This paper analyzes the problems related to the lack of adjustment in the Russian economy to the growing importance of knowledge for economic performance and industrial modernization. Three periods are observed. The first (1985–“1990), known as perestroika, was marked by a substantial reduction in political considerations in business management and university curriculum. Firms focused mainly on saving workers’ collectives rather than on industrial modernization. Meanwhile, the universities were focused on monetizing rather than conducting research. The second period (1991-1999) was characterized by economic liberalization, the concentration of national resources in oligarchic hands, and outflows of capital and of scientists. As a result, publicly-financed research was destabilized and much attention was paid to the creation of funding mechanisms that provide incentives to competition rather than to collaboration. The third period, since which began in 2000, has focused on the financial recovery of national firms and on increasing state incentives for national innovation projects. JEL codes: L21, O31, P52