Every country has small and medium-sized fast-growing companies that account for a significant share of economic growth. There are such companies in Russia, and many of them, but the state still weakly supports them

Growth driver

The Russian leadership has recently been very interested in small and medium-sized businesses. Vladimir Putin noted on the April “straight line” that “the contribution of small and medium-sized businesses to the country’s total GDP is significantly lower than in developed economies” and that this needs to be corrected.

Now it is planned to introduce tax holidays for two years for beginning entrepreneurs. However, this is clearly not enough to stimulate the growth of small businesses in the country. And this growth can be achieved not only through the emergence of new small businesses, but also through faster growth in sales of existing ones. How to do it?

As our research shows, small and medium-sized enterprises in the manufacturing sector, with high growth potential, can become one of the main drivers of our economy and revitalize it. In many foreign countries, for economic policy purposes, a group of fast-growing companies is specifically identified, the average revenue growth rate of which over three years exceeds 20%.

In Finland, the state provides free consultations to such companies; in Holland, it opens free educational programs for them on growth management. Denmark has a special program (The Gazelle Growth Program), under which the state helps promising fast-growing companies enter foreign markets - both with advice and financially. In Germany, the government provides grants to fast-growing companies for their investment projects.

Revenue growth for gazelles in developed countries can account for more than 50% of GDP growth. At the same time, in OECD countries their share in the total number of firms is less than 2%. However, in developing countries, including Russia, their figure may be more than 8% due to the unsatisfied demand of the population. The markets of the BRIC countries have grown rapidly in recent years, and there are more gazelles in them. And in conditions of a general decline in business activity, this segment of small and medium-sized businesses is especially important for economic development.

Large construction site

In 2014, the RANEPA Research Laboratory for Corporate Strategies and Firm Behavior conducted a large-scale analysis of fast-growing companies in Russia. We studied the development features of more than 13 thousand small and medium-sized businesses. The largest number of fast-growing companies were found in the manufacturing industry (3,181), construction (3,175) and real estate (2,066).

In the manufacturing industry, they are mainly engaged in the production of concrete, gypsum and cement products, plastic products, and building metal structures. In the construction industry - the actual construction of buildings and structures, installation of engineering equipment, preparation of sites for construction. In the field of real estate transactions, gazelles are engaged in both purchase and sale and mediation, as well as engineering and technological design.

As you can see, Russian gazelles were mainly associated with the construction sector, which in 2010–2012 was experiencing a phase of active growth. And 36% of such companies are concentrated in Moscow, the Moscow region and St. Petersburg.

Where are gazelles found ?

In the study, we also examined the reasons for the rapid growth of revenue and high labor productivity of participants in the rating of Russian high-tech companies “TechUspech-2013”. It was found, for example, that a company that invested 1% more in training one employee would have 0.09% higher productivity. By increasing the cost of technological innovation or the share of new products in revenue by 1%, the company receives a 0.1% increase in labor productivity. An increase in IT costs by 1% results in a difference in labor productivity of 0.04%.

In contrast, a firm whose equipment is on average 1% older than other firms' equipment has a 0.4% lower growth rate. At the same time, companies that invested 1% more in R&D per employee had a growth rate of 0.08% higher after two years.

In short, spending on employee education, R&D and innovation produces tangible positive results - increased revenue and increased productivity. The location also helps such companies: proximity to large agglomerations, ports, border areas, high research activity in the region (share of employees in R&D and patent activity). The most profitable territories for the development of gazelles are Moscow, Moscow region, St. Petersburg, Rostov region, Krasnodar region, Nizhny Novgorod region, Novosibirsk region, Voronezh region and Tatarstan.

A study of the leaders in the TechUspek rating shows, however, that innovations usually “work” not on their own, but together with other factors, such as the professionalism and competence of specialists, effective business organization, participation in partner networks, free access to financing, etc. d. This leads to clear recipes for the companies themselves: it is necessary to improve the skills of employees, invest in new equipment and technologies, and increase the share of new products in revenue.

Vacations alone are not enough

As for the state, as foreign experience shows, one of the main incentives for updating equipment and investing in new developments is tax policy. In many developed countries, expenses for R&D and equipment modernization significantly reduce the income tax base for small and medium-sized businesses.

Such mechanisms need to be more actively used in Russia, not limited to tax holidays for everyone. In particular, introduce a double deduction of R&D expenses when calculating corporate income tax. This is important, given that we should not expect rapid economic growth in the coming years, which means that there will be no budgetary funds to support small and medium-sized businesses. “Gazelles” will also be helped by targeted consultations, training, and assistance in entering foreign markets. This can be done on the basis of business incubators already operating in Russia.

About the authors

Vera Barinova Head of Laboratory, RANEPA

Alla Sorokina Senior Researcher, RANEPA The point of view of the authors whose articles are published in the “Opinions” section may not coincide with the opinion of the editors.

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