Igor Gurkov*
Professor, Head of the Centre for
Organisational Studies
State University Higher
Phone: 7 (095) 152-09-41, Fax: 7
(095) 928-79-31
Work address: Kochnovskiy pr. 3, room 623,
E-mail: gurkov@hse.ru Web page:
www.lodaos.ru
ABSTRACT
This report presents the results of a large-scale survey involving Russian enterprises during the year 2000. The results show that Russian export-oriented companies are implementing the latest methods in operations and quality control management, and some forms of modern managerial accounting and personnel management. Despite that fact, Russian CEOs perceive the overall suitability of Western management methods as low. This signifies that CEOs of export-oriented companies will not be active advocates and promoters of advanced Western management techniques in local business networks.
Keynotes: exports, transforming
economies,
1. Introduction
After the ruble lost three-quarters of
its value in the last quarter of 1998, Russian industries had an incentive for
export expansion. In 2000,
The crucial question for the further
development of the Russian economy is: To which extent is an export boom
accompanied by a strengthening of the competence base of Russian firms? The
active accumulation of knowledge by Russian exporters and the subsequent
diffusion of that knowledge through local value chains may enhance overall
national competitiveness and contribute to sustainable economic growth (see
The
theoretical framework of the present study is derived from recent theoretical
and empirical studies on the absorption and diffusion of innovations in an
international setting. Regarding the absorption of knowledge, it has been
suggested that user-supplier relations are central to the diffusion of
innovations (Dosi et al., 1990). Such
user-supplier relations may, and do, take place over national borders and over
large geographical distances. In addition, it is well known that a network that
extends beyond a dense core group and into more distant and less frequent
contacts, can be of great importance for radical change, i.e. "the
strength of weak ties" (Granovetter, 1973, 1360-1380). In
Trading partners from developed
countries may require better contract discipline; contract violations with
international partners may have more severe consequences than similar
violations with local partners. This implies that not only the timing of
deliveries should follow the agreed schedule, but also that the quality of
goods and services should be more stable.
The stability of quality requires
the normalization of production processes. This may be brought about by internal normalization, for example, by
the application of modern standards for operation management (such as ISO
standards) or by external normalization,
for example, a careful selection of local suppliers.
Such normalization may effect
further changes in the internal organization of the firm, such as in human
resource practices and organizational structures, and in its external
organization, for instance marketing strategies and financing sources.
As
a result, the side effects of exporting to developed countries should include
not only technical innovations but also organizational innovations. We combine
purely organizational innovations and the soft side of technical innovations
into the term "management innovations." Such a combination is
widely used in current management literature and indeed makes sense, as there
are strong connections between the technical innovations and the organizational
innovations in real enterprises (see: Leonard-Barton, 1988).
This
position determined the first goal of the study: to explore to which extent Russian exporters absorb new knowledge and
are inclined to implement management innovations.
However,
to serve as diffusers of managerial
innovations,
Performance gains of [greater than?
What is the relationship between late and early adopters?] early adopters and
Subjective beliefs of earlier
adopters in the applicability of particular organizational innovations in a
broader local context.
In order to understand the role of Russian exporters in the absorption and diffusion of modern management techniques, we should address the following issues:
1.
What is the current proportion of
actively exporting companies to total sum of companies in
2.
How are export activities linked to
innovations in various areas of enterprise management?
3.
What are the attitudes of
export-oriented company managers towards the implementation of advanced Western
management techniques?
.
We suppose that if
demonstrate better performance than
their local-oriented colleagues and
their managers believe in the
applicability of advanced management techniques in Russian business conditions,
they
may serve as active diffusers of knowledge.
2.1 The approach to research design
The approach to research design was predetermined by the research goals. However, in identifying the particular methods of data collection we faced additional challenges. First, there was the challenge of the selection of a suitable method for data collection. Our major task was to receive at least a quasi-representative picture of the innovation processes in Russian enterprises. Although observational studies coupled with interviews may be the most appropriate form for studying innovation processes (Kimberley, 1976, pp. 321-347), surveys have the advantage of taking into account the tradeoff between scale and costs. One additional advantage of using surveys in transition economy research is the possibility of capturing an instant photograph. Under the rapidly changing economic and business conditions characteristic of transition economies, such instant photographs often have a greater resolution than prolonged observational studies.
