This trend holds for both countries but for very 

 different reasons. In the US innovation is more 

 closely woven into the whole economic fabric and cul- 

 ture of the nation than it is in the Soviet Union. 

 The industrial connection is a close one, and Ameri- 

 can R&D, therefore, is powerfully influenced by the 

 general condition of industry. In the USSR general 

 economic policies are of overriding importance pre- 

 cisely because of the separation of R&D from produc- 

 tion. Science and technology have not been driving 

 forces of the Soviet industrial machine. Indeed, the 

 production sector strongly discriminates against in- 

 novation. The supplementary guidance system of spe- 

 cial agencies, plans, budgets, and incentives orien- 

 ted to the advance of S&T still stands largely apart 

 from the primary guidance system for basic economic 

 activity. Science policy continues to have little 

 appreciable impact on the normal processes of econom- 

 ic life in the USSR. 



At issue in both systems is the problem of balanc- 

 ing the risks and rewards associated with innovation. 

 The balance rests on profits tied to the market in 

 the American setting and bonuses tied to plan fulfill- 

 ment in the Soviet. Both company profits and enter- 

 prise bonuses vary with general organizational perfor- 

 mance, as do the rewards to management. Hence, Soviet 

 industrial managers tend to maximize bonuses as their 

 American counterparts maximize profits. In neither 

 country is the management reward structure attuned to 

 the pace of innovation. Both American and Soviet man- 

 agement work with a short time horizon, and each tends 

 to fall into a profit-^NOW and bonus-NOW syndrome. Ori- 

 entation to production means that innovation consists 

 largely in the adoption of less risky, small size 

 cost-reducing processes rather than the creation of 

 basically new products. Moreover, the problems of in- 

 novation in both countries lie not so much in internal 

 management as in relations with outside organizations, 

 principally with suppliers in the Soviet Union and 

 with customers in the United States. 



On the whole, the balance of risk and reward in 

 the USSR still tends to work against innovation. Al- 



323 



