Innovation Policy in Estonia

Marika Popp

Ministry of Economic Affairs andCommunications for Estonia

Technology and InnovationDivision

Global Education: Universities inthe 21st Century

6 July, 2006

Agenda

- The European context

- Activities and developments up to now

- Main challenges and weaknesses

- Strategic lines of actions in the new Knowledge-basedEstonia 2007-2013

The European context 1: Lisbon & beyond

Shift towards more sophisticated target setting:

– Recognising need to optimise policy mix per Member State (perregion in larger countries);

– Taking better account of baseline R&D capacities and priorities ineach Member State;

– Acknowledging differences in innovation drivers and processes ofkey business sectors.

– Aiming at critical mass by integration of research and innovationeffort via EU wide technology platforms and transnational co-operation.

The European context 2: Lisbon & beyond

At EU level pledge to develop a ‘common approach’ for research andinnovation. Addressing:

– “the full research and innovation spectrum, including non-technological innovation”.

October 2005 Commission Communication argued for “strengthening thelinks between research and innovation”, with:

– research policy focusing more on developing new knowledgeand its applications and the framework conditions for research;and

– innovation policy focusing on transforming knowledge intoeconomic value and commercial success”.

EstonianEstonian R&D&R&D&I governance systemI governance system

Policydesign

Programmedesign

Programmeadministra-tion

Projects

Innovation Policy Commission R&D Policy Commission

Ministry of Economic Affairsand Communications

Enterprise Estonia KREDEX

Science Competence Council

Science Foundation

UniversitiesR&D InstitutesFirms

Competence Centres VC

Academy of Sciences

Archimedes Foundation

Ministry of Education andResearch

Government

Parliament

R&D Policy Council

Policydesign

Programmedesign

Programmeadministra-tion

Projects

Innovation Policy Commission R&D Policy Commission

Ministry of Economic Affairsand Communications

Enterprise Estonia KREDEX

Science Competence Council

Science Foundation

UniversitiesRD InstitutesEnterprises

Academy of Sciences

Archimedes Foundation

Ministry of Education andResearch

Government

Parliament

R&D Policy Council

Policy framework

Objectives set out in Knowledge Based Estonia 2002-2006:

Updating pool of knowledge, focus on three technology areas Increasing the competitiveness of industry, main precondition –

integration mechanisms between research and industry

Main targets related to:

Increasing level of expenditure on R&D, notably business expenditure Better balance between basic and applied research activities

Selected results 2002-2006

Improved R&D financing governance

More effective doctoral studies system

Centres of Excellence and Technology Competence Centres

Increased R&D capacities of enterprises

New investments into R&D infrastructure

Support for commercialisation of research results

Increase of human resources at innovation support structures

Increased public awareness of innovation and technology

A.Reid Technopolis 2005

Estonian R&D expenditure of GDP, %Estonian R&D expenditure of GDP, %

“Knowledge based Estonia”; Statistical Office of Estonia

Gross R&D expenditure of GDP, %

0,620,73 0,75

0,830,91

0,80,9

1,1

1,3

1,5

0,7

0,75

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

1999 2000 2001 2002 2003 2004

Actual

Knowledge based Estonia

European Innovation Scoreboard2005

NL

UKDE

DKSEFIBE

FR

AT

IS

LU

NO

IT

MT

IE

ES

EELV

BG

SK

HU

EL

PL

RO

CY SIPT

CZ

LT

20

40

60

80

100

120

140

160

180

0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80

2005 Summary Innovation Index

2004

Pe

rca

pita

GD

P(E

U25

=1

00)

High-income Low-income Linear (Low-income) Log. ("All countries")

Source : European Commission / DG ENTR D1

Innovation in business sector – mainbottlenecks

Innovation deficit (business R&D expenditure 0,36% of GDP in 2004 (EUaverage 1,22%);

Only a 1/5 of innovative companies have innovation expenditure above64.000 EUR or 5% of turnover, 20% had no expenditure (CIS 2000)

Sales income from new products and services as a share of turnover twotimes lower than EU average

Innovation activity in firms essentially process (introduction of newtechnologies) not product (purchasing costs of machinery and equipmentamount to 60% of total innovation expenditures)

BUT – fastest growing private sector R&D expenditures in EU!Share of innovative enterprises has grown significantly from 36% in

2002 to 49% in 2006Innovation expenditure as % of sales has grown from 1,2 to 1,6%

Cooperation with universities has decreasedA.Reid Technopolis 2005

Ranking of industries in Estonia byproductivity in 2004 and their share inmanufacturing employment

0

2 0 0

4 0 0

6 0 0

8 0 0

1 0 0 0

1 2 0 0

1 4 0 0

1 6 0 0

1 8 0 0

Compute

rs, o

ffice

mac

h.

Chemic

a l industry

Milk

proce

s sing

Bevera

ges

Wood

proce

ss ing

Paperan

dpul

p

Mea

t proce

ssin

g

Autom

otive in

dustry

Construct

ion

mat

erials

Met

a l pr o

ducts

Elec tri

c,optic

product

s

Mac

hinery

Furnitu

re

Textile

Radio, T

V , tele

com

m.