After
selecting the survey as the main form of data collection, the second question
was the choice of relevant respondents. It has been emphasized by most scholars
that while top management can serve an important function in the decision to
adopt technical innovations, the importance of top management involvement and
visible support for the implementation of management innovations is of greater
magnitude. Therefore, we decided to consider the CEOs of Russian enterprises[1] as the
persons in charge of the implementation of most of the organizational changes
in their companies. In addition, since management innovations can be influenced
by the adopters subjective interpretation (see Alange and Jacobsson, 1998),
the CEOs perception of the effects of particular management innovations may
present more valuable and relevant information about innovative processes than
any factual data.
The
third challenge usually related with the use of surveys is the necessary
restriction of the survey to a necessary limited number of items. In studying
transition economy management innovations, there is the additional risk of
overlooking important areas of change in enterprise management. We overcame
this difficulty by using the following two methods. First, we managed to
collect 30 reports written by senior executives about the recent changes in
their companies. Such reports became an invaluable source of information about
the particular new management methods and techniques being tested in various
Russian companies. Second, we carried out a series of pilot surveys (three
pilot surveys including 210 CEOs) to refine the surveys questions and
determine its scale.
2.2 The sample
In the present
paper, we address the outlined issues using the results of a large-scale survey
of Russian CEOs. In October-December
2000, we conducted a survey that included 1000 CEOs from various companies. The
response rate was 73% (732 questionnaires were collected). The administration
of the survey used the network of an influential governmental agency which has
local branches in each of
Around 13% of the companies in the sample are small with less than 100 employees. Twenty-six percent of the companies have between 100 and 500 employees. The remaining 61% of the companies in the sample have more than 500 employees. Our sample roughly corresponds to the overall structure of the Russias large industrial enterprises with 26% of the surveyed CEOs managing machine-building companies, 14% working in food-processing, 11% managing oil and gas production, 10% active in electronics, 9% working in textiles, 7% involved in the chemical industry and finally 6% active in metallurgy. Around 87% of the surveyed companies were established before 1991. Only 9.3% of the surveyed companies are start-ups and 1.5% are joint ventures.
The
questionnaire consisted of several sections addressing the goals of the study[3].
To map the overall assessment of the company situation for the subsequent
comparison between companies at various levels of export activities, two
questions were used. First, CEOs were asked to assess the economic situation of
their firm on a five-point scale (ranging from bad to excellent), and to
compare the present situation with the situation two years ago (again on a
five-point scale ranged from much deteriorated to much improved).
Second,
we asked CEOs to report on management innovations that had taken place in their
companies to see how export objectives were translated into real actions. CEOs
were asked to indicate the magnitude of changes in financial management,
marketing management, human resource management and organizational design. An
opportunity to add to the list was offered to the respondents. Here we used the
following three-point scale: 1- no changes, 2 minor changes, 3 major
changes. In addition, we requested ratings, again on a three-point scale, for
eight management tools commonly used in Russian companies, including ISO
standards, Internet marketing research, etc.
Lastly, we asked CEOs to express their attitudes about the applicability of Western methods in six areas of enterprise management on a five-point scale (ranged from not applicable at all to completely applicable).
3.1 The level of export activities
First, we determined the surveyed companies export sales during the past three years (see Table 1).
Table 1. The share of exports in total sales (percentage of companies)
Share of exports in total sales
|
1998 |
1999 |
2000 |
Less than 5 percent |
49.4 |
47.7 |
47.3 |
5 20 percent |
11.6 |
12.8 |
14.7 |
21 50 percent |
4.9 |
6.0 |
4.9 |
51 80 percent |
4.2 |
3.7 |
4.6 |
More than 80 percent |
3.1 |
4.1 |
4.4 |
No answer |
26.8 |
25.7 |
24.1 |
Our results
show that Russian exporters are wary of revealing business details. About a
quarter of the surveyed CEOs refused to provide answers to this question, while
for other questions, the non-response rate was only 1-3%. We may conclude that
the subsequent analysis will consider only so-called white exports, exports
with proper custom clearance and tax procedures.
Nevertheless,
the data suggests that the number of Russian industrial companies that actively
export has only slightly increased over the past three years. In 1998, about
24% of companies had exports that comprised more than 5% of their total sales,
and in 2000, 26.6% of companies had exports comprising more than 5% of sales.
