necessary, because fixed and operational costs are not negligible while returns tend to be small, and the licensing to patenting ratio is very low. Moreover, returns from spinoffs need time to mature and contract research only develops in gradual steps. Despite evidence that specific TTO activities that favor new venture creation include early-stage technology and licensing for equity, such a strategy is the least likely to be favored by the university and thus unlikely to be used. Evidence from the United States confirms that TTOs are concentrated in short-term cash maximization, because the main mechanism favored by most TTOs was licensing for cash (72 percent), with licensing for an equity stake and sponsored research less popular at 17 percent and 11 percent, respectively (Markman et al. 2005).

Russian TTOs and/or their parent institution tend to provide accompanying innovation services. Half of TTOs report offering both incubation and prototyping services. The presence of auxiliary innovation services is welcome (Figure 11), as most research results need further development before they reach a phase where they can be commercialized. In the United States, from inventions licensed in a five-year period, TTOs reported that 45 percent were at the proof of concept stage, 37 percent were laboratory prototypes, 15 percent were manufacturing-ready technologies, and 12 percent were market-ready inventions (Thursby et al. 2001).

Patent applications through TTOs are made mostly in Russia but patenting abroad is negligible. On average, each TTO surveyed applied for 34 local patents. The estimated total of 1,715 patents represents around 5 percent of total patent applications made in Russia. Patent filing in the European Patent Office and U.S. Patent and Trademark Office is almost nonexistent – on average, not even 1 patent is filed annually.

The TTOs surveyed helped initiate around a fifth of all the start-ups based on research discoveries. Out of the 973 IP-based start-ups reported by the MoES, 200 were founded using licenses of the TTOs’ parent institution technology, an average of 3 start-ups per TTO.

# **III.2. Technology Transfer from R&D in Defense**

Russian R&D discoveries in defense could be a major source of civilian innovation, but their use remains limited. The Soviet industrial base is still the core of Russia’s high-tech industries: advanced materials, nuclear power, aerospace, and other sectors of the defense industry. In Soviet times, the connection between military-oriented industries and R&D institutions was intense. R&D institutes were integral parts of the organizations of line ministries, which coordinated all stages of innovation (Yegorov 2009). However, there have not been major spillovers of technology to the civilian sector, because most of the discoveries in defense R&D have remained secret and are inaccessible to the private sector, and because much of the technology developed, especially in Soviet times, falls in the category of know-how as opposed to patents, making difficult commercialization based on codified knowledge.

The government still owns a large proportion of defense firms, and sector consolidation efforts are under way (Box 2). Nowadays 40 percent of firms in the defense sector are fully government owned, 40 percent are mainly private (with the government having 25 percent or less ownership), and the rest have significant government participation. Russian defense firms are relatively small and there are government efforts to consolidate the industry by creating large holding companies (Crane and Usanov 2010).

## **Box 2: Commercializing the discoveries of Russian weapons scientists**

<mark>In 2007, LARTA, a U.S. non-profit, private corporation devoted to accelerate the market readiness of earlystage enterprises, worked with several Russian companies on a very small-scale program funded by the U.S. Department of Energy – GIPP (Global Initiative for Proliferation Prevention). The objective was to get the start-ups ready to present at a LARTA-produced conference to penetrate the U.S. market. They were</mark> 25