1

FACILITATING INNOVATIONS IN HIGHER EDUCATION IN TRANSITION

ECONOMIES

Authors:

Olga Saginova, Doctor of sciences, Professor, Dean of Graduate School, Plekhanov Russian

Academy of Economics

36 Stremyanny, Moscow, 115998, Russian Federation

Tel/fax: +7 495 9582947, e-mail: saguinova@rea.ru

Vladimir Belyansky, Doctor of sciences, Professor, Vice-rector, Plekhanov Russian

Academy of Economics

Abstract

Emerging market economies face a number of problems many of which are closely linked to and

dependent upon the effectiveness of higher professional education. The changes in the market

environment of higher education, such as the formation of knowledge economy, globalisation,

changes in the educational needs of consumers as well as new technological advances and

growing competition require a different scale of innovations in higher education. Many

governments and non-government foundations use innovations as a basic requirement for

funding universities and business schools. The paper analyses innovations in education from the

point of view of product content and markets selected. Both external and internal means of

facilitating innovations are being considered. Inter-departmental project groups are effective in

developing innovative products, which then need to be institutionalised and disseminated. The

paper is based on a series of research projects undertaken in 2001-2006 at the Plekhanov Russian

Academy of Economics to study the challenges higher education systems face in emerging

markets and develop strategies to meet these challenges using a marketing approach.
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Introduction

Education is the agent of the future: through developing knowledge and skills of the individuals

it affects the intellectual, moral and economic potential of the society. Education is in constant

change: on the one hand, being influenced by the developments of its external environment, and

on the other hand, changes in education actively influence this environment and its needs.

Education performs three major functions (Gershunsky, 1998):

1. Translation function. Education translates moral, cultural and scientific values from one

generation to another. To accomplish this function education needs access to the latest

developments of science and culture in order to select, summarise and translate the most

modern and significant intellectual and cultural values to the younger generation.

2. Enrichment function. Education is enriching individual and social qualities of society

members with major intellectual and moral values of human civilization. Education is

stimulating individuals to develop new knowledge thus enriching the human heritage.

3. Correction and transformation function. Education can change and transform value

systems and processes which define human behaviour and that of society as a whole.

Through the process of creation and transfer of knowledge, developing intellectual

potential education can purposefully change and improve social processes and systems in

accordance with the changed value system and latest developments of national culture,

science and technology.

This is why education development is a priority task for economies in transition.

Research

A series of research projects were undertaken at Plekhanov Russian Academy of Economics in

2001-2006 aimed at analysing the needs of modern Russian economy in specialists of applied

economics and management and finding ways to meet these needs through university

reengineering and developing customer-oriented education programmes. Research included three

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(2001, 2003 and 2005) students’ surveys to identify customer expectations and satisfaction, three

waves (2002, 2004, 2005) of expert interviews to find out stakeholders’ perceptions of

university programs and identify the gaps to be bridged.

Research team chose marketing specialisation for the analysis of applicants’ expectations of their

university studies. Interviewers who were chosen from 3 year students of the Marketing

department were asking all applicants at the Open Day event about their choice of specialisation

and its reasons. Almost 300 responses were collected each year showing the changing perception

of this new area of professional activity in Russia.

A general misconception in the West, both in business and academia, is that Russia did not—and

could not—have had any marketing before market reforms started in the mid-1980s. In fact,

some early elements of marketing in the Soviet Union date to 1975, when the Marketing Section

of the Chamber of Commerce of USSR was established (Fox et al, 2005). In 1980 Philip

Kotler’s third edition of Marketing Management was severely pruned and translated into Russian

- from a total of 529 pages in English to 222 pages in the Russian edition (Fox et al, 2003). From

1990, marketing became recognized as a separate business function. Marketing research

activities developed rapidly, and marketing books appeared in bookstores. The first academic

department of marketing was instituted at the Plekhanov Russian Academy of Economics in

Moscow in 1990, with its first marketing graduates completing their diplomas in 1995.

