From the Plan to the Market and Back—The Organisational Transformation of the Russian Defence Industry

Abstract

The article examines the organisational transformation of the Russian defence industry during the period of privatisation and radical market reforms. The study is based on the results of an original large-scale longitudinal survey of the directors (CEOs) of the industry. We find that over a decade of transition, 1996–2006, Russian defence industry managers were able largely to preserve the production potential of their enterprises and make them capable of operating under market conditions. Coupled with the restoration of government orders and the 2020 rearmament programme, these newly acquired market skills have contributed to the impressive revival of the Russian defence industry in the Putin era.

Notes

1 ‘Chislo Oboronnykh Predpriyatii Mogut Sokratit’ Primerno Na Chetvert’’, Kommersant’’, 19 March 2013, available at: http://www.kommersant.ru/doc/2149638, accessed 6 October 2015.

2 See Cooper (1993, 2006), Fontanel et al. (1995), Gaddy (1996), Gonchar (2000), Perevalov (2000), Sanchez-Andres (2000, 2004), Davis (2002), Graham (2002), Galeotti (2003), Sokolov (2003, 2011), Rosefielde (2005), Vorobyov and Pozharov (2005), Isakova (2006), Kassianova (2008), Aliamov (2011), Oxenstierna and Westerlund (2013).

3 Paradoksy Rossiiskoi Demilitarizatsii (Moscow, Inter-regional Foundation of Information Technologies, 1998).

4 See: Gurkov (1998), Jones (1998), Linz and Krueger (1998), Bonnell and Gold (2002), Djankov and Murrell (2002), Schwartz (2004), Ahrend (2006), EBRD (2006, 2007, 2008, 2009, 2010), World Bank (2006a, 2006b, 2007, 2008, 2009), Guriev and Megginson (2007), Linz and Semykina (2008), Morrison (2008), Estrin et al. (2009).

5 For details of the survey, see the Appendix.

6 The survey questionnaire was developed by Ol’ga Kolennikova, Rozalina Ryvkina, Yuri Simagin, Vitalii Vitebsky, and the authors of this article.

7 To secure the cooperation of enterprise directors, the survey was conducted under the auspices of the All-Russian Association of Defence Enterprises (Liga sodeistviya oboronnym predpriyatiyam—ARADE), a major defence industry lobbying organisation. We wish to acknowledge the Russian Academy of Sciences as a co-sponsor of the study.

8 See Kanuk and Berenson (1975), Linsky (1975), Dillman (1978, 2000), Cooper and Yu (1983), Brennan and Charbonneau (2009).

9 Control of the ‘golden share’ allows the state to block any decision regardless of its nominal stake in the capital of the enterprise.

10 Actual bankruptcy proceedings were initiated in 2006 for 4.6% of defence firms (Aliamov 2011).

11 ‘Nearly Half of Russian Air-to-Air Missiles with IAF have Precision Problems, CAG Report’, The Indian Express, 16 July 2009, available at: https://indianexpress.com/article/news-archive/web/nearly-half-of-russian-airtoair-missiles-with-iaf-have-homing-ageing-problems-cag-report/, accessed 20 June 2018.

Additional information

Notes on contributors

Leonid Kosals

Leonid Kosals, Professor, Senior Researcher, Laboratory for Studies in Economic Sociology, National Research University Higher School of Economics, 9/11 Myasnitskaya ulitsa, Moscow, 101000, Russian Federation; Status Only Professor, Centre for Criminology and Sociolegal Studies, University of Toronto, 14 Queen’s Park Crescent West, Toronto, ON M5S 3K9, Canada. Email: [email protected]

Alexei Izyumov

Alexei Izyumov, Associate Professor, Department of Economics, University of Louisville, 110 West Brandeis Avenue, Louisville, KY 40292, USA. Email: [email protected]

Bruce Kemelgor

Bruce Kemelgor, Associate Professor of Management, Department of Management, University of Louisville, 110 West Brandeis Avenue, Louisville, KY 40292, USA. Email: [email protected]