset by state matching funds and the quality control provided by faculty peer review. Ninety-six percent of companies reported that participation enabled them to undertake something they could not do inhouse due to, for example, insufficient expertise, financial resources, or research infrastructure. • Expanded circles of collaboration • Create R&D leaders, develop a highly skilled workforce, and expand technology transfer. Eighty-four percent of UC researchers said their experience encouraged them to build research relationships with other companies. • Tackle major social problems including health, clean • Enhanced air, water, energy, manufacturing and public safety. The IUCRP sought to create a large-scale transformation in the way the university's tripartite mission of education, research, and public service was pursued. It set out to rapidly increase the number and quality of collaborations between UC faculty, students, and industry and to focus those collaborations on strategic areas of research to benefit the economy. At the same time, the IUCRP aimed to change the university culture and create greater openness to innovating with industry by building a wide and deep pool of academics who were skilled at working in partnerships. Here are some results of the program.15 15 The results were taken from Making Industry-University Partnerships Work 2012. See part 4, case 6, University of California. survival rate of start-ups that formed partnerships with university researchers These young firms reported that participation helped them raise capital, recruit key personnel, and accelerate R&D. • Enriched career paths of students Students' experience in industry-relevant research programs made them attractive recruits for companies, and some students started their own firms. The program seeded future R&D leaders. The booming research activity generated by IUCRP highlights the considerable debate about the issue of rigor versus relevance in academic research. In the academic literature (e.g., Benbasat and Zmud 1999; Davenport and Markus 1999; Lee 1999) research is perceived as either being academically rigorous, or relevant to practice, but rarely both. Some scholars (Lee 1999) believe that academics should serve as the “conscience” of practice, while 9 www.irex.org • www.usrf.ru others believe that research should be immediately implementable by practice. We believe there is a definite need for both. Sponsored research, where businesses fund research that addresses their particular needs, is a valuable activity that can fuel economic development. On the other hand, developing lasting theories such as Porter's Five Forces16 requires a level of rigor that naturally takes a significant amount of time. While we wholeheartedly support such rigorous research, we also believe that universities must provide research expertise to assist in economic development and collaborate with business communities, industries, and government agencies to contribute to diversification and economic growth. World-class research institutions are the prime engines of economic renewal (A Practitioner's Guide n.d.). To become economic leaders in the future, emerging economies need significant research capabilities. Since 2011 the University of Hawaii (UH) has sustained an initiative to produce knowledge and foster national research capabilities in partnership with community and business groups. The state's political, academic, and business leadership, along with federal officials and national experts, is trying to implement key steps toward meeting the objectives of the University of Hawaii Innovation Initiative. The local business community has long recognized that research and innovation needs to be part of Hawaii's future. That is, the university can create businesses based upon biofuels technology, geothermal technology, wind technology, and military technology, as well as make possible biomedical advances. The university plans to drive the growth of industry by hiring and developing top scientists in particular areas over the next decade. The University of Hawaii system includes ten campuses and dozens of educational, training, and research centers across the state. Classified by the Carnegie Foundation as having “very high research activity,”17 a National Science Foundation report ranked UH Mãnoa fifty-first among 689 public and private universities in federal R&D expenditures for fiscal year 2009. By comparison, the University of California Berkeley ranked fortieth. The University of Hawaii at Mãnoa is recognized for its pioneering research in such fields as oceanography, astronomy, Pacific Islands and Asian area studies, linguistics, education, tropical agriculture, cancer, and genetics. Holding the distinction of being a land-, sea-, and space-grant institution, UH Mãnoa is ranked in the top 50 public universities in research funding by the National Science Foundation. UH Mãnoa received $333 million per annum in extramural awards averaged over the last five years.18 The faculty and staff at UH conduct cutting-edge research, advancing the frontiers of knowledge and being entrepreneurial in their quest for research funding. Seven of UH Mãnoa's faculty are currently members of the National Academy of Sciences, the National Academy of Engineering, and the National Institute of Medicine. The Hawaii Innovation Initiative19 is an effort to double the UH system's extramural (outside) research funding from the current level of $500 million to an ambitious $1 billion per year by 2022. The goal of the initiative is to expand the research and technology portion of Hawaii's economic pie over the next decade by strengthening areas of proven excellence (astronomy and space sciences, 16 Porter's Five Forces analysis is a framework to analyze the 17 http://manoa.hawaii.edu/research/. level of competition within an industry and business strategy development. It draws upon industrial organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. 18 http://manoa.hawaii.edu/research. Case Study #3: The University of Hawaii 19 See http://www.hawaii.edu/innovation/ for more on the University of Hawaii Innovation Initiative. 