Innovations in technology and social sphere that go with the integration processes are characteristic of post-industrial economies. Integration, developing as interaction of the government, large-scale and small businesses, is aimed at the establishment of closer links to better utilize administrative and financial resources.
Interaction of the education and business sectors has a long history, based on training of workforce able to produce goods and services, satisfying the market demand. In many countries, it was the government that took responsibility for training and employment of university graduates in accordance with the market demand. Kazakhstani business tends to put the blame for imperfections in the current professional training on both the government and the consumers of education services, designing the model of crosssubsidization. The rent-oriented behavior of large-scale raw-materials businesses, developed in Kazakhstan after redistribution of public property, and the growing shadow economy seem to confirm the conclusion of the institutional trend that it is neither businesses nor economy in general that are the drivingforce of the economic and social development. The major development factors are diversity of the institutional environment, as well as high potential of the human, social and cultural capital. Joseph Alois Schumpeter considered people’s creativity to be the driving force (the cause) of the economic development, and innovative entrepreneurs were to introduce new ideas and realize them.
High international competitiveness of a country is based on effective innovative products, which are in high market demand. The economic growth of any country is due to the innovation development model, including rapid implementation of new production technologies, its generation of cutting-edge scientific knowledge, research and development. However, this model of the country’s development requires special focus on the training of new scientists and engineers, which is most costly and time-consuming. Modernization of the country’s economy with domestic knowhow requires much more investment into science. Only technology design and development requires funding exceeding 3% GDP annually for five years. In 2015, the total public funding of Kazakhstan science was only
- bln. tenge (0.15% GDP):
- grants – 16.8 bln. tenge;
- program-oriented funding – 12.5 bln. tenge;
- basic funding – 4.9 bln. tenge .
The new technology system gives absolutely new opportunities for production and consuming, which enhances effectiveness of resources management. The neoclassic economic theory proposes that the key factor of the modern scientific and technological breakthrough is making science the leading productive force. According to V.P. Goreglyad, now people realize that the innovation policy is only really promising when innovation dominates the economic system .
The object of development is the economic system or its part that is undergoing changes, its subject is the government, researchers, enterprises, investors, and financial market participants. There we could also add consumers as direct participants of the investment process. This article considers such subjects as the education and science sector, business (mainly, industry), and the government.
The education and science sector is the total of all kinds of scientific and educational activities throughout the country. The education and science as a unity are singled out, as they are closely interdependent and cannot exist without each other. Education trains highly qualified workforce for science, whereas science provides education with Masters and PhDs. Thus, science and education provide for each other. Many research workers and educators have both academic degrees and academic ranks, as their activities are in the both spheres. Many universities have such research departments as laboratories and research institutes; there are also some departments, which provide both education and research (Master Degree Programs); university staff and students do research. Modern higher education institutions integrate education and science into a uniform system, however, this is only possible if they are closely interrelated and interconnected.
Business is an economic activity of the subject in the market economy, targeted at making profit by producing and selling products, work, and services. Both physical bodies and legal entities can be subjects of business. Businessmen are interested not only in free competition, but also in agreement upon certain aspects of their behavior in the market. The article studies business in the industrial sector, as here innovation activity – new technologies – enhances obtaining the top position in a certain market segment. We do not study insurance, consulting and tourism business, as there innovation is not connected with new industrial technologies.
In countries with mature economy, the state’s economic policy is mainly in the interest of private business. An important function of the state is the establishment of the legal framework of the economic activity, development of laws and regulations to regulate all economic processes and activities of some of its subjects. This enables the legislative and executive bodies, on behalf of the state, to define a set of “norms of behavior” in the economy.
In modern world, the state is not only a coordinator and monitor, but an entrepreneur who acts in the public sector of economy.
The government funds different social programs, targeted at providing the population with access to education. Its innovation policy also supports development of fundamental science. The effectiveness of the abovementioned subjects is achieved by provision of the institutional, motivating, and organizational basis developed with consideration of economic, political and social interests of the participants involved.
The innovation environment is a development factor for practically all economy sectors, including those that are constituents of the education sector. Thus, a priority of the national innovation policy is development and maintenance of the innovation environment. It should be noted, though, that innovation environment does not only characterize the total of different conditions, necessary for the innovation activities, but also the subjects who are to realize the innovation potential of a country .
There exist different definitions of the notion “integration”, characterizing interrelations of the subjects. Many researchers agree that integration interrelations are positive if the “cooperation +competition” principle is observed. To reduce fallacies during transactions, a set of stimuli is used to provide for this principle.
As a term, “integration” is not explained in a uniform way. The majority of modern reference books on economics define “integration as unification of economic subjects, intensification of their interactions, developing links.
Integration is defined as combining efforts by a number of organizations in order to achieve a common strategic goal, improve competiveness and performance in the current economy [4, pp. 32-39].
