CC BY
34
Austrian Journal of Humanities and Social Sciences 1-2 (2017) Economics
< iAgTWEST >
K»*EUHrTTS
- ISSN 2310-5593 (Print) / ISSN 2519-1209 (Online) -
UDC 336:658:330.3 DOI: http://dx.doi.org/10.20534/AJH-17-1.2-116-121
R. I. Balashova 1
1 Donetsk National Technical University, Donetsk, Ukraine
THE ECONOMIC IMPACT OF THE NEW INDUSTRIALIZATION ON THE FINANCIAL SECURITY OF AN INDUSTRIAL ENTERPRISE
Abstract
Objective: to consider the impact of the processes of new industrialization financial support for industrial enterprises.
Methods: comparison, generalization, observation, systemic analysis, data grouping, theoretical cognition, the method of analogy and historical method.
Results: basing on the analysis of scientific economic literature the main problem of financial support of innovative processes have been investigated, the feasibilities of new industrialization policy in modern conditions have been identified. It has been determined that under the conditions of new industrial policy, the financial support of activity with a view to achieving a competitive development of the industrial enterprise is based on the integrated use of innovative, technological, financial and organizational components. It has been shown that innovative projects can be carried out in the form of recovery of rational relations within production chains, the introduction of new industries, communications and technologies. It has been proposed to consider financial support policy of the new industrialization of the economy as a process of provision and use of funds allocated for the design, development and organization of new products production, introduction of new equipment or technology, the development and introduction of new organizational forms and methods of management. It has been proved that significant failures in the area of cost management create the necessity to find innovative methods and management techniques that could provide competent accumulation and allocation of capital, the target allocation of resources, preventing unjustified cost increases. The effective cost planning, the establishment of standards at the time of a new product designing, the introduction of equipment that is not used in the operating activities of the enterprise, diversification of production, the availability and assessment of the necessary financial resources have been recommended.
Scientific novelty: for the first time on the basis of the presented methods, the article studies the ways of realization of this problem at the level of the industrial enterprise.
Practical significance: the main provisions and conclusions of the article can be used in scientific and teaching when considering the economic impact of the processes of new industrialization financial support for industrial enterprises.
Keywords: Economic impact; New industrialization; Financial support; Innovation and economic development; Industrial enterprises.
INTRODUCTION
In modern conditions of the new industrial policy financial support of activities with a view to achieving a competitive development of the industrial enterprise is based on the integrated use of innovative, technological, financial and organizational components. This requires the setting and alignment of interests, concentration of efforts of financial management on resource conservation and innovative development.
Innovation and technology direction of the new industrial policy, forming the corresponding potential and the necessary mechanisms for its implementation,
makes it possible to increase the rate of competitive advantages on the industrial enterprises. Economic and organizational direction of mechanism for the implementation of the new industrial policy is a specific action on the accumulation and the formation of the economic and financial potential.
Technological development demonstrates the growing influence of the technological component the structure of financial support. This technological development makes it possible to create a unified financial network, which leading centers are London, Paris, Zurich, New York, Tokyo, Singapore, Hong Kong, Shanghai and Dubai.
Economics
< BAiTWEST >
SdB*ELMTTS
Austrian Journal of Humanities and Social Sciences 1-2 (2017)
Modern globalization provides regulation of financial resources not only in the domestic but also in foreign markets. [1] Investors have access to domestic and foreign markets, which can provide a high rate of return or risk reduction. That is why the technological component is an important part of the innovation potential.
The study relevance of the problem is confirmed by the necessity of the timely transformation ofproduction lines of industrial enterprises. The role of the financial component in ensuring of the innovation potential can be estimated on the basis of the dynamics of the number of financial intermediaries, asset growth, as well as their financial depth (the share of the volume of loans, financial assets and capitalization of the financial market).
Equally important in the development of financial security of innovation potential is the organizational component of the enterprise. It determines the contractual and financial intermediaries, which accumulate financial resources and redistribute them among the economic agents with the help of financial instruments. Such participants of financial support form the resource component of the new industrialization policy, since the concentration of financial resources has a functional purpose, aimed at accumulation with the view of their augmenting or for specific programs.
