The puzzle that drove my curiosity to pursue this research project is how the Soviet Union was able to industrialise in the absence of intellectual property, while Russia fails to re-industrialise despite adopting strong intellectual property rights that are presumably better served to promote innovation. To understand this puzzle, I analysed Russia’s 100-year history of institutional experiments with legal forms, incentives, and organisational structures in search of an optimal system of knowledge production and diffusion. In this work, I relied on theories of historical institutionalism, national innovation systems, history of science, and legal transplants. I also conducted case studies in the pharmaceutical and information technology industries. In addition to traditional legal, scholarly, and statistical sources, the study was enriched by more than 40 semi-structured interviews with key experts working for the government, universities, and industry. My original contribution to knowledge is a new understanding of how global intellectual property legal transplants, originating from the WTO TRIPS Agreement, altered the regulatory design of the Russian innovation system by re-shaping its open knowledge-sharing principles and esteem-driven incentives. This re-shaping was not a matter of careful architectural design but rather an exogenous shock that contributed to the system’s fragmentation while creating opportunities for extractive groups of interests to maintain their status quo. Ultimately, my research shows that for Russia, institutional mismatch leads to lost opportunities to escape from ‘the resource curse’ and to diversify its economy. The Russian case is not simply a story of institutional decline, it is also a story of new informal rule of the game evolving in which new networks are steering Russia’s approach to innovation. Russia’s desire to regain the pride of being a knowledge-rich society is being mediated by new networks of influence over Russia’s high technology sectors.