Two major groups of students are studying marketing in Russia: young university students

working toward their first and/or specialist qualifications, or beyond (into MBA or similar

programs); and post-graduates in other fields who now wish to understand marketing.

Specifically, after several years working in managerial positions, people with engineering or

other technical backgrounds often recognize the importance of marketing knowledge.

Research showed that as for marketing as a special field, many university applicants do not

exactly understand what marketing is. Before the August 1998 financial collapse, many would-
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be business students were attracted by jobs in banking and other financial areas and thus most

were choosing finance, on the recommendation of family and friends. Finance was popular

before the 1998 crisis for obvious reasons: banks offered new graduates excellent salaries—

sometimes $1000 a month or more (ten times the pre-1998 pay of a chief surgeon and twenty

times the pay of a university professor)—and finance was a clearly important and prestigious

field. Even now, with far fewer finance jobs and much lower pay than before, finance remains a

popular field of study “because that’s where the money is.”

Those who decide to study marketing are making a thoughtful choice, as it is not a standard

preference. Few Russians understand what marketing is, and many would think of it as

advertising and sales. So those who decide to study marketing have had to seek out information

on what marketing is about. Urban young people are more informed about marketing, because

they see marketing all around them in the form of marketing efforts by companies. Young

people outside the major cities have far less exposure to advertising and marketing activities, and

are far less likely to consider studying marketing.

Ironically, the 1998 crisis that killed demand for finance specialists created greater demand for

marketers, especially for those in customer care, sales, and account management. Companies

realized how important it was to keep and satisfy clients and customers. In all Russian ratings

of professions published in the last three or four years, marketing managers, sales managers were

on the top of the list—a fact that has stimulated students to choose marketing. In the aftermath

of the 1998 crisis, both Russian and foreign companies cut staff, both Russian and expatriate,

with some companies using the crisis as an opportunity to terminate underperforming staff or to

reduce departments that had been overstaffed before the crisis.

To define and analyse employers’ expectations of higher education in Marketing and possible

gaps an algorithm represented in Fig. 1 was developed. The first stage aimed at studying the

experts’ general knowledge of the system of higher education in marketing and defining the
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main criteria to describe effectiveness of university education. Experts for this stage were

selected from among big multinational, medium and small businesses as well as government

agencies, recruiting agencies and media. In-depth interview protocols with these experts were

then analysed using content analysis to identify most commonly used competencies referring to

marketing graduates. These competencies were then grouped into clusters.

The second stage of research included identifying a short list of experts using snowball method.

Its main objective was to identify a model of marketing specialist basing on the competencies

relevant for different stakeholders. The resulting model was then assessed to identify the weights

of different competencies.

The third stage included experts’ clarifications of the weights and rating the competencies

identified before. Cluster analysis helped to group competencies basing on similarity of experts’

opinions
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Stage 2 Identifying experts 1.1. experts opinion of the higher

sample education

Developing a list of competencies

for marketing specialists 1.2. history of interaction between
universities and businesses

Developing a list of experts for

the second stage

Stage 2. Developing a model of

marketing specialist 2.1. integrated list of competencies

Developing a list of “super-experts”

for the third stage
3.1. identifying weights for each
competence

Stage 3. expert interviews to clarify 3.2. rating competencies using

the competencies weights identified

Fig.1. algorithm of expert analyses

Research team participated in two international projects (2001 and 2005) and could use their

results to fine-tune university positioning and its brand values. The bar-chart in Fig.2 show some

of the findings dealing with school brand elements.

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Fig.2. a- reasons to choose the school. B- characteristics of the school brand

Three master theses, one Ph.D. dissertation and one doctorate dissertation (Saginova, 2005) were

prepared on the basis of this research.

This paper summrises research results to draw some conclusions and develop recommendations

to adapt university activities to the specific needs of transition economy.

