National Innovation Systems, PESTLE and SWOT Synthesis Report · National Innovation Systems,...

WP3 – Activity 3.4: National PESTLE & SWOT Analysis & Regional Synthesis 1/145

National Innovation Systems, PESTLE and SWOT Synthesis

Report

Output Title National Innovation Systems, PESTLE and SWOT Synthesis Report

Work Package WP3- Context Analysis and Taskforce Formation

Activity 3.3- National ICT Innovation Systems studies & Regional Synthesis 3.4-

National PESTLE& SWOT Analysis & Regional Synthesis

Short Description The document discusses in detail the aggregated results of the

National Innovation System Studies performed in each country, as well

as the national PESTLE&SWOT Analysis.

Status Final

Distribution level Public

Responsible partner University of Macedonia

Version V01


Revision History:

Version Responsible Organization Comment

01 University of Macedonia Template Created

02 University of Macedonia First Draft incorporating analysis of competitiveness, statistics, policies

03 ATHENA ISI, ISHAS, ICI Provision of comments and suggestions

04 University of Macedonia, University of Patras

Provision of reformulated draft and revised structure

05 University of Macedonia Incorporation and reformulation with data from Serbia and Montenegro

Revision

LEGAL NOTICE

Neither the European Commission nor any person acting on behalf of the Commission is responsible for

the use, which might be made, of the following information. The views expressed in this report are

those of the authors and do not necessarily reflect those of the European Commission.

© FORSEE Partnership, 2011

Reproduction is authorised provided that the source is acknowledged.


Table of Contents

National Innovation Systems, PESTLE and SWOT Synthesis Report ............................................. 1

Table of Contents .......................................................................................................................... 3

List of Tables .................................................................................................................................. 5

List of Figures ................................................................................................................................ 6

Executive Summary ....................................................................................................................... 7

1 Introduction ........................................................................................................................ 10

2 Background Chapter ............................................................................................................ 12

2.1 Task Objectives............................................................................................................ 12

2.2 Background Country Reports Countries Reviewed ..................................................... 13

2.3 Methodological Framework and Processes Involved ................................................. 15

3 General Economic Outlook of Countries Reviewed ............................................................ 20

3.1.1 Countries Overview ............................................................................................. 20

3.1.2 Competitiveness Aspects .................................................................................... 22

3.1.3 Europe 2020 Performance .................................................................................. 28

4 Policies and Priorities .......................................................................................................... 30

4.1 Background Information on European Innovation Policies ........................................ 30

4.2 Snapshot on national RTDI and Innovation Policies ................................................... 34

4.2.1 Main Innovation Policies Orientation ................................................................. 36

4.2.2 Main Innovation Systems Priorities .................................................................... 38

4.2.3 Coordination and Capacity .................................................................................. 39

5 Innovation Axis .................................................................................................................... 41

5.1 Human Resources ....................................................................................................... 41

5.1.1 Educational System performance and Science Base ........................................... 41

5.1.2 Links between education and RTDI systems ....................................................... 44

Annual data on employment in total knowledge-intensive activities at the national level ....... 45

5.2 Knowledge flows ......................................................................................................... 46

5.2.1 Science-industry collaboration ............................................................................ 47

5.2.2 Partnerships ........................................................................................................ 48


Public-private co-publications per million populations .............................................................. 48

5.2.3 Key actors ............................................................................................................ 49

5.3 Internationalisation of knowledge .............................................................................. 51

5.4 Infrastructure and Funding ......................................................................................... 56

5.4.1 Funding Considerations ....................................................................................... 56

5.4.2 Existing infrastructure in the region ................................................................... 60

5.5 Innovation and Business Environment ....................................................................... 62

5.5.1 Market development .......................................................................................... 62

5.5.2 Industrial RTD and Innovation............................................................................. 64

6 Focus Theme: The ICT sector in the reviewed countries .................................................... 70

6.1.1 Digital agenda aspects......................................................................................... 70

6.1.2 RTDI /ICT Comparative Performances ................................................................ 72

7 Additional Issues ................................................................................................................. 77

8 PESTLE & SWOT Synthesis ................................................................................................... 79

8.1 Political, Economic, Social, Technological, Legal and Environmental analysis of the

Region 79

8.2 Strengths, weaknesses, threats and opportunities in the Region .............................. 84

8.3 Short Discussion .......................................................................................................... 88

9 Conclusions ......................................................................................................................... 91

10 Abbreviations, Glossary, References............................................................................... 93

10.1 Abbreviations .............................................................................................................. 93

11 References ....................................................................................................................... 94


List of Tables

Table 3.1. Structural indicators of the SEE economies and basic demographics. .................. 20

Table 3.2. Global Competitiveness Report regional rankings .............................................. 23

Table 3.3. Innovation Capacity Index Rankings 2010-2011 .................................................. 25

Table 5.1. Main education indicators in the region ............................................................. 41

Table 5.2. Spending in education ....................................................................................... 43

Table 5.3. Education and RTDI in the region ....................................................................... 45

Table 5.4. Collaboration parameters .................................................................................. 47

Table 5.5. Publication, licence and patents performance in the region ................................ 48

Table 5.6. Patents and specialisation in the region ............................................................. 52

Table 5.7. ICT trade balance and high-tech trade balance in the region ............................... 54

Table 5.8. Participaton of SEE countries in funding programmes (AT excluded) ................... 54

Table 5.9. EC Funding and participation per country .......................................................... 55

Table 5.10. Pattern of innovation followed by enterprises in the region ............................. 63

Table 5.11. Innovation profiles of enterprises in the region ................................................ 65

Table 5.12. Strategic trends of enterprises in the region ..................................................... 67

Table 6.1. Percentage of ICT sector in GDP ......................................................................... 74

Table 6.2. ICT expenditure as % of GPD in the region ......................................................... 75

Table 7.1. Regional innovation typologies in the area ........................................................ 77

Table 8.1. Synthesized regional PESTLE .............................................................................. 80

Table 8.2. Synthesized regional SWOT ............................................................................... 85

Table 8.3. Self-Assessment Tool on Features of a well-functioning NIS ............................... 88

Table A- 22: Opportunities and Challenges of financial crisis on the ICT sector .................... 97

Table A- 23: Trade Balances in the region (difference between exports and imports) ......... 102

Table A- 24. Trade Balances in the region ......................................................................... 103

Table A- 25. ICT policies and challenges at the EU level ..................................................... 104

Table A- 26. Operational Programmes Coherence ............................................................. 113

Table A- 27. Common priority axis and baseline priorities in the region ............................. 114

Table A- 28. FP7 participation per country and theme /top 20 performers in the EU .......... 130


List of Figures

Figure 1: Synthesis Report Methodological Conceptual Schema ............................................. 15

Figure 2. Illustration of competitive aspects in the region (1) .................................................. 25



Figure 5. Europe 2020 indicators positioning ............................................................................ 28

Figure 6. Assessment of supply-side or demand-side public policies and technology-push and

demand factors .......................................................................................................................... 36

Figure 7. Competitiveness Aspects in Education and Rankings in the region (global rankings)

..................................................................................................................................................... 43

Figure 8. Employment in knowledge-intensive activities progress 2007-2009 ........................ 46

Figure 9. R&D expenditure by source of funds ......................................................................... 57

Figure 10. Gross Domestic Expenditure of R&D as % of GDP ................................................... 58

Figure 11. Business R&D expenditure a as % of GDP ................................................................ 59

Figure 12. Distribution of ICT BERD shares in EU countries ...................................................... 60

Figure 13. Progress of the region against Digital Agenda targets ............................................. 71

Figure 14. Weighing of ICT sector components in Europe ........................................................ 74

Figure 15. Major PESTLE forces with a potential impact in the region .................................... 84

Figure A-16. BERD in times of economic downturn .................................................................. 99

Figure A-17. Percentage of Real GDP growth rate in the region ........................................... 101

Figure A-18. Percentage of employment growth in the region .............................................. 101

Figure A-19. Emerging technologies in the context of ICT on a European Level ...................... 104

Figure A-20. Product –Service innovation ............................................................................... 131

Figure A-21. Innovative enterprises by type of innovator, as a percentage of all enterprises

................................................................................................................................................... 132

Figure A-22. BERD by sector of activity ................................................................................... 132

Figure A-23. % of population interacting with public authorities online ............................... 135

Figure A-24.Regional disparities in R&D expenditure as a % of GDP, 2007 ........................... 138

Figure A-25. Regional disparities in R&D personnel as a % of GDP, 2007 .............................. 138

Figure A-26. Regional disparities in employment in high-tech sectors as a % of total

employment, 2007 ................................................................................................................... 139


Executive Summary

The present synthesis report aggregates the results of the eight national innovation reports on

the basis of an initial appreciation of the potential of innovation structures and systems

performance in the region. The report tries to identify the main components of the regional

innovation system by identifying the pertaining characteristics which emerge when

considering and contrasting the countries under examination together. Thus, the present

report aims at synthesizing the results of national reports and drawing upon their implications

for policies in the domain of ICT RTD. The National Innovation System reports have delivered

key insights into the nature of innovation processes, governance, institutions and partnerships

among innovation stakeholders and thus provided new insights on the strengths and

weaknesses of the innovation system in a regional scope and the degree to which it is

equipped for coping with new emerging challenges.

The pace of change has accelerated in the globalisation era, imposing high requirements for

policy-makers in the public and the private sphere, which are confronted with a high degree of

uncertainty, complexity and ambiguity. Policy-making is confronted with major difficulties in

designing, implementing and delivering effective and coherent policy initiatives due to the

complexity of innovation processes.

In general, the region is fragmented in terms of innovative potential and output. The level of

innovation in regions varies considerably across almost all countries reflecting the persisting

absence of a unified internal market for many of the most innovative sectors. The main

discrepancies among countries lay upon the GDP, government debt and employment growth.

The countries present some common patterns in terms of ICT usage and technological

readiness, as well as education and labor market.

Within the review of the national reports and the topics addressed, the main pillars and

parameters of the synthesis results have been clustered into five broad areas, namely: Human

resources pillar, including a discussion of the educational systems and links between education

and RTDI; Knowledge flows consisting of science-industry collaboration, partnerships and key

actors; Level of Internationalisation of knowledge reflecting patents, publications, participation

in European research and trade specialization; Infrastructure and Funding and Innovation and

the Business Environment, capturing firm-specific trends. General policy considerations, the

specific ICT performance and PESTLE/SWOT analysis complement the aggregated results.

These broad themes emerged as central across the reports reviewed, but they are also

important for addressing the main challenges that Europe currently faces.

Set within this context, three main conclusions can be highlighted (pertaining policies and

priorities, the PESTLE/SOWT analysis and the five pillars). First, the national reports delivered

key insights into the nature and conceptualisation of innovation within their national policies.

All countries have explicit policies with regards to RTDI and innovation, which are namely

influenced by European priorities and “umbrella” policies. The common policies pursued as key

to innovation are related to education (supply of HR for RTDI), support to SMEs and

entrepreneurship, development of innovative infrastructure, exploitation of key national

strengths, forging strong partnerships across innovation actor and reinforcing private sector in


R&D activities. Cooperation and partnerships, quality of life, education, support of innovative

entrepreneurship and competitiveness and improvement of the institutional framework

remain on the agenda of the countries for promoting innovation and RTDI, as these broad

issues are normally considered insufficiencies and systemic failures of the systems at hand.

Secondly, the national reports under consideration have delivered insights on the strengths,

weaknesses, opportunities and threats present at a regional level so as to identify barriers and

bottlenecks preventing the region from reaching its potential. Most striking strengths are the

investments undertaken in R&D infrastructure and broadband, ICT penetration rates and

improved educational structures, while most striking weaknesses are the low investments in

information technology, the low usage of ICT in the learning process, the limited amount of

innovative enterprises and lack of financing schemes for innovative SMEs and start-ups. In

similar terms, the support for increasing science-industry collaboration and the role of the

educational system towards strategic advantages are marked as important opportunities,

while the complex insufficient system for innovation, the low responsiveness of the education

system to market demand and the centralization of innovation in certain areas are considered

major threats. The main forces that are expected to play a crucial role in the future are political

(unstable political landscape, frequent changes in leadership, incoherent spending priorities),

economic and market forces (the global recession, austerity measures, poor knowledge-

intensive economy extroversion and spending cuts in the RTDI system) as well as

environmental (climate change and green culture) and last some social and cultural (increased

life expectancy and major societal challenges, improved education levels, poverty and

unemployment. Finally, technological forces include R&D infrastructure development, low ICT

expenditures as % of GDP and a diversifying picture in ICT application areas.