Bakery

Fishery

Cloth

ing

0

2

4

6

8

1 0

1 2

1 4

1 6

N e t sa le s p e r e m p lo y e e (1 0 0 0 E E K ) S h a re fro m to ta l e m p lo y m e n t in m a n u fa c tu re (%)

Share of enterprises’ R&D expenditure inGERD (%), 2003

30,731,031,5

33,133,9

42,643,0

45,146,7

48,951,451,651,852,1

55,561,5

63,164,365,4

67,269,5

71,973,9

0 10 20 30 40 50 60 70 80

HungaryPoland

PortugalGreece

ESTONIAAustria

ItalySlovak Republic

UKSpain

Czech RepublicNorway

NetherlandsFranceEU 25

DenmarkUS

BelgiumGermany

IrelandFinlandSweden

Japan

%

Goals and indicators in Knowledge-based Estonia 2017-2013Goals Main indicators by 2014Increase of the quality levels and volumes of Estonian R&D 8 R&D workers per 1000 employees (5 in 2004),

Share of updated infrastructures 80% of all infrastructures (ca20% in 2004)GERD 3% of GDP (0,91% of GDP in 2004)

Innovative entrepreneurs creating value and growth tocompete globally

Business R&D expenditure 1,6% of GDP (0,36% in 2004),

Business innovation expenditure 2,5% of turnover (1,6%in 2004);Productivity per employee 72% of the EU25 average(50,6% in 2004)Employment in medium-high and high-tech sectors 11%of total workforce (7,6% in 2004)

Innovation-friendly society oriented to long-term development Increasing inflow of knowledge and technology intensive FDI

Increasing inflow of foreign researchers and studentsIncreasing number of internationally recognised Estonianbrands and trademarks

Strategic lines of actions inKnowledge-based Estonia 2007-2013

Development of human capital

Raising the efficiency of RD&I system

Raising the innovative capacities of enterprises

Developing long-term oriented policy making

Raising the innovative capacities ofenterprises (1)

1. Supporting the creation and growth of new innovative companies- Developing science and technology parks- Innovation awareness raising & competence building, including business plan

competitions- Early-stage venture capital for innovative ventures (NEW)

2. Promoting collaborative technology development, transfer of knowledge andtechnologies- Continuation and extension of Technology Competence Centres, aimed at

supporting collaborative technology development between enterprises andRD institutions

- Supporting commercialisation (incl IP protection, prototyping & proof ofconcept) of RD results achieved in universities and other HEI-s (MODIFIED)

- Supporting participation of Estonian companies in international RDprogrammes and networks (activation, consultation, co-financing)

- Supporting international technology transfer through IRC network- Improving human capital mobility between HEI-s/universities and enterprises

(NEW)- Raising competence on innovation management, offering innovation audits

and technology counselling (NEW)

Raising the innovative capacities ofenterprises (2)

3. Raising technology levels and boosting innovation potential ofEstonian enterprises

- Continuing support to business RD&I projects, extending theexisting range of support to provide a ‘tool-kit’ for equipmentpurchase & take-up of new technologies, licensing and patenting,industrial design etc (MODIFIED)

- Supporting collaborative actions between group of enterprisesand the formulation of clusters (NEW)

- Supporting the recruitment of RD and innovation personnel(researchers & doctoral students, engineers, designers, marketingspecialists) (NEW)

- Raising competence on innovation management, offering innovationaudits and technology counselling (NEW)

Evident need to focus on mostperspective clusters/areas…

…will be based:1) On the RD&I strategy, which identifies:

– Key technologies: ICT, biotechnologies, material technologies– Socio-economic challenge areas (inconclusive list): energy,

environment, health care, security, information society2) On the results of foresight and sectoral studies3) On the results of cluster development activities

… will be carried out:1) Through national RD programmes (to be elaborated and implemented

according to the new RD&I strategy)2) Through directing the existing measures to specifically address a

particular sector or technology area (e.g thematic calls, sub-budgets forcertain sectors or technologies)

Current Policy MixCurrent Policy Mix:: StrengthsStrengths andandWeaknessesWeaknesses

Research policy:

– Need to further prioritise and focus spending on research teams which:

a) have leading edge potential vis-à-vis EU research agenda, or

b) provide response to specific needs of Estonia economy and society.

– Lack of longer term strategic research programmes at national level (multi-disciplinary and cross-institute teams).

Innovation policy:

– Need for sectoral/thematic actions to support innovation in wider group ofenterprises;

– Current enterprise innovation financing measures need to be widened toinclude technology transfer & ‘non-technological’ innovation (design,marketing) issues.

– Increase investment in infrastructure and services for ‘high-potential’ firms(spin-offs, research intensive inward investment)

A.Reid Technopolis 2005

ResearchResearch andand InnovationInnovation:: Key ChallengesKey Challengesforfor EstoniaEstonia

Research policy:

– 1) Adopt a long-term financial perspective providing a stable environment forresearch activity

– 2) Pursue reforms to create an internationally competitive research system

– 3) Reinforce elements of research systems responding to specific needs ofEstonian society

Innovation policy:

– 1) Close the productivity gap through increased technology diffusion;

– 2) Increase export of innovative products;

– 3) Improve networking and co-operation turning knowledge into innovation.

Policy Governance :

technology foresight, enterprise innovation studies, procurement, fiscal environment,etc.

A.Reid Technopolis 2005

A proposal for a strategic framework forresearch and innovation

Overall vision:

– By 2013, Estonia will be recognised as Europe’s most innovative and competitivesmall nation.

– Centred around ‘human potential’ as key leitmotiv for knowledge economy.

Strategic objectives:

– A skilled population open to new technologies, products and ideas

– Business leaders open to innovation and risk-taking in new technologies andmarkets;

– Researchers working at the forefront of science, open to co-operation to createvalue from invention.

Four key priorities:

– A creative and innovative population;

– Attracting, creating and developing innovative enterprises;

– Investing in internationally competitive research;

– Future needs of Estonian research & innovation system.A.Reid Technopolis 2005