System Modernization of Domestic Enterprises: Theoretical Background, Motives, Principles

This article covers the basic principles and methodological, economic and mathematical tools for solving the problem of modernization of Russian enterprises. The paper shows that the solution of this problem affects a wide range of topical issues of the modern economic science: effective structuring of the socio-economic aspect of society; concepts and definitions of ‘enterprise’; theory of the firm; theory of production functions and associated models; methods of organization and of the evolution management of the development of the economy at the micro level. The article proposes the concept of the enterprise as a system of institutional and organizational, social and labour, property and technological, business and model sectors interacting both among themselves and with the authorities, population, economic and business structures of regional and federal levels. This concept allows not only formulating a correct definition of the ‘enterprise’ concept, but also indicating the ways of the implementation of enterprise modernization projects. The concept of system modernization as a method of the transformation of economic entities, occupying an intermediate position between the administrative modernization and organic evolution has been developed. The author classifies the risks and advantages of both methods of transformation. The resource-based and competence-based theory of the firm highlighting the interaction of enterprise resources with its capabilities (ambitions, aspirations, competencies) can be the basis for describing the functioning of the enterprise under modernization. The nonconformity of the amount of resources to the level of capabilities of the enterprise is a powerful stimulus of its transformation. The article has developed a small-size model of the functioning of an enterprise under modernization, including the resource-based and competence-based production function, as well as the functions of costs, dynamics of resources and capabilities of the firm. The author presents the key elements of the strategy of the massive modernization of enterprises at the regional and federal levels