Integration is a process, which, depending upon the integration level, results in the establishment of interrelated or integral unities from independently working organizations, the activities of which have a common target. Due to unification of their potential and resources, the synergy effect takes place, enhancing the effectiveness of the integration unity. Big integrated unities are the skeleton of a national and world economy in general.
The Triple Helix Concept assumes it that the government becomes an equal partner, and the subjects are linked horizontally which corresponds to the horizontal integration type. The concept is quite unlike the National Innovation System model where firms dominate (B.А. Lundvall, R. Nelson)and the Triangle model, where the government is the main subject (G. Sabato) .
The Triple Helix Concept states it that institution responsible for generation of new knowledge dominate. It is mainly due to the trends in the scientific sector development (interdisciplinary approach, synergy of research schools). The Triple Helix Concept is a framework, more adjusted to the current economy trends as “there appeared a necessity to enhance links between the three subjects of development (government, business, and science); communication networks are being developed, which means change of the functions the three subjects in the innovation development .
All subjects of integration interactions acts out of different motives for business administration, which depends on the form of proprietorship, principles and mechanisms of management. Thus, methods of stimulating their activity in innovation development and integration interactions can be specific for each subject.
In works on economy, the concepts and structures of motivation mechanism are given in models (i.e. A. Maslow, K. Alderfer, D. Mackelland, F. Herzberg), on the basis of which different motivation classifications are developed. There are theories based on the assumption that not every need motivates the person. It is only motivating if it results in content and is connected with the work done (need in success, acknowledgement, career development).
A “drive” for innovation is in the development of needs and motives which stimulate a manager’s/employee’s activity aimed at the design and development of new production technologies, developments, etc. to effectively manage and coordinate, the government needs to consider interests of its participants and ways of their stimulation. The vital importance of coordinating interests of economy subjects is due to the threat of wasting budget funding spent on the training of those specialists who are not in demand at the labor market. And business is at risk not to get highly qualified workforce with the required competencies. This can only be prevented if there is active motivation fostering investment in new technologies, demand for young competent specialists [7, pp. 109-129].
N.A. Sudakova notes that fundamental science and business have common interests only in 4%. Companies are interested in involving university scientists of high academic repute, and these academicians should be focused on the solution of problems of this or that business. Companies are not stimulated enough to invest in academic research as the results are obscure and profit cannot be expected in the short term. Besides, the results of such research become publicly known, which makes it difficult to control their use by other market participants [8, pp. 319-321].
Motivation of researchers differs much from that of people working in the industrial sector. Two major forms of motivating researchers are singled out, based upon academic results and upon the academic status. The former presupposes the number of articles, monographs, awards, medals, grants, frequency of references to the authors. The academic status is assessed with consideration of academic degree and rank, membership in academic associations, working position. External motives of the researcher include the need to be acknowledged in the scientific community, to establish his/her authorship for an invention, to improve his/her competence. Internal motives are indispensable for effective innovative research. In the Kazakhstan education and science sector, the ratio of internal and external motives is distorted. As the staff in research institutions are underpaid, material incentive is the priority.
According to the motivation type, R. Yadov classifies research workers into classical scientists who are really enthusiastic, and for whom cognition is self-realization; competent professional researchers who are practical-minded and working for sake of science, they prosper in life; a scientific community of ambitious, pushing and pragmatic scientists whose target is to get high repute in official science, so they often become “managers in science” [9, pp. 29-38.].
The dominating principle of motivating the research worker is that salary should be dependent on the effectiveness of the research. Lack of such correlation reduces realization of professional potential and does not improve the prestige of research work in Kazakhstan.
Functioning of the education and science sector in the forming innovation system
The Kazakhstan concept of the education and science sector development is designed in government departments and agencies, which does not provide for the thorough understanding how the education system is functioning and reduces chances to get funding from additional, off-budget sources. The strategy for education and science sector development should be designed by means of cooperation of the scientific and teaching community with the political and business community.
Growth of the number of high technology industries is due to the increase of high quality human capital, which is directly dependent on the system of education programs and technologies implemented in higher education.
On the education system, the modern society places the following responsibilities:
- to improve the quality of higher education in order to obtain scientific and technical personnel with up-to-date knowledge and research experience;
- to attract and keep talented young researchers in education and science;
- to contribute to the effectiveness of spending budgetary funds, human, information, and material resources both in research and training of researchers;
- to foster links with the business sector and transfer of technologies into the production sector.
To realize the above-mentioned, higher education institutions must be able to foresee development trends, meet the demands of the community, an individual, and potential employers.
The “new” role of universities is reflected in the concept of reforming the education system. It comprises the following elements: training of highly-qualified personnel; scientific and technical developments; development of its own infrastructure, enhancing innovation; generation of intellectual property objects, which can turn into commercial objects; development of innovation infrastructure with numerous centers, incubators and other forms of interaction of business and science, establishment of small high-tech enterprises, actively cooperating with universities; training personnel for innovation activity, development of innovation culture in the business environment.