Besides the
number of exporters, we determined the proportion of exports in the main
industries (see Table 2).
Table 2. Export intensity (industry
analysis)
|
Share of exports in
total sales (percent) |
|||||
|
|
Less that
5 |
5-20 |
20-50 |
50-80 |
More than
80 |
Industry |
Minerals |
43 |
21 |
18 |
8 |
8 |
Oil and gas |
61 |
17 |
6 |
13 |
2 |
|
Timber |
54 |
22 |
3 |
6 |
13 |
|
Chemicals |
59 |
33 |
2 |
2 |
2 |
|
Metals |
23 |
33 |
20 |
13 |
10 |
|
Machine-buildings |
58 |
22 |
6 |
7 |
6 |
|
Electronics |
64 |
24 |
3 |
3 |
5 |
|
Food |
76 |
10 |
3 |
3 |
7 |
|
Textiles |
63 |
13 |
13 |
4 |
6 |
|
Construction |
100 |
|
|
|
|
A high proportion of exporters to all companies in the industry indicates the possible presence of export-enabled knowledge acquisition within each line of industry. We may see that in oil and gas, metals, timber and textiles the number of active exporters (with exports accounting for more than 20% of sales) exceeds 15% of the surveyed companies. This means that industry-specific knowledge transfers to other industries only along the value chains in supplier-user relationships with export-oriented companies.
3.2
Economic performance of exporters versus non-exporters
To receive a clear picture of the particular strengths and weaknesses of Russian exporters, we divided all companies into five groups according to the percentage of their exports to their total sales. Group 1 contained companies with less than 5% of sales accounted for by exports, Group 2 consisted of companies with exports totaling 5 to 20 % of sales, Group 3 included companies with exports making up 20 to 50% of sales and Group 4 included companies with exports representing 50 to 80% of sales. Finally, Group 5 was comprised of total exporters, companies with exports accounting for more than 80% of their sales. The subsequent analysis will be based on a comparison between these groups using the ONEWAY ANOVA statistical technique.
First,
we compared the perceived company performance for a range of companies with
different levels of export activity (see Tables 3-4).
Table 3. Perceived current economic situation of the companies as assessed by
CEOs
Current economic
situation |
Group 1 |
Group 2 |
Group 3 |
Group 4 |
Group 5 |
Bad |
21.4 |
9.7 |
2.9 |
12.1 |
0.0 |
Satisfactory |
64.4 |
76.7 |
80.0 |
69.7 |
62.5 |
Good |
14.2 |
13.6 |
17.1 |
13.2 |
37.5 |
Table
4. Perceived performance dynamics in 1999-2000 as assessed by CEOs
Economic position of
the firm as compared with 1998 is |
Group 1 |
Group 2 |
Group 3 |
Group 4 |
Group 5 |
Much worse |
7.1 |
4.8 |
0.0 |
3.0 |
0.0 |
Somewhat worse |
10.7 |
4.8 |
5.7 |
3.0 |
12.5 |
No change |
10.4 |
9.6 |
8.6 |
9.1 |
12.5 |
Somewhat better |
55.2 |
52.9 |
57.1 |
48.5 |
40.6 |
Much better |
16.6 |
27.9 |
28.6 |
36.4 |
34.4 |
At first glance, a concentration in export sales seems to be a ticket to heaven for Russian companies. Total exporters differ significantly from all other groups as can be seen by their positive assessment of the current situation. Total openness towards foreign markets, however, does not automatically guarantee stable performance. Despite the generally positive conditions for most Russian exports, around 12% of total exporters feel that their situation is somehow worse when compared to 1998.
3.4
Managerial innovations realized by exporters versus non-exporters
First, we
tried to establish the extent to which companies in different groups have
adopted new management methods and techniques (see Table 5).
