Russia’s Silicon Valley: Russian president Dmitry Medvedev is trying to recreate Silicon Valley outside Moscow. His hope is that the Innograd technology park will help Russia develop a high-tech economy.
The project is the latest attempted solution to a problem that has vexed Russia for years. The country has produced plenty of tech-savvy innovators — look at Google founder Sergei Brin — yet they have a habit of fleeing abroad. Despite legions of science graduates, a lack of high-tech industries leaves Russia dangerously dependent on volatile commodity exports.
The Kremlin’s plan has its sceptics. Innovation, after all, must develop in the hearts and minds of entrepreneurs, not by government decree. Yet similar projects have helped in other countries, including China. Russia's real problem is not a dearth of good ideas, but the way they always seem to be fouled up in practice by corruption and bureaucracy.
At least Medvedev is keen to tap foreign expertise.
He hosted a delegation of US venture capitalists last week, and has even sent senior officials for a crash course at MIT. A US investor has pledged $250 million for IT infrastructure. But most investors remain cautious. Russia’s venture capital industry has a paltry $2 billion under management. Private equity firms prefer to invest in supermarkets rather than new technologies, because returns are more reliable and materialise faster.
The deeper problem is Russia’s broken legal system — and in particular poor protection of intellectual property. Speculative technologies are often expensive to develop and take years to bear fruit. Investors need to know that their investment is safe. Russia’s record doesn’t impress.
Fixing these problems will take years. It’s far from clear that Russia’s leaders are committed to the task. They routinely tolerate abuses of the legal system, sometimes instigating them for political purposes.
The danger is that in his enthusiasm for Innograd, Medvedev is losing focus on the more fundamental legal and political reforms needed to inculcate a culture of entrepreneurship and long-term risk taking. Without these, Innograd risks becoming an expensive Potemkin village.
