Import Substitution of IT in Russia: Analysis of the Impact of Factors on Profitability of Information Technology Companies

As a consequence of the political instability and sanctions imposed on Russia since 2014, which have been expanding since 2022, a problem has arisen in the procurement and application of imported software. This has led to the necessity of developing the market for the creation of proprietary software and supporting domestic IT manufacturers in order to achieve independence from IT products produced in other countries. Therefore, it was essential to assess how domestic companies cope with this situation and what factors influence their financial performance. Our research question is: «What factors in the context of import substitution of information technologies have influenced the profitability of IT companies?». The central objective of this research paper is to identify factors impacting the profitability of IT sector companies in Russia. The study collected data on 142 largest companies from the IT sector over the period from 2016 to 2023, some of which are listed in the Russian software register. This study uses three main panel data analysis models: the pooled model, the fixed effects model, and the random effects model, followed by pairwise comparison of these models. For conducting regression analysis the best model was selected to identify the dependence of company profit on the influencing factors considered in the study. The study revealed a correlation between the profitability of IT companies, their age, company size, level of digitalization, staff costs, inclusion in the unified register of Russian software, and government support.