Thirdly, based on the ample materials reviewed and filtered, important directions for policy

emerge which indicate towards increased cooperation and coordination of the policy

landscape:

-Human resources: In general, the levels of education are considered good with adequate

graduates in science and technology; nevertheless in most of the counties, the environment is

unattractive for retaining graduates and researchers. Furthermore, there are significant

weaknesses in training levels inside companies, lifelong learning and absorptive capacity of the

RTDI systems.

-Knowledge flows: Only Austria and Slovenia have strengths between innovations actors,

intermediary units and interdisciplinary centers of excellence. In general, the picture is highly

diversified, with most of the countries (expect Austria and Slovenia) targeting basic measures

for enhancing knowledge flows such as technology transfer, cooperation and industry liaison,

technological parks, incubators, joint technology platforms. The level of gravity or actors in

each country is highly dependent on the systemic structures of the research as well as the

government system. The main actors consist of public research organizations, universities,

private research organisations and to a lesser extend private companies, incubators,

innovation zones international research centers and special services or facilities. NGO’s are

almost indictable as actors of innovation.


-Internationalisation of Knowledge: South-East European countries are among those having

limited cross-border activities, and quite differenced trade patterns. The external balance in

ICT trade is negative in most of the countries with the notable exception of Hungary. Also,

there is a relative specialization in ICT services trade than ICT goods. In this pillar countries are

also quite diversified in patenting orientation in ICT and knowledge-intensive industries.

-Infrastructure and Funding: The share of R&D as a percentage of the Gross Domestic Product

(expenditure of the public sector) is very low in the region with the exception of Austria, which

is the only country approximating the EU goals of 3% R&D expenditures as percentage of GDP.

Slovenia presents a dynamic share, whilst the rest of the countries do not surpass 1.5%.

Business Sector expenditures on R&D present an analogous picture in terms of country

rankings.

-Innovation and the Business Environment: Slovenia and Austria are the only countries to

appear to spend less in non-R&D than R&D. The prevailing type of innovation is both

technological and non-technological innovation. In general the countries not present a unified

and mature market for addressing new to market innovation. Regarding the type of innovation

in SEE countries, product and service innovation is the dominant type, with most of the

countries evolving around the EU average. In particular, Slovenian, Romanian and Greek

enterprises are characterised by a propensity to introduce new processes and marketing

strategies as compared to the EU average. There seems to be a lack of coherence regarding

RTDI performances inside the private enterprises of the participant countries, but the whole

region appears to be performing well in the areas of open innovation as most of the countries’

indicators are above the EU average. The standpoint of enterprises in the region towards open

innovation normally exceeds the stance of EU-27 enterprises. Enterprises in the region

generally tend to use innovation stimulators such as knowledge management systems, internal

mechanisms for innovative ideas, staff rotations and cross-functional teams on innovation

projects.

It is important to note that despite some general findings emerge from a set of national

reports does not necessarily mean that all the questions have been answered. Important

future research directions emerge in the interplay between organisations and institutions, the

balance between harmonisation and diversity and the operation of effective mechanisms to

enable goal-oriented transformation processes.


1 Introduction

The present synthesis report aggregates the results of the eight national innovation reports on


performance in the region. Different implications in terms of research, technology and

innovation (RTDI) policies are highlighted in the process of the synthesis of the national

reports.

The national innovation system reports, as well as a PESTLE and SWOT analysis were produced

by partners to facilitate the main foresight work in terms of approaching in a holistic manner

both their innovation systems as well as specific ICT issues. In specific, the national reports

provide an initial understanding of the development, planning and implementation of ICT/RTD

policies by examining the sectors, technologies and industries that should be promoted to

enhance regional competitiveness and the key development trends and by investigating some

aspects of the innovation system central to foresight exercises, such as the design and

implementation of research and innovation policies, the main orientations, the investment

trends, education and training systems , key partnerships, framework conditions that promote

business investments in R&D, public support to innovation etc. PESTLE and SWOT analysis

were also performed as a basis for more detailed discussion about the scope of the foresight

exercises and analyze each country’s external environment to review the general frame for

implementation of exercises.

The present report was drafted in three specific stages: first the information from the national

reports was collected and assessed with a view on enabling key stakeholders access key

information that may prove useful in strategic planning and scenario building and understand

resources and constraints related to ICT foresight. The report was first drafted on the basis of

the structure of the national reports, by aggregating and synthesizing relevant sections.

Additional research was performed by accessing key documents and performance reports of

the European Union to widen the scope of the results. The information was then re-filtered on

the basis of a common methodology that provided a comprehensive framework of presenting

results on a regional level.

An important constraint reported at the outset is the divergence of the national innovation

systems, reflecting country-specific historic and economic circumstances, divergent policies

and different approaches on innovation as well as the different degree of sophistication of the

relative sections of the national reports determined by access to information and lack of

expert-validated results. These difficulties underpin the robustness of the synthesis report.

The report is structured as follows:

The second chapter provides background information on the processes of the national

innovation systems drafting and discusses in detail the methodological framework employed

for the synthesis of the results. The third section discusses policies and priorities, both

presented at an EU level and country level to enable the understanding of the regulatory

environment and conceptualisation of innovation priorities.


The fifth section discusses the pillars of the analysis i.e. the different parameters against the

results were assessed against. In specific, five pillars are presented:

1. Human resources pillar, including a discussion of the educational systems and links

between education and RTDI;

2. Knowledge flows consisting of science-industry collaboration, partnerships and key

actors;

3. Level of Internationalisation of knowledge reflecting patents, publications,

participation in European research and trade specialization;

4. Infrastructure and Funding and

5. Innovation and the Business Environment, capturing firm-specific trends.

Section 6 discusses in detail the ICT sector in the reviewed countries, as isolated from the NIS

structural analysis. A wide range of information is presented in terms of comparative

performances of countries in ICT specific areas. This section has been enriched with statistical

information, however it is noted that in the cases of Serbia and Montenegro, the lack of

reliable and homogeneous statistics and ICT specific indicators limits the scope of analysis to

the rest of the countries. Section 7 introduces additional issues (regional typologies and

emerging trends in innovation) that are extensively covered in the Annex.

Finally, section 8 compiles and synthesizes the PESTLE & SWOT analysis and the last section

concludes.

The document Annex provides supplementary information of each of the sections, enabling

stakeholders and interested parties to access country-specific information upon which high-

level results were derived as well as some information on the effects of the current financial

crisis on innovation and ICT.


2 Background Chapter

This chapter provides an overview of the objectives for the specific activity, as well as the

methodological considerations that underlined the formulation of the report.

2.1 Task Objectives

Within the context of activity 3.3 (National ICT Innovation Systems studies & Regional

Synthesis) and activity 3.4 (National PESTLE & SWOT Analysis & Regional Synthesis), an

extensive analysis was undertook by partners to produce national innovation system reports,

as well as a PESTLE and SWOT analysis. The underlying objectives of the National NIS, PESLTE

&SWOT report in relation to the main foresight work were:

to identify the main policies and implications for policy that lead to the definition of priority areas

to understand the development, planning and implementation of ICT/RTD policies

to grasp the region-specific needs for foresight by including the regional characteristics and regional goals, drivers and barriers

to identify the sectors, technologies and industries that should be promoted to enhance regional competitiveness and the key development trends in central social issues

to investigate some aspects of the innovation system central to foresight exercises, such as the design and implementation of research and innovation policies, the main orientations, the investment trends, education and training systems , key partnerships, framework conditions that promote business investments in R&D, public support to innovation etc.

to perform PESTLE and SWOT as a basis for more detailed discussion about the scope of the foresight exercises and analyze each country’s external environment to review the general frame for implementation of exercises

to enable key stakeholders involved in the foresight exercise access key information that may prove useful in strategic planning and scenario building

to enable the FORSEE Consortium understand the resources and constraints related to ICT foresight that would contribute to the common methodology

The information collected by the national reports will be used to inform stakeholders, map

competencies and capabilities, map implications and strategies and extrapolate positive

trends.

The report’s structure (elaborated by the Task Leader-University of Macedonia) abides both to

the SEE Programme Manual that stipulates that the innovation capacity can be described by

the education system, the human resources (level of qualification) and the institutional

framework for research and development (public and private sector, institutions, enterprises,

budgets, programmes and politics) as well as the “Oslo Manual” of the OECD that provides

guidance on innovation indicators and their interpretation. It is also enhanced by additions

based upon a scrutiny and review of European policy documents, country reports, Innovation


Scoreboards and Competitiveness Reports generated by the European Union with a view of

incorporating components that would serve the overarching aim of facilitating foresight work.

Other conceptualisations of innovation flows (such as the concepts of innovation inputs and

outputs of the Pro-Inno Europe (1)) are taken into consideration for the analysis of indicators.

To develop their potential, and find their new role in the emerging EU25+ knowledge-based

economy, regions need to widen their focus and go beyond their own innovation landscape to

explore the European and trans-regional dimension to the full. Foresight is a key element in

the creation of future oriented and outward looking visions and strategies. Many regions

considering implementing foresight exercises need help to overcome initial barriers, such as

doubts about the usefulness and usability of foresight, problems linking foresight to existing

regional mechanisms, as well as simply lack of knowledge on how to set up and undertake

foresight activities. Easy to understand practical blueprints on how to set up a foresight

activities to suit specific regional circumstances could be instrumental in supporting regions to

implement regional foresight (2).

2.2 Background Country Reports Countries Reviewed

A National Innovation System encompasses a broad array of institutions and relationships

involved in scientific research, the accumulation and diffusion of knowledge, education,

technology development and the development and distribution of new products and

processes. It is also defined as a “set of distinct institutions which jointly and individually

contribute to the development and diffusion of new technologies in which governments form

and implement policies to influence the innovation process” (3). As hybrid systems, innovation

systems cut across other societal areas such as education and training, business

entrepreneurship, existing infrastructures or other sectoral policies that highlight the interplay

of research and innovation stakeholders and actors. The national reports employ a systems

approach analysis that is inclusive of the main components of a NIS such as human capital,

training, the institutional environment, the regulatory environment, R&D and usage of ICT as

well as the resulting linkages among the components. Taking into consideration the innovation

systems approach, the reports consider innovation as an interactive process among a wide

variety of actors (4). However, in some specific cases, a shortage of relevant sources was

noted; therefore partners had the liberty to elaborate on the components where more

information was available. In any case, the main building blocks of the innovation system were

included so as to provide the “diagnostics” of the situation inherent in every country. (5).

A definition of “innovation” as perceived in the present report needs to be elucidated at the

outset. According to the OECD innovation is “the implementation of a new or significantly

improved product (good or service), or process, a new marketing method, or a new

organizational method in business practices, workplace organization or external relations” (6).

Innovation is seen as central within the knowledge-based economy, and it is recently that a

better understanding of the complexity of the processes has been understood. Thus, the

innovation system is perceived as an all-encompassing ecosystem based upon the pillars of

science and technology institutions, the enterprise landscape, the broader framework

condition of national institutional and structural factors and transfer factors that influence the


efficiency of innovation linkages (6). The factors, policies and institutions fostering innovation

as well as the underlying logic of analysing them in the context of the national reports are:

Institutions and the priority-setting during specific programming periods, which are

essential issues to be taken into consideration by foresight exercises

Innovation governance (the implications of governance may foster or impede

investment climate, entry to market, business innovation and general efficiency in the

system)

The macro-economic environment of the country, especially in light of the current

financial crisis, as fiscal and monetary policies can contribute to a stable domestic

environment.

The regulatory framework and analysis of competitiveness of the country (obstacles to

competitiveness and doing business may generate additional challenges for innovation

and entrepreneurship. The role of public sector procurement policies and other

conditions might prove favourable to foster innovation and they are subsequently

analysed).

ICT usage and the ICT landscape in the country. As FORSEE targets RDI ICT foresight, it

is imperative to include indicators regarding ICT with regards to trade, expenditure,

productivity, industry structure, economic significance etc. The micro-level (firms), the

report endeavours to assess capacities to absorb knowledge. Specific focus in placed

upon the specialization patterns of each country and existing infrastructure.

Other components and cross-cutting issues, such as links between industry and

academia, links between the educational system and research, funding modes are

analysed according to the degree of strength and the underlying role within the NIS.

Education and training are emphasized as drivers of innovation and are inherently

included.

The reports acknowledge recent developments in innovation literature, according to which,

interactions and linkages between actors, systemic failures and the interaction of the firm and

its environment (framework conditions) were key to understanding innovation (or the lack

thereof) from a policy perspective.

For further clarity, the methodology of the national reports was elaborated by the Task Leader

(University of Macedonia). The template, specific guidelines, points for analysis, existing

literature and references to be consulted as well as documents including statistical indicators

for each country were drafted and provided by the Task Leader (University of Macedonia). The

main limitations of this task were concerned with the measurement of NIS which is a difficult

manner, so a mix of qualitative and quantitative indicators was used. The indicators were

selected on the basis of providing a holistic picture of the state of the NIS.