Education and transition

Emerging economies are characterised by high level of complexity, significant reforms under

way in almost all sectors, massive organisational restructuring and increased competition. Under

the formation of knowledge economy tasks performed by intellectual workers require not only

professional education but also high level of flexibility, independence, ability to work under

stress, in the situation of high risk and uncertainty. Fundamental and theoretical education with

early specialisation, which was characteristic for most higher education institutions in Russian
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before 1990-s, did not develop the required skills and thus failed to meet transition economy

challenges.

Knowledge economy requires specialists to upgrade their knowledge and skills regularly during

their life (Duderstadt, 2000) which has led to growing variety in educational offerings and study

tracks. Universities are facing the need to validate students’ previous education and experience

and offer different options of getting higher education. Individualisation of education models,

student’s individual responsibility for the results, student centred teaching and developing

universal transferable skills are the main requirements of modern economy (Malhotra, 2003).

Competition was seen by universities as something suitable for business only and absolutely not

applicable to education. Competition in higher education has always had two sides (Lorange,

2002): competition for resources and competition for quality. Any resource is scarce and

universities have always been competing for government or private money, for the best faculty

and for the best students. By introduction of entry requirements universities define what students

they would like to get. The more famous and prestigious the university, the higher are the

requirements. Besides these forms of competition now universities face competition previously

common only to businesses (Saginova, Fairweather, 2001): they compete with foreign schools

entering their local markets, compete for students going to study overseas or choosing corporate

universities to upgrade their knowledge and skills. All this adds stress combined with decreasing

government funding and new types of education services providers eating up universities’ share

of the market.

Higher education in Russia

In Russia the prestige of higher education is still very high (Saginova, 2005). However with the

spread of education (measured by the number of students per 1000 of population) being one of

the highest in the world, education sector accounts for only 2.9% of GNP, which is considerably

lower than in many European countries. Lack of government funding was partially compensated
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by the introduction of tuition fees in Russian universities, and these fees are increasing every

year. Prices for educational services are growing faster than inflation rate and now rank 5th

among the paid services after transportation, communal utilities, everyday services and

communications. This has led to the formation of multichannel financing of higher education.

Labour market in Russia is characterised by ineffective use of specialists with higher education,

many university graduates are not working in the sphere of their specialisation.

All this shows the need for transformations in the sphere of higher education. There are two

possible ways to transform this system: copy a foreign example or build a system to match

specific needs of the country development. The first model was used in several post-soviet

countries. These transformations were often politically biased and a change in the country

leadership can be dramatic for the education reforms.

Higher education sphere in Russia as in many other transition economies is characterised by high

level of risk and uncertainty. There is a need to challenge and change what has successfully

worked in the past, which creates opposition and resistance both within universities and in

society at large. Transformation in higher education should balance global market requirements

against national needs and existing standards, be customer oriented, transparent and publicly

accountable and include mechanisms to manage fast change. Education systems in transition

economies are mandated with strengthening market-based economy, improving local universities

competitiveness both locally and internationally and generating additional income flows to

support transformation.

Transformations in education can take the form of product innovations, new technologies and

new markets. Product innovations are about introducing changes in the study programmes and

evaluating knowledge and skills of the graduates. Technologies concern with the programmes

format, teaching process and faculty. Market innovations are linked to the decisions about
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programme positioning, selecting its target consumers and defining the most convenient channel

of distribution.

Innovations in programmes

Education services are a complicated type of services combining the characteristics of both

professional and mass services (Saginova, 2005). On the one hand, students are dealing with

people but not equipment, though a distance-learning format involves enough of technology to

enable students to study on-line almost without visiting the university campus. There are

standard education services which are mass in character, but some professional or corporate

courses can be highly customised, and coaching which has become very popular lately can be

really an individual one-to-one education. Even mass programmes give students opportunity to

select a considerable proportion of the subjects studied, thus creating their personalised offering.

The core value of education is delivered by the teaching staff, but support staff such as

secretaries, security guards or accountants can also influence customer perceptions of the value

of the services provided.

