Skolkovo, Russian Silicon Valley vs. Corruption: how innovation can thrive?

Skolkovo was built with aspiration to nurture domestic breakthrough talent so much needed for the failing economy. In spite of the flamboyant federal support, empowered security services and corrupted government officials push innovation in the opposite direction.

“Nowadays we export oil, gas, and, unfortunately, brains” said Russian premier minister Dmitry Medvedev in 2017. [1] Despite being home of 29 Noble Prize winners and the long list of mathematical and physics geniuses, Russia celebrates centenary of its brain drain disease, that started with Bolsheviks’ Revolution in 1918 and according to the recent research by Russian Presidential Academy of National Economy and Public Administration accelerated after 2014 [2]. Unsurprisingly, Russian Government is disappointed with this trend, as continued innovation is one of the key drivers of the economy growth. Recent space missions’ fiascos are few of the warning signs of the depth and severity of talent supply conundrum.

One of the main initiatives to foster innovation that Russian Government undertook was to create Skolkovo Technopark, “the biggest of its kind in Europe and marvel of engineering”. [3] Located outside of Moscow, Skolkovo is innovation city by itself, home to 1000 startups and employs over 30,000 people. Funded by federal budget in 2010, Skolkovo landed partner agreements with leading tech and innovation organizations like IBM, Microsoft, Intel, Cisco as well as collaborated with MIT on setting up Skoltech, private institute of science and technology. [4]

Skolkovo supports innovations in multiple dimensions. Its 5 clusters (IT, BioMed, Energy, Space, Nuclear) are autonomous to set up their goals, directions, locate funding and potential partnerships, holds innovation competitions co-sponsored with international partners, awards grants to the aspiring scientists and entrepreneurs to prototype and test the most daring ideas.

However, Skolkovo cannot be separated from the realm of Russian political and societal crisis. Skolkovo is the product of Tandemocracy era, the period or Russian modernization and the “reset” of the U.S.-Russian relations led by Presidents Obama and Medvedev. The focus shifted with the resumed presidency of Putin in 2013.

Under Medvedev the government adopted special law for Skolkovo, that enabled beneficial tax and customs regime, as well as allocated lucrative shank of budget money for multiple tenders. According to Transparency International Russia deputy head Ivan Ninenko, “The Skolkovo setup is a very corruption-encouraging environment.” As the president and prime minister rotated back, the political climate changed as well. Previously favored officials fell out of grace with new leadership. “There is no fight against corruption in Russia, it is rather a fight against particular corrupt officials,’ he added [5]. Skolkovo faced multiple corruption probes, its offices were raided by the law enforcement officers, and managers were accused of corruption, embezzlement and fraudulent tenders.

Reputation damage was huge and demanded complete rebranding and change in business model. Before the main goal was to turn Skolkovo into global hub for innovation and to bring bright minds not only from within, but from outside of Russia. It was based on international partnerships and open innovation. After 2013 new vision for Skolkovo has been set to attract and sustain internal talent, “trying to build entrepreneurship on the foundation of Russia’s basic science achievements”. [6]

But how well did they manage to do so since? HKS student, who visited Skolkovo in 2016, spotted behind modern, almost westernized buildings the uniformed guards and claimed the innovation center to be “nearly-defunct”. [7] One particular recent example is astonishing. In 2017 the founder of “Tion” (Skolkovo resident) Dmitry Trubitsyn was charged with criminal conspiracy to produce counterfeit medical devices and jeopardizing the Russian healthcare.

Mr. Trubitsyn is aspiring physicist, who worked in Skolkovo as well as partnering Akademgorodok on inventing new air filters and climate controlling devices. His scientific interest was the new technology of purifying and disinfecting air using photocatalytic oxidation. He founded start-up Tion to produce high-tech air filters for hospitals using his inventions. The start-up grew steady to employ 250 people and by 2017 supplied the state hospitals with its devices.