For some countries (Serbia, Montenegro), most statistical indicators used in the reports were

unavailable from the European Union and the World Bank, therefore, determining the strength

of the NSI was a cumbersome task. In addition, these countries have recently introduced the

concept of innovation as a policy instrument, resulting in a lack of practice and treatment of


measures supporting innovation. As standard metrics were unavailable and the constituent

parts of the systems dissimilar, relevant partners relied on existing literature and some

qualitative measurements when available. In addition, some factors, such as knowledge flows,

interactions and linkages and the functionality of the system were difficult to assess for many

countries. The interactions between multinational companies and local firms were also difficult

to determine. The reports also expand to the environment to involve broader factors

influencing the innovative environment in the PESTLE and SWOT analysis. For instance the

social, economic and cultural context of each country was assessed (7) to indicate

developments that might have an impact on innovation.

2.3 Methodological Framework and Processes Involved

As the synthesis report collects and analyses the results of the national reports to deliver

results on a regional level, the methodology had to be adjusted to a comprehensive framework

that would allow conclusions to be formulated for each element of the innovation system. On

a conceptual level, the methodology for the synthesis in depicted in the following figure:

Figure 1: Synthesis Report Methodological Conceptual Schema

In the schema, there are five main pillars of the innovation system in the region and each pillar

is analysed against some specific issues so as to grasp the dynamics and effects of each of the


pillars. Before the results of the analysis are presented, a short chapter of the general

economic situation and competitiveness aspects of all countries intervenes as a “snapshot” of

the region in general terms. As innovation surveys provide a wide array of information on the

innovation process, the analysis is not usually combined with other information sources such

as economic statistics so as to measure incremental changes (8). According to the FORSEE

view, it would be inadequate to consider only science and technology issues and not

incorporate in the analysis a broad range of social dynamics such as linkages, diffusion,

entrepreneurship, finance, skill needs and education, awareness of market and social demands

for innovation etc.

The pillars and sub pillars are presented below and the principal rationale for developing the

framework and each sub pillar is included in the analysis, although the review of framework

later on serves at understanding the rationale of embodying the indicators. It has to be noted

that this framework is customised to the needs of the specific project but still encompasses

NIS literature surveys used to build the methodology (Frascati Manual, (8) (9), (10), (5)). In this

line, we do not adapt an available framework, rather we create bottom-up a project-specific

framework on the basis of the common NIS components and innovation indicators.

The umbrella pillar discusses policies and priorities, both presented at a EU level and country

level. This enables the understanding of the regulatory environment that determines the

strategic importance of innovation (and ICT/RTDI) for the development of the economy. The

way that innovation is conceptualised and the priorities are set also determine the

environment in which foresight is called to contribute. The rest of the pillars are included as

follows:

1. Human resources

a. Human resources (educational System and matrix)

b. Links between education and RTDI

This pillar includes the basic educational system for the general population, the university

system, the specialised technical training system, the science and research base and some

basic indicators on the workforce of the countries.

2. Knowledge flows

a. science-industry collaboration

b. partnerships

c. key actors

Linkages act as sources of knowledge and technology for firm innovation activities and connect

firms to other actors in the innovation ecosystem. The level of interaction differentiated well-

developed innovation systems as well as successful clusters.

3. Internationalisation of knowledge

a. Patents,

b. Publications, participation in FP’s

c. trade specialization

According to the Oslo manual, patent statistics are increasingly used as output of research

activities since they reflect the technological dynamics and the direction of technological

change.


4. Infrastructure and Funding

a. Funding Considerations (spending by type, venture capital)

b. Existing infrastructure in the region (connectivity, major networks available)

The degree of which ICT RTD infrastructure available is compatible with European

infrastructure or a part of it is of importance, as the efficient connection of entities and the ICT

sector with its environment is evaluated.

5. Innovation and Business Environment

a. market development

b. industrial RTD and innovation This pillar tries to capture the range of innovative efforts carried out by enterprises, their

expenditure, the acquisition of knowledge and efforts associated with other innovation-related

parameters such as the introduction of new products and processes, organizational changes

and marketing innovations, percentage of sales to new product etc.

The focus theme in the framework is the ICT sector in the reviewed countries (comparative

performance in the ICT sector, Digital Agenda performance, etc). It discusses in more detail the

general status and resources devoted to ICT R&D. This discussion was incorporated in the

analysis of the previous draft of the report, however it was decided to disentangle the main

indicators and present it in isolation to better serve the needs of the audience.

A horizontal second pillar is the SWOT and PESTLE activity. Although SWOT and PESTLE analysis

were different tasks in the context of the workpackage, the activities were merged in this

report to provide a more comprehensive picture of the innovation systems and the forces that

are likely to impact the system and its development. A broad range of social dynamics, like

entrepreneurship, finance, scope for formation of firms, skill needs and educations, awareness

of market, patterns of economic evolution and economic organisation, environmental and

technological forces are included. The rationale behind PESLE analysis lies in that scientific and

technological knowledge will continue to evolve and be used in ways that will both shape and

be shaped by social structures and processes. SWOT on the other hand captures critical

capabilities or deficiencies either in industry of in knowledge infrastructure that is not

adequately mirrored in the innovation systems analysis. SWOT includes an initial presentation

of the strengths that need to be built on, the weaknesses that are to be overcome, the

resources and the opportunities to be exploited and the threats to be avoided. By

amalgamating the results, the regional picture presents the common characteristics on which

foresight can reside and the common deficiencies that might hamper its impact. In the present

common PESTLE/SWOT analysis, the common patterns are brought on according to their

relative robustness in the region so as to create a “prioritisation” of common factors. We

preliminarily note that the analysis is performed by the partnership therefore this analysis is

not expert-validated.

According to past literature, two basic families of S&T indicators were previously directly

relevant to the measurement of innovation: resources devoted to R&D and patent statistics.

The Oslo Manual and Community surveys (such the European innovation scoreboard and

community innovation surveys) represent the main building blocks of the indicators and the

methodology used. Other studies such as Romijn and Albaladejo (2000) Hansen and


Birkinshaw (2007) were reviewed but their recommendation in including innovation vale chain

etc. could not be embodied in this report.

The Oslo manual acknowledges human resources indicators (The basic educational system for

the general population, which determines minimum educational standards in the workforce

and the domestic consumer market, the university system, the specialised technical training

system), the science and research base, innovation policies and other government policies that

influence innovation by firms, the legislative and macroeconomic settings such as patent law,

taxation, corporate governance rules and policies relating to interest and exchange rates,

tariffs and competition, the communications infrastructure, including roads and

telecommunication networks, the financial institutions which determine, for example, the ease

of access to venture capital, market accessibility and industry structure (firm –level) as the

main components on the National Innovation System. However, the Oslo Manual grew to

capture a wider range of innovation activities than R&D expenditures, a wider range of

innovation output indicators such as the introduction of new products and processes,

organizational changes and marketing innovations, percentage of sales to new products as well

as information about a way that innovation proceeds.

The European Union in the European Innovation Scoreboards has adopted a quite divergent

framework, where innovation input and output are distinct pillars with specific indicators.

Input consists of innovation drivers (Human resources indicators, broadband rate), Knowledge

creation (R&D expenditures, funding of enterprises) and innovation & entrepreneurship

(Businesses innovating in house, in cooperation, modes of innovation and venture capital). On

the output side, employment indicators, exports, sales, patents and trademarks are evaluated

to assess application and intellectual property of knowledge creation.

However it is acknowledged that innovation involves tangible and intangible inputs, the

process of innovation is complex and the outputs might be difficult to characterize. Recent

indicators for measuring innovation tend to drift apart from innovation surveys, indexing and

benchmarking to knowledge, networks, demand and system dynamcis (9). Recent

approaches include intangible capital as human capita, intellectual capital and organisational

capital, investments and ICT infrastructure (11), (12), (13) In addition, available surveys are not

well-suited to provide information of the institutional environment and linkages. Finally the

Handbook of Knowledge Society Foresight (14) further developed 3 indicators to measure

knowledge society: Digital divide index (DIDIX), adaptability of work index (AWAI) and the

eCommerce index. This are included in the Digital Agenda indicators under the ICT Focus

Theme. Last, it is noted that although the systemic approach places emphasis on the

interdisciplinary approach in terms of a historical perspective and examine learning and

interactions as determinants of innovation, such a task proved extremely complex for partners,

as these issues require extensive research, which was out of scope in the specific task.

According to the SEE operational guide, context indicators should monitor the evolving socio-

economic context of the countries and it based on official statistics. To complement the

acquisition of context indicators, some additional sources were collected, such as:

The EU Industrial R&D Investment Scoreboard


ERAWATCH Inno-Reports and INNOVA sectoral innovation watch

The European Institute of Innovation and Technology

Eurostat and the World Bank

Innovation Survey Data

RIM database, European Commission.

Digital Agenda Observatory

The 2010 report on R&D in the European Union

Innovation union competitiveness report 2011


3 General Economic Outlook of Countries Reviewed

This chapter mainly serves as an introduction of the countries’ review and their current

standings in terms of general economic performance and competitiveness. An assessment of

the Europe 2020 performance is also included. This marks a first attempt to unravel the

underlying economic dynamics and growth patterns as well as some baseline common or

divergent patterns of competitiveness. The chapter is only exploratory in nature, i.e. it does

not seek to explain variant economic features but only present the current situation to enable

stakeholders gain a short overview of the underlying economic environment. This serves as a

familiarisation tool with the specific structural characteristics of the economies that can

severely impact future projections and scenarios as well as illustrate the sensitivity of the

economies against the backdrop of the current economic turbulence. More information under

each heading is included in the Annex.

3.1.1 Countries Overview

Most of the countries under investigation currently face some critical challenges both in terms

of an emerging society and economy which do not perfectly correspond to the new realities

and of an industrial sector that needs to transit to a knowledge-intensive reality. The economic

models and industrial organisation of most of the countries (and in particular the former

socialist countries) are characterised by the rational of transition.

According to the European Innovation Scoreboard (2009), the classification of the countries

based on the innovation performance is as follows:

Austria and Slovenia are among the innovation followers

Greece and Hungary belong to the moderate innovators

Bulgaria and Romania are characterised as catching-up countries1

Before embarking on an analysis of the innovation potential and performance analysis, a brief

overview of the economic performance of the countries first takes place.

Table 3.1. Structural indicators of the SEE economies and basic demographics.

2Austr

ia Bulgari

a Hungar

y Greec

e Romani

a Sloveni

a Serbi

a Montene

gro

GDP (100 base value)

139 20 40 83 23 72 n/a 41

1 Serbia and Montenegro did not undergo an assessment in the EIS 2 For consistency reasons, the abbreviations of countries used therof are consistent with the Eurostat taxonomy and are represented as follows: Austria (AT), Bulgaria (BG), Hungary (HU), Greece (GR-EL), Romania (RO), Slovenia (SI), Serbia (RS) and Montenegro (ME)


Health expenditure as % of GDP

11% 6.86% 7.4% 9.6% 5.27% 9.3% 5.7% 9.26% 3

Public expenditure on education (% of GDP) 4

5,46% 4,61% 5,1% n/a 4,25% 5,22% 3,52% n/a

General Government debt ( % of GDP)

72.3% 16.2% 80.2% 142.8%

30.8% 38% 31.3% 38,6%

Gross Capital Formation (% of GDP)

22% 25.6% 22% 16.2% 30.5% 23.4% 23.9% 27.7%

Employment Growth (%)

1% -5.9% 0.2% -2.1% -1.8% -2.2% 1% (2008)

Jobless growth

Unemployment rate

4.4% 10.2% 11.2% 12.6% 7.3% 7.3% 20% n/a (17.6 for 2007)

M= 4.6% 10.9% 11.6% 9.9% 7.9% 7.5% 19.2% n/a

F= 4.2% 9.5% 10.7% 16.2% 6.5% 7.1% 21% n/a

Inequality of income distribution -2009

3.7% 5.9% 3.5% 5.8% 6.7% 3.2% 5.6% n/a

% of urban population

30% 22% 25% 47% 16% 26% 29% 61%

Rural population

32.6% 28.6% 32.1% 38.8% 45.6% 51.7% 27.8% n/a

Source: World Bank and Eurostat

GDP, capital formation and employment rates represent basic indicators of the economy

whilst public expenditure on health and education as well as income inequality denote some

underlying challenges each economy faces as to its budget restrictions. The main discrepancies

lay upon the Gross Domestic Product, government debt and employment growth. Austria,

Hungary and Greece have a large government debt; however Greece further faces losses in

employment growth. Employment growth is negative for Bulgaria, Greece, Romania and

Slovenia while unemployment underpins the Bulgarian, Hungarian and Greek economies.

