Human capital and its place in the classification system of factors, which have an influence on innovation activity of the country

The strategic objectives of the modern Kazakhstan’s economy are the development of domestic high-tech production, development and exploration of new information technologies, that are meant to obtain competitive products and ensure the economic interests at the expense of preservation and development of industrial and technological potential of the republic.

Trends in the development of the world community demonstrates the growing impact of innovative activity on economic growth. In the world market the products of intellectual labor have more value when comparing with other areas of economic activity. Market requirements dictate the need to create conditions for wide usage of innovations and for strengthening innovation activity.

Kazakhstan has all the prerequisites for the transition to an innovative development path. First of all is that Kazakhstan has rich natural resources that provide most of the domestic demand for raw materials and energy; the presence of significant spare capacities to run high-tech industries; cheap labor  combined with its relatively high education level; sufficiently developed scientific and technical potential; the groundwork for a number of technological structures.

According to the results of the Global Competitiveness Index (GCI) in 2014 Kazakhstan took the 50th place among 144 countries, situated between Italy and Costa Rica. For your information:  GCI is formed of 114 indicators, of which 34 indicators are calculated based on the results of statistical data of international organizations, and others on a survey of business executives. 12 factors of competitiveness are defined on the basis of 114 indicators. And only in 2013 Kazakhstan started participating in the rating as a country whose economy is moving from the second stage, the stage of efficient development, to the third – the stage of innovation development [2].

According to Table 1 there was an improvement in the country’s position in the group of efficiency factors, in particular through improved performance of the efficiency of the market of goods and services, financial market development and market size. In the group of factors of innovative development the rating increase in the competitiveness of companies and slight decrease of innovative potential can be traced.

Table 1 – Components of the overall rating of Kazakhstan in 2013-2014

International business school INSEAD (France), in collaboration with Cornell University and the World Intellectual Property Organization, calculates the Global Innovation Index. The index is being calculated since 2007 and includes the most comprehensive set of indicators of innovative development. Total of 80 indicators are taken into account. In 2014, 143 countries were surveyed, producing  a  total  of  98.3%  of  the  global   gross domestic product.  According  to  the  survey,  it was found that the most innovative countries are Switzerland, UK and Sweden. Kazakhstan took 79th place, lifted up from 84 place by 5 positions, and being in an intermediate position between Tunisia and Guyana. For comparison, Estonia is 24th, Latvia 34th, Lithuania 39th, Moldova 43th, Russia 49th, Belarus 58th, Ukraine 63th, Armenia 65th, Georgia 74th place [3]. 

Table 2 ‒ Main indicators of innovative activity of the RK companies 

Experts of JSC «Institute of Economic Research» explain the Kazakhstan’s being behind a number of CIS countries and leading countries of the world by the fact that the national system of introduction and support of innovations is at the stage of formation.

According to Table 2, all indicators of innovative activity of the companies in the republic observed to increase multiple times. And here it takes into account all kinds of innovations in the    companies product, process, organization and During the period from 2009  to  2013  the  level of innovative activity of Kazakhstan companies increased by 2 times. This increase is the lowest among other indicators of innovative activity [4].

Innovativeactivityofcompaniesentirelydepends on the external factors affecting the  development of the country, on the  economic  situation inside the country and in the world, on the geopolitical situation and historical heritage of the country. In our opinion, the factors of innovative activity of the company act as the levers of innovative activity, that slow down or stimulate its growth, as well as determine the competitiveness of the company.

If  the  environment  of  an  economic   system is favorable to innovations,  they  depend entirely on internal local factors of innovation activity. Innovation activity is determined by two groups of factors: internal factors directed at enterprise-level management of innovation activity and external factors conducive to expansion of innovation activity’s scope.

Internal factors that govern an enterprise’s interaction with its economic and social environment are the following:

External sources of support for all stages of innovation process: from discovery and development of a novelty to its commercialization;

Communication with customers, business partners, investors, competitors, research organizations and universities;

Lobbying of interests in public institutional structures.

As practice shows, a detailed exploration of various aspects of the environment’s impact is  necessary since the environment acts as a supplier of economic resources indispensable for maintaining internal processes of the enterprise at a target level [1].

Internal factors represent key particular features of the enterprise that distinguish it from competition and determine its innovational capability:

• a motivated leadership;
• integration of technological, institutional and management innovations;
• high productivity;
• efficient personnel relations and successful involvement of employees in the innovation process;
• continuous institutional training;
• an efficient marketing system providing communication and feedback with end users;
• quality, infrastructure and institutional development management.