10 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development ocean and earth sciences, health sciences), enhancing emerging strengths (clean energy, new agriculture, cancer research, pharmacology), and building up new areas (informatics and cyber infrastructure, diabetes and obesity research). Technology transfer is an important channel through which university research spills over into the broader economy. The UH has struggled to effect high rates of technology transfer. An important goal of the Innovation Initiative is to advance the licensing and commercialization of UH research. There are several examples of research initiatives ripe for commercialization. For example, the UH plans to be the first university in the world with dedicated rocket launch capability for satellites that are constructed and operated by its students and faculty. In the School of Engineering, corrosion research for the U.S. Navy and advanced tsunami research have the potential to be commercialized and patented through accelerated technology transfer. While it is costly to recruit highly productive research scholars, the premise of the Innovation Initiative is that this investment will both pay for itself and produce increased economic activity in the form of extramural research expenditures, jobs, technology transfer, and harder-to-quantify social benefits. In the best-case scenario, the total grant volume will grow to $737.6 million by fiscal year 2022, the Net Present Value (NPV) of the initiative will reach $250.4 million, more than 13,000 jobs will be attributed to the UH system's total research expenditures, and the Internal Rate on Return (IRR) for the initiative will be 96 percent (“The Economic Contribution of the Hawaii Innovation Initiative” 2013). This is clearly an exceptional return on investment. Beyond the large, positive expected return on investment—as high as 96 percent in the best-case scenario—other benefits will include thousands of new jobs created in the state, new discoveries, and the development of new support businesses and opportunities. These additional benefits gener- ate a win-win outcome for both the UH and the state. Research activity requires support staff, equipment, and materials, which in turn boost local businesses. Simultaneously, new businesses are nurtured by Hawaii's research economy, and additional growth may result from technology transfer. In this way, the research industry amplifies investment into broader statewide benefits. Creating innovative, self-developing, and selffunctioning organizational structures is a challenge. However, meeting this challenge will foster economic growth and promote innovation and business competitiveness. Numerous programs encourage companies to collaborate with communities to welcome the talent and resources necessary to develop an innovative culture. Promoting an Innovative Culture in Russia Considering the best practices described above, we propose the establishment of a similar, highly interactive, innovative, and entrepreneurial structure at Perm National Research Polytechnic University. This structure will build a university-industry partnership to form the Perm City Regional Innovation Network. This structure, called a “Center of Competence,” will bring people, ideas, and processes together. Innovation, science, and human capital will serve as the cornerstones of the new innovative system designed to serve social and economic needs. The Center of Competence (CC) will become a tool for integrating knowledge, expertise, and supporting entrepreneurial activity. Designed as a flexible system, and managed to ensure competitive growth, the CC will assist with the implementation of innovative strategies for creating competitive companies in the Perm region. The CC will help to pool the following components within an integrated management system for innovation development: business, government, academia, 11 www.irex.org • www.usrf.ru Figure 2: The CC as an ecosystem for innovation development professional associations, and the local community (figure 2); within the CC a flow of qualified specialists, active entrepreneurs, creative youth, and government agencies, together with science and education, will define the innovative development of economic sectors. The Center of Competence will link industry and the university as well as assess public/private resources for mutually beneficial needs (e.g., facilitate tech transfer and start-ups; administer industry contracts and outreach efforts; provide innovation services to internal and external researchers/organizations; utilize industry retirees to promote innovation and entrepreneurship; increase research funding and seed capital opportunities; train and mentor start-ups and small businesses; and facilitate collaboration between large companies and recognized researchers). These efforts should intensify technology transfer and commercialization, and attract venture capital and other private investment resources, leading to the creation of a vibrant technology and innovation-driven ecosystem in the Perm region. The objective of the CC as the core of communication between these different elements is ensuring the integration of knowledge and processes, and stimulating the emergence of an innovative culture. The CC will help companies in the Perm region strengthen their competitive edge, build dedicated teams of specialists with new comprehensive competencies, and drive the shift to an innovative management model. The Center of Competence at Perm National Research Polytechnic University will be created in collaboration with major regional companies. These partnerships will ensure the integrity of the innovation cycle, help establish network-based operational principles, support the modernization of R&D and science, and improve the efficiency of research focusing on breakthrough technology areas. The university will become a major resource for a regional innovation strategy. The impact of knowledge derived from the university-industry collaboration will contribute to regional performance by promoting competitiveness and economic growth. The Center of Competence at Perm National Research Polytechnic University has the potential to become a key driver of economic progress in the Perm region. The impact of the CC on the local and state economy could be evaluated in the future by the number of entrepreneurial ventures created, the collaborative research of faculty within industrial areas, and the number of new innovative projects contributing to industry development. The suggestions below provide examples of how we might better position the CC to achieve the goals stated above: 1. Create an executive advisory board to advance the reputation and capabilities of the center. Work with the advisory board to identify potential cooperation with enterprises in the region and to establish partnerships with those entities. 2. Motivate faculty members to lead research in the area of their expertise with connections to market needs. 3. Pursue funding through the local and federal governments to sponsor research initiatives of faculty and graduate students. 