Additional societal challenges arise from a quite high inequality of income in Bulgaria, Greece

and Romania while half of the Greek population is located in large urban centres whilst half of

the Romanian and Slovenian in rural areas. Urban population is equally located in Montenegro.

This information will be further analyzed in the context of regional issues and regional

3 Base value for 2009 4 Base value 2008 except for Romania, where last update is 2007


innovation capacities. In general, the countries face social and economic challenges such as an

ageing population, high expectation in regard to quality of life, in particular in healthcare and

other concerns.

For the two countries that are not members of the European Union, some further clarifications

must be made, since these countries have undergone the process of economic transition from

a planned to a market economy. The countries were marked by a late transition process with a

high percentage of the population living below poverty lines due to turbulent period during

the past years, especially for the primary sectors. GDP growth has been considerable for

Serbia, with only a recent negative projection while in the Montenegrin Economy, GDP growth

is expected to recover after a short downturn and former impressive growth. At the beginning

of the transition period there was a common expectation that there would be a considerable

improvement in the financial performance of privatized enterprises but this has been slow to

materialise. The Serbian economy is dependant on metals, furniture, chemicals and

pharmaceuticals while the Montenegrin on materials, agricultural process and consumer

goods (World Bank, Wikipedia)

The global financial crisis appears to have affected most of the SEE economies, as the real GDP

growth rate has been violently disrupted in 2008 and 2009 to regain only a part of the growth

momentum in 2010, as depicted in Figure 2 in the Annex. It has to be noted ex ante that this

disturbance bears an impact on the investments and GDP percentage channelled to promoting

innovation and growth. Similar conclusions can be drawn from the disruptive nature of

employment growth diachronically which presents rather gloomy perspective unemployment

especially for Bulgaria, Romania and Greece (Figure 3, Annex)

Another aspect of the economic profile that can potentially impinge on future developments

concerning innovation and the RTDI system is the degree of extroversion or introversion of the

economy, as demonstrated by trade indicators (Tables 3.2, 3.3, Annex). The negative external

trade balance for import-oriented countries such as Greece, Bulgaria, Romania and Serbia

appears to gradually diminish, although this amelioration is more intense for Bulgaria,

Romania and Serbia. Negative external balances normally denote a lack of a competitive

advantage in the Ricardian perspective, meaning that the national strengths have not been

able to be channelled to international markets. This trend however tends to be alleviated

when considering total high-tech trade. Indeed, external trade balance of high-tech indicates a

strong positioning of the countries in high-tech exports. In similar terms, external high-tech

trade improves diachronically with the exception of Greece. At this point, the analysis is not

advanced enough to reveal if the SEE countries in question follow a specific, isolated trend

with respect to the general EU trend (15). At the moment a short snapshot of the economy

dynamics points towards a relative specialisation in high-tech trade as well as a diversifying

picture in structural economy and major societal indicators.

3.1.2 Competitiveness Aspects

Some additional data on the competitiveness of the economies with respect to a number of

issues in terms of the different components of the NIS is given below. Different scores on the


competitive aspects can elucidate some preliminary strengths of each country. For acquiring a

rather objective view, several sources were sought.

Table 3.2. Global Competitiveness Report regional rankings

GCR Rank AT BG HU GR RO SI ME

Public institutions 15 115 77 82 81 48 43

Private institutions 15 106 89 101 79 49 56

Infrastructure 20 80 51 42 92 36 67

Macroeconomic environment

24 42 69 123 78 34 37

Higher education and training

16 67 34 42 54 21 52

Quality of education 21 48 42 84 64 26 41

On the job training 10 114 60 100 92 42 70

Goods market efficiency 19 82 67 94 76 39 44

Competition 23 79 51 112 74 37 40

Quality of demand conditions

7 82 94 66 76 51 70

Labour market efficiency 32 58 62 125 76 80 39

Efficiennt use of talent 25 79 69 114 70 40 54

Financial market development

23 91 68 93 81 77 28

Technological readiness 18 48 37 46 58 35 44

Technological adoption 17 110 49 92 96 65 78

Availability of latest technologies

8 100 47 59 99 38 85

Firm level technology absorption

16 127 70 91 108 72 90

FDI and technology transfer 63 98 25 109 70 101 44

ICT use 19 32 37 39 45 28 42

Internet users 23 48 33 50 62 31 49

Broadband internet subscriptions

25 44 35 37 43 23 41

Internet bandwindth 15 7 38 44 16 35 70

Innovation and sophistication factors

subindex

13 95 51 73 91 35 56

Business sophistication 6 95 69 74 93 36 70

Innovation 20 92 41 79 87 34 45

Capacity for innovation 11 79 46 105 72 22 51

Quality of scientific research institutions

20 73 18 88 83 27 36

University industry collaboration in R&D

18 110 75 112 103 37 52

Government procurement of advanced technological

products

38 87 106 108 105 64 28


Source: Global Competitiveness Report 2011-2012, Global Economic Forum 5

The first source classifies countries according to a wide spectrum of issues, such as institutions,

infrastructure, education, framework conditions, technological adoption, IC (institutional

capacity) and capacity for innovation. Austria lies within the countries with an impressive

scores on most of the issues at hand. The quality of demand conditions and the availability of

latest technologies as well as business sophistication place the country at one of the first

places globally, especially relating to the capacity for innovation. The rest of the countries

present a rather mixed picture, since advantages and disadvantages are not streamlined. For

instance, Bulgaria’s strengths are oriented towards the macroeconomic environment,

broadband infrastructure and ICT use while institutional capacities, training and technological

adoption and availability are less advanced components, placing the country at the 79th place

for the capacity for innovation. Education, technological readiness, FDI and ICT use as well as

innovation and quality of research institutions are among the strongest capacities of Hungary,

while the country lacks significantly in demand conditions, rather the capacity for innovation

places Hungary among the top 50 countries. Greece is positively assessed in infrastructure,

higher education, ICT use and broadband, while linkages and collaboration, efficiency of labour

market, competition and other framework conditions appear very weak. Romania is negatively

assessed in linkages, infrastructure and training, but the country is assessed as medium in the

rest of the components. Slovenia appears to possess a number of advantages in economy,

education and training, use of talent, technological readiness and availability and ICT usage

and availability and research institutions endowing he country with a remarkable score in the

capacity for innovation (22nd place). Montenegro appears to be of high potential as regards

capacity for innovation as it positions among medium to high achievers. The country scores

considerably in framework conditions such as labours and financial market efficiency but its

deficiencies focus on ICT usage, bandwidth and business sophistication.

Convergent and divergent components are exemplified in the following figure:

5 Total no of countries: 138, blue countries are included in the first quartile of competitive

countries , red in the last quartile


Figure 2. Illustration of competitive aspects in the region (1)

A common pattern emerges in ICT usage, internet users, broadband and technological

readiness. A secondary pattern indicates a closeness of scores for Slovenia and Austria as a fist

set, and the rest of countries as a second set with similarities and differences to both previous

sets. In some cases, Greece and Austria pose the extreme positions. For instance, in education,

labor market and technological adoption most of the countries are in the same cluster.

A quite analogous finding derives from the innovation for Development report which assigns

innovation capacity to include the following pillars: Human Capital, Training and Inclusion,

Institutional Environment, Usage of ICT and R&D so as to balance a broad coverage of those

factors which affect the capacity for innovation. Countries with remarkable marks in the

institutional environment are Austria and Slovenia whereas Greece and Hungary lag behind. All

of the countries score very well in human capital and social inclusion, with the exception of

Romania which is placed in the medium-ranked countries. Similar rankings are noted in R&D

and ICT adoption for most of the countries. In R&D and ICT infrastructure, Romania and

Bulgaria score less that the rest of the countries which are classified in the top 50 countries in

terms of infrastructure. Austria is once more merely exemplary in merely all the rankings. In

terms of regulatory and legal framework (doing business in particular), the findings are not

attuned to the previous source, since Bulgaria is topped in terms of doing business, Austria,

Hungary, Romania and Slovenia have a medium score, while Greece slips into the 107th

position.

Table 3.3. Innovation Capacity Index Rankings 2010-2011

Pillars/Country Institutional Environment Human Capital, Training, Social Inclusion

0

20

40

60

80

100

120

140

Pu

blic

inst

itu

tio

ns

Pri

vate

inst

itu

tio

ns

Infr

astr

uct

ure

Mac

roe

con

om

ic e

nvi

ron

men

tH

igh

er

ed

uca

tio

n a

nd

tra

inin

gQ

ual

ity

of

edu

cati

on

On

th

e jo

b t

rain

ing

Go

od

s m

arke

t e

ffic

ien

cyC

om

pet

itio

nQ

ual

ity

of

dem

and

co

nd

itio

ns

Lab

ou

r m

arke

t ef

fici

ency

Effi

cie

nn

t u

se o

f ta

len

tFi

nan

cial

mar

ket

dev

elo

pm

ent

Tech

no

logi

cal r

ead

ines

sTe

chn

olo

gica

l ad

op

tio

nA

vaila

bili

ty o

f la

test

…Fi

rm le

vel t

ech

no

logy

…FD

I an

d t

ech

no

logy

tra

nsf

er

ICT

use

Inte

rnet

use

rsB

road

ban

d in

tern

et…

Inte

rnet

ban

dw

ind

thIn

no

vati

on

an

d s

op

his

tica

tio

n…

Bu

sin

ess

sop

his

tica

tio

nIn

no

vati

on

Cap

acit

y fo

r in

no

vati

on

Qu

alit

y o

f sc

ien

tifi

c re

sear

ch…

Un

iver

sity

ind

ust

ry…

Go

vern

me

nt

pro

cure

men

t o

f…

Austria Bulgaria Hungary Greece

Romania Slovenia Montenegro


General Good Governance

Policy Assessment

General Education Social inclusion

Austria 14 13 32 17 32 15

Bulgaria 48 60 21 36 40 35

Hungary 50 39 109 28 18 31

Greece 83 50 127 20 11 27

Romania 61 56 74 48 43 50

Slovenia 28 25 38 21 8 29

Regulatory and legal framework

R&D Adoption and use of ICT

Doing Business R&D infra Patents ICT usage Quality of ICT infra

Austria 61 13 17 19 6

Bulgaria 32 48 44 47 21

Hungary 53 30 26 39 77

Greece 107 40 39 36 20

Romania 52 61 51 49 85

Slovenia 56 24 28 28 13

Source: (16)6


Note: lower rankings are considered better positioned.

6 Blue colour denotes in the first quartile of competitive countries , red in the last quartile. Non available data for Serbia and Montenegro

0

20

40

60

80

100

120

140

Austria

Bulgaria

Hungary

Greece

Romania

Slovenia


It has to be noted that the indicators between the two sources above are quite differentiated

both in annotation and methodology, subsequently country rankings under similar headings

may be assigned to the same quartiles, but individual scores in absolute terms are diverse.

Nevertheless, strengths can be implied yet again in ICT usage, R&D infrastructure and

education.

A different standpoint on the competitiveness of the economies emerges from the World Bank

and the Doing Business Report in specific. Despite the distinctiveness of the sub indicators of

the rankings (construction permits, property, getting credit, protecting investors, paying taxes,

trading across borders, enforcing contracts and starting/closing a business, the countries in

question rank from the 30th to the 109th position out of 183 economies. Austria ranks 32nd in

2011 (and 31s in 2011), Slovenia 42nd (having ameliorated one place), Bulgaria 51st (no change

over the year), Hungary and Montenegro 46th (having stepped up 5 counties, Romania 56th

(from 54th), Serbia 89th while Greece is ranked at the 109th position (from the 97th in 2010) (17).

A political viewpoint is also included in the competitiveness discussion. According to

Transparency International (Corruption Index), Greece and Serbia are among the most

corrupted countries (3.5), Hungary, Romania, Montenegro and Bulgaria have a better

positioning (4.7, 3.7 and 3.6 respectively) while Slovenia and Austria are among the cleanest

countries (6.4 and 7.9 respective scores) (9-10 is the cleanest score) (18).

It is thus explicit that the historic developments and political foci have endowed the countries

with different perspectives on innovation capacities.

0

20

40

60

80

100

120

140 Higher education andtraining

Quality of education

On the job training

Competition

Labour market efficiency

Technological readiness

Technological adoption

Availability of latesttechnologiesFirm level technology

absorptionFDI and technology

transfer

ICT use

Innovation andsophistication factors…

Business sophistication

Innovation

Capacity for innovation

Quality of scientificresearch institutions

University industrycollaboration in R&D

Government procurementof advanced…

Austria Bulgaria Hungary Greece

Romania Slovenia Serbia



3.1.3 Europe 2020 Performance

The Europe 2020 Strategy aims at improving conditions and access to finance for research and

innovation, to ensure that innovative ideas can be turned into products and services that

create growth and jobs so that Europe develops its own distinctive approach to innovation.

