=Paper=
{{Paper
|id=Vol-2713/paper12
|storemode=property
|title=Strategic priorities of innovation and investment development of the Ukraine's economy industrial sector
|pdfUrl=https://ceur-ws.org/Vol-2713/paper12.pdf
|volume=Vol-2713
|authors=Vаlentyna Stadnyk,Pavlo Izhevskiy,Nila Khrushch,Sergii Lysenko,Galyna Sokoliuk,Tetjana Tomalja
|dblpUrl=https://dblp.org/rec/conf/m3e2/StadnykIKLST20
}}
==Strategic priorities of innovation and investment development of the Ukraine's economy industrial sector==
https://ceur-ws.org/Vol-2713/paper12.pdf
145
Strategic priorities of innovation and investment
development of the Ukraine’s economy industrial sector
Vаlentyna Stadnyk[0000-0002-2095-3517], Pavlo Izhevskiy[0000-0001-6457-399X],
Nila Khrushch[0000-0002-9930-7023], Sergii Lysenko[0000-0001-7243-8747],
Galyna Sokoliuk[0000-0003-2589-5376] and Tetjana Tomalja
Khmelnitskiy National University, 11 Instytutska Str. Khmelnitskiy, 29016, Ukraine
stadnyk_v_v@ukr.net, izhevskypavlo@gmail.com,
nila.ukr@gmail.com, sigoruk@ukr.net, sokoliukg@gmail.com,
sts8383@ukr.net
Abstract. The problem of determining the investment priorities of the national
economy development has been actuated. It has been argued that the formation
of institutional preferences for activation of industry investment processes should
be carried out taking into account the potential ability of each sectoral group
enterprises to increase the added value. The scientific and methodical approach
for sub-sectors investment attractiveness assessment has been formed on the
example of the Ukrainian food industry. It has been recommended to use for this
substantiated set of relative performance indexes which are duplicated in
aggregate statistical state surveys based on the enterprise’s financial statements.
It has been formed the recommendations for the investment priorities of food
industry development in Ukraine which are based on the appropriate calculations
made by the TOPSIS and CRITIC methods. Methods of economic-statistical and
comparative analysis were used for structural and dynamic characteristics of the
Ukraine industrial enterprises activities. Given that innovation processes should
also cover small and medium-sized industrial enterprises, whose resource
opportunities are mostly limited, it is proposed to expand them within the
framework of a strategic partnership. Graphic modeling methods have been used
to visualize the process of building the business structures resource potential on
the basis of their strategic partnership. The influence of the motivational
environment on the value of organizational relations within the partnership has
been formalized.
Keywords: food industry, TOPSIS method, CRITIC method, cluster analysis,
strategic partnership, innovative potential, value of partnerships.
1 Introduction
Ensuring sustainable and dynamic development of the country is a key task of the
economic policy of each state. This policy is developed taking into account existing
and future social (including global) needs and the ability of national economic entities
to meet them, relying on their (specific for each) competitive advantages and
___________________
Copyright © 2020 for this paper by its authors. Use permitted under Creative Commons License
Attribution 4.0 International (CC BY 4.0).
146
opportunities for their build-up. The presence of a significant number of such entities
in certain industries determines the country’s place in the world division of labor. Quite
a lot of countries use their natural resources to create competitive advantages, which
can be unique and have value in the world market, even with a minimal degree of their
processing. However, history shows that such countries, which mostly offer raw
materials for the exchange on the world markets, are increasingly lagging over time
behind in the level of economic dynamics and quality of life of the population from
other countries that develop their ability to create new consumer values.
This ability is especially necessary in the context of the global economic crisis,
which is beginning now. The COVID-19 pandemic has become a trigger for this crisis,
whose rapid deployment casts doubts on the globalization benefits and resuming
discussions about its scale feasibility. And not only in the millions of people life-saving
light, but also in the many businesses types inevitable economic losses context, this can
disrupt the national economies established structures and threaten their economic
security. This crisis pandemic nature has worsened consumer demand in many market
segments. In addition, the quarantine restrictions that are taken by the most countries
governments for slowing the COVID-19 proliferation pace have led to the numerous
logistics chains disruption and this greatly complicated many business processes [20].
As a result, a significant decrease in industrial production is expected (depending
on industry specialization). This will lead to the major job losses – especially on
enterprises that manufacture products for production systems reproduction of other
industries economic entities. Under crisis circumstances, such reproduction is usually
complicated – both due to lack of investment resources and because of uncertainty of
the future state of consumer markets. And businesses are increasingly unable to
produce high value-added products and are focused mainly on natural resources
intensive and predatory use, this forms the country’s export structure. The presence of
such disparities in the modern Ukraine’s economy is extremely urgent to overcome
them for enhancing the country’s ability to withstand the threats of global challenges
and maintain an economic security proper level.
The formation of such ability is of paramount importance to Ukraine, because the
national economy in the world division of labor still occupies the position of raw
material supplement to the economies of the developed countries. However, the current
stage of its development is characterized by a change in the vectors and priorities of
economic cooperation due to European integration processes. It is important that, in the
course of these changes, the Ukrainian economy could take the best positions in the
global market from the standpoint of macroeconomic perspectives. This requires a
sound approach to determining the directions of structural changes and their
implementation through appropriate investment processes, supported at the institutional
level through the tools of state economic policy.
Many researchers deal with the problem of the formation and implementation of an
effective state economic policy in different market contexts. In particular, in Ukraine,
this problem was reflected in the works of Dmytro Lukianenko [12], Oleksandr Bavyko
[3], Svitlana Radziyevska [19], Inesa Khvostina [7], Marharyta Sharko [21],
Oleksandra Moskalenko [13] and many others. The authors express different views
about the instruments and directions of institutional support for the development of the
147
national economy, but it is indisputable that it should ensure the growth of its
international competitiveness.
A special interest in this problem arose in recent years, as the crisis phenomena were
the reason for that in the socio-economic processes of many developed countries, whose
governments supported the dominance of market mechanisms of macroeconomic
regulation. Ideally, these mechanisms should ensure capital inflows (inflows of
investments) into those sectors of the economy in which greater added value is created,
that would ensure the conditions for sustainable socio-economic growth. In particular,
this was referred to in the UN Recommendations for those countries (2013) for post-
2015 development, which justified the need to transform economies in favor of
employment and overall growth based on value added and productivity through
industrialization as the central strategy for achieving this transformation [14].
However, Mancur Olson once emphasized that, with strong lobbying, “the choice of
state support sectors can create preferences not to those who could use them most
effectively from the point of view of the interests of the country” [15]. It can be
confirmed by the fact that quite often unjustified preferences were received by
individual economic entities in Ukraine at different periods of market transformation.
Proceeding from the current political and economic realities in Ukraine, it is important
to more reasonably approach the definition of the directions for the formation of such
preferences from the point of view of improving the dynamics of overall economic
growth.
Indicating the decisive role of the state in regulating economic processes, Justin Yifu
Lin focuses on the strategic use of limited resources of the state for the targeted support
of certain industries in which a comparative advantage is probable [11]. In this, his
position coincides with the position of Michael E. Porter, who highlighted the directions
for the formation of these comparative advantages in the context of the national
economy (so-called “diamond of competitiveness”) [16]. In its composition, the
opportunities of the industrial sector, which in different countries have their structural
completeness, take on the prominent place. But most of all it creates the largest number
of jobs in it and accumulates the largest share of value added.
Supporting the necessity of developing the industrial sector in each country, Justin
Yifu Lin noted that “specific political levers and the institutional framework for
generating of optimal industrial policy results” should be defined in appropriate
contexts [29, p. 9]. Depending on the tasks to be solved in the course of structural
changes in the national economy, as well as on the institutional characteristics of the
economic environment, different forces and vectors of leverage should be chosen that
will form the economic basis of the regulatory mechanism. In our opinion, the vectors
and levers of influence should deal primarily with investment processes and form from
the standpoint of the value of investments in certain areas of economic activity for the
national economy as a whole.
Despite the variety of such tools, in their totality a significant place is given to those
that are aimed at intensifying entrepreneurial activity, especially in areas where large
industrial corporations do not see the opportunity to expand mass production,
competing with their own kind. It is obvious that in order to maintain the sustainable
development of Ukraine’s economy in the global economic crisis context, it is
148
important to prevent further degradation of those areas of economic activity that are
potentially capable for increasing the country’s production and economic potential. At
the same time, the defining emphasis in the regulatory mechanism formation should be
its tools and levers general focus on increasing the national economic system ability to
compete in the global market.
It is obvious that this ability is formed through the results of the most productive and
powerful businesses, able to choose the right strategy and tactics of behavior in the
market segment, which they define as promising. And the activities are not so much
disparate as integrated, when less powerful participants are involved in business
processes.
This approach to development management for economic growth fits, on the one
hand, into the concept of sustainable development (in the sense of continuity and
complementarity of change processes), and on the other hand it relies on the resource
concept (which is most fully formulated by Birger Wernerfelt [31]). and the theory of
the firm (conceptually formulated by Ronald H. Coase [4], and expanded by Oliver E.
Williamson [32], taking into account the specifics of integration processes between the
owners of different types of resources).
Investigating the integration processes motives Tatiana Kolmykova, Olena
Lukianykhina, Nataliia Baistriuchenko and Vadym Lukianykhin [8] emphasize that
integration expands the participants’ resource capabilities and it improves their ability
to effective innovation activity and contributes to the national economy innovative
development. At the same time, Viktoriia Dergachova and Tetiana Tryhlib [5] point to
the necessity of a strategic analysis of the integration different vectors prospects based
on the all participants competitive advantages in the integration formation. Similar
positions are held by Vitalina Babenko et al [2], who used methods of economic and
mathematical modeling to develop forecasts of the economic entities’ integration
effectiveness in different scenarios.
It is obvious that the greater number of market participants working in mutually
beneficial cooperation for the result, the more important role the business processes
integrator should play in their spatial and temporal structuring. After all, he will be the
initiator of the innovation and investment project, taking on all its risks and rules of the
relevant regulatory mechanism. Moreover, his interests will dominate in the “economic
growth points” selection and the integrated partner network formation. However, to
ensure overall economic growth, these interests should not run counter to the national,
in particular, not to increase the scale of Ukraine’s exports raw material specialization.
So, the expediency of state support for economic entities innovative development
investment projects should be assessed both from a macroeconomic point of view (for
these processes effective management in the intersectoral context and taking into
account national interests in the implementation of the Association Agreement with the
EU) and economic interests market participants (micro level) because this is what
determines their strategic choice.
The purpose of the paper is to determine the investment priorities of structural and
technological changes in the Ukrainian economy in the context of the implementation
of the sustainable development concept.
149
2 Research methodology
By the methods of logical analysis it has been argued the need of investment priorities
argumentation of the national economy development according to the industry-specific
based on synthetic indexes which are characterize the financial and economic dynamics
of the industry enterprises in terms of their components of liquidity, debt management,
productivity, profitability and changes in sales volumes and added value.
The method TOPSIS (Technique for Order Preference by Similarity to an Ideal
Solution) has been used for determination the relative deviation from the benchmark
by the groups of synthetic indexes of food industry enterprises activity from different
sub-sectors. The weighting coefficients of group indexes were determined using the
CRITIC (Criteria Importance Through Intercriteria Correlation) method.
Methods of economic-statistical and comparative analysis were used for structural
and dynamic characteristics of the Ukraine industrial enterprises activities. Graphic
modeling methods have been used to visualize the process of building the business
structures resource potential on the basis of their strategic partnership. The influence of
the motivational environment on the value of organizational relations within the
partnership has been formalized.
3 Results
3.1 Substantiation of priority directions of Ukraine`s economy
industrial sector enterprises development investment
The great amount of losses of national economies from the permanent world financial
and economic crises and the further aggravation of geo-economic contradictions
between countries of the world economy for markets and resources forced to raise again
the question of the effectiveness of market mechanisms for ensuring the
competitiveness and sustainable development of the national economy as a coherent
economic system. Unfortunately, the realities are that national interests are increasingly
giving way to the interests of global economic players, which are powerful
multinational companies. This confirms the thesis of I. Wallerstein that the
development of the global economy is most likely to take place according to the
scenario of “fake transformation, superficial transformation” of national economies,
whose purpose is “the inviolability of the existing inequality” in the global economic
space, because this is in line with interests of the world economy leaders [30, p. 45].
In Ukraine, structural processes in the economy also develop according to the
scenario of “fake transformation” in the interests of global economic players. They are
interested primarily in expanding its resource base and markets. The main scopes of
direct foreign investment are directed in the relevant industries. According to our
calculations (made on the basis of official statistics), in the last 5 years only 1.7–2.5 %
of the total volume of capital investments is directed into the machine-building
industry, which among other industrial sectors should be able to create the largest
volumes of value added. In the food industry, which increases the degree of processing
150
of agricultural raw materials (creates value added within Ukraine) it is only 4.21–
6.15 % ((table 1, built on data [27]).
Table 1. The structure of capital investment in the industrial sector of Ukraine’s economy.
Years
Indicator
2014 2015 2016 2017 2018 2019
Total capital investment, UAH billion: 219.4 273.1 359.2 448.5 578.7 624.0
Investments in the processing industry in general:
42.5 46.2 62.2 73.9 100.9 105.9
– volume, billion UAH
– part, % 19.37 16.92 17.32 16.48 17.44 16.97
to the machine-building industry;
5.5 6.3 7.6 10.3 12.5 11.0
– volume, billion UAH.
– part in the total CI, % 2.50 2.30 2.13 2.30 2.16 1.76
to the food industry:
13.5 13.5 21.3 18.9 30.2 31.9
– volume, billion UAH
– part in the total CI, % 6.15 4.94 5.93 4.21 5.22 5.11
As can be seen from the above data, the dynamics of investment processes in key
sectors of the processing industry can not be called such that corresponds the
requirements of the national economy sustainable development. Although in absolute
terms the volume of capital investment during the study period was constantly growing,
the part of investment to the manufacturing decreased from 19.37 % in 2014 to 16.97 %
in 2019. And the most noticeable was the investment decrease to the machine-building
industry, it was less than 2 % of the total their volume. In 2019 part of investments to
the food industry also decreased – by 5.11 % against 5.22 % in the previous year. And
compared to 2014 (6.15%) this decrease is even more significant.
At the same time, capital investments to the agricultural production for 5 years
ranged from 8.6 to 14.3% of their total volume. That means that investors in Ukraine
prefer the development of this industry, rather than processing enterprises. With such
dynamics of investment processes, Ukraine loses the opportunity to move away from
its raw material orientation. This is logical in terms of investment return – the
profitability of agricultural production operating activities is much higher than in the
food industry (fig. 1, built on data [28]).
However, while maintaining such dynamics of investment processes, Ukraine loses
the opportunity to move away from its raw material orientation. E. Reinert, well-known
expert on economic growth, stressed that all rich countries, without exception, became
rich in the same way, based on a common strategy for all of them, which is to abandon
the raw material orientation of production and exports in favor of manufacturing [18].
After all, this provides a significant increase part of value added in the gross domestic
product structure.
It should be emphasized that the development of the food industry should be one of
the priorities in Ukraine. Being equipped with the latest technology, it will be the
leading link in the chain of creation of consumer values, increasing the value added in
the processing of agricultural raw materials of domestic origin. Processing enterprises
of the food industry can combine the economic entities of the national economy
involved in the whole process of food production in the interval “from raw materials to
151
the final consumer”. As the main integrators of the promotion of products to the foreign
market, they will contribute to an increase in domestic commodity circulation in
Ukrainian agriculture and an increase in external demand for high-quality food
products.
45
40
32.4
Level of profitability, %
35 41.7
30
23.2 22.4
25 21.7 20.6
18.3
20
15 11.3
10 6.4
4.2 5.1 5.1 4.9
3 2.8
5 6.1
0
2011 2012 2013 2014 2015 2016 2017 2018
Manufacture of food products, beverages and tobacco
Agriculture, forestry and fisheries
Fig. 1. Comparative dynamics of Ukraine’s enterprises operating activity profitability in the
spheres of agricultural products production and processing.
Obviously, in order to ensure sustainable economic dynamism, Ukraine must develop
its industrial sector by creating new jobs with attractive working conditions. However,
the formation of institutional preferences for activating investment processes in
industry should be made taking into account the potential ability of enterprises of each
branch group to increase the value added, and also to be competitive in the strategic
perspective.
Therefore, the determination of the priority and investment attractiveness of the
national economy sectors is possible only with the determination of their dynamics and
developmental capacity, which is determined by a number of relative performance
indicators in international business practice and is duplicated in aggregate statistical
state surveys based on the financial statements of enterprises grouped according to
sectoral characteristics and value added. The grouping and the procedure for calculating
these indicators are given in table 2 [22].
On the basis of grouped indicators, first of all, it is necessary to determine the
synthetic indicator of economic and financial efficiency of the national economy of
Ukraine in terms of the opportunities for the development of a particular industry that
can be ensured by the TOPSIS (Technique for Order Preference by Similarity to an
Ideal Solution) method [17; 10] taking into account the following steps:
─ definition of the hierarchical structure of the multicriteria problem of the levels of
the national economy development;
─ normalization of the values of economic and financial indicators;
─ substantiation of criteria and features of financial and economic indicators on the
basis of assigning weighting coefficients to them using the СRITIC (Criterion
Importance Through Intercriteria Correlation) method [1];
152
─ determination of the synthetic measures for economic and financial efficiency using
the TOPSIS method.
─ linear ordering of the national economy branches.
Table 2. Indicators of evaluation of economic and financial situation.
Indicator Calculation procedure
Group of financial liquidity
Current liquidity Current assets / current liabilities
Instant liquidity [Current assets – stocks – accrual] / current liabilities
Cash flow Short-term investments / Current liabilities
Debt burden and the ability to service it
Total debt obligation Commitments and provisions for liabilities / assets
Commitment by tangible assets Fixed assets / long-term liabilities
Coverage of liabilities with financial
[Operating profit + depreciation] / total liabilities
surplus
Coverage of interest with operating profit Operating profit / interest
Productivity
Total turnover of assets Revenue / asset summary
Productivity of operating assets Gross value added / operational assets
Productivity of fixed assets Gross value added / fixed assets
Labor efficiency Gross value added / number of employees
Cost Index Operating expenses / operating income
Profitability
Operational Operating profit × 100 / operating income
[Operating profit + depreciation] × 100 / operating
Operating assets
assets
Invested capital Operating profit × 100 / invested capital
ROA (Return on Assets) (Net profit / average assets) 100
ROE (Return on Equity) (Net profit / average annual amount of equity) 100
The dynamics of change
Revenue from sales (Revenuet – Revenuet-1)100/ Revenuet-1
Gross value added (Value addedt – Value addedt-1)100/ Value added аt-1
At the stage of formation of the hierarchical structure of the evaluation multicriteria
task, the following elements are considered: the main criterion of evaluation, the
subcriteria, features and objects of evaluation. The main criterion is positioned at the
highest level of the hierarchy and contains several subcriteria (individual criteria
contain features that describe the objects of evaluation) [10]. Peculiarities create
features of development levels of objects, that is, branches of the national economy.
The choice of characteristics of the economic and financial state of the industries is
based on objective and statistical analysis, and in order to exclude highly correlated
features, the matrix analysis of the inverse correlation R-1 is provided (in the case of
excessive correlation of certain features relative to other features, the diagonal elements
of the matrix R-1 will exceed the unit that will be detected in bad numerical
conditionality of the matrix R [10].
153
The value K of economic-financial characteristics for N of statistical units (branches
of economy), established on the basis of objective and statistical analysis, are
summarized in the matrix of dimensional data (N × K):
х х ... х
х х ... х
Х= ... ... ... ... , (1)
х х ... х
where xij (i = 1, ..., N), (j = 1, ..., K) іndicates the value of the jth feature in the ith
statistical unit.
At the second stage, the normalization of functions is ensured in order to combine
them into numeric ranges, and different approaches are used for that [10]. In our case,
it is expedient to use the linear normalization approach – zeroed unitarization – by
means of which one can compare the stimulator and the disintegrator on the basis of a
single dimensionality using transformation formulas:
{ }
= (stimulator); (2)
{ } { }
{ }
= (destimulator); (3)
{ } { }
Nominals:
х { }
= , ≤ { } (4)
{ } { }
оr
{ }
= , ≤ { } (5)
{ } { }
Converted values of zij features are normalized in the interval ⟨0,1⟩.
The third stage is devoted to the formation of weighting coefficients for economic
and financial indicators using the CRITIC method [1], presented in the form of
= , ,... .
Weighting factors in this specified method are determined taking into account the
standard deviation of each of the characteristics and coefficients of correlation between
the features, and their vectority is as
= ⁄∑ = 1, = 1,2, . . . , (6)
follows:
= ( )∑ (1 − ), = 1,2, . . . , (7)
where: sj(z) – standard deviation, calculated for the normalized values of the jth feature;
rjk – correlation coefficient between jth and kth features, for which ∑ = 1.
154
In the future, the product of the normalized values of the features is determined by
weight coefficients:
∗
= , = 1,2, . . . , , = 1,2, . . . , . (8)
At the fourth stage, we use a reference method for determining the value of the synthetic
feature using the classical TOPSIS method for calculating the Euclidean distance to
each object of the model:
• development
: =( ( ∗ ), ( ∗ ), . . . , ( ∗ )) = ( , ,..., ); (9)
• antidevelopment
: =( ( ∗ ), ( ∗ ), . . . , ( ∗ )) = ( , ,..., ) (10)
In the case of zeroed unitarization we will receive:
= 1,1, . . . ,1 or = 0,0, . . . ,0 (11)
К К
After defining an example of development and anti-development, the Euclidean
distances of each unit of evaluation will be calculated as follows:
• development
: = ∑ ( − ) (12)
• antidevelopment
: = ∑ ( − ) (13)
The next step is to calculate the synthetic function value Si:
= ,0 ≤ ≤ 1, ( = 1,2, . . . , ). (14)
The smaller the distance of the desired unit from the developmental standard and,
accordingly, farther from anti-development, the closer to 1 will be the significance of
the synthetic function.
At the final stage, it is proposed to rank the branches of the national economy in
accordance with the calculated synthetic values of economic and financial efficiency.
The multidimensional analysis of sub-sectors of the food industry sectors of Ukraine
was carried out in accordance with the described methodology. In the State Classifier
of Products and Services SC 016-2010 [25], the food industry is included in the section
C (processing industry) and includes enterprises producing goods under codes 10 and
11.
155
Based on the data of the State Statistics Committee [26], the interim calculation of
TOPSIS synthetic indicators for the food industry of Ukraine by the formed five groups
(see table 1) was carried out for 2 sub-periods: years of 2013-2015 and 2016-2018.
Output results made it possible to specify seven groups of food producers that differ in
terms of financial liquidity, debt load and maintenance, productivity, profitability, and
dynamics of changes determined by intervals. The results of synthetic TOPSIS values
and real values form separate clusters that are subject to cluster analysis. It was
conducted taking into account individual concentrations (clusters) during the indicated
periods. The results of cluster analysis are presented in tables 3 and 4 [22].
Table 3. Ukrainian food industry clusters according to the resalts of calculation synthetic
indexes.
Clusters
Indicator Medium
1 2 3 4 5 6 7
Current liquidity 1.15 1.41 1.44 1.16 1.31 1.2 2.5 1.36
Instant liquidity 0.84 0.95 0.91 0.64 0.72 0.87 1.68 0.88
Cash flow 0.19 0.25 0.17 0.07 0.13 0.16 0.83 0.2
Synthetic, S1 0.39 0.39 0.34 0.31 0.29 0.39 0.51 0.36
Total debt obligation 0.54 0.43 0.43 0.63 0.57 0.47 0.29 0.49
Commitment by tangible assets 4.07 6.25 5.67 4.39 3.88 5.94 14.79 5.56
Coverage of liabilities with
5.62 10.59 6.29 3.68 2.73 15.11 70.17 10.46
financial surplus
Coverage of interest with
0.22 0.38 0.27 0.15 0.14 0.48 0.38 0.28
operating profit
Synthetic, S2 0.31 0.45 0.40 0.23 0.26 0.47 0.56 0.36
Total turnover of assets 2.51 1.6 1.43 1.68 1.48 1.86 1.38 1.75
Productivity of operating assets 0.45 0.53 0.4 0.31 0.28 0.73 0.53 0.44
Productivity of fixed assets 0.81 0.9 0.81 0.70 0.71 1.26 1.08 0.87
Labor efficiency 88.98 120.43 119.26 110.97 117.45 219.16 139.98 124.04
Synthetic, S3 0.34 0.35 0.27 0.24 0.21 0.51 0.34 0.31
Operational 3.25 7.90 5.52 3.99 3.39 9.67 5.84 5.47
Operating assets 11.91 18.40 11.46 7.16 6.22 31 10.13 13.53
Invested capital 5.16 9.79 6.21 3.66 2.59 15.08 6.8 6.79
ROA (Return on Assets) 15.77 21.79 15.1 11.82 10.72 29.63 17.11 17.06
ROE (Return on Equity) 12.88 18.99 11.8 10.47 7.25 30.68 13.68 14.61
Synthetic, S4 0.38 0.54 0.44 0.34 0.31 0.7 0.43 0.43
Revenue from sales 5.93 4.53 2.2 16.61 - 2.5 7.7 -9.9 5.04
Gross value added 6.94 4.27 6.5 14.9 -3.23 6.25 -9.6 4.94
Synthetic, S5 0.42 0.42 0.42 0.5 0.36 0.42 0.3 0.42
The general synthetic indicator
0.37 0.42 0.36 0.32 0.29 0.49 0.42 0.36
of the food industry
With the change of the time period of research for 2013-2018 compared to the time
period of 2012-2017, the distribution of food industries by clusters did not change, but
the overall synthetic indicators in each of the clusters deteriorated slightly. First of all,
the situation is explained by the unfavorable situation with the export of traditional
finished products of the food industry and its compliance with international quality
systems, as well as - high interest rates on enterprise lending.
156
Table 4. Cluster positioning of the Ukrainian foods industry subsectors.
Years/ 2015-2017
clusters 1 2 3 4 5 6 7 Together
10.1; 10.12
1 11.07 11.01 6
10.13; 10.51
2 10.91 10.72 10.89 10.52; 10.71 5
10.61;
10.86;
3 10.82; 10.42 6
2012-2014
10.73
10.83
10.20;
4 10.41; 10.39 4
10.85
5 10.81 11.02 10.32; 11.03 4
6 10.84; 11.05 2
7 10.31 1
Together 5 5 5 3 4 4 2 28
Sub-sectors of the food industry belonging to the first cluster (10.11–10.13 – canned
meat and meat products, 10.51 – dairy and cheese products, 11.07 – soft drinks, bottled
mineral water, 11.01 – alcoholic beverages, distilled, 10.91 – feed products for farm
animals) have an average level of efficiency, which is confirmed by a general synthetic
index with a value of 0.38. In general, the indicators influencing its final value were
characterized by higher (compared with the average in the industry) levels of liquidity
and debt, but lower than the average industry profitability and yield. In general, the sub-
sector of this cluster needs external sources of investment more than other enterprises
of the food industry of Ukraine.
The cluster’s fullness varied across different time segments by enterprises of various
sub-sectors (during 2013-2015: 10.11–10.13, 10.51, 11.07 and 11.01, during 2016-
2018: 10.11–10.13, 10.51, 10.91). The cluster 2 unites enterprises of sub-sectors with
a high level of synthetic index – 0.42, which is affected by low debt levels and high
profitability. Sub-sectors of this segment have a high level of return and are attractive
both for domestic and foreign investment.
However, the subfield format has changed somewhat during the study period. In
2013-2015 it consisted of: 10.91 – food products for livestock, 10.71 and 10.72 – low-
moisture bakery products and flour confectionery products, of long-term and short-term
storage, 10.89 – other foodstuffs, 10.52 – ice cream. During the years of 2016-2018:
11.07 – soft drinks, bottled mineral water, 10.72 – bakery products, low humidity,
confectionery, flour, long-term storage, 10.73 – macaroni, noodles, couscous and
similar flour products, 10.81 – sugar.
The cluster group 3 is coherent in its overall level of synthetic indicator of financial
and economic efficiency to cluster number 1 (0.37), but the components of such a result
differ by the lower level of indicators of liquidity and debt servicing. At the same time,
this cluster is characterized by an average level of profitability and a high level of
growth in sales and value added, which forms attractive prospects for long-term
investment in this direction of food production. The unchanging core of the group
consists of the following enterprises: 10.61 – products of the milling industry, 10.82 –
157
cocoa products, chocolate and sugar confectionery, 10.89 – tea and coffee, processed.
During the period of 2013-2015, the group 10.86 was updated with ready-made food
products homogenized for children’s and dietary foods, 10.73 – macaroni, noodles,
couscous and similar flour products, 10.42 – margarine and similar edible fats, and in
2016–2018 they were changed in the sub-sector 10.89 with other food products, 11.02
– grape wines.
The cluster group number 4 combines enterprises with a low level of total synthetic
index (0.32) – low liquidity, profitability and high level of indebtedness compared to
other branches of the food industry. However, these sub-sectors show a high positive
dynamics of sales volumes and value added. This points to their investment
attractiveness but not only in increasing their production capacity, but also in their
technological upgrading, which will increase their operating profitability or cost-
competitiveness. Invariably the group during 2013–2018 includes: 10.20 – fish,
crustaceans and shellfish products, processed and preserved, 10.41 – oils and fats, 10.85
– food sets and prepared meals.
The cluster number 5 is characterized by the lowest level of synthetic indicator in
the food industry (0.29), which is determined by the lowest rates of practically all
components of financial and economic efficiency. To this group in 2013–2015
enterprises included 4 sub-sectors: 10.81 – sugar, 11.02 – grape wines, 10.32 – fruit
and vegetable juices, 11.03 – cider and other fruit wines. In 2016–2018, positions 10.32
and 11.03 remained. The listed sub-sectors require significant investments, and in their
economic nature they are complex and unattractive for both domestic and foreign
investors.
The highest level of efficiency, as well as investment attractiveness is characterized
by the sixth group, to which during the years of 2013–2018 the following sub-sectors
of the food industry were included: 10.84 – condiments and spices, 11.05 – beer. The
total synthetic rate in the group is 0.49.
The cluster number 7 during the analyzed period was characterized by a general
synthetic efficiency indicator of 0.42, which in general exceeds the average in the food
industry as a whole. However, despite the rather high financial liquidity and low level
of indebtedness of the enterprise, the sub-sectors of this cluster practically did not show
a positive dynamics in the scopes of sales of goods and value added, that is, they were
not attractive for investment. During 2013–2018, this group included a sub-sector of
10.31 – potatoes, processed and preserved, and also in the years of 2016–2018 there
was included a sub-sector 10.42 – margarine and similar edible fats.
The obtained results allowed differentiating the food industry into groups with wide
possibilities for analysis, on the basis of which their attractiveness for investment was
determined. According to the calculations of synthetic indicators and cluster analysis,
it was determined that the most priority investment plans for the period include meat
processing, oil fat, fish processing, confectionery, milling branch and cereals, a
subsector for the production of food sets and ready-made dishes. The development of
these sub-sectors is economically profitable both from the standpoint of the owners of
capital and from the point of view of the public interest, since it will ensure the growth
of the value added within the national economy.
158
It is obvious that investment processes in the processing industry should provide not
only expanded reproduction (or simple scaling) of production systems, but above all
their radical renewal. After all, only such production technologies can provide domestic
processing enterprises with competitive advantages in the global market, where the
parity of major economic players has been established long time ago. In addition, access
to the global market is possible only if the production systems correspond to the
international quality standards, which requires the introduction of resource-saving and
environmentally friendly technologies. Therefore, certain investment priorities in the
food industry should be supported by the state if their technological component
correspond the requirements of consumer and environmental safety (HACCP
standards).
Similar calculations can be performed to identify priority areas of innovation and
investment processes in other areas of industrial activity. In addition, the key argument
in favor of choosing priority projects, which should provide investment support from
the state, should be their ability to increase not only added value but also the consumer
value of the final product. Moreover, for a long period, which will form a stable
competitive advantage for industrial producers in target market segments. Therefore,
advanced production technologies should be a mandatory component of all investment
projects in the processing industry.
Their implementation, among other things, should open wider opportunities in the
product innovations development. For the food industry, among the latest technologies
characteristics, which are preferred for inclusion in the innovation and investment
project, is waste-free (increases the product range due to the deep level of raw materials
processing). In machine-building complex this characteristic is flexibility, which in
combination with standardization provides not only the necessary conditions for
modification of prototypes and product line development for target consumers within
the selected business strategies, but also reducing the cost of readjustment if necessary
to diversify production.
Unfortunately, recent years the Ukraine`s machine-building complex enterprises are
increasingly losing markets. Not only their export potential decreases, but also their
ability to meet the needs of domestic consumers. As a result, own revenues are not
enough for the needs of modernization and technological renewal. Such conditions do
not contribute to the innovative activity of the enterprise and cause further technological
degradation and loss of competitiveness. The solution to this problem is possible
through the involvement of a strategic investor.
But the problem is that in Ukraine investment support for innovative development
projects by economic activity state regulation tools is carried out mainly for large
enterprises. However, from the standpoint of social security / stability of the state, it is
important to create favorable conditions for the development of productive economic
activities not only in the format of large-scale, but also using the advantages of small
industrial enterprises.
159
3.2 Development of innovation and investment opportunities for
industrial enterprises on the basis of strategic partnership
Small and medium-sized businesses make a significant contribution to the creation of
public goods in any country. Its main advantages are high mobility and sensitivity to
market changes. However, turnover (market share) and productivity are highest in large
enterprises. To assess the contribution of small and medium-sized businesses to the
overall results of Ukrainian enterprises economic activity (table 5, is constructed by [9,
pp. 153–157 and p. 231]; the data are given without taking into account the temporarily
occupied territories of the Crimea, and parts of Donetsk and Luhansk regions).
Table 5. Structural and dynamic indicators of Ukrainian enterprises activity.
Values of indicators by years Changes,
Indicators
2014 2015 2016 2017 2018 2018-2014
The total number of enterprises engaged in economic activity, thousands of units
In total 341.0 343.4 306.4 338.3 356.0 15.0
of them: large 0.497 0.423 0.383 0.399 0.446 -0.051
medium 15.906 15.203 14.832 14.937 16.057 0.151
small 324.598 327.814 291.15 322.92 339.37 14.772
Part of enterprises engaged in economic activity, % of the total
Large 0.1 0.1 0.1 0.1 0.1 0
Medium 4.7 4.4 4.9 4.4 4.5 -0.2
Small 95.2 95.5 95.0 95.5 95.4 0.2
The total number of operating industrial enterprises, thousands of units
In total 42.2 42.6 39.1 42.0 44.4 2.2
of them: large 0.289 0.233 0.208 0.215 0.237 -0.052
medium 4.791 4.691 4.652 4.745 4.866 0.075
small 37.107 37.640 33.695 37.066 39.322 2.215
Part of operating industrial enterprises, % of total
Large 0.7 0.6 0.5 0.5 0.5 -0.2
Medium 11.3 11.0 12.1 11.3 11.0 -0.3
Small 88.0 88.4 87.4 88.2 88.5 0.5
The total volume of products sold by enterprises, UAH billion
In total, 4170.7 5159.1 6237.5 7707.9 9206.1 5035.4
of them: by large 1742.5 2053.2 2391.4 2929.5 3515.8 1773.3
by medium 1723.1 2168.8 2668.7 3296.4 3924.1 2201
by small 705.0 937.1 1177.4 1482.0 1766.2 1061.2
Part of products sold by enterprises by their sizes, %
By large 41.8 39.8 38.3 38.0 38.2 -3.6
By medium 41.3 42.0 42.8 42.8 42.6 1.3
By small 16.9 18.2 18.9 19.2 19.2 2.3
Total volume of sold industrial products, UAH billion
In total 1546.6 1887.5 2343.0 2862.3 3302.5 1755.9
of them: by large 932.9 1078.2 1232.2 1537.3 1790.4 857.5
by medium 531.5 691.1 921.1 1092.1 1230.3 698.8
by small 82.16 118.1 152.4 188.4 227.6 145.44
Part of industrial products sold by enterprises by their sizes, %
160
Values of indicators by years Changes,
Indicators
2014 2015 2016 2017 2018 2018-2014
By large 60.3 57.1 53.4 54.6 55.1 -5.2
By medium 34.4 36.6 40.0 38.7 37.9 3.5
By small 5.3 6.3 6.6 6.7 7.0 1.7
Part of sold industrial products in the total sales of economic activity different types
enterprises, %
In total 37.1 36.6 37.6 37.1 35.9 -1.21
of them: by large 53.5 52.5 51.5 52.5 50.9 -2.61
by medium 30.8 31.9 33.4 34.4 35.4 4.55
by small 11.7 12.6 12.0 13.0 14.0 2.35
From the data given in table 5 it is seen that in the economy of Ukraine there is a steady
trend of reducing the efficiency of large industrial enterprises (if the efficiency is
understood as the sales of products and services). Thus, the part of products of medium-
sized enterprises in 2018 increased to 37.9% compared 34.4% in 2014, and small
enterprises – respectively to 7% against 5.3%. The share of industrial output of large
enterprises decreased during this period from 60.3% to 55.1%. At the same time, the
quantitative structure of enterprises of all types of economic activity of these sizes has
changed in the direction of some increase in the share of small enterprises.
In the industrial sector, the structural ratio of industrial sales changed mainly in favor
of medium-sized enterprises, while in large enterprises the dynamics of sales was
negative. Thus, in 2014, 53.5% of the total sales of products (works, services) were sold
at large enterprises, and in 2016 - only 50.9%. Conversely, in medium-sized enterprises
this part increased from 30.8% in 2014 to 35.4% in 2018. In small enterprises, the same
trend is observed – in 2014-2018, the part of industrial sales increased by 2.35 % – from
11.7 % to 14.0%.
These trends can be explained if the comparison in the same period to analyze the
dynamics of the structural relationship of enterprises of different sizes. As can be seen
from the table 1 data, the most significant changes affected large enterprises - their total
number decreased from 497 in 2014 to 383 in 2016. However, in subsequent years,
their number began to grow and in 2018 economic activity was carried out by 447 large
enterprises. This is slightly less than in 2014, but positive trends have emerged. A
similar trend can be observed in the industrial sector of the national economy – in 2018,
large industrial enterprises became 52 units less than in 2014, although in the worst, in
2016, this difference was 81 enterprises.
In small and medium-sized businesses, the number of industrial enterprises has
grown significantly in five years, although by 2016 there was a decrease in their number
– more than 3.4 thousand small industrial enterprises ceased operations this year. In the
following years, their number began to grow and in 2018 even exceeded the number of
those operating in 2014 – by 2.2 thousand units. In 2018 middle industrial enterprises
were functioned on 75 units more than in 2014.
Thus, these data indicate growth in Ukraine’s contribution of small and medium-
sized businesses in the overall performance of industrial enterprises. Using a niche
strategy, they can provide many consumer needs and create add value to a much greater
extent than large enterprises, which often function as raw materials for international
161
corporations. However, the financial results of enterprises in this sector are only 20.8%
of the total financial results of all operating enterprises [9, p. 156]. And this indicates a
much lower efficiency of small businesses than large enterprises.
Obviously, one of the classic factors of higher efficiency of large enterprises is the
larger scale of their activities, which gives economies of scale, as well as the
opportunity to choose the best competitive strategies. For small and medium-sized
enterprises, higher business efficiency can be achieved only when they do not just copy
the existing business, but choose for themselves an innovative development scenario.
However, small industrial enterprises have limited resources to implement business
development projects that could ensure its quantitative growth. These opportunities can
grow through strategic partnerships. In our opinion, such a partnership will be strategic
in the case of the formation of organizational heterarchy – a form of cooperation that
provides growth of adaptive properties of participants through a variety of forms and
methods of organizational integration. Including, due to cross-sectoral integration
processes, as shown by us in previous researches [23].
The term “heterarchy” was introduced into scientific usage by David Stark – as an
organization with horizontal or distributed power, which allows it to self-organize. He
emphasized that the ability to adapt is stimulated by the organization of diversity within
the enterprise – when different organizational principles coexist in a state of active
competition within one enterprise. This ensures the development of constructive
organizational reflectivity and allows for recombination of resources, recombination of
old organizational forms of economic interaction into a new organizational structure
with high adaptive properties [24, p. 119].
Describing the features of organizational interaction in the hierarchy, Stark
emphasized that this is a new way of organization, which is neither market nor
hierarchical. If hierarchies are based on relations of dependence, and the market is based
on relations of independence, then hierarchy is based on relations of interdependence.
These relations are characterized by a minimum degree of hierarchy and organizational
heterogeneity [24, p. 120–121]. Michael T. Hannan also argued that “the ability to adapt
is stimulated by the diversity of organizations: a system that has a greater variety of
organizational forms is more likely to find a satisfactory solution in the event of changes
in external conditions [6].
Strategic partnership is now increasingly recognized as a successful alternative to
market competition of small businesses. The organizational development of such
partnership is carried out on the principle of competence and resource complementarity
in order to maximize the objective function. Through the development of partnerships,
it is possible to enhance mutually the resource potential of all participants in the
partnership, expanding the ability of competitive business strategies choice.
The key role in determining the direction of enhancing the participants’ innovative
potential in such a partnership should be played by the producer of the final products –
in fact it is in direct contact with the market and it develop the concept of new products
in line with the trends of scientific and technological progress.
The solution to these problems belongs to the sphere of marketing and requires
adequate information and analytical support. It is advisable to justify and make
appropriate decisions by actively interacting with existing/potential partners, involving
162
them in mutually agreed organizational or technological changes. This is shown
schematically in fig. 2.
Fig. 2. The model of the enterprise competitive business strategy selection considering the
resource potential increasing possibility on the basis of strategic partnership.
Integrated business structures incentives-preferences in the field of innovation need
should be formed not only in the organizational space of an individual enterprise, but
also in the context of innovative development of all partners – if such a partnership is
163
considered as strategic. To do this, we recommend to developed the motivational
potential of engagement marketing, which is based on maintaining the partnerships
value.
Communication marketing interaction system will ensure the rapid exchange of
information between the participants of the strategic partnership in relation with
common goals and strategies, which may also be related to various aspects of
innovative potential realizing. It will create favorable conditions for active and effective
innovation activity and achievement of the goals set in each strategic period. This also
applies to the structural and functional development of the innovation potential of the
enterprise – the filling of structural elements with new competences, taking into account
the specifics of the selected business strategies.
In the strategic partnership of business structures, it is necessary to cultivate such
relationships that form a system of trust. In this case, the partners evaluate positively
each other’s actions in the process of choosing the directions and scale of organizational
change, without looking for threats to their own security. This will eliminate the causes
of opportunistic behavior of partners, develop cooperation and mutual support in
identifying and solving new problems.
It is extremely important that the integrated business structures participants clearly
understand the common benefits, so the value of the strategic partnership. It is advisable
to determine the expected value from the development of partnerships by means of the
integral efficiency index in cases of interval uncertainty based on the criterion of
optimism-pessimism of Leonid Hurwicz – provided that the value of managing these
relations is to obtain the potential benefit from increasing the resource potential.
Е = { × ( ) + (1 − )× ( )}, (15)
where Eik – expected integral efficiency of one enterprise relative to others, which
determines the value of relationships in the affiliate network; { ( )},
{ ( )} – the maximum and minimum value of the function belonging to the ith
set of a linguistic variable values; ui – is a generalized value of the individual dynamics
index of each partner in the affiliate network, taking into account the ith set of the
linguistic variable values; dsi – is the average interval value of the E. Harrington scale
of dominance estimation, taking into account the ith set of the linguistic variable values.
In the organizational space of strategic partnership forms an organizational
heterarchy, it expands the possibilities of generating innovative ideas that can give a
new impulse to business development. Due to the production of new knowledge,
creation of new products and technologies that develop social needs, integrated into the
partnership business structures move from a predominantly adaptive scenario of
behavior in the market to proactive, maintaining and increasing their competitiveness.
4 Conclusions
Defining strategic priorities for the national economy development is an important
element in the formation of state economic policy, the regulatory instruments of which
(institutions) should create a motivational environment for overall economic growth. In
164
the set of such tools, an important role is played by those that regulate innovation and
investment processes in terms of economic activities and sectoral specialization of
economic entities. The paper substantiates that for the national economy sustainable
development it is advisable to provide institutional support for investment in those
sectors that can provide a high level of added value in the creation of consumer values
in strategic perspective. It is also substantiated that it is expedient to use TOPSIS and
CRITIC methods to assess investment priorities.
Substantiation of innovation and investment support strategic priorities for the
Ukraine’s economy industrial sector development was carried out on the example of
the food industry, which can significantly increase the total value added, using the
agricultural production potential. It covers different sub-sectoral groups in terms of
consumer purpose and technological equipment, which determines their different
financial and economic performance, and hence different investment prospects.
According to the calculations of synthetic indicators and cluster analysis, it was
determined that the most priority investment plans for the period include meat
processing, oil fat, fish processing, confectionery, milling branch and cereals, a
subsector for the production of food sets and ready-made dishes. The development of
these sub-sectors is economically profitable both from the standpoint of the owners of
capital and from the public interest point of view, since it will ensure the growth of the
value added within the national economy.
It has been noted that in the formation of state economic policy it is advisable to
differentiate approaches to the creation of investment preferences for attraction of
strategic investors. In particular, such preferences should be defined for the
development of the food industry in the context of those sub-sectors that correspond to
the dynamics of food markets in Ukraine and increase the opportunities for entry into
the European Union market.
Given that innovation processes should also cover small and medium-sized
industrial enterprises, whose resource opportunities are mostly limited, it is proposed
to expand them within the framework of a strategic partnership. It has been defined the
organizational features of such partnership, which is characterized by a blurred
hierarchy (heterarchy) and rivalry of organizational principles, which forms the
motivational basis for improving the processes of creating consumer values. A graphic
model of choosing a competitive business strategy has been built, taking into account
the possibility of resource potential building on the basis of strategic partnership. It has
been formulated and formalized the author’s position on improving the motivational
environment of participants in innovation processes in a strategic partnership through
monitoring the value of partnerships.
The developed recommendations can be used to expand the directions and methods
of the national economy industrial sectors business structures organizational interaction
within the plans of strategic partnerships building for the competitive business
strategies implementation.
165
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