Panarina-Hardin_White Paper_Eng

Introduction
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 long-
term 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 educa-
tion, underdeveloped financial markets, and low levels of business sophisti-
cation 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).
Katerina Panarina, Andrew Hardin
Innovating Higher Education in Russia:
Implementing a Center of Competence as an Accelerator
and Facilitator For Economic Development
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
1
www.irex.org • www.usrf.ru
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, distin-
guished by their large, fast-growing economies and significant influence on regional and global affairs.
3 www.ey.com/attractiveness.

When building a comprehensive innovation sys-
tem, Russia should focus on upgrading technologi-
cal 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 universi-
ties. 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 commer-
cialize 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
In 2012, Russian president Vladimir Putin
announced in a formal address that Russia's univer-
sities 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 technology-
transfer 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 com-
petitiveness 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 partner-
ships with industry to improve innovation in Russia.
These initiatives will support innovation through
the production of “deliverables” for commercializa-
tion (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 mar-
ket 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
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.

Coupled with government support and outside invest-
ment, these collaborations can help solve pressing
social and economic challenges. The CC will be a hub
for leaders in science, education, business, and govern-
ment 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
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 coun-
try 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
move toward a modern, knowledge-driven economy.
The country spends less on technology and innova-
tion than other European economies. It ranked fifty-
first (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
3
Katerina Panarina, Andrew Hardin. Innovating Higher Education in Russia:
Implementing a Center of Competence as an Accelerator and Facilitator For Economic Development
Table 1. Measures Most Needed to Improve Russia's
Investment Climate
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.

the business environment, fostering entrepreneurship,
and developing its innovation capacity are necessary
to provide sustainable growth in Russia. The new gov-
ernment strategy “Innovative Russia 2020”9 foresees
large increases in funding for research, commerciali-
zation, 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 high-
technologies 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 estab-
lishment 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 partner-
ships have been forged in the recent past, for exam-
ple, Alcatel-Lucent signed an R&D pact with SC
Rostechnologii, Russia's largest high-technology cor-
poration, to accelerate the deployment of advanced
long-term evolution (LTE) or 4G mobile services,
new network systems, and groundbreaking trans-
mission technologies.
• Strengthen links between universities and
industry. Encouraging collaboration between indus-
try and academia would help to improve Russia's
innovation climate. This would strengthen the foun-
dation of entrepreneurship and innovation.
Russia's economy in 2013 was estimated to repre-
sent 2.9% of global GDP (figure 1). In comparison,
China's and Brazil's were 12.2% and 3.0%, res-
pectively.
4
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

According to The Global Competitiveness Report
2012–2013, Russia is 47th in the world for competi-
tiveness in terms of infrastructure, but it is 136th
for the quality of roads, 104th for airline infrastruc-
ture, 93rd for port infrastructure, and 30th for rail-
way 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
5
Figure 1: World's twenty largest economies in 2013.
Source: International Monetary Fund, World Economic Outlook Database, October 2013.
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.

were involved in innovative activities. Despite
the existing potential in the sphere of human
capital and research activities, the level of innova-
tion 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 infra-
structure for commercialization, financing of inno-
vative 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 inten-
sifying innovation activity and developing techno-
logy-intensive products. The relevance and signifi-
cance 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 coun-
tries 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 entre-
preneurial, 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 estab-
lished in Russia-will support innovations from the
early stages of development to commercialization.
Its mission will be to accelerate the commercializa-
tion of discovery-driven innovations from universi-
ties 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 pro-
grams 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
6
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 stim-
ulates 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 incu-
bation and spin-off processes and provides other value-added servic-
es together with high quality space and facilities.”

of a “national research university,” one of only twen-
ty-nine other universities in Russia to achieve this
status. Thus, Perm is an ideal location for an entre-
preneurial 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 initia-
tives 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 Best Practices of Innovative
and Entrepreneurial Centers/
Incubators at US Universities
The US university partnership initiatives discussed
below are good case studies for learning how success-
ful 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 inno-
vation and economic growth.12 This new vision
of a model of higher education should generate
knowledge that can benefit Russian society.
Case Study #1: University of Nevada,
Las Vegas
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 entrepreneur
ship:
•The Center for Entrepreneurship (CFE)13 resides
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 Engi
neering. 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 implemen
tation of an angel investing certificate program, by all
accounts the only one of its kind in the United States.
•The Mendenhall Innovation Program is another
center at UNLV focused on innovation and entrepre
neurship. 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 innova
tion 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 investor
quality business plans developed in collaboration with
Lee Business School students.
7
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.
13 http://web.unlv.edu/depts/cfe/.

•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 busi
ness 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 Entrepre
neurship 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 Entrepre
neurship 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 re
commendation 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 private
and public sector partnerships to support and develop
economic growth, workforce development, industry
sponsored 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 Enter
tainment. 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 col
laborations 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 Industry
University 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.
8
14 Research Grants Program Office, University of California:
http://www.ucop.edu/research-grants-program/programs/
industry-university-collaboration-and-innovation/.

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 foun
dation for entirely new technologies and products.
•Leverage industry, state, and federal R&D invest
ments.
•Build a diverse science and technology portfolio
relevant across a broad array of R&D intensive indus
tries.
•Inform faculty and students about how R&D is
planned and managed in the private sector.
•Promote high risk/high impact research with rigor
ous quality controls.
•Create R&D leaders, develop a highly skilled work
force, and expand technology transfer.
•Tackle major social problems including health, clean
air, water, energy, manufacturing and public safety.
The IUCRP sought to create a large scale trans
formation 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
•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 cam
puses. 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 in
house due to, for example, insufficient expertise,
financial resources, or research infrastructure.
•Expanded circles of collaboration
Eighty four percent of UC researchers said
their experience encouraged them to build research
relationships with other companies.
•Enhanced 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 compa
nies, 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
15 The results were taken from Making Industry-University
Partnerships Work 2012. See part 4, case 6, University
of California.

10
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, deve
loping lasting theories such as Porter's Five Forces16
requires a level of rigor that naturally takes a signifi
cant amount of time. While we wholeheartedly support
such rigorous research, we also believe that uni
versities 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.
Case Study #3: The University of Hawaii
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, geo
thermal 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 mil
lion 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
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.
17 http://manoa.hawaii.edu/research/.
18 http://manoa.hawaii.edu/research.
19 See http://www.hawaii.edu/innovation/ for more on the
University of Hawaii Innovation Initiative.

ocean and earth sciences, health sciences),
enhancing emerging strengths (clean energy, new
agriculture, cancer research, pharmacology), and
building up new areas (informatics and cyber infra
structure, 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 impor
tant 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 self
functioning 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 wel
come 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 part-
nership to form the Perm City Regional Innovation
Network. This structure, called a “Center of Compe-
tence,” 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 innova-
tion development: business, government, academia,
11

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 out-
reach 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 communica-
tion 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 estab-
lish network-based operational principles, support
the modernization of R&D and science, and improve the
efficiency of research focusing on breakthrough technolo-
gy 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 competi-
tiveness 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 im-
pact 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 innova-
tive 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
Figure 2: The CC as an ecosystem for innovation
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 poten-
tial 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 suc-
cessful collaboration with industry are the following:
• Make industry-university partnerships a strate-
gic 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 uni-
versity 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

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 compre-
hensive 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

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