Europe 2020 builds on its strengths and capitalises on its values by focusing on innovations

that address the major societal challenges identified in Europe 2020. It is suggested that

pursuing a broad concept of innovation, both research-driven innovation and innovation in

business models, design, branding and services will add value and involve all actors and all

regions in the innovation cycle (19).

This section gathers some baseline information to juxtapose the positioning of the region

under investigation against the Europe 2020 indicators (especially in view of societal

challenges) to derive common challenges that can underpin the foresight process, especially in

view of convergence to a common strategy for inclusive growth. The targets of the strategy are

the following:

- employment rate

- Gross Domestic Expenditures invested on R&D

- greenhouse emissions and energy efficiency

- share of school leavers and tertiary educational attainment by gender

- reduction of poverty.

Figure 5. Europe 2020 indicators positioning

(Source: Eurostat, 2011)

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

Employmentrate by

gender, agegroup 20-64

Grossdomestic

expenditureon R&D

Early leaversfrom

educationand trainingby gender

Tertiaryeducationalattainmentby gender,age group

30-34

People at riskof poverty or

socialexclusion (%

of totalpopulation)

Share ofrenewablesin gross final

energyconsumption

EU 27 Austria Bulgaria Greece Hungary Romania Slovenia Target


The table above compares the performance of the region against the EU 27 performance and

the targets set by the strategy. In this context, societal challenges are more vividly depicted, as

well as inherent differences against set criteria for inclusive growth. Austria and Slovenia

appear most well-prepared to embrace this strategy, as they almost attain targets in

employment rates, early leavers from education and tertiary attainment as well as renewable

alternative sources in energy consumption. Similarly, they have the lowest rates of people at

risk of poverty. On the other hand the rest of the countries again do appear to be challenged

with a different set of issues, except for the employment rate, which is a common

denominator. Romania has apparent deficiencies in early leavers in education, percentage of

access to tertiary educational attainment as well as risk of poverty. Greece needs to pace

towards bringing the gap concerning early leavers and improve tertiary education attainment

along with Bulgaria and Hungary, as well as reduce poverty and risk of social exclusion. Energy

consumption varies according to size, population and habits while expenditure on R&D seem

underachieved for most of the countries (3% is the target set). Notable challenges thus appear

in risk of poverty, exclusion and energy. As FORSEE adopts a challenge-oriented approach

towards themes relevant to economic competitiveness and societal challenges, this section

provides all relevant information.


4 Policies and Priorities

The following section discusses the main cornerstones of R&D and innovation policies of the

European Union to provide a comparative base upon which national policies and their

respective trends can be further assessed as to their European Union dimension. As the

innovation system consists of a set of institutions that contribute to knowledge diffusion,

governments implement policies so as to exert influence on the innovation process. The

interconnection of institutions calls upon an analysis of the policies and the implications they

have on the innovation process. An orientation of the main innovation policies among the

participating countries is also presented in terms of the common innovation systems priorities

and it examines whether there is a common orientation among the countries and it focuses on

the way in which policies are conceptualized and coordinated so as to detect common

characteristics and incongruent elements.

4.1 Background Information on European Innovation Policies

The EU approach to innovation policy demonstrates a positioning of innovation as a key driver

for a prosperous future. According to the European Commission (20), innovation is the

precondition for the creation of a knowledge-based, low-carbon economy necessary to render

the EU competitive in the globalised world and to achieve wider societal goals. The challenges

that arise at the EU level are to better exploit the potential of the partnership between the

Union and the Member states and coordinate innovation at all levels. Framework conditions,

uptake rates of innovative products and services and the proliferation of synergies soon

became the kernels of the future of innovation policy. In particular the key initiatives and

background policies of the European Union are as follows:

Innovation Union

This initiative aims at supporting innovative ideas turn into products and services that can offer

growth and employment and at improving the conditions for accessing funding for research

and innovation in Europe. In addition, it aims at improving the quality of life of Europeans and

at creating a greener society. It consists of more than 30 action points and introduces the

European Innovation Partnerships, the use of public procurement budgets, the Innovation

Scoreboard and a European knowledge market for patents and licensing. More specifically, the

planned initiatives are the strengthening of Europe’s knowledge base (support coherence

between European and national research policies and business-academia collaborations, cut of

red tape and elimination of obstacles in researchers’ mobility), supporting new ideas to enter

the market via standardization, patent protection, public procurement, smart regulation,

reinforcement of private sector investments and of European venture capital investments. In

addition, another planned initiative is to secure the involvement of all regions so as to avoid an

“innovation divide” and ensure the proper use of the remaining structural funds. The European

Innovation Partnerships in turn address challenges such as climate change, health, ageing

population and food and energy security efficiently through collaborations of private and


public actors in EU. Innovation Union is a flagship Initiative of the Europe 2020 Strategy for a

Smart, Sustainable and Inclusive Economy targeting smart growth.

Lead Market Initiative (LMI)

The LMI consists of the European policy for six important sectors through which new products

and services can enter the European market. The identified markets are: eHealth, protective

textiles, sustainable construction, recycling, bio-based products and renewable energies. It

further recommends the creation of conditions that can foster the transformation of

technological and non-technological innovation into products and services in innovation-

friendly markets. The policy tools relate to the improvement of regulations, the

encouragement of public procurement, a more innovation-friendly standardization and

supporting activities. This can accelerate the market expansion of fast-growing products and

services in involved in lead markets. The LMI is one of the nine priorities that the

Competitiveness Council of December 2006 had set for reinforcing the innovation action at EU

level.

Social Innovation Europe (SIE) and Regional Innovation

With the aim of addressing social needs and changes, Social Innovation is an initiative that

focuses on innovative new ideas that can create new types of collaborations. Social

entrepreneurship is illustrated as means through which social innovation can be

conceptualized and implemented. Regional Innovation is an initiative that aims at exploiting

the potential of regional performances in the stimulation of innovation. It focuses on networks

that facilitate the interaction between businesses and the rest of the stakeholders

(universities, research institutes etc) active at the regional level as well as to regional

governments which have the budget and the competences to efficiently innovate. An example

of the abovementioned networks is the clusters initiative at the regional level.

In the context of societal challenges, the Strategic-Energy-Technology Plan (SET Plan) is a

thematic priority of ERA and a strategic plan by the EC to support the development and

deployment of cost-effective low carbon technologies. It is the first step to establish a policy

for energy technology in Europe and aims at achieving the 2020 Energy and Climate Change

goals and the transition to a low-carbon economy by 2050. The European Industrial Initiatives

(EIIs) bring together the Commission and the Member States as well as the industry and the

research community in public-private partnerships so as to achieve the rapid development of

energy technologies. A joint programming framework and the alignment of the R&D activities

to the priorities of the SET Plan are undertaken by the European Energy Research Alliance

(EERA).

Other relevant trends and drivers

Clusters have been set as one of the nine priorities set by the Competitiveness Council

of December 2006 for reinforcing the innovation action at EU level. Their objective is

to support the cooperation between enterprises and research institutions and other

relevant actors in the same geographical area, to raise the levels of openness and

excellence of clusters, to increase the transnational collaboration between clusters

and to facilitate the integration of innovative SMEs into clusters.


The protection of Intellectual Property Rights (IPRs) has been considered as a priority

by the Competitiveness Council of December 2006 for reinforcing the innovation

action at EU level and as a means of increasing the competitiveness of Europe in the

global marketplace. The creation of a knowledge market for licensing and patents is in

the center of the EC’s action for the improved economic exploitation of IPRs.

Standardization can reinforce the efficiency of innovation in Europe as the definition of

(technical) specifications can lead to improved future technological developments and

to large scale markets. For these reasons, Standardization in support of innovation was

set as a priority in the Competitiveness Council of December 2006 for reinforcing the

innovation action at EU level. In addition, a White Paper is currently being prepared in

the area of standardization of ICT.

Public Procurement for Research and Innovation is seen as an instrument that public

authorities can use to stimulate private investment in research and innovation. In this

way, lead markets for new technologies can be created and firms can get the

opportunity to suggest innovative solutions. The integration of technology

requirements into tendering procedures is proposed and explained by the EC in the

document “Guide on innovative solutions in public procurement. Since 2008, thematic

networks of public procurers which focus on the LMI sectors are being supported with

the aim to increase their demand for innovation in products and services. Public

Procurement for Innovation has been set as a priority by the Competitiveness Council

of December 2006 for reinforcing the innovation action at EU level.

The transformation of research results into commercial products and services as well

as the proper collaboration of public research institutions, industry, civil society and

other relevant actors for the success of this transformation are regarded as significant

elements for the industrial innovation. The elimination of barriers that affect this kind

of collaborations and the creation of an environment that supports knowledge transfer

can increase public investment in research.

Including resource management and process management, Eco-Innovation is an

initiative that appears in several sectors of the Lead Market Initiative (renewable

energy, recycling, sustainable construction).

The importance of know-how as a vehicle for the efficient commercialization of new

services and products is considered significant for the leap towards a more innovative

Europe. The initiative targets at the development of a more digitally literate workforce

and at the improvement of education levels and “soft skills”.

The Innovation in Services policy aims at strengthening the innovative potential of the

service economy in Europe and draws the attention to non-technological innovation-

related services as well. With the exception of the ICT services sector, the innovation

level in the services sector is low and this policy has the objective to increase it. In

addition, Innovation in Services has been set as a priority by the Competitiveness

Council of December 2006 for reinforcing the innovation action at EU level.


The creation of national frameworks for venture capital funds is considered essential

for a more integrated venture capital market in Europe. EU aims at facilitating the

access to financing for innovative small enterprises by creating a common regulatory

environment among its members. In December 2011, the EC presented the Single

Market Act, which contained several legislative proposals that focused on venture

capital funds.

Public Private Partnerships in Research (PPPs) is another thematic priority of ERA.

Three Public Private Partnerships in Research (PPPs) have been launched in 2009 by

the EC with the aim to engage top industrial companies, SMEs and research

organizations in Europe in the reinforcement of their research activities in three

significant industrial sectors -automotive, construction and manufacturing- so as to

achieve a more green and sustainable economy through innovation.

The role of ICT and other key technology enablers

Information and Communication Technology is viewed by the EC as the most significant

characteristic of successful innovation. It is a means of increasing the competiveness levels at a

European level, as ICT and other key technology enablers (such as micro- and nanoelectronics,

nanotechnology and other) can re-invent the way in which business is conducted and in which

products and services are created. The Competitiveness Council of December 2006 has set two

additional priorities for reinforcing the innovation action at EU level.

Joint Technology Initiatives (JTIs): Joint Technology Initiatives (JTI) is a mechanism for

the performance of research at EU level which was firstly established in 2007 by the EC

(Cooperation Programme). They are long-term public-private partnerships to support

large-scale multinational research activities in key areas which can reinforce the

industrial competitiveness of Europe. The partnerships can involve industry actors, the

research community and public authorities. In addition, JTIs have been created to

function as a coordinating mechanism for the activities of the European Technology

Platforms (ETPs). The structures implementing JTI are independent legal entities which

function in an integrated way so as to carry out research.

A Digital Agenda for Europe: This initiative, which is the successor of the i2010

initiative, aims at the creation of a new digital Single Market with simpler regulations

and management and at reinforcing greater interoperability for the ICT products and

services. The specific action areas are delineated shortly so as to provide the basis of

understanding of relevant policies at the national level.

1. A vibrant digital single market (telecom, internet services)

2. Interoperability and standards (between IT products and services) to ensure a

digital society

3. Trust and security (protection of infrastructure, information security)

4. Fast and ultra fast internet access (basic broadband etc)

5. Research and Innovation: the main challenges identified in national R&D

systems are the investment gap is related to weak and dispersed public R&D


effort, market fragmentation of financing and the slow uptake of ICT-based

innovations, notably in areas of public interest. The R&D targets therefore are

to step up efforts and efficiency (e.g. 2020 flagship, cloud computing for

government and science), to drive ICT innovation by exploiting the single

market (public sector innovation, knowledge transfer, open access) and focus

on open innovation and open platforms for new products and services.

6. Enhancing digital literacy, skills and inclusion through digital literacy and skills

and inclusive digital services.

7. ICT-enabled benefits for EU society through the smart use of technology and

exploitation of information to address major challenges such as ICT for

environment , sustainable healthcare and support for independent living, c

cultural diversity and creative content, eGovernment and Intelligent Transport

Systems for efficient and mobility

8. International aspects

In general the level of innovation in the ICT sector in the European Union related to

fragmented technology policies (15), scarcity of large-scale projects and slow decision making.