Scientific and theoretical frameworks of the development of financial relations, their influence the formation of the industrial policy of the enterprise have been established in the works of such classical economists like Adam Smith, John Keynes, Marx, Jean-Baptiste Say, F. Quesnay, F. Bastiat, Schumpeter [2-8]. Significant contribution into the development of the theory of financial support has been made by such scientists as Yu Kovalenko [9] V. Savchuk [10], M. Dudin [11], P. Egorushkin [11].
Analysis of scientific and practical results of these authors allows us to emphasize that, despite the usefulness and timeliness of the findings, studies have been carried out taking into account the impact of the socio-political and economic factors, the theoretical approaches to the formation of financial support systems require the examination and perfection.
RESULTS OF INVESTIGATION
Problems of renovation and modernization of production, their financial security has repeatedly attracted the attention of researchers and specialists in order to solve them. Thus, the theorist of the classical scientific school Marx in his paper [4], stressing the importance
of technological development, said that "as long as the craft and manufacture create the universal basis of social production, the manufacturer's submission for only one branch of production, the destruction of the original diversity of its activities are an essential development point. On this basis, each branch of production finds the corresponding technical system empirically and improves slowly. From time to time there are changes that are caused by the gradual change of the working tool besides the new labor material".
Developing these foundations and considering the economic processes of new industrialization as the "most appropriate, realistic and promising trend in modern Russia, which is capable ofproviding advanced economic development of the country at a crucial time for it," the author V. Kul'kov [12] characterizes the reindustrializa-tion, and super-industrialization neo-industrialization or advanced development, as the processes for the designation of the overall guide of development. Therefore it is necessary to have a reliable logistical base of the national economy for the framework of the sovereignty of the country, which is associated with an industrial power, ensured the sovereign expansion of national reproduction.
This author [12] also notes that the "re-industrialization appears as a set of specific measures needed to overcome (as far as possible and appropriate) of consequences of a devastating de-industrialization of the Russian economy in the period of its market transformation. Neoindustrializm is characterized by the transition to automation, computerization, greening of industrial production, as well as to the formation of a new type of reproduction — high-tech, labor replacing and ecologically effective, expressing an advanced stage of intensive type of reproduction. Super industrialization, as the line of development, should be associated primarily with the new technological order, the formation of which begins in the world. Its most important elements will be biotechnology, nanotechnology, artificial intelligence systems with the active continuation of the development of space technologies, global information networks, nuclear energy ".
Such projects may take the form of restoration of rational relations within production chains, expressed in the revival production, which has not lost its importance yet, introduction of new production facilities, communications and technology.
Financial support of new industrialization policy of the economy in all its manifestations, "on the level
Austrian Journal of Humanities and Social Sciences 1-2 (2017)
< IASTWEST >
StBJCEUHÍTÍS
Economics
of an industrial enterprise is considered as the process of providing and utilization of funds allocated for the design, development and organization of production of new products, introduction of new equipment or technology, the development and introduction of new organizational forms and management practices" [13].
Thus, the scientist A. Dolzhikov [14] states that "the effective improvement of production is possible only if company's management has accurate and updated information on the production costs. This will allow making informed decisions both at the operational and strategic levels." A similar view is expressed by Russian scientist V. Savchuk [10], who notes that "the mentioned issues are very relevant in the current economic conditions as the basis of competitiveness is put at the strategic level. Therefore, in modern enterprises of consumer industry, where there are problems of maintenance of competitiveness of products on the market, the overall level ofprofitability should be raised from the operational to the strategic".
Significant failures in the field of cost management form the need to find innovative methods and management techniques that could provide competent accumulation and allocation of capital, the target allocation of resources, preventing unjustified cost increases. Improving the situation of solvency will have a positive impact on the financial result and balance sheet structure. Cost management should be systematic, each control element must be part of the system and meet the common goal — optimization ofproduction costs. [15] Production costs should be determined taking into account existing enterprise technology and available equipment, as well as takinf into account the requirements of quality specified by the customer of the future products.
Formation of financial support for industrial enterprises in the terms of new industrialization should be based on the principles of effectiveness of such policy. These principles take into account the multiplicity of products, multi-vector functions within various forms of ownership, direction of innovations and their financial coverage, economic feasibility of attracting of financial resources, timely and adequate financial support.
Supporting the theme of domestic policy of rational use of resources and optimum cost, scientist K Stryzhy-chenko [16] as a result of his study of industrial activity of the enterprise, its pricing and marketing policy, recommends ways to reduce costs across the enterprise. The form of such recommendations includes effective cost
planning, for example, the establishment of standards at the time of the design of a new product; the introduction of the equipment, which is not involved in the operations of production, diversification of production, and others.
At an industrial scale it is recommended to conduct measures that will explore the reasons of defect and identify the ways to reduce costs by means of reducing of losses from defect. This would give the opportunity to reduce waste and its better management. The elimination of unproductive costs and losses requires a separate study for the analysis of which it is necessary to make separate estimates (cost overruns and corruption of raw materials, violation of financial, settlement and contract enforcement). The introduction of effective systems of productive and economic relations conducive to saving resources, product quality improving, labor costs reducing by engaging employees to innovation and investment policy of the enterprise, perfection of the dividend policy should be the final measures on the improvement of internal financial policy.
The traditional presentation of the financial parameters, that are informational base for decision-making on financial security, is based on the financial analysis of the enterprise model. Such approach makes it impossible to account the investment risks and the required rate of return.
Authors E. Molchanova, A. Puzenko [17] emphasize that it is quite difficult to assess the current state of such a complex techno-economic system, which a modern industrial enterprise is in the conditions of interaction of internal and external factors. Evaluation of its activity only on the basis of formalized calculation parameters may cause actual results to be inadequate to the real condition of the enterprise.
Therefore, considering the free cash flow (FCF), which is one of the main financial operating results, the authors M. Dudin, P. Egorushkin, N. Lyasnikov, F. Safin [11] give an appropriate assessment of the values of this index: its negative meanings not always inform investors negatively. This may indicate about growing investment opportunities of companies and about the need to invest in projects that will bring profits to shareholders in the future.
The abovementioned gives grounds to confirm that the argumentation of key parameters of economic stability of the enterprise is impossible out the context of the obvious, but not taken into account situations in the modern format of assessment:
Economics
< lAiTWEST >
Austrian Journal of Humanities and Social Sciences 1-2 (2017)
- maintenance of the parameters that form the stable position of the enterprise in the current period does not guarantee the stable position in the future, even while maintaining the key indicators of its security;
- long stay in the zone of unstable condition makes it impossible to return to a stable state based on quantitative and qualitative values of the current (last) parameters [18].
In order to implement the industrial and technological policy in the coming period such priorities should be taken:
- technological restructuring ofthe industrial sector on the basis of advanced technology, improving the quality and competitiveness of products; the development of domestic, inter-sectoral, trans-regional and international economic links and cooperation. Formation of transparent technological cycles from raw material extraction to the production of high commodity readiness;
- formation of corporate structures that are effective in terms of production development, innovations, and management, the expansion of the domestic and foreign markets; large-scale introduction of information engineering and technology, building interconnected markets of goods and services on this basis;
- commercialization of scientific and technical sphere: development encouragement and commercialization of new technologies [9, p. 134].
These situations determine the fundamental methodological stance on the nature of financial stability. Thus, the preservation of the enterprise in times of global economic crisis or a recession, even with a minimum yield can be considered a stable state. That relative character of financial stability defines the objective necessity of the quantitative and qualitative changes in its key parameters, due to changes in the conditions of functioning of the enterprise, the dynamism of the market, active actions of competitors and the transformation targets. The specific of the environment affects the quality of life aspects of the enterprise, enhancing its commitment to the most favorable condition available in this period.
Combinations ofparametric changes lead to the need for objective response, which may be accompanied by a temporary loss of financial support in the current period and its compensation in the long run.
According to the authors M. Jenike, K. Jakob [19], the development of a new industrial economy requires presence and evaluation of the necessary financial resources. A standard set of"long" resources includes funds of institutional investors, funds of enterprises, funds of the population, budgetary funds, as well as foreign investment. These funding sources are usually given in a variety of programs for socio-economic development. The potential of these sources is economically dependent on the existing conditions for the functioning of the economy and the sustainability of its businesses. In developed economies the greatest volumes of long-term investment resources are concentrated in the insurance companies and pension funds.
