Valieva O.V.
Institute of Economic and Industrial
Engineering Siberian Branch of The Russian
Academy of Sciences (IEIE SB RAS),
Novosibirsk State University,
Novosibirsk State Technical University,
Novosibirsk, Russia
O_valieva@mail.ru

Global value chains in the biotechnology market: an assessment of Russian companies

Annotation
The study examines the creation of global value chains in the biopharmaceutical sector of Russia
in general and in Siberian companies in particular. Problems are studied at all stages of research,
production and sales cycles. The degree of incorporation of Siberian biotechnology companies
into global value chains is analyzed. Survey results showed that domestic companies are poorlyembedded in global value chains. As a rule, in the markets of “red” biotechnologies it is theimport of primary highly purified / low-purified substances, depending on the sphere of use in
the final product and the export of high-tech services in the field of R & D. The weak link of ourmarket in GVC is engineering and distribution. In the markets of "green" biotechnology, inwhich one can identify segments of genetic engineering (breeding new plant varieties, GMcrops), biotechnologies for livestock and plant growing, high competitiveness and export
potential have so far formed only in the market of biological plant protection products. However,the pace of growth is far behind the world. This gap is due to several factors: high supply ofplant protection chemicals from global corporations, difficulties in registering their own
developed drugs, limited financial resources, lack of government funding and support measures.

Keywords: Global value chains (GVC), biotechnologies, competitive advantages, biotechnology
companies, barriers of scientific and technological development

Formulation of the problem
The development of the biotechnology market is one of the important tasks of the economic
development of the country. Companies of the biotechnology sector are setting their priorities on
the development of new drugs and medicines, the creation of advanced diagnostic technologies
and the antivirus industry, plant and animal protection products, and new technologies for1

agriculture. To assign these or other biotechnologies to different areas of the application, a “colorcode” was created. “Red biotechnologies” is biomedicine (therapy, diagnostics) andbiopharmaceutics (production of proteins, enzymes, antibodies), “green biotechnologies” biotechnologies for the agro-industrial complex (genetic engineering, production of feed andfood, animal health, plant protection products, etc. .), “White biotechnologies” - development
and production of biofuels, bioremediation, as well as industrial biotechnologies for thechemical, food, oil industries (enzymes, chemicals, cellulose, food), “blue biotechnologies ”biotechnologies created on the basis of the marine and aquatic environment (Amarakoon, 2017).
The development of modern biotechnology is one of the priorities in the national strategies of all
developed countries. The Russian biotechnology market is developing at a significantly slower
pace than global markets and technologies, and identifying growth reserves ensuring widespread
use and introduction of competitive domestic biological products and technologies is an
important and urgent task for the development of the country1.
Approaches
One way to analyze the degree to which domestic companies are involved in international
markets is to analyze Global value chains (GVC). Approaches to exploring global value chainsare based on studies of the structure and dynamics of global industries, to understand where how
and by whom economic, social, and environmental values are created and distributed (DukeUniversity, 2016). In practice, GVC research questions focus on the problems of developing
companies,

competitivenessbusiness, industries, cities and states. Identifying potential

problems affecting suppliers and partners and finding bottlenecks in the value chain. GVC
analysis is also important at the stages of developing industrial policy and strategic development
plans for individual companies, industries, regions and for government and intergovernmental
interaction programs.
The global economy is increasingly structured and concentrates around global value chains,which in turn affect the growth in the share of international trade, global GDP and employment.
GVCs bind companies and consumers around the world and save on production and promotion
costs. For many countries, the ability to effectively participate in global value chains is a vitalcondition for development (Gary Gereffi, Karina Fernandez-Stark, 2016).
GVC analysis is based on two phases. The first is the mapping of the value chain(determining the geographic location, key figures, logistics, input-output steps). The second is1

The research is carried out according to the research plan of the Institute of Economics and Industrial Engineeringof the Siberian Branch of the Russian Academy of Sciences, project XI.170.1.2. "Formation of the fundamentals of
the theory of innovative economics: operational definitions, measurements, models, scientific and technologicalforecasts and programs", AAAA-A17-117022250128-5