However, the same report outlines some factors that are likely to shape the future of the ICT

industry: convergence of industries, embedding and integration of technology and closer links

between technology and applications. Crowd-sourcing and open innovation also surfaced as

critical issues for products and services (21) in which participatory innovation addresses

challenges related to the Single Market for knowledge intense services. Prospective challenges

at a EU level are ingrained in the level of ICT uptake in the economy (skills and demand) and

especially in the public sector. Public procurement has the potential to favour innovative

solutions and support R&D and innovation. In this regard, ICT R&D innovation is related to

both general issues (promotion of the knowledge economy, promoting adoption, investing in

R&D) and technological and market-oriented issues, skills and collaboration and suppliers.

Therefore, ICT RTDI cuts across a wide spectrum of horizontal activities and policies. The

remaining section thereof discusses policy issues in the countries under view to extrapolate

common challenges or fragmented logic of public intervention.

A table illustrating the main policies from a review of EC documents and work programmes can

be found in the Annex.

4.2 Snapshot on national RTDI and Innovation Policies

As a general overview, the general policy orientation and the priorities set in the countries

under review have been strongly influenced by their pronounced accession to the EU and its

inherent model towards development and growth. The level of influence is exacerbated by the

previous development model, as the partnership is represented by Greece that has accessed

the EU in 1980, Austria which accessed in 1995, three previously communist countries that

accessed in 2004 (Bulgaria, Romania and Slovenia) and two countries that are not members of

the EU (Serbia, Montenegro having gained candidate status). Our goal is not present a

thorough investigation of the development paths and the homogeneity with the EU Common


Market structures but expose the degree of congruence with European policies and check

whether implementation and coordination of policies take place in similar settings.

In a typical, supply driven system, orientation and S&T priorities are driven by funding

opportunities and not by market demand. This bears several effects to the analysis. It is

acknowledged that the innovation policy mix should consist of both supply-side measures and

demand-side instruments (22). Policy mixes focusing on demand factors for innovation are

found to spur modernisation of the economy and accelerate catching-up of countries and

regions and in turn affect economic development. In this section in general, the importance of

the public sector in the process of innovation is examined in general and demand-based

innovation policy measures through the mobilisation of public procurement, regulation and

accompanying systemic measures such as lead markets etc. in particular. Supply-side measures

such as subsidies, loans and venture capital do have a positive impact of RTDI activities in the

private sector and are presented in conjunction with previous policies when available. Specific

demand-side innovation policies started to surface in Slovenia and in Austria, when in the

other countries it is still in deliberation. In Specific, public (green) procurements started to

flourish in Slovenia as well as open innovation paradigms. In Austria, public procurement for

societal challenges in the public sector and green energy appear to gain in importance, while

there are some Lead Market initiatives in Western Greece. However, this might have an impact

on foresight, since a shift in emphasis from supply to demand-side policies might change the

policy mix and delivery of services. According to the Innovation Union Competitiveness report

(23), successful demand-side policies are reported by enterprises to have a positive effect,

while supply-side measures were less likely to have positively affected enterprises’ innovation

activities since 2006, except from enterprises in knowledge-intensive services sectors

(although ICT RTD in countries where the state is the main developer of infrastructure could be

connected to non competitive sector through state procurement as well).

0

10

20

30

40

50

60

70

80

90

Greece Slovenia Romania Austria Bulgaria Hungary

Supply-side Demand side Technology-Push Demand-Pull


Figure 6. Assessment of supply-side or demand-side public policies and technology-push and

demand factors 7

Figure primary source: Innovation union competitiveness report 2011 and authors’ calculations

The predominance of demand in boosting innovation is evident with some diversification in

Bulgaria and Hungary, where supply-side is considered more important, however this might be

generated by the existing industrial sectors and the export economy as well of the existence of

a strong local RD institutional setting, therefore in such a case the boundaries between supply

and demand led policies is blurred. It is illustrated that the majority of companies state that

only changes in technology-push factors are positive, thus the importance of public sector

policies on a national or supra-national level is obviated.

4.2.1 Main Innovation Policies Orientation

Sustainable development and economic growth is the main objective behind the main policies

among the participant countries (22). Taking into consideration the innovation gap between

certain countries it was expected that several differences regarding the orientation of the

innovation policies would occur. In fact, Austria’s position as an innovation follower – with the

aim of becoming an innovation leader in the forthcoming future- is incongruent with the

innovation position of the other countries, especially of those that are in the catching-up

phase. However, the domains towards which the orientation of the participant countries is

common are many, since formal national programs tend to include policy concepts included by

current trends. Nevertheless, there are some policies that direct efforts towards different

channels. The section discusses these channels in details along with the degree of occurrence

of patterns. The references under each country that support this categorization are given in

the Annex.

Two specific cases are discussed in more detail (Serbia and Montenegro) where international

and historic circumstances have imposed a quite different NIS model on these countries.

Serbia on the one hand has not synchronized documents with the Lisbon guidelines and

documents. The first attempts of Serbia towards putting priorities into the restructuring of the

RTDI system were only taken in 2006 with two new laws for science and innovation that aim at

the reduction of budget-based financing, introducing competition for all sorts of support for

R&D activities in the country, the inclusion of private sector into the competition process and

the creation of innovation infrastructure as part of government strategy for S&T and economic

development. In a similar case, Montenegro was faced with different challenges that

influenced ICT and RTD. The transition process had some negative effects related to

standardization of ICT RTD on the national level as well as harmonization with key regulations

and strategies on EU level in recent period. Current legal and regulatory background related to

ICT RTD has showed improvements towards introduction and harmonization of the “Acquis

7 Technology-push factors include the emergence of new technologies for exploitation while

demand-pull factors are pressure from competitors, new opportunities for market entrance,

new demand generated by government and the public sectors or commercial clients.


Communautaire”. However, there are some regulations which need to be adopted in the

future, such as the Law on Mandatory Financing of ICT RTD, while some of laws need further

revision (Law on E-commerce, Law on Digital Signature).

The common priorities are shortly discussed below:

Increase of support towards all research-relevant actors – Supply of HR for RTDI (8/88)

Various measures here aim at lifelong learning, doctoral research, and in general the

knowledge and innovation based society by increasing support to the relevant actors in

research. Common patterns concentrate on the upgrade of higher education and increase

stimulation of research.

Support to SMEs- Entrepreneurship (8/8)

Support to SME’s is the cornerstone of national policies, where the majority of the countries

stress the importance of boosting investment of SME’s especially in new technologies amidst

the particular difficult economic downturn. Specific supply-driven measures are envisaged,

especially through innovation coupons, direct subsidies and access to finance. It is a common

priority for all countries since as it will be available later on BERD levels are extremely low for

most of the countries.

Development of Innovative infrastructure, Centers of Excellence, Technology Transfer (7/8)

The main priorities here include innovative infrastructure and strentgening of regional

infrastructure. Innovation zones, incubators and spin offs are more pronounced in Hungary an

Greece. By contrast, in Serbia and Montenegro, the emphasis is still placed on new research

equipment and ICT infrastructure while in Montenegro some technology and science parks are

also envisaged and incubators in Serbia.

Increase of competitiveness- Exploitation of key national strengths (7/8)

Most of the countries have set targets to increase the competitiveness of their economies and

their business sectors so as to make their regions attractive places to invest and work in.

Greece, Hungary and Serbia and Montenegro have pronounced their competitive capacities in

various sectors.

Reinforce the participation of the private sector in R&D activities and funding- Innovativeness of companies (6/8)

Such priorities might be explicit or more implicit in other sets of policies for some countries,

nevertheless the collaboration of research actors, especially innovative companies and

research institutions.

Cooperation (6/8)

A sustainable basis for cooperation is in the centre of the policies of most countries. However,

the type of collaboration that is supported differs from country to country. For instance it may

be captured in terms of a sustainable education-business-science relation, among the main

8 denotes number of countries (countries where relevant policies have been identified.


research intensive sectors or institutions or between applied research and the industry.

Cooperation might also connotate bringing research results into market or participation in

common calls for RTD projects. Nevertheless, cooperation is explicit for the majority of the

countries. In Montenegro, the emphasis is placed on international cooperation.

Improve quality of life and services through the use of ICT (3/8)

Improving quality of life and services through the use of ICT is only visible in Romania, Austria

and Greece, demonstrating a gap and limited attention of policy makers towards societal

challenges, which were outlined in the previous section.

Restructuring of the RDI system in a more functional and efficient way (2/8)

This priority (mainly in Greece and Romania) targets functional identified failures of the RTDI

systems and the re-organization of the systems so as to reduce fragmentations and make

optimal use of resources. It has to be noted that this priority is not explicit in the case of Serbia

and Montenegro, as the RTD systems of these countries are relevantly new and directly target

at deficiencies.

4.2.2 Main Innovation Systems Priorities

Priority setting cannot be easily measured and presented ( (22)(Inno-Europe 2012). Current

analysis only underlines the policy priorities found in the policy mix. The most common STI

policy priorities related to innovation detected among all the participatory countries relate to

the support and improvement of scientific research and infrastructure, the support of

innovation activities in SMEs as well as of the economic competitiveness of each country. In

addition, the promotion of entrepreneurship and increasing of productivity levels are further

common points. Most of these priorities seem to accommodate priorities set in the European

Innovation Policies and more specifically with the Europe Strategy 2020 and the Flagship

Initiatives Innovation Union and the Digital Agenda, including some nation-specific challenges

which are not present at EU level. Most of the declared priorities focus on supply side

elements.

The following list presents the common characteristics on the main priority axis of the

countries and baseline common priorities:

Education-Training/Lifelong learning and knowledge society. Country-specific

measures under this heading are not identical but tend towards the quality in human

resources, increasing the number of researchers and improving investments in

knowledge and excellence. the acknowledgement of lifelong learning is also gaining in

importance

Research Infrastructure: Most of the countries aim at the creation of either ICT

broadband infrastructure or technology transfer, business pareks r and investment in

larger facilities, such as supercomputing centers or R&D institutions. .

Addressing Societal Changes- Elimination of Risks and Inequality: this measure is only

visible as such in about half of the countries that take into consideration societal

challenges and improving the quality of life, such as employment, sustainability, health

facilities and combating social exclusion and climate change .


Creation and support of partnerships: The majority of countries aim at the creation of

partnerships in RDI fields between research actors, the private sector, financial

institutions, national-wide national networks and improving collaboration. These

commonly articulated policies are correlated with weak collaboration ties among

research actors.

Improvement of the institutional framework: This is also a commonly articulated policy

with measures aiming at addressing failures and bottlenecks in the institutional

frameworks and market access conditions to ensure efficient and coherence in

policies. In some cases, demand-side measures are also discussed.

Promotion of innovation activities in enterprises: Assistance towards SMEs, research

incentives in the private sector, stimulating investments. Specific supply-side measures

vary from country to country.

Improvement of the business environment: Measures here are similar to the

improvement of the institutional framework but instead focus on internationalization

of knowledge, exports, patents and start-ups.

Support of innovative entrepreneurship and competitiveness: Another common

denominator in policies aiming at developing knowledge centers throughout all

education levels, technology transfer schemes and access to capital or taxing facilities.

in low-performing countries these policies are more generically articulated towards

the reorientation of the productive base towards entrepreneur investments.

Horizontal support of ICTs: Romania and Greece specifically support application of ICTS

as a means of improving quality of life or electronic public services.

The relevant table is presented in the Annex for more information. Except for the common

priority axis, there are also thematic priority axes of each country in accordance with national

strategic frameworks.

Some common priorities can be identified at a first glance, such us: ICT, energy and the

environment, biotechnology, space and security and new materials for innovative products.

Still, these particular common axes reflect international patterns or reflect specific interests in

national contexts. Therefore, these particular fields may appear on national policies but that

does not necessarily entail actual implementation, instead there are on the rhetoric level.

Some additional conclusions on common sectors, though on a more generic level can be drawn

from an initial analysis of the Operational Programmes in each of the countries, thus pointing

to different foci when Structural Funds are involved. These are relevant only at the regional

and cross-border level and regard specific areas of intervention, such as environment,

transport infrastructure and increase of economic competitiveness. Relevant tables can be

found in the Annex.

