These stories are offered to illustrate some of the business problems that could be encountered by foreign companies or individuals attempting to form business enterprises with institutions in the FSU. The actual institutions involved have not been identified because very often the information was incomplete. These stories are not of interest because of their veracity; the panel has no method to check for accuracy. They are of interest because they illustrate problems that could be encountered in doing business in the former Soviet Union.

Warranty Service

The faculty of a teaching institution formed a company to manufacture a measuring device for process control. They had a foreign partner for this enterprise. In their business plan, maintenance and warranty service was to be provided by sending an engineer directly from the company, in this case the teaching institution, to the customer's site for repairs or service. This was a viable alternative to establishing representatives in foreign countries because at the time, airfares to foreign countries were cheap. This business strategy quickly failed when currency deflation eroded buying power, thus making international airfares too expensive. The company eventually failed because it was unable to service its product.

Data Sheets

A major manufacturer of electro-optical devices, such as sensor arrays, individual detectors, and LEDs, and general electronic components, such as capacitors and resistors, has just begun developing marketing materials. It appears that the performance characteristics of the devices are quite good, but the manufacturer could not provide data sheets, pricing, or any information about how to place an order. The managers of this enterprise were primarily technical. They are now faced with the hard choice of downsizing, and dismissing engineers who have loyally worked for the enterprise for years, in order to provide cash resources to establish marketing and sales departments. This is all happening at a time of severe cash shortages and a lack of standing orders for their products. Marketing and sales are unfamiliar new arenas of business for these managers. They are unsure about what actions they should take.

The Dual Role of Principal Investigators at Government Labs

Many of the institutes that the panel visited were government- supported institutions for basic research. In the past these institutes were tightly coupled to government enterprises, especially the design bureaus, and had contributed to designing and developing technologies for civilian and military use. Now virtually all of these institutions have associated enterprises or are looking for ways to transfer their technology to application. The hope is that these enterprises will bring support for the basic research agendas of the institutes.

Some of the employees of these institutes had formed enterprises that were separate companies with employees, facilities, and research and development efforts that proceed independently of the primary institute. In this case, the enterprise could be seen as a spin-off in much the same sense that a business might spin off from a university or federally-funded laboratory in the United States. In other cases, the enterprise was nothing more than business cards with the names of individuals who continue to work exclusively at the institute. The enterprise they represent may have no independent facilities or employees. In this case, it is unclear whether the technology that these individuals might offer for sale was theirs to sell. The technology offered for sale or license by these individuals may have been developed and even manufactured at the institute. Many individuals may have participated in developing the technology. Doing business with these enterprises without a clear delineation and understanding of ownership could lead to problems, especially if the business becomes profitable.

Incredible Gizmos from Unusual Places

An institution charged primarily with precompetitive basic research might also have a small manufacturing facility. This appeared to be highly probable in fields like the materials sciences. These institutions might manufacture sensors or devices in limited quantities, using new materials or processing methods. This would be comparable to a western university laboratory producing 30-100 special devices that then become part of a system, such as an optical gyroscope or portable radio telephone. Thus research institutes may have manufactured special leading edge devices for a very limited customer population in the past. Many of these institutions were interested in finding a foreign partner for a joint venture to manufacture these devices. Where the manufacturing would be done, how it would be scaled-up (or whether it could be scaled- up), and who would own the technology rights were all unclear. Often these uniquely manufactured devices had extraordinary performance characteristics. The WTEC panel saw a position detector that made precision measurements on a submicron scale and that produced a linear output signal over its entire range. This device would be useful in many machine applications, ranging from steppers to repair and inspection machines. Whether it could be manufactured consistently and in sufficient volume to support a manufacturing technology is an open question.

Published: December 1994; WTEC Hyper-Librarian