4. Organize business plan competitions for university students to build entrepreneurial skills and develop 12 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia: Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development an innovative culture. Create cross-disciplinary teams to compete such as engineering, science, information systems, etc., in which interdisciplinary student teams will be required to write business plans focused on new technologies. 5. Develop a focused strategy that includes leading areas of expertise for the university such as mechatronics, nanotechnologies, aerospace, energy, and information systems technology. Long-term collaborations made though the CC will give rise to new technologies helping to transform industries while modernizing the role of the university. However, collaboration is not going be easy. As a rule, for most universities, partnering with industry does not come naturally. Most Russian academics are not engaged at all in collaborations with industry. When Russian universities do form partnerships with industry, too often the potential for synergy is thwarted by communication failures. The most productive collaborations are strategic and long-term; they are built around a shared research vision and may continue for a decade or beyond, establishing deep professional ties, trust, and shared benefits that work to bridge the cultural divide between academia and industry. The collaboration requires strong university leadership, faculty who understand business, academics who have worked in industry, and making industry-university partnerships a clear priority. The key recommendations for universities to foster successful collaboration with industry are the following: • Make industry-university partnerships a strategic priority and communicate the message regularly to the entire academic community. • Create an advisory board of executives from selected industry sectors and the highest level from the university who will develop an understanding of the key scientific and technological questions companies are seeking to answer. As a first step, a joint steering group including senior academics and company executives should be formed. • Assess the core academic strengths of the university and the core research competence of local companies to identify promising opportunities for collaboration. • Design incentives for university faculty and provide resources to manage a cultural shift that puts a clear priority on engaging with industry for mutual benefits. • Encourage industry involvement. The university must utilize people capable of building and managing partnerships. Collaborations only work well when they are managed by people who cross boundaries easily and who have a deep understanding of the two cultures they need to bridge. • Create opportunities for academics, company researchers, and executives with shared interests to come together and develop a dialogue. For example, informal exchanges over lectures or seminars can bring both sides together to spark conversations and lead to new relationships. • When a partnership has been launched, have an executive board meet regularly to encourage strong two-way communications between academics and senior company officials. The chair should follow up regularly with members to keep the dialogue flowing and encourage impromptu feedback on the project from both sides at any time. • Develop two-way exchanges to build a substrate of academics who understand industry. The university should encourage professors to get internships in industry and invite industry researchers to teach. • Create long-term strategic partnerships that focus the university's creativity and talent on future innovations that can be taken to market by industry and deliver economic benefits within five to ten years. • Encourage diversity. Innovation works when there is diversity. Invite to the projects individuals from different disciplines to contribute to the whole process. Collaboration of ideas, people, and places should be systematic. • Redefine the role of the research university as a source of competence and problem-solving for society. Julio A. Pertuze, Edward S. Calder, Edward M. Greitzer and William A. Lucas, in their “Best Practices for Industry-University Collaboration” (2010), propose a set of seven guidelines that companies should follow to get the most out of their research collaborations 13 www.irex.org • www.usrf.ru with universities. The guidelines partly correlate with the key recommendations for universities stated above: longer-term projects, continuing relationships, assigning project managers who make the contract feel like a partnership, and enabling these managers to invest the time and effort to generate effective knowledge flows between the university and the company. In the end, we emphasize that bold, visionary partnerships between industry and university are able to accelerate innovation and help deliver solutions to pressing economic and social challenges. Universities should collaborate with industry, and the role of the research university should be redefined for the twenty-first century as one that goes beyond teaching and public service to tackling key social challenges and helping drive economic growth. The university in the twenty-first century should be viewed not just as a generator of ideas but as a source of knowledge and competence that can benefit society. Conclusion Despite its many assets, the Russian economy is struggling to reach its potential. Among other things, Russia is losing its once strong position as a leader in technological innovation and thus needs more comprehensive approaches to enhance its competitiveness and enrich the national innovation system. As a solution, we propose that Russian universities and companies form close partnerships. In particular, we propose as a first step that a Center of Competence be established at Perm National Research Polytechnic University. As we have documented in this paper, such a center can, much like its counterparts in the United States, foster strong university-industry partnerships and re-energize Russia's ability to produce innovative products and technologies. 14 www.irex.org • www.usrf.ru Katerina Panarina, Andrew Hardin. 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The Yegor Gaidar Fellowship Program in Economics is a program of the U.S. Russia Foundation for Economic Advancement and Rule of Law (USRF) and IREX. The Gaidar Program supports the long-term development of Russia’s market economy by providing opportunities for leading Russian economists to conduct collaborative research with U.S. economic experts. It is named in honor of Yegor Gaidar, the first Minister of Finance of the Russian Federation. http://www.irex.org/project/yegor-gaidar-fellowship-program-economics.