4.2.3 Coordination and Capacity

The main issue arising from the coordination of policies is the lack of a central coordinating

mechanism that can coordinate the activities of the ministries , of other RTDI related actors or

even the policies themselves due to the fragmentation of their governance. In general the

mode of coordination is not explicit, relying on the interaction of several Ministries and


organizations. Only Hungary and partially Greece and Montenegro have a more explicit

organization or interministerial structure devoted to coordinate STI policies. The clarity of the

systems and its coordination is different to conceptualize on a synthesis level due to the

divergent structures inherent in each country. Still, the degree of stability of the structure in

most of the countries is relatively low, as frequent changes take place in governance

structures. Furthermore, good governance elements cannot be reported, as the measurement

of the density of linkages, the frequency of consultations and the results of consensus-building

in corresponding countries remain unknown.

Coordination or RTDE in most of the countries takes place among various Ministries and

advisory bodies. Ministries with a common mandate to innovation activities include the

Ministries of Finance, Education, Information Society and Science. Another issue arising from

screening the national reports is that RTDI policies are not usually distinct but intertwined in

complex national settings of policy making and governance. A short overview of coordination

mechanisms in each country is again provided in the Annex for clarity and easy reference.


5 Innovation Axis

This chapter presents the synthesized results for each of the pillars identified in the

methodological section, i.e. Human Resources, Knowledge Flows, Internationalisation of

knowledge, Infrastructure and Funding and Innovation and Business Environment.

5.1 Human Resources

This subsection provides further information on Human resources and the drivers and barriers

of the educational system to produce innovation inputs based on Human Resources.

Educational profiles and HSRT rates in the region are delivered and some issues such as the

importance of life-long learning and the robustness of other policies conclude the analysis.

5.1.1 Educational System performance and Science Base

As one can assume, the educational systems and the profiles significantly diverge in the region,

mirroring inherent differences in educational traditions and the prioritization of human

resources as an enabler for innovation.

The following table recapitulates basic indicators in human resources, so as to enable an

extrapolation of common strengths and weaknesses on a regional level. Secondary and tertiary

education attainment seems to be high in the region (exception of Romania indicating a low

tertiary level attainment). There a clear shortage in lifelong learning in most of the countries

scoring low and very low, but sufficient structures in Slovenia and Austria. Brain drain seems to

be a problem, even with countries with scarcity in RTDI. In particular, Bulgaria, Hungary and

Serbia are characterized by a scarcity of talent in RTDI, Romania and Austria have good supply

rates, while in Greece and Slovenia, the situation is about average. Another major weakness is

the RTDI graduates employed. The situation is somehow better in Hungary and Slovenia but

for the majority of the countries reviewed employment is low either due to unattractive

working conditions or structural mismatches in employment.

Table 5.1. Main education indicators in the region9

Education indicators

GR RO AT SI BG HU RS

Secondary level education attainment 10

High (83%)

High (78%)

High (85%)

High (89%)

High (84% )

High (84% )

High (89%)

9 No relevant data have been provided for Montenegro, for Serbia 10 2010 data, Eurostat , comparison to EU average(79%)


Tertiary education attainment 11

Medium (28.4)

Low (18%)

Medium (23.5%)

High (34.8%)

Medium (27.9%)

Medium (25.7%)

n/a

Level of lifelong learning 12

Low (3%)

Very low (1.3%)

High (13.7%)

Very High (16%)

Very low (1.2%)

Low (2.8%)

Low (3.95%)

Scarcity of talent in RTDI 13

Relative (12.5%)

Good supply (24.9%)

Good supply (21.1%)

Relative (16.2%)

Scarcity (12.4%)

Scarcity (10%)

Scarcity (10%)

Outward mobility of researchers 14

High, increased supply

Brain Drain

Diaspora n/a n/a Brain Drain

n/a

HSRT in total employment 15

Low

Low

Low

Medium to high

Low Medium to high

n/a

Doctoral degree attainment (% of population)

Low 0.3%

Low 0.9%

Medium to high

Medium Low 0.3%

Low 0.4%

n/a

Source: National Innovation Reports

In addition, most countries suffer from high levels of unemployment in RTD personnel. The

educational structures of all countries serve a long-lasting tradition in science and therefore

provide skilled workforce, especially in IT. Only Austria shows a relatively low share of

graduates in science and technology, whilst the country is ranked as top in tertiary education.

A common challenge is to update the educational systems in terms of skills in RTDI. In most of

the countries the innovation RTDI systems are not yet well-structured and mature to enable

absorption of researchers and highly skilled personnel to stimulate research careers, as shown

by HSRT in total employment. This is also confirmed by the amount and strength of RTDI

actors, discussed later on. In Serbia and Montenegro in specific, the educational system is

characterized by an availability of scientists and engineers.

Still, all countries have experienced increases on public spending on education (both in terms

of expenditure and both on DGP on education), except Hungary. Although these metrics do

not entail the quality of the education system, as funds might be channeled to personnel,

infrastructure etc. it indicates a commitment to increasing science base and improving Human

Resources.

11 2010 data, Eurostat , comparison to EU average(33.6%%) 12 Share of persons having participated in education and training, 2009 data, comparison to EU average (9.1%) 13 2009 data, percentage of population graduates, comparison to EU average (19.2%) 14 Partnership evaluations 15 R&D personnel in ICT sector and employment in high technology activities for 2009 combination


Table 5.2. Spending in education

GDP on education Public spending on Education

2007 2008 2009 2007 2008 2009

Hungary 5,3 5,1 10,4 10,4

Bulgaria 3,9 4,4 10 12,3

Romania 4,3 11,8

Serbia 4,7 4,9 5 8,9 9,3 9,5

Austria 5,3 5,5 11,1 11,2

Slovenia 5,2 5,2 12,2 11,8

Source: World Bank Statistics, 2011 (data unavailable for Greece and Montenegro)

Figure 7. Competitiveness Aspects in Education and Rankings in the region (global rankings)

The figure above recapitulates information from section 3.12 (competitiveness aspects) as

regards education and science. Different rankings appear, and countries between 0-20 show

considerable global rankings, while between 20-40 upper global rankings. As indicated, Austria

and Slovenia are considered leaders in almost all aspects. Deficiencies can intuitively be

identified in higher education, on the job training in most half of the countries (Bulgaria,

Greece, Romania and partially Hungary). The general education quality pillar is admirable for

most of the countries, especially, Greece, Hungary and Slovenia. Quality of education appears

to be the third deficiency in most countries. It also appears that on the job training is a crucial

challenge, as most of the countries do not ensure good matches of skills between higher

education and the market, nor do they provide sufficient training and skills. Consequently, in

terms of this pillar 3 categories emerge bottom-up: Austria and Slovenia in one cluster,

Hungary and Montenegro in the second and Greece, Romania, Bulgaria and Serbia in the third

one. This clustering is intuitive and does not take into consideration the excellent ranking in

human capital and education in Greece.

0

20

40

60

80

100

120

AT BG HU GR RO SI ME

Quality of education On the job training

Higher education and training General Human Capital and Training Index.

Education


5.1.2 Links between education and RTDI systems

The participant countries appear to have different challenges to address in terms of education

and RTDI. Each country presents different levels of education (especially tertiary education)

and lifelong learning participation. Thus, the landscape consists of rather contradictory

elements.

Each of the identified clusters is presented in more detail. More specifically, Austria and

Slovenia appear to have very good levels of education, PhD graduates and lifelong learning.

The only challenges that the countries face are the rates of unemployment due to the vast

number of tertiary graduates, and the shortage of human capital in RTDI which is however

being addressed by new policies. These two countries score very close to EU average in terms

of employment in knowledge-intensive activities.

The second cluster (Hungary), presents increasing but insufficient levels of S&E graduates and

PhD holders and an unattractive environment for the retention of the existing graduates that

results to brain drain. When considering Montenegro, good quality research institutions and

availability of scientists and engineers appear to be a common denominator in the overall

system.

Countries in the third cluster present significant weaknesses in training levels on technological

innovation inside companies, lifelong learning and absorptive capacity of the RTDI systems. In

spite of the scarcity of tertiary graduates in Bulgaria, these countries experience brain drain

and unemployment as well as a non-conducive environment for employment in research and

technology. Therefore, the most striking element that could be said that most countries share

is the talent scarcity in the RTDI sector for which Greece and Romania report an amount of

human capital that cannot be absorbed by the country itself, resulting to significant brain drain

to other countries. Greece and Romania further suffer regional inequalities in total

unemployment as well in knowledge-intensive employment, although the total rankings along

with total number of researchers of Greece can classify it in a different cluster. Both Greece

and Serbia in this cluster possess increased capabilities in total number of R&D researchers.

Pronounced misalignments between the industry’s needs and the response of the education

system are about present in each of the clusters with a different degree of importance.

The links between education and RTDI can be better reflected in the percentages of

employment in Knowledge-Intensive high technology services as well as R&D personnel. The

percentage of employment in knowledge-intensive activities in high technology represents a

fraction between 1.5-3% on a country level.

Bulgaria, Romania, Hungary and Greece are characterized by a descending trend between

2007 and 2009 while in Slovenia the trend is increasing (and marginally for Austria). No major

differences are noted on a regional level and the EU-27 level, although Greece and Romania

perform fewer than 2% of total employment. The situation in these two countries in

exacerbated by regional inequalities in total unemployment as well in knowledge-intensive

employment ranging from 0.5% to 3.%. The general picture on employment in knowledge-

intensive activities (all sectors) is more encouraging as a range of about 30-35% is noted in

Austria and Slovenia as well as Greece and Hungary. Romania scores the lowest percentage of


19% while Bulgaria precedes the 30% threshold. The employment rates however in both

columns indicate that about 1/10th of the personnel employed in knowledge/intensive

activities is employed in high-technology knowledge intensive activities ( in Greece this

percentage is notably smaller). The diachronic development of employment in knowledge-

intensive activities is illustrated in the schema below, indicating stagnation between 2008 and

2009 probably due to the global financial crisis. ICT personnel in the economy (as % of total

employment) are relatively low in all countries (Eurostat, 2011). 2007 data denote that only

Hungary maintained a 3.7% percentage, followed by Austria and Slovenia (2.5-2.7) while the

rest of the countries fluctuate around 1.5%. However, when examining R&D personnel in the

ICT sector, it occupies around 15-20% (except from Romania) indicating an increased relative

weigh of ICT in total R&D. These indicators do not necessarily disclose links between academia

and industry but provide a picture on R&D personnel and possibly the “weighing” of intensity

in each economy.

The situation is complemented by total R&D personnel and researcher in each country, in

order to cover Serbia. As a percentage of total employment, an increased share or R&D

personnel in employment is noted mainly in Austria and Slovenia, as well as Greece. Bulgaria

and Romania are noted by a small percentage, while in Serbia the percentage lies within the

median of national scores.

Table 5.3. Education and RTDI in the region

Number of employed persons in knowledge-intensive high-technology activities in business industries/ total employment

Annual data on employment in

total knowledge-intensive activities

at the national level

Total R&D personnel and researchers in all sectors unit

European Union (EU27) 2007 3,29% 33,13% 2.363.460

2008 2,58% 36,94% 2.471.292

2009 2,62% 38,2% 2.554.862

Austria 2007 2,59% 30% 53.252

2008 2,41% 34,86% 58.077

2009 2,62% 36,52% 58.002

Bulgaria 2007 2,54% 22,1% 16.940

2008 2,18% 27,27% 17.219

2009 2,08% 29,06% 18.230

Hungary 2007 3,28% 28,2% 25.954

2008 2,27% 33,24% 27.403

2009 2,19% 34,23% 29.795

Greece 2007 1,95% 25,51% 35.629

2008 1,66% 32,52%

2009 1,72% 32,88%

Romania 2007 1,52% 14,4% 28.977


2008 1,19% 18,98% 30.390

2009 1,26% 19,83% 28.398

Slovenia 2007 2,8% 26,45% 10.369

2008 2,78% 31,19% 11.594

2009 3,16% 32,29% 12.410

Serbia 2007 - 18.153

2008 - 19.321

2009 - 20.067

Source: Eurostat-- Science and Technology-- High tech industry and knowledge intensive (non

available data for Montenegro.

Figure 8. Employment in knowledge-intensive activities progress 2007-2009

5.2 Knowledge flows

Knowledge flows are considered as the “blood” of each innovation system, enabling either

strong performance or creating fragmentation of actors and weaknesses in commercialisation.

Weak knowledge flows hamper the creation of a knowledge-base economy, as activities are

becoming increasingly knowledge-intensive and the economy required skilled people for high

technology industries (24), (25). Mapping knowledge flows proved to be rather a complex task

for the national reports, as limited bibliography and evaluation has been devoted. However,

some channels for knowledge flows and bottlenecks have been identified as hampering factors

to innovation performance. We note that knowledge flows consist of a separate pillar, as it

clearly reflects the systemic approach to innovation underlying by the present study. More

specifically, the chapter draws the attention to the measures that countries have in place to

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

2007 2008 2009

Annual data on employment in total knowledge-intensive activities at the national level

European Union (EU27) Austria Bulgaria

Hungary Greece Romania

Slovenia


ensure and promote the collaboration between different actors of science such as universities

and research institutes and actors of the industry such as big companies and SMEs.