The Tion Air technology, credit https://pro.tion.ru/en/med/

To prove the concept, Mr. Trubitsyn set up 10-meter long aerosol stand to experiment with technology. As patent was pending, during intensive trials and tests the scientists came to the conclusion that photocatalysis was not improving the purifying efficiency. In fact, it might have dangerous chemical by-products [8] and is less energy-efficient, and the filter invented by Mr. Trubitsyn and Tion is much better product without this technology. Tion filed the amendments to the patent, but the Russian Law Enforcement alleged that Mr. Trubitsyn built and sold air purifiers that are useless without photocatalysis. Increasingly empowered under Putin’s presidency security services accused Mr. Trubitsyn of innovating “too fast and too freely”. [10]

Can open innovation survive and flourish in the highly centralized economies that are prone to corruption? Is there successful example how innovation can go around bureaucracy and scrutiny of government officials?

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[1] RBC. (2017). Investment forum in Sochi, 2017. [online] Available at: https://www.rbc.ru/rbcfreenews/58b41aec9a7947ea101ed916 [Accessed 27 Feb. 2017].

[2] RBC. (2018). Accelerated brain drain in Russia. [online] Available at: https://www.rbc.ru/society/23/01/2018/5a673f129a794712579d7dbe [Accessed 23 Jan. 2018].

[3] Sk.ru. (2018). About Technopark – Skolkovo Community. [online] Available at: https://sk.ru/technopark/about/ [Accessed 12 Nov. 2018].

[4] Skoltech.mit.edu. (2018). MIT Skoltech Program. [online] Available at: https://skoltech.mit.edu/ [Accessed 12 Nov. 2018].

[5] Nechepurenko, I. (2013). Skolkovo Office Searched in Corruption Probe. [online] The Moscow Times. Available at: https://themoscowtimes.com/articles/skolkovo-office-searched-in-corruption-probe-23399 [Accessed 19 Apr. 2013].

[6] Mellow, C. (2015). Dodging Geopolitics, Russia’s Skolkovo Tech Center Evolves. [online] Institutional Investor. Available at: https://www.institutionalinvestor.com/article/b14z9y83k6mrnk/dodging-geopolitics-russias-skolkovo-tech-center-evolves [Accessed 13 Jul. 2015].

[7] Reynolds, J. (2016). Skolkovo: The Moscow Suburb’s Struggle to Survive – KENNEDY SCHOOL REVIEW. [online] KENNEDY SCHOOL REVIEW. Available at: http://ksr.hkspublications.org/2016/04/14/skolkovo-the-moscow-suburbs-struggle-to-survive/ [Accessed 14 Apr. 2016].

[8] ScienceDaily. (2015). Certain air filters using photocatalytic oxidation have dangerous by-product, study shows: Dangerous by-products released by a filter already in commercial use. [online] Available at: https://www.sciencedaily.com/releases/2015/07/150715130835.htm [Accessed 15 Jul. 2015].

[9] “Air Purification And Decontamination In Medical Facilities”. 2018. TION. https://pro.tion.ru/en/med/.

[10] Higgins, Andrew. 2017. “Russia Wants Innovation, But It’S Arresting Its Innovators”. Nytimes.Com. https://www.nytimes.com/2017/08/09/world/europe/vladimir-putin-russia-siberia.html.

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4 thoughts on “Skolkovo, Russian Silicon Valley vs. Corruption: how innovation can thrive?

  1. It’s not entirely clear to me how open innovation was applied successfully, or at all in this case. What is the goal of creating an open environment at Skolkovo and what is the main hypothesis around what open innovation will contribute. Are there any examples in other countries or economies where open innovation has worked well?

  2. If Skolkovo succeeded, many would be trying to copy this model of building a new startup city. What conditions do you think are must present to foster a startup city? What conditions do you think caused Skolkovo to fail? It seems that the brightest minds locked in a room is not the answer. How can help the next attempt at cities like Skolkovo succeed?

  3. This is a very interesting article. France was trying to develop a similar idea by attracting talents / promoting open innovation with mediocre success. Do you think Skolkovo concept could have been successful and if so, how would fix the situation? Is the corrupted government the only factor that prevented success?

  4. Great article – I think part of the challenge here is there was a perception that the products caused harm to individuals. Are there areas that might have less detrimental effects that could be used to pilot the governance model of Skolkovo, before trying to work across all of the described sectors?

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