Table 5. Introduction of particular
management tools (percentage of companies in each group)
Tool |
Group
|
Not introduced |
Introduced with
minimal effects |
Introduced with
significant positive effects |
ISO 9000-140000 |
Group 1 |
59.7 |
24.3 |
16.0 |
Group 2 |
41.8 |
33.7 |
24.5 |
|
Group 3 |
46.9 |
18.8 |
34.4 |
|
Group 4 |
33.3 |
18.2 |
48.5 |
|
Group 5 |
30.0 |
36.7 |
33.3 |
|
Computer programs for business planning |
Group 1 |
51.3 |
35.2 |
13.4 |
Group 2 |
38.8 |
37.9 |
23.3 |
|
Group 3 |
35.3 |
35.3 |
29.4 |
|
Group 4 |
31.3 |
40.6 |
28.1 |
|
Group 5 |
25.0 |
37.5 |
37.5 |
|
CAD/CAM |
Group 1 |
49.7 |
30.9 |
19.4 |
Group 2 |
37.9 |
33.0 |
29.1 |
|
Group 3 |
40.6 |
25.0 |
34.4 |
|
Group 4 |
25.8 |
32.3 |
41.9 |
|
Group 5 |
41.9 |
19.4 |
38.7 |
|
Computerized systems of managerial accounting |
Group 1 |
39.0 |
39.9 |
21.1 |
Group 2 |
25.5 |
46.2 |
28.3 |
|
Group 3 |
32.4 |
50.0 |
17.6 |
|
Group 4 |
18.2 |
42.4 |
39.4 |
|
Group 5 |
12.9 |
45.2 |
41.9 |
|
Marketing analysis using Internet resources |
Group 1 |
55.6 |
30.0 |
14.4 |
Group 2 |
31.7 |
51.0 |
17.3 |
|
Group 3 |
44.1 |
41.2 |
14.7 |
|
Group 4 |
43.8 |
34.4 |
21.9 |
|
Group 5 |
48.3 |
31.0 |
20.7 |
|
Computerized systems of personnel testing |
Group 1 |
83.0 |
13.1 |
3.9 |
Group 2 |
74.0 |
18.3 |
7.7 |
|
Group 3 |
74.3 |
25.7 |
0.0 |
|
Group 4 |
68.8 |
25.0 |
6.3 |
|
Group 5 |
67.7 |
25.8 |
6.5 |
As was hypothesized, active exporters (Groups
4 and 5) are eager to implement all the identified forms of new
management techniques. Companies in Group 4 (with the exports accounting
for 50 to 80% of total sales) put special emphasis on new methods of product
design and manufacturing. Almost 50% of companies in Group 4 see the
implementation of ISO standards as the most fruitful element of the existing
management techniques. Companies in Group
4 also appreciate the introduction of CAD/CAM techniques and are the
most ardent users of the Internet for marketing research.
By contrast, companies in Group 5 (with the exports
totaling more than 80% of total sales) are more preoccupied with managing the
cash inflows resulting from export operations. Companies in Group
5 place special emphasis on mastering financial planning (more than 80%
of companies) and managerial accounting systems (almost 90%).
As active exporters proved to be at the forefront of implementation of advanced management techniques, we decided to check whether such methods lead to changes in the organization of Russian companies. We may speculate that the implementation of advanced management methods that center on the computerization of particular management processes may eventually require the search for new personnel or changes in performance requirements and the performance assessment of existing personnel. We tested this hypothesis using the CEOs responses to questions about the intensity of changes in human resource practices in their companies (see Table 6).
Table 6. Comparison of intensity of changes in various aspects of human resource management (percentage of companies in each group)
Type of innovation |
Group |
Did not introduce |
Introduced |
|
To some extent |
To a great extent |
|||
New forms of recruitment and personnel selection |
Group 1 |
56.3 |
32.8 |
10.9 |
Group 2 |
45.3 |
33.0 |
21.7 |
|
Group 3 |
34.3 |
54.3 |
11.4 |
|
Group 4 |
18.2 |
48.5 |
33.3 |
|
Group 5 |
29.0 |
48.4 |
22.6 |
|
New methods of performance appraisal |
Group 1 |
50.0 |
36.2 |
13.8 |
Group 2 |
36.1 |
42.9 |
21.0 |
|
Group 3 |
22.8 |
57.1 |
20.0 |
|
Group 4 |
24.3 |
51.5 |
24.2 |
|
Group 5 |
20.0 |
43.3 |
36.7 |
|
New wage schemes |
Group 1 |
36.8 |
40.0 |
23.2 |
Group 2 |
22.6 |
45.3 |
32.1 |
|
Group 3 |
14.3 |
57.1 |
28.6 |
|
Group 4 |
12.1 |
60.6 |
27.3 |
|
Group 5 |
25.8 |
35.5 |
38.7 |
The data
suggests that in the implementation of new forms of recruitment and performance
appraisal, active exporters certainly exceed their local-oriented colleagues.
However, in administration of salary payments, there is no such discrepancy
between exporters and non-exporters.
3.5
Exporters as trainers subjective prerequisites
Our data suggests that active exporters are powerful adopters of various advanced management methods. Exporters also proved to be in better financial shape that local-oriented companies, although this security does not come automatically. But it remains unclear to which extent there is a willingness among exporters to serve as trainers to their local colleagues. We have indicated that such willingness would start with an overall assessment of whether modern (presumably Western) management techniques are applicable to Russian business conditions.
We compared CEOs opinions on the overall applicability of Western methods in various areas of enterprise management (see Table 7) and found the outcome surprising.
Table
7. The perceived applicability of Western methods in various areas of
enterprise management (opinions of CEOs)
Area |
Group 1 |
Group 2 |
Group 3 |
Group 4 |
Group 5 |
Technology
management |
2,93 |
3,03 |
3,21 |
2,94 |
3,37 |
Quality
control |
2,73 |
2,91 |
3,30 |
2,84 |
3,23 |
Marketing |
2,67 |
2,78 |
3,03 |
2,79 |
2,96 |
Human
resource management |
2,39 |
2,43 |
2,50 |
2,55 |
2,72 |
Organizational
design |
2,53 |
2,54 |
2,63 |
2,63 |
2,73 |
Note: a scale used 1= completely inapplicable, 3= moderately applicable, 5 = completely applicable
Although the perceived applicability of technology and quality control management is proportional to percentage of exports that comprise total sales, it is not true for other areas of enterprise management. Human resource management and organizational design are the areas where, accordingly to most Russian CEOs, the chances of successful direct application of Western management techniques are low.
4.
Discussion
First, we should briefly repeat our main findings.
In oil and gas, metals, timber and textiles the proportion of active exporters (with exports accounting for more than 20% of sales) exceeds 15% of the surveyed companies. In other Russian industries the proportion of active exporters is much smaller.
The higher the percentage of exports in total sales, the better the CEOs assessed the current performance of their companies. However, the performance of Russian exporters is unstable.
In all the surveyed industries, active exporters demonstrated a broader use of modern management methods. CEOs of such companies are inclined to see increased performance from the use of advanced management techniques.
Companies with the exports accounting for 50 to 80% of total sales place special emphasis on mastering techniques for quality improvement and overall normalization of operations, including ISO, CAD/CAM, etc.
The active implementation of new management techniques is accompanied in export-active Russian companies by a limited modification of human resource practices, especially personnel selection and appraisal methods.
The high respect for Western methods in technology management and quality control coexists with widespread doubts about the applicability of Western methods in the soft aspects of enterprise management, namely, human resource management and organizational design.
At first glance, we may see a considerable discrepancy between the export- and local-oriented sectors of the Russian economy. The export-oriented companies are adopting the latest methods in production and operations management. The favorable financial performance of the majority of the surveyed exporters makes possible active recruitment policies that call for managers who can effectively apply the advanced techniques. In addition to the need for mastering new operation, accounting and marketing methods, there is a strong inclination by CEOs to implement new business methods. CEOs attitudes towards the effectiveness and efficiency of the new management methods have established a pattern of internal adoption and the willingness to disseminate the knowledge. Within the company, a CEOs enthusiasm for new management tools is often a prerequisite for its successful implementation. It has been found that subordinates generally study the behavior of their managers to determine what is really important; what the top manager does and visibly demonstrates, and not merely what he says, gets the most attention. In Russia, where a strong paternalistic tradition exists, young well-educated managers, often believed to be the main players in mastering advanced management methods, still emulate their bosses attitudes and leadership patterns (Gurkov and Maital, 2001).
In the intra-company networks, the transfer of knowledge concerning management innovations usually happens informally. In this respect, the inclination of a CEO towards new management tools and his acknowledgment of their performance gains serves as a pattern for the imitation of such a tool by the local business community. Even if CEOs are trying to hide their powerful competitive weapon, such management tools become especially valued by local competitors.