5.2.1 Science-industry collaboration

The overall situation is characterized by rather low levels of collaboration between science and

industry. Most of the countries involve report a rather weak collaboration of the research

triangle; however this cannot be based on metrics. The only metric available refers to the GCR

rank reported previously and in particular the “University-industry collaboration in R&D”. The

results classify Austria and Slovenia in considerable global rankings (18th and 37th respectively),

which is distinctively different from the rest of the countries. Hungary and Montenegro score

in medium terms, however Greece, Bulgaria and Romania are classified among the last ranks

globally (112th, 110th and 102nd) indicating severe structural inefficiencies within their systems.

In the same context, the robustness and amount of measures put forward in each of the

countries serve as a measure of the intention to “correct” such failures. For instance, Austria

reports a sufficient number of institutions for public/private partnerships, and Slovenia reports

a small number but strong relationships between firms and research centers. Hungary has

several measures in place to support further collaboration of this kind. The rest of the

participant countries (Greece, Bulgaria, and Romania) lack strong intermediary mechanisms

and efficient ways of commercially exploiting research output. However, they report that there

are measures and policies in place for the improvement of the situation. These measures are

under OPs and mainly aim at the creation and development of technology transfer centers,

innovation poles, technology incubators and platforms and other means of reinforcing the

collaborative links between science and industry (e.g. programme “cooperation” and clusters

in Greece, technology transfers, commercialization, pre-procurement strategies, PPP’s etc.).

The issue of these links is a long-lasting challenge and needs concentrated action. In countries

such as Austria, Slovenia and Hungary, historically there are long-established partnerships

between businesses and higher education institutions and intermediary organizations have

been “bridging” mechanisms deeply embedded in the innovation culture, characteristics that

are almost non-existent in the rest of the countries, in which the research systems corresponds

to an orientation in a more traditional productive sector.

In a different survey, Serbia and Montenegro feel about university-industry collaboration in

R&D that businesses and universities collaborate adequately but not intensively.

The following matrix revises most of the information and measures put forward in each

country, that might have some explaining power on the specific structures. Further

information can be found in the Annex.

Table 5.4. Collaboration parameters

Collaboration parameters

AT, SI HU, MEN16 GR, BG, RO,RS

16 Information on Montenegro and Serbia are very limited.


Strengths between actors

++++ ++ -----

Intermediary units ++++ ++ ---

Inter-disciplinary centers of excellence

++++ ++ ?

Measures 17 Centres of Excellence, Technology Platforms, Clusters

Jointly-run competence centers and Joint technology platforms in Austria

Policy support measures such as pre-commercial procurement

knowledge circulation and the exploitation of research results. Joint university-industry research centers in Hungary.

Technology/innovation centers in Montenegro

Technology transfer, clusters, cooperation enhancement measures, industry liaison offices, business incubators, technological parks,

Joint technology platforms in Greece

Source: National Innovation Reports

5.2.2 Partnerships

The degree of cooperation among key actors and the links between European policies and

initiatives and the policies that each country has in place is also explored here. Publication

rates and further indicators are presented for all the countries in which data were available.

Partnerships and collaboration schemes are conceptualized and implemented differently in

each country thus the only emerging paradigm regards strength in patenting and a general

tendency towards innovation absorption. Hence, the situation in each country is presented

separately in this section, as commonalities are very limited and we run the risk of

generalisation. The per country analysis can be found in the Annex.

Table 5.5. Publication, licence and patents performance in the region18

Scientific publications among the top 10%

most cited publications worldwide as % of total scientific publications of

the country

License and patent revenues from abroad as % of GDP

Public-private co-publications per

million populations

European Union (EU27)

0,11 0,21% 36,2

17 Existent for the first two groups , planned and existent in the third. 18 No data for Montenegro


Austria 0,12 0,19% 56,3

Bulgaria 0,03 0,02% 2,3

Hungary 0,05 0,62% 19,6

Greece 0,09 0,01% 12,5

Romania 0,04 0,12% 6,3

Slovenia 0,07 0,08% 51

Serbia - 0,1% 4.2

Source: IUS2010, Thomas-Reuters database, Eurostat

The parameters held in the table cannot however be viewed as decisive of partnership

strengths. They only provide an approximation of research outputs that reach the academic

community or create added-value in their economic system. As expected, Austria scores best

in scientific publications and co-publications, followed by Greece, Slovenia and Hungary.

Greece’s lower score in co-publications is indicative of the partnership strengths. In license and

patent revenues the situation is quite different, as Serbia and Hungary manage to create

revenues in their economies and to a lesser degree Austria and Romania. In Greece and

Bulgaria, revenues are only marginal. This is also an indication of the low level of

internationalization of knowledge, discussed later on.

5.2.3 Key actors

SEE countries under investigation present a diversified picture in terms of the level of actor

involvement in the National Investment Systems in accordance to GERD and funding

specificities. The level of gravity or actors in each country is highly dependent on the systemic

structures of the research as well as the government system. Thus, any strategic direction in

R&D might affect or be affected by the degree of adjustability of the main research actors in

new strategic directions. The main actors in RTDI and the degree of variance in the countries

are listed below, however it is noted that the different categorization scheme in every country

poses some complexities in the following classification:

Public Research Organizations: Public research organizations receive state funding for

theoretical or applied research. These organizations are extremely important for

Romania and Greece as well as in Bulgaria, where academies of science are important

state actors. Science units in government and government agencies cover a notable

share in research in Bulgaria while in Greece, competitive calls through ministries is a

norm of research activity distribution. Serbia also has an important amount of

government-owned institutes (57) relative to its size; however there is no evidence on

prominence or excellence.

Universities: Universities are the main research performers in most of the countries,

especially in Greece and Serbia and to a lesser extent in Austria and Hungary.


However, universities play a vital role in every country’s research system with high

records in excellence.

Private Sector Research Organizations are more visible in Austria. In specific, the

relatively high share of BERD obviates the undertaking of research on behalf of private

Austrian research organisation.

Private companies and Multinational Companies (MNC’s): Again, research activity is

remarkable in Austria and Hungary. Especially in Hungary, major business actors such

as Ericsson and Nokia, Microsoft and SAP have partnerships with higher education for

research. The Business enterprise sector is significantly smaller in Serbia (Kutlaca,

2008)

Other actors: A wide array of other actors also partakes in the RTDI system such as:

Incubators and technology/incubation centers (Montenegro), innovation zones

(Greece and Romania), Technology platforms (Slovenia), international research centers

and special services or facilities (Romania). NGO’s part in the RTDI agenda is detectable

in Bulgaria and R&D centers in Serbia, occupied with technological development.

Private investors only occupy a marginal part in research activities while interest

organization only have a small part in Slovenia

Regional actors are notable in Serbia and Montenegro, such as entrepreneurship

enhancement centers, institutes and agencies, as well as chambers.

In general, the proliferation of public R&D organizations and research centers in the countries

indicate some implementation of the political rhetoric to invest in R&D. A notable exception in

this landscape is notable in Serbia, where the number of R&D organizations actually decreased

from 1980 and the number of R&D organizations and the private sector is almost not

integrated in the R&D system and private educational institutes do not partake in research

activities at all. Specifically ICT is a strong thematic profile for some business incubators,

technology transfers and information centers in Romania, Serbia and Montenegro to a lesser

degree. ICT centers for excellence also exist in Bulgaria as well as several Academies in Bulgaria

and Universities.

There are some notable specificities per country that we shortly refer to:

In Slovenia, the research stakeholder research is less distinct with types of

collaborative tri-sector participation and high degree of diffusion among stakeholders.

The tri-sector participation is mainly among technology platforms, centers of

excellence and clusters. Centers of excellence for example combine research facilities

at different public research units, thus the nature of RTDI is inter-disciplinary. In

addition the classification of research actors pole apart from the rest of the countries,

as there are government executing, bridging institutions, technology innovation

support organisations, financial intermediaries and interest organizations.

Regarding excellence, in Greece there are top performers in Chemical engineering,

Molecular biology, biotechnology and genetics, Agrobiotechnology, Computer Science,

Roman and Greek antiquity, Byzantine studies, Applied and computational

mathematics, Immunology, Astroparticle physics and Oceanography as well as

agriculture.


In Austria, competence centres exist for advanced computing, mechatronics,

eCommerce, Microsystems, ETourism, Materials, Processing and Product Engineering,

Industrial Biotechnology, Information and Communication Technologies in Austria. In

Bulgaria, excellence is dispersed in mathematics and informatics, mechanics, system

engineering, robotics and ICT.

In Romania, the activity profile of scientific and technological parks includes ICT,

electronics and microelectronics, environment protection and unconventional energy

sources, micro and nanotechnologies, micro engineering and new materials,

chemistry, physics, control of technological processes, bio-technologies, food industry,

audio-video technologies, economical sciences, marketing.

5.3 Internationalisation of knowledge

In a more “narrow” sense, internationalisation of knowledge refers to the capacity of an

economy to utilise complementary resources associated with a local innovation system and

the mostly regards foreign-located R&D (26). In this report however, our intention is to

examine only spill-overs of knowledge in terms of patents, publications (codified knowledge)

as well as external trade indicators in the knowledge economy. It is not a normative intention

to isolate knowledge flows but rather present some indicators related to the degree of

extroversion of the economy in terms of knowledge. We note that in literature (27), the

openness of the NIS was measured by R&D in multinational firms, technical alliances,

technology transfer abroad, international trade and international flow of scientific personnel.

Due to difficulties in gathering such information we only focus on 3 basic assessment

indicators.

South-East European countries are among those having limited cross-border activities, and

quite differenced trade patterns. It has been previously shown that the external balance in ICT

trade is negative in most of the countries with the notable exception of Hungary, which

exceeds the rest of the countries also in high-technology exports, as part of total

manufacturing exports, revealing a clear national advantage in ICT manufacturing. Greece and

Austria also perform well in high-tech exports. Another remarkable finding of the analysis is

the relative specialization in ICT services trade than ICT goods. This trend is notable in Bulgaria,

Slovenia but Romania in particular, where ICT service exports are about 1/5th of its national

service exports. These findings are herewith combined with firm-level data and their

propensity to engage in cooperation with other countries. According to the Innobarometer

report 2011 (28), Greek enterprises are most willing to outsource tasks exceeding the EU

average along with Slovenia, while Hungarian enterprises are less willing to engage in

outsourcing. Enterprises in Austria, Bulgaria and Romania consider outsourcing an important

activity. As regards investments, Austrian and Slovenian firms are most active in making

investment in other countries, while Hungarian and Romanian firms are the least. Hungary and

Romania are also least likely to recruit employees from other countries, while Austria, Slovenia

and Greece are more open to international recruitment. In summary, the highest proportion of

cooperation with countries outside the EU was found in Slovenia (26%), Austria and Greece


(20%). The lowest proportion of innovative enterprises cooperating is in Romania and Bulgaria,

one of the lowest in the EU.

The following table summarizes some the key data for patenting, trade specialisations and

participation in Framework Programmes. Other indicators to manifest commercialisation

routes were not identified and in most of the cases the reference year is not very recent. ICT

and patent applications in societal challenges present relative strengths in the area (apart from

Romania and Bulgaria), indicating a relative advantage and scientific strength in these areas. As

trade indicators signify, the common strengths in high-technology exports are electronic and

telecom, pharmacy and computer/office machines. Still, according to these data

commercialisation routes appear to be weak, considering the strengths in patenting and

cooperation in terms of research projects through Framework programmes and relative

performances.

Table 5.6. Patents and specialisation in the region19

GR AT BU RO SI HU

Patents

ICT patents applications (as percentage of total) 2006

25.2% 23.7% 9.3% 6.9% 9.7% 6.6%

Biotechnology patent applications, (as percentage of total) 2006

6.3% 4.4% n/a 1.5% 6.1% 3.3%

Patent applications in societal challenges as percentage of total, 201020

29% 14% 10% 6% 25% 25%

Trade Specialization

High-technology trade as % of total, 2009

8.5% imports

10.6% imports

6.3% imports

8.7% imports

7.1% imports

17.2% imports

5.9% exports

10.8% exports

3.6% exports

5.4% exports

5.2% exports

20.2% exports

19 Data non available for Serbia and Montenegro 20 OECD data


High technology exports (% of manufacturing exports)

11.25% 11.48% 8.2% 10% 6.5% 24%

High-technology exports by group, 2008 (only notable segments)

Electronics, telecom, aerospace and pharmacy to an equal degree

Electronics, telecom, and to a lesser degree pharmacy

Electronics, telecom dominant sