Impact of formal and informal institutions on innovative economic development

Formal institutions are important elements of the institutional structure of the national innovation system. The development of legislative regulation of the Russian innovation system fits within the framework of the administrative state evolution: the growth of the scope of regulation is accompanied by an increase in the number of laws and by-laws. Although the dynamism of formal institutions is an essential condition for adapting to changing environment, it also increases uncertainty and therefore has a negative impact on actors. The analysis of the functioning of formal institutions can be conducted from two perspectives: deductive and inductive. The deductive approach is based on the analysis of the legislative regulation-associated costs and is close to the new institutional economics tradition. The inductive approach, which is used in this paper, follows original institutionalism and narrative economics scholarly tradition. The following problems associated with the functioning of formal institutions have been highlighted in the analysis of narratives about the Russian innovation system: the lack of the necessary legislation, non-complementarity and inconsistency of laws and by-laws, the imperfection of existing legislation, lack of real support for innovations in the formal creation of relevant legal acts, funds and organizations, etc. An econometric modeling of formal and informal institutions influence on the innovative development of the economy has been carried out. Significant variables have been identified including the general indicators of formal institutions and social capital. It leads to the conclusion that the improvement of formal institutions is necessary for the innovative activity development, and high social capital contributes to building trust and, therefore, promotes knowledge sharing and cooperation, which are crucial for innovation initiation.