The Russian economy has the greatest volume of financial resources accumulated by commercial banks. Credit resources are the second-largest (after payables) sources of funding for enterprises now. There are two main causes of the situation which exists with lending to the real sector of the economy. First reason is extremely high interest rates on long-term loans which excess the investment returns for the majority of Russian enterprises. The second reason is the high risks of long-term loans to businesses that are willing to borrow at high interest rates. An important role in increasing of the resource base of commercial banks is played by central banks.
Among the sources of long-term funds for the modernization of the national economy an important place is occupied by foreign investment: direct and portfolio long term. The main source of funding for the development of enterprises is their own money. In the overwhelming majority of enterprises the share of own funds in the amount of investment is a significant part [20]. In countries that are leaders in terms of industrialization and modernization of national economies, the main source of long-term loans is the savings ofthe population. An important source of financing investment in the Russian Federation is the budget. At the same time, many questions arise when assessing the efficiency of use of budgetary funds.
The probability of introduction of new technologies, business processes and higher level of innovative activity characterize large companies, where most of the innovations is developed inside the enterprises without the involvement of intellectual and financial resources from outside.
Conclusions
Traditionally, the lack of financial support is considered in economic literature as a result of stable devia-
Austrian Journal of Humanities and Social Sciences 1-2 (2017)
< IASTWEST >
StBJCEUHÍTÍS
Economics
tions in the implementation of agreements and contracts, exceeding the set cost budgets, violation of movement of material and financial flows, the reduction in sales volume, unevenness of supply, increase the level of financial dependence.
Given that the argumentation of the relative character of financial stability makes it possible to state that the indicators which characterize the quality offunctioning ofthe enterprise may keep at a basic level. However, changes in environmental conditions, actions of competitors, targets do not give an opportunity to identify an aggregate state of the enterprise in the current period as stable.
New industrialization is considered as a process that has an integral character, carrying out of which includes adherence to the following line: simple, modern and post-modern industrialization. In another perspective, reflecting the types of long-term economic policy, new industrialization involves a combination of three strategies: recovery, dynamic catch-up and advanced development. Such structuring makes it possible not to mix different directions of multidimensional and scale economic development. It is also important that such an interpretation of the new industrialization gets wide
time coordinates.
Accepted objectives of the new industrialization strategy should be transformed into an appropriate industrial policy, supported and guided by the state system institutions. To perform the tasks of legislative, financial and human resources ensuring of this process it is necessary to identify such priority measures:
- achieving and maintaining or financial stability as the basic premise of the structural financial and industrial policy; adaptation to conditions that have been formed in terms of monetary policy, the optimization of the level of economy monetization; regulation of the tax burden on enterprise and the level of bank interest;
- development of legal conditions and securing of economic conditions for inflow of foreign investments; creation of equal conditions for the activities of the different investors;
- programming and improving the principles of attracting of long-term household savings and the temporarily free funds of enterprises in the financial sector for the future financial security of the new processes of industrialization.
references:
1.
Kovalenko, Yu. Instytucionalizacija finansovogo sektoru ekonomiky (Institutionalization of the financial sector of the economy), Irpin: Nacional'nyj universytet derzhavnoi' podatkovoi' sluzhby Ukrai'ny, 2013, 608 p. (in Ukr.). Smith, A. Issledovanie o prirode i prichinah bogatstva narodov (An Inquiry into the Nature and Causes of the Wealth of Nations), Moscow: Socjekgiz, 1962, 684 p. (in Russ.).
Keynes, Dzh. M. Obshhaja teorija zanjatosti, procenta i deneg (The General Theory of Employment, Interest and Money), Moscow: Jeksmo, 2007, 960 p. (in Russ.).
Marx, K. Kapital. Kritika politicheskoj jekonomii (Capital: Critique of Political Economy), Moscow: Politizdat, 1983, 3883 p. (in Russ.).
Say, J.-B. Traktat po politicheskoj jekonomii. Jekonomicheskie sofizmy; Jekonomicheskie garmonii (A treatise on political economy. Economic sophistry; Economic harmony), Moscow: Direktmedia Pablishing, 2008, 68 p. (in Russ.).
Quesnay, F. Izbrannye jekonomicheskie proizvedenija (Selected economic works), Moscow: Socjekgiz, 1960, 1200 p. (in Russ.).