Internal factors may be, in turn, divided in two groups. The first group of factors determines the system of internal economic relations and ways of interaction with environmental factors. Among the factors that belong here are:

• ownership of capital equipment that determines the nature of economic interests of business entities, including management relations;
• institutional framework which determines just how mobile an economic system is in terms of management decision-making;
• size of enterprise, e. whether it belongs to the small, medium or large business category;
• industry affiliation that characterizes enterprise’s profile, its objective, market share and The second group consists of factors related to socalled internal resources of organization. They include:
• financial situation of the enterprise shedding light on its financial stability, dependence on external sources of innovation financing, solvency and borrowing ability;
• scientific and technological potential which characterizes organization’s capability to realize R&D activities;
• production capacity that determines enterprise’s manufacturing capabilities;
• talent pool showing the level of professional qualification of human

As it happens, post-Soviet countries share more or less similar factors which negatively influence innovation activity of enterprises.

For example, main factors that hinder innovation breakthroughs are:

1. Enterprises use morally obsolete equipment (mostly III technological wave). Low technological level is the most significant contributor to the national industry’s lagging behind European countries in terms of labor
2. High level of physical wear of equipment it discourages use of the potential of modern technologies, and production of goods with high added value, as well as slows down consolidation of export potential and cripples business competitiveness in foreign markets.
3. Shortage of own resources, high cost of innovations and unreasonably high interest rates on bank loans.
4. Frequently inefficient and inappropriate use of innovation funds, underdeveloped venture financing for innovation activity and lack of a mechanism for investment reinsurance.
5. Limited effective demand in domestic market for advanced technologies and innovations, low demand of real economy for  prospective  results of research and development activity, and a nonexistent market of innovation products.
6. Resistance to innovations both on the part of top management and rank-and-file employees, lack of qualified human resources for implementation of all stages of the innovation process.
7. Inadequate regulatory framework with regard to innovation activity, including a legally deficient mechanism of financial leasing and the unresolved issue of authorship in rationalization
8. Program-oriented and goal-oriented approach is predominantly used for innovation management which causes tensions between republican and local authorities and the enterprise and reduces companies’
9. Rigid institutional enterprise management structures (mostly linear-functional) and, accordingly, obsolete decision-making Many enterprises lack departments in charge of innovation activity.
10. Weak ties between scientific organizations, educational institutions, production facilities and innovation infrastructure units.
11. Modern mechanisms of commercialization and marketing of technological innovations have not found extensive use, and the market of innovation products is slowly developing.

It should be noted that the above is far from being an exhaustive list of «bottlenecks» which discourage development of innovation processes in industrial enterprises.

Analysis of existent approaches to the study of factors hampering innovation activity of enterprises enabled to develop a classification shown in Table 3. In this classification factors that negatively impact innovation activity of enterprises are divided in 7 groups.

We believe that the proposed classification may have both theoretical and applied relevance since it represents a body of knowledge about factors – hurdles for innovation development of a national economic system and contains a wealth of extremely condensed information about them. Its practical relevance stems from the fact that the classification makes  accessible a system of factors that hamstring innovation development of economic systems at all levels.

It is worth mentioning that at present attempts at classification of factors of activation of innovation activity are few and far between. Various researchers at different points have made independent attempts to systematize factors of innovation activity. However as of today no single systematic conception regarding the ensemble of factors is yet present.

Table 3 – Classification of factors hampering innovation activity of enterprises 

Note – developed by authors on the basis of research

Given system can also be applied on the factors, which positively affect the innovation activity. One of those factors and not the least of importance is human  capital.  Based  on  the  constructed unified classification, the human capital factor in the innovation activity of the organizations and the country as a whole can be determined in the following way (Table 4): 

Table 4 – Determination of the place for human capital according to 7 classification parameters 

Study of factors exerting the most influence on innovation activity has enabled us to enhance existing classifications. In our opinion, this classification is notable for its versatility and applicability to any regions regardless of their profile, size or territorial location. At the same time, such systematization of factors hampering innovation development may be used by businesses for development and implementation of corporate innovation strategies and programs. It may also be helpful at the republican and regional level for development of public innovation policy aimed at enhancement of innovation activity of business entities in various sectors of economy and establishment of a national innovation system in general.

According to the developed classification, the characteristic of human capital factor based on 7 parameters was determined, which proves the applicability of the proposed method to positive factors as well As a result, the «human capital» factor is classified as:

• primary according to importance;
• institutional and management according to functions;
• objective according to management impact;
• belongs to resources and human capital according to issue pools;
• continuous according to duration;
• general according to incidence;
• measurable according to measure of impact.

References 

1. Barancheev V, Мaslennikova N, Мishin Innovations management. – 2nd edition. – М.: Yurait, 2013. – 711 p.
2. The Global Competitiveness Report 2014–2015 (2015) // http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf
3. The Global Innovation Index 2014 The Human Factor in Innovation (2015) // http://www.wipo.int/edocs/pubdocs/en/economics/gii/gii_2014.pdf
4. Innovations. Informational society (2014). Statistical compilation // http://stat.gov.kz/getImg?id=ESTAT105446.