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Innovations are essential for international competitiveness. In this research study, we analyze factors that affect the involvement of Russian firms in the innovation process. Our objective is to find out which factors on a regional level are the most important for innovative activity, that would allow for improving the innovation policy. We overview the main groups of factors that were considered to be significantly affecting innovations. We then proceed to analyze the regional-level data, and classify the Russian regions into three groups based on set of their characteristics. Our results suggest that currently the most important external determinants of innovation propensity for the Russian regions are the share of organizations that carried out scientific research, FDI, appropriate infrastructure and the quality of human capital. It implies that the innovation policy should focus mainly on these indicators. We also found substantial differences between regional groups, both in significance of the considered indicators and in their power. Based on the results, we propose several policy recommendations that would facilitate innovation activities of the Russian regions

ECONOMETRIC MODELING OF EXTERNAL FACTORS INFLUENCE ON INNOVATION ACTIVITY IN THE CASE OF REGIONAL HETEROGENEITY IN RUSSIA