We may see an export-oriented CEOs opinion of a particular management tool as an indicator of its future use in Russia. For example, in our survey CEOs of export-oriented companies assessed the results of the implementation of ISO standards as highly positive (70% of CEOs in Group 4 who tested the methods found the effects to be positive). This assessment referred to their evaluation of 1999-2000 figures. The experts who studied the motivation of local companies to implement ISO standards in 2001 stressed the need to start to export or to serve the exporters as the main reason for implementation (Ovsianko, 2001). It seems that export-oriented companies have served as information brokers and role models for their local-oriented colleagues in the assimilation of ISO standards. We may also speculate that export-oriented companies have initiated the bandwagon effect regarding the adoption of ISO standards in Russia. A bandwagon, as described by Amrahamson and Rosenkopf (1993), is a diffusion process wherein adopters choose an innovation, not because of its technical benefits, but because of the sheer number of other companies that have already adopted the innovation. As more firms adopt innovations, pressure increases for other firms to adopt them as well. Bandwagons create self-reinforcing loops, because the bigger the bandwagon gets, the larger the number of organizations desiring to join the bandwagon.
We may observe similar patterns of acceptance with other management tools. Since computerized systems for managerial accounting were highly rated by export-oriented companies in 2000/2001, local companies frequently implemented them in 2001/2002. This trend, taking industry limitations into consideration, is also applicable to CAD/CAM techniques. At the same time, active exporters have not found Internet marketing research particularly effective and have found computer-assisted personnel testing to be totally inadequate (less than a quarter of users experienced any significant positive results by implementing such systems). Such methods are still unpopular in Russian companies.
Besides serving as testers of various management methods, active exporters may perform as barriers for other potential testers. We have seen that CEOs of export-oriented companies do not believe in the applicability of Western models in human resource management. Such subjective dismissals make these models unattractive for both internal implementations by company managers or for imitation by local-oriented colleagues (competitors).
5. Conclusions and Practical
Implications
Our
study suggests that we should not expect a second managerial revolution,[4]
even though such a revolution might result from the current extremely favorable
foreign trade position of Russia. Russian exporters, who are generally in good
financial shape, spend a significant amount of money and time adopting advanced
methods for operations management and quality control. In this they partly rely
on the expertise and assistance of their foreign partners. However eager to
adopt technical (operational) innovations, Russian CEOs are cautious in
changing the traditional financial and human resource management routines
currently in place. When CEOs are forced to do so, pressured by foreign
partners and (in some cases) by foreign owners, they consider such methods to
be inappropriate in general for Russias business and social environment. The
weaknesses of these methods prevent CEOs of export-oriented companies from
acting as information brokers and advocates of such methods within local
business networks.
In
general, we may conclude that in the foreseeable future organizational imitation
will play an important role in Russian business. The improving quality
standards of products and services and the growing accuracy in business
transactions will please the Western trading partners of Russian companies. As
long as foreign companies will able to inform Russian partners about the newest
production methods, without going deeply into the internal organizational of
their Russian partners, both sides may work well together. Active exporters
also may serve effectively as role models for local-oriented Russian companies
in adsorbing technological and operational innovations, sometimes even
initiating the bandwagon effect. However, the local traditions and routines of
human resource management will remain largely unaffected by Western methods.
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* This work was supported by
Research Support Scheme of the Open Society Institute, Research Grant 1562/2000.
An earlier version of the paper was presented at the International Congress Ten Years of Economic Transformation: Experiences and Future Challenges. 30-31 August 2001, Lappeenranta, Finland
[1] Generally, the title of General Director of a Russian company assumes a broader authority than that of a Chief Executive Officer in a Western company. Russian general directors usually also serve as the Chairmen of the Boards of Directors for their companies (see Nestor and Jesover, 2000).
[2] In addition to the usual methods, like the insertion of personal questions about age, length of service and the arrangement of the working week among various types of work, we also included, as an addition to the questionnaire, special self-diagnostics tools to assist CEOs to assess the status of innovation management in their company.
[3] The English version of the questionnaire is available from the Center for Organizational Studies: Kochnovsli prozed, 3, Moscow 125319, Russia; e-mail: gurkov@hse.ru
[4] The first managerial revolution in Russia was claimed by S.Puffer and associates to happen at the beginning of 1990s (see Puffer, 1992).