Bastia, F. Jekonomicheskie sofizmy (Sophismes Economique), Moscow: Socium, 2001, 304 p. (in Russ.).
8. Schumpeter, J. Teorija jekonomicheskogo razvitija. Kapitalizm, socializm i demokratija (The theory of economic development. Capitalism, Socialism and Democracy), Moscow: Jeksmo, 2007, 335 p. (in Russ.).
9. Gavrilova, Zh. L. Novaja industrializacija Rossii. Teoreticheskie i upravlencheskie aspekty (The new industrialization of Russia. Theoretical and managerial aspects), St. Petersburg: NPK «ROST», 2014, 237 p. (in Russ.).
10. Savchuk, V. Strategicheskoe upravlenie izderzhkami (Strategic cost management), Strategii, 2004, No. 11, pp. 28-40 (in Russ.).
11. Dudin, M. N., Egorushkin, P. A., Lesnikov, N. In., Safin F. M. Informacionnyj forsajt kak instrument konkuren-tosposobnogo razvitija predprinimatel'skih struktur (Innovative foresight as a tool of competitive development of business structures), Moscow: Publishing house «Science», 2013, 216 p. (in Russ.).
2.
3.
4.
5.
6.
7.
Economics <f Austrian Journal of Humanities and Social Sciences 1-2 (2017)
< BAiTWEST >
SdB*ELMTTS
- ISSN 2310-5593 (Print) / ISSN 2519-1209 (Online) -
12. Kulkov, V. O pozicionirovanii novoj industrializacii (On the positioning of the new industrialization), Economist, 2014, No. 10, p. 49 (in Russ.).
13. Balashova, R. I. Finansovoe obespechenie predprijatij kak jelement ih geoprostranstva (Financial support of enterprises as an element of geospace), Geokontekst, 2016, No. 3, рр. 5-12 (in Russ.).
14. Dolzhik, A., Garkusha, S. Upravlinnja vitratami jak chinnik pidvishhennja pributkovosti i rentabel'nosti sil's'kogospodars'kih pidprijemstv (Costs management as a factor of increasing of the yield and profitability of agricultural enterprises), Ekonomichnij analiz, 2016, No. 2, pp. 37-44.
15. Suslenko, V. T. Oblik i analiz system Finansovoy bezpeky torgovelnogo pidpriemstva (Accounting and Analysis of Financial Security of commercial enterprise), Crimean economic Bulletin, 2015, No. 4, pp. 77-81 (in Russ.).
16. Stryzhychenko, K. Derzhavne reguljuvannja finansovogo rynku v umovah novoi' ekonomiky (State financial market regulation in the new economy), Berdyansk: FOP Tkachuk A. V., 2013, 352 p. (in Ukr.).
17. Molchanova, E., Puzenko, A. Sovremennaja struktura mirovogo finansovogo rynka (The Modern structure of financial markets), Foreign trade: Economics, Finance, and law, 2013, No. 3, pp. 188-195 (in Russ.).
18. Inozemtsev, V. Vossozdanie industrial'nogo mira (Reconstruction of the industrialized world), Rossia v globalnoy politike, 2011, No. 6, p. 98 (in Russ.).
19. Jenike, M., Jakob, K. Tret'ja promyshlennaja revoljucija (Dritte industrielle Revolution), Internationale Politilk, 2008, No. 5, pp. 38-39 (in Russ.).
20. Aganbegjan, A. G. Social'no-jekonomicheskoe razvitie Rossii: finansovo-kreditnye aspekty (Socio-economic development of Russia: the financial and credit aspects), Den'gi i kredit, 2013, No. 1, p. 9 (in Russ.).
Information about the autor
Balashova Raisa Ivanovna, Doctor of Economics, Associate Professor, Professor of the Department of Enterprise
Economics; Donetsk National Technical University;
Address: 61103, Kharkov, Ukraine, 23 August, house number 43, apt. 16, тел.: +38 050 347 05 70; +79 780 859 469
Address (including the index) and the telephone number of the organization: 283000 Donetsk, ul. Artema, 58,
phone: 0623010326
E-mail: [email protected]
ORCID: http://orcid.org/0000-0001-5688-7032