Now, state education standards have been introduced; universities of absolutely new types – national and research have been founded; transition to the trilingual training in higher education institutions is under way; a new salary system for public sector employees has been introduced; at the universities technology parks, business incubators and other forms of innovation activity are being established.
At present universities with the new status have got some experience. National research universities is a form of involving the community into innovation activity. Such universities have many advantages. First, additional funding to establish innovation centers, business-incubators, research laboratories, enlargement of the resource base. Second, the increase of the wages fund provides directed stimulation the research activity of the staff. Third, university is a base of research and development of new production technologies that makes it more attractive for the production sector.
An important condition for attracting young researchers to develop Kazakhstan education and science sector is acknowledgement of necessity of domestic scientific developments by the business. There is a need in developing both the higher education system and the research institutes, in the effective infrastructure of innovation developments transfer into the production sector, in the defense of the right of authorship and in the opportunity to get profit from the research activity. However, the infrastructure is not enough developed to minimize the problems occurring when new knowledge is to be launched into the market. Low interest of Kazakhstan market to scientific and technical developments makes commercialization of developments and selling innovation products difficult. The given situation does not stimulate production of new products as in the domestic market there is practically no demand, and interna-
tional market requires even more expenses. For effective integration, it is not enough to reform the education system in accordance with the demands of development of the innovation environment. Business structures should also be stimulated to do innovation activity.
The essence and role of motivation mechanisms of private entrepreneurship in the development of innovation activity
One of the obstacles in development of the effective innovation system in Kazakhstan is little investment of the businesses into the design of new goods, research and development. This stage of development of Kazakhstan economy faces reduction of interest private enterprises have in investment into innovation and science. Thus, involvement of private enterprises in development of science is a most task. At present, a share of private enterprises in funding research does not exceed 12%, whereas in the majority of mature economies (the USA, Germany, France, etc.) it is over 60% .
Another obstacle for investment in innovation is other alternative ways to gain profit, less risky and with more guaranteed profit. As most proprietors are interested in short-term return of investment and production management is not quite linked with revenue, participants of integration interactions have high transaction expenses.
Private enterprises can be stimulated to do innovation in two “parallel” ways: one is favorable organization structure and production management, the other is provision of production with human resources.
The first way of enhancing the innovation activity of businesses comprises tax concessions, a possibility to attract government to co-funding production of new products, to participate in development of new technologies with the academic community, use of Kazakhstan developments, and effective legislative basis for business activity. The concept of the current, short-term and long-term interaction with universities, effective laws on protection of rights on intangible assets as well as patent law is also vital. The second set of motivating mechanisms implies provision the production sector with highly-qualified workforce (the task for the government and the teaching community), involvement research workers in the achievement of production targets.
Low activity of Kazakhstan business sector in investing into research and development can be explained by poor cooperation of government and private enterprises in realization of innovation projects; insufficient demand for innovation in Kazakhstani economy; low profit from use of technology innovations, and its ineffective structure (great share of equipment in Kazakhstan import);the imitative character of Kazakhstan innovation system, as it tends to borrow new technologies, and does not create its own breakthrough knowledge.
The business environment and the market conditions set to Kazakhstani companies challenging tasks:
- To reduce high expenses a business has if it needs to get public funding as its instruments are not effective enough. The task can be achieved by forming a new institutional basis for public funding of business.
- To design a Kazakhstan system of innovation activity management with consideration of the world trends, with new technologies, i.e. to develop a business management system, using new technologies;
- To act under new conditions, with consideration of the existing red tape and new obstacles – lack of mature innovation market and of continuous, regular links with government;
- To consider peculiarities of new forms of doing innovation activity, inter alia, including transition to the transparent, open model. In other words, it is necessary to find new forms of active cooperation of business with education and research institutions in order to participate in joint projects on developing new technologies, to provide distribution of rights on intangible assets and intellectual products, which requires institutional, legal base.
Development of the innovation environment requires a segment of small enterprises, cooperative efforts of the education and science system, business and government to provide highly-qualified workforce as well as institutional and infrastructure support. It demonstrates the principle of interaction of the education and science system and business as a base for the development of the country’s innovation system. Besides, small and largescale business should not be opposed to each other.
The problems in business small undertakers face are insufficient resource base (both financial and technical), high taxes, red tape. It is possible to stimulate both small and largescale business only by developing effective institutes and institutional infrastructure which only government can do. Only the favorable institutional infrastructure will enable subjects of innovation activity to improve competition and motivate business structures get involved in innovation activity.
Thus, the analysis of the ways the major subjects of innovation interaction function proved it that they have great differences in the motives, principles and targets of development. Motivation of activity remains the same in any circumstances, however, a system of stimuli can undergo changes. To enhance innovation activity of business, it is necessary not to let businesses get excess profit (e.g., from resource rent), to focus on forming the system of defense of intellectual property rights, to reduce red tape and destroy corruption in economy. Improvement of the system of stimuli will contribute to the solution of some most pressing problems of business, e.g. reduction of transaction expenses and increase of the number of long-term investment projects.
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