Russia should increase protection of intellectual property, strengthen competition and invest more in research and development to boost innovation and entrepreneurship across its economy, according to a new OECD report.

OECD Review of Innovation Policy: Russian Federation says that Russia should build on its strong base of public research institutes in science and engineering and the recent high-level political commitment to innovation which has helped target research and development (R&D) resources more effectively.

Joining the World Trade Organization would enable Russia to take advantage of fast-growing global markets in engineering services, such as aerospace, software, and information and communication technologies.

But, the report says, Russia’s innovation system continues to be undermined by several factors, including very low levels of R&D and innovation activities in firms, a lack of competition and high levels of corruption, and weak infrastructures and regulations. Efforts to reform are also often frustrated by active resistance from established groups or institutional inertia.

Boosting public spending on research and development would help: Russia’s spending on research and development as a percentage of GDP stood at only 1.03% in 2008, down from a peak of 1.28% in 2003. This compares to an OECD average of 2.33%.

However, much of this funding is still allocated without adequate accountability or performance goals. Improving priorities for innovation funding and targeting of resources would increase value for money and enable more firms to benefit from investment in public R&D.

Current innovation policy is also too focused on high technology, which means it neglects large parts of the Russian economy, according to the report. More emphasis should be placed on low-tech and service industries.

The code of intellectual property rights, which entered into force on 1 January 2008, is in line with legislation in most developed countries but problems of enforcement remain. These include a lack of transparency in court decisions, especially concerning copyright.

Stronger market competition would encourage more firms to invest in innovation, particularly small and medium-sized companies. Further reforms of the public administration, cutting red tape and improving financial sector regulations would also foster the creation of start-ups.

The government should improve standards of transparency and disclosure in state-owned enterprises (SOEs), which often dominate their industry sector in Russia. Part-privatising SOEs would provide them with greater access to foreign know-how and accelerate the modernisation agenda.