University product that is offered to both students and companies of the labour market is its

education programme, which can be defined as a combination of educational and support

services aimed at improving or changing the level and/or area of customer’s education and

provided with adequate resources of an educational institution. The success of the programme is

measured by its graduates for whom quality parameters include employability in their special

area within certain period of time (for many professions within 6 months), level of entry salary,

career development path and speed, employer’s evaluation and work satisfaction.

In most Russian universities now education programmes are evaluated by their content,

measured in terms of contact hours and often provide a very broad and unfocused transfer of

professional information from a professor to students. Students are passive and generally result

oriented, interested in getting high grades and reluctant to take difficult tasks, being afraid of
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making mistakes (Saginova, Fairweather, 2002). To change the situation, universities should

partner with their own graduates and key employers of their alumni. Regular and objective

feedback from the graduates and employers can help a university improve its programmes and

prepare its students better for the challenges of their profession and the needs of transition.

Effective forms of such feedback are steering committees formed from representatives of key

employers. Companies in emerging markets are not yet ready to invest money and time in

cooperating with education, so a partnership should be mutually interesting and bring benefits to

the company as well as the university. These benefits can be company presentation to

perspective employees, graduate recruitment programs, promoting company products to

university students, increasing the public value of company top managers by acquiring adjunct or

visiting professorship status at the university.

Feedback from alumni is not easy to get either. However emotional people can get at graduation

parties, everyday problems easily break the ties with their schools and they need special

incentives to communicate back. Such incentives include additional services to alumni in the

form of professional exams preparation and short-term courses at reduced price or even free of

charge. Being able to get something useful from their alma mater, alumni are more responsive to

usual communications such as newsletters, reunion parties which can be used for various surveys

necessary for programmes improvement.

New competencies for transition economies

Transition economy requires some competencies critical for the success of transition. These can

be classified into three groups:

1. Personal competences include communication and interpersonal skills, ability to socialise

and adapt in a new environment and tolerance to any form of difference: cultural,

national, religious, etc.

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2. Professional competences depend on the education programme profile and subject area,

but more and more interdisciplinary and cross-functional knowledge and skills are

required. These unfortunately can not be provided through existing programmes which

are subject centred, as well as by the existing university structure based on departments

uniting staff in one subject area. Business ethics and corporate social responsibility are

also of great importance among professional competences.

3. Development competences include the ability to learn and regularly update one’s

knowledge base, personal development planning and exercising. In knowledge economy

no university programme can provide a student with the knowledge and skills sufficient

and relevant during all of their professional career. Graduates should be able to identify

the need for additional education or training, be able to use upcoming opportunities, find

and analyse possible alternatives and plan their professional and personal development in

an effective and efficient way.

Innovations in the markets

Market innovations in higher education are influenced by the globalisation, or more precisely by

the “glocalisation”. Universities in many transition economies realise that their markets can not

be taken for granted. They can be taken away by international competition, emerging and fast

growing private institutions and corporate education providers. Universities have to decide what

they are and what they would like to be. Many institutions of higher learning now have their

mission statements proudly placed on the web sites. However many of these are not in any way

linked to the institution’s core competences and thus can not be used as tools in strategic

development. Strategic planning should start with looking at the present market of a university.

If this market is shrinking or is becoming too competitive, the university should decide how its

core competence can be most effectively used, who its strategic customers are, whether they are

local, regional or international.

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Globalisation in education can take the form of academic mobility, internationalisation of study

programs, transnational education and various forms of export of education. Over time the main

focus in globalisation in education has been shifted from cultural and educational goals to the

economic ones. These can be short-term, like generating additional income from enrolling

foreign students paying for their tuition; or long-tern, like developing regional partnerships to

train adequate workforce. A comparison of different forms of globalisation in education based on

expert evaluations is given in table 3.

Export of education and other forms of internationalisation are very important for universities in

transition economies. Students exchange programmes are quite common for universities in

Moscow and St. Petersburg, but still underdeveloped in the regions of Russia. Regional, inter-

country students’ mobility is almost non-existent, which for a country as big as Russia means

many lost opportunities. Summarising internationalisation issues in Russian higher education,

several points can be made:

• Unless linked to the university development strategy, internationalisation has little impact

on the programmes quality and will remain elite in character;

• Internationalisation should aim at creating mutually beneficial and self-sustainable

partnerships adding value to the education programmes of all partners;

• Faculty exchange and visiting professors can improve internationalisation of the

university regular programmes only if coupled with efficient faculty development and

motivation programmes;
Table 3. Comparison of different forms of globalization in education

Participation of Participation Comparison of Recognition of Recognition of Licensing and Partnership of

students of faculty study plans study abroad diplomas accreditationя institutions
periods
Mobility Involves all Involves all Possible but not Customary but Absent Possible but not Present in some
participants, but participants, compulsory not compulsory compulsory programmes
not the university but not the
as a whole university as a
whole
Evaluation (in points) 2 2 1 1 0 1 2
Double degree Involves all Involves all Compulsory but Compulsory De facto National – Present in the
programmes participants, but participants, exceptions are compulsory, core
not the university but not the possible international – programmes
as a whole university as a university decides
whole
Evaluation (in points) 2 2 3 5 4 4 4
Triple degree Involves all Involves all Complete Complete De facto National – Present in the
programmes participants, but participants, compulsory, core
not the university but not the international – programmes
as a whole university as a university decides
whole
Evaluation (in points) 2 2 5 5 4 4 4
Transnational One-way Complete Complete Complete By agreement Compulsory Possible but not
education compulsory
Evaluation (in points) 2 5 5 5 2 5 1
Internationalization Involves the Involves the Possible but not Possible but not Possible but not University decides Present in some
of study programmes whole university whole compulsory compulsory compulsory programmes
university
Evaluation (in points) 5 5 1 1 1 2 2
Export of education Involves all Involves the Possible but not Possible but not By agreement National – absent
participants, but whole compulsory compulsory compulsory,
not the university university international -
as a whole desirable
Evaluation (in points) 2 5 1 1 2 4 0
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• Internationalisation should be institutionalised through creating international offices

students’ counselling services and introducing international study programmes and

subjects into the university regular curriculum. International partnership networks are

excellent tool for innovations development. However, unless institutionalised even

exceptionally successful projects do not add value to the university programmes and are

easily destroyed with the change of leadership or end of grant funding.

Developing innovations

Innovative educational programmes are usually developed by project teams, which are set across

academic departments. For innovations to be successful project teams need assistance in the

form of guidelines and templates, consulting services and infrastructure to support them. A

project management office can provide the necessary support and assist in disseminating project

results to be used by other academic departments of the university.

Limited funding can hinder innovations development and dissemination. Russian government is

currently making efforts to stimulate innovations through competitive funding and rewarding for

the best results. Both public and private money is used to stimulate innovations. There are

awards for the best faculty, best students are getting special scholarships, and best institutions

receive grants for innovations development. Two waves of grants distribution to the institutions

developing innovative programmes have taken place within the National priority project in 2005

and 2006, with 17 universities of the first wave and 40 institutions in the second wave receiving

up to $20 mln. Each to support the further develop their innovations. However transparent these

activities are they are still temporary and not sufficient to dramatically change higher education

system to meet the needs of transition economy. One of the innovative funding schemes is

through public-private partnerships. This scheme is now actively discussed by representatives of

business, government and the academia, but not practical steps have yet been taken. Practical
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implementation of the scheme will need changes and amendments into the national legislation on

education and training new calibre of higher education managers to administer the partnerships.

Conclusions

Economies in transition set special and very challenging tasks to the higher education system. It

needs to be flexible enough to provide high quality services to meet the changing needs of a

transition economy and still be able to carry our its social and humanitarian functions. Strategic

marketing approach can be useful to implement the necessary transformations within the higher

education and develop innovations in the content and delivery of educational services to satisfy a

variety of stakeholders of a university and facilitate positive developments in the society.

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