This paper is focused on assessing the risk factors for Russian manufacturing firms posed by sanctions imposed on Russia by the EU, US, and other countries in 2014. While there is an extensive literature assessing the successes and failures of international sanctions on the economies of both those imposing and targeted by sanctions on a macroeconomic level, we are more interested in trying to understand the corporate response -i.e. which firms evaluate the introduction and increasing scale of economic sanctions as a threat to their corporate strategy, and their possible reactions aimed at adjusting to a changing environment due to the geopolitical shock. Our research, based on a recent survey of manufacturing companies, provides evidence that over the last decade Russian manufacturing firms have become much more integrated into the global economy than is commonly assumed, through foreign direct investment, foreign trade (including imports of both technological equipment and raw materials and components), international partnerships, and by extensively supplying foreign companies that operate in Russia. Considering the self-selection effect of the top-performing firms in terms of foreign trade, we can state that sanctions could prove most harmful not only for the targeted firms, but for the entire population of betterperforming and globalized firms involved in foreign trade with the EU and Ukraine. Thus, the impact of the sanctions on the prospects of the Russian manufacturing sector may be very strong over the medium-to-long term.
The paper is based on the findings of a major project by the Higher School of Economics Institute for
Industrial and Market Studies (IIMS) to monitor competitiveness of manufacturing enterprises. The study focuses on the drivers and dynamics of business competitiveness, including changes in firms'behavior during the period before the crisis (2005)(2006)(2007)(2008)
T he Russian manufacturing sector has an underdeveloped SME sector both in terms of employment and contributions to GDP in comparison with other economies, with evident signs of stagnation over the past few decades. However, little is known about the capacity of SME sector, i.e., the opportunities to grow and thus exploit the benefits reaped from economies of scale. This paper attempts to estimate the impact of internal and external factors on a firm's competitiveness in the context of optimal enterprise size.The main conclusion is that that the satisfaction of Russian SME managers has been increasing due to factors such as the sufficient supply of qualified personnel, modern infrastructure, developed partnerships, the expansion Кeywords: small and medium enterprises; scale of business; determinants of growth; barriers to growth; Russia.of the geographical scope of available markets and favorable institutional conditions for entrepreneurship. In contrast, serious constraints to SME growth in Russia discourage entrepreneurs and lead to poor decisions by managers such as exploiting shadow schemes, leaving the market or growth in the form of nominally independent firms under the informal "umbrella" of one owner. Formidable bureaucratic barriers and significant transactional costs increase the vulnerability of small businesses to administrative pressure. In order to survive and remain on the market, Russian companies have to adapt to the existing institutional environment, and must be larger compared to their counterparts in developed economies.
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