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defining the role of dynamic factors (management, institutions, and interfirm relations) that
affect the location, development, and competitiveness of an individual company, country, oreven a city (within the concept of a gateway city). As an example, the role of Singapore in
strategic cooperation with Vietnam and Indonesia. The analysis of cross-country interactions
within the Global Production Network (GPN) concept can complement the GVC and is also
important for choosing a strategic development vector (Breul M., Revilla Diez J., Sambodo T.
S., 2018). However, today Russia is involved in GVC mainly as a supplier of energy resources,
which ensures “high profitability of the fuel and energy companies participating in them” (E.
Sidorova, 2018).
At the macro level, many researchers show the importance for the innovative developmentof a country, the involvement of national companies in global markets through cooperation withtransnational corporations. Jiali Gea et al., analyzing the data on 249,357 industrial enterprises in
China from 2000–2007, note that after reform and opening up, China’s economy graduallymerged into the global value chain. The formation of GVC not only motivated the integration ofeconomic factors around the world, but also brought tremendous opportunities for economic
growth in China (Jiali Gea , 2018).
Loecker (Loecker, 2007) argues that in the process of participation in GCC, enterprises fromdeveloping countries are more quickly integrated into technological progress through the“Learning effect”.
Baldwin and Jan (Baldwin J., Yan B., 2014), analyzing data from Canadian companies, haveshown that high-tech companies are getting the most benefit from using GVC. Quite a significant
part of the research shows the positive impact of GVC on the growth of productivity andinclusion of both countries and individual companies in technological progress.
Methodology
Researchers at the Joint Research Center of the European Commission on Global Value
Chains in 2016 proposed a new methodological approach for mapping GVC using a set of datafrom innovative biopharmaceutical companies. The study provides an example of the global
value chain of the biopharmaceutical sector and describes a step-by-step procedure fordisplaying interconnected opportunities on a global scale. The proposed methodology contains
two fundamentally different approaches - for downward global mapping of the value chain from
top to bottom, as well as for bottom-up mapping. This methodology can be applied to theanalysis of the GVC in the field of new technologies, as well as at the level of individual
countries and regions. New methodology and methods for collecting and visualizing data
demonstrate the relationship between segments of biopharmaceutical chains and the position offirms in the field of research and development; pharmaceutical manufacturing; managing a3

complex network of outsourcing, insourcing and procurement relationships through subsidiaries
around the world (E. Todeva, R. Rakhmatullin, 2016). In further research, we will build on thisconcept.
The goal of our research is to identify the degree of incorporation of Russian biotechnologycompanies into global value chains. The research methodology was based on:• Adaptation of various GVC concepts to the analysis of the “red” and “green” biotechnology
markets;• Identification of key Siberian companies with export potential and built into the full cycle ofcreating innovative biotechnological products;• Surveys of top managers or owners of companies from the list of key agents in thebiotechnological market;• Processing survey results and building GVC matrices.
Surveys were conducted and conducted by focused interviews of managers of companies
that are members of the Biopharm Biopharmaceutical Technologies Association “BioPharm” 2.
At the moment, 15 senior executives and owners of companies have been interviewed.
The questionnaire form contained the following questions:
1. How companies are involved in interaction with foreign partners, on what conditions, on
what markets, on what stages of GVC;
2. What are the competitive advantages of Russian biotechnology companies in the domestic
and foreign markets;
3. What problems and barriers of technical development (organizational, institutional,personnel, tax, infrastructural) have to face at all stages of the scientific and production cycle, theimplementation of supplies and sales;
4. To what extent has the policy of sanctions weakened / strengthened the position ofbiotechnological and biopharmaceutical companies in domestic and foreign markets;
5. How did this affect the availability of dosage forms, reagents, raw materials, materials
and equipment for production and research activities;
6. How much the import substitution programs have contributed to the growth of domesticdemand;
7. What should be the measures of state incentives and regulation of the biotechnology
market.

2Association for the Development of the Innovative Territorial Cluster of the Novosibirsk Region in the Field ofBiopharmaceutical Technologies "Biopharm" // https://npbio.ru/

4Results
Preliminary survey results showed that domestic companies are poorly integrated into global
value chains. As a rule, in the markets of “red” biotechnologies it is the import of primary highlypurified / low-purified substances, depending on the sphere of use in the final product and theexport of high-tech services in the field of R & D. The weak link of our market in GVC isengineering and distribution.
In the markets of "green" biotechnology, in which one can identify segments of geneticengineering (breeding new plant varieties, GM crops), biotechnologies for livestock and plantgrowing, high competitiveness and export potential have so far formed only in the market of
biological plant protection products. However, the pace of growth is far behind the world. Thisgap is due to several factors: high supply of plant protection chemicals from global corporations,difficulties in registering their own developed drugs, limited financial resources, lack ofgovernment funding and support measures.
References1. Amarakoon I.I., Hamilton C.L., Mitchell S.A., Tennant P.F., Roye M.E. (2017).
Biotechnology // Pharmacognosy: Fundamentals, Applications and Strategies. AcademicPress. Pp. 549-563.
2. Duke University. (2016). Global Value Chain // https://globalvaluechains.org/concepttools
3. Gary Gereffi, Karina Fernandez-Stark. (2016). Global Value Chain Analysis: A Primer.
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