RuEn

Journal section "Socio-economic development strategy"

Management of Vertically Integrated Systems Formation and Development in the Russian Economy

Kozhevnikov S.A.

6 (48), 2016

Kozhevnikov S.A. Management of Vertically Integrated Systems Formation and Development in the Russian Economy. Economic and Social Changes: Facts, Trends, Forecast, 2016, no. 6 (48), pp. 53-69. DOI: 10.15838/esc.2016.6.48.3

DOI: 10.15838/esc.2016.6.48.3

Abstract   |   Authors   |   References
The article reviews the essence, nature, features and basic approaches to the interpretation of vertical integration. It proves that one of the key conditions for modernizing and neo-industrializing domestic economy and transforming Russia into an industrialized country is overcoming technological fragmentation of business entities, as was the case in the Soviet Union and is now observed in the developed countries. In this situation, it is vertical integration which can ensure the diversification and restructuring of the economy, the linkage between the extractive and processing industries. Based on the results of analyzing the activities of major multinational corporations (Royal Dutch Shell, Sinopec Corp., Valio Ltd. etc.) it has been proved that these integrated systems supply competitive products with high degrees of processing and serve as growth drivers in developed economies. To justify this, the author calculated the companies’ value added multiplier. Currently, vertically integrated systems such as PhosAgro PJSC, LUKOIL PJSC, Miratorg agro-industrial holding company, KamAZ OJSC, Arkhangelsk pulp and paper mill PJSC operate in various economic sectors. The article shows that most of these companies’ level of technological integration is still not optimal; the formation of a full production chain is an additional factor in their development and competitive recovery. Accordingly, the author believes that the key objective of federal and regional authorities should be the transformational change in the economy by eliminating its disintegration and restoring processing chains of value added in priority economic sectors. The example of metallurgical industries integration (Steel Manufacture PJSC) and machine-building integration (Mashinostroitel Corporation JSC) shows many positive internal and external impacts of this kind of association. The creation of vertically integrated systems implies the development of a public policy which, through the use of complex direct and indirect tools, would encourage businesses to participate in integration processes

Keywords

vertical integration, value added multiplier, vertically integrated systems (VIS), value added chains, corporation

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