How effectively have Russian small and medium-sized enterprises adapted to the sanctions of Western countries after the start of special military operation

A research group of students from the HSE campus in St. Petersburg: Andrey Shirshov and Ekaterina Kukovenko (BP International Business, 4 d year), led by Associate Professor of the Department of Finance, Ph.D. Elizaveta Igorevna Markovskaya studied how the adaptation strategies of Russian small and medium-sized businesses, applied in response to sanctions from the United States and the European Union after the start of the special military operation, influenced the performance of firms in the short-term period.

The study examined the dependence of the company's main financial indicator, revenue, on strategies related to the introduction of innovation and human resource management. Additionally, the impact of the international activities of enterprises, their use of government support, marketing and other actions, as well as the main characteristics of firms on the effectiveness of firms' response to sanctions pressure was studied.

The authors of the study comment:

Elizaveta Markovskaya

Департамент финансов: Доцент

Shishov A.

Student

Kukovenko E.

Student

Our data collection was organized with the support of the federal and regional centers of the national project “My Business”. The study involved 129 Russian small and medium-sized enterprises from 7 federal districts.

The analysis using an ordered logit regression showed that those small and medium-sized businesses that increased their R&D expenses, as well as the number of personnel, were most effectively able to adapt to the sanctions pressure of Western countries in the short term. This is likely due to the necessity of replacing technologies and, accordingly, hiring people who can develop new solutions. Such a firm's policy provides an opportunity to ensure independence and potentially long-term competitive advantage. It is worth noting that production companies coped with the sanctions much better than service firms. Exporters that had connections with Western countries before the start of the special military operation showed less adaptability than other enterprises. The remaining factors studied did not have a significant impact on the financial success of companies, which may be due to the insufficient time period of the study from the beginning of the sanctions regime.

This study confirms the low effectiveness of sanctions imposed by Western countries. Despite the obvious intention of the United States and its allies to cause serious damage to the Russian economy, reality shows that even among its most vulnerable entities - small and medium-sized enterprises - there is increased investment activity which is aimed at ensuring long-term stability and competitiveness. We see trends towards increasing investments in technology and personnel, which is not at all typical for the crisis situation that Western countries have tried and are trying to create. All these factors can indicate effective government policy towards business in the sanctions era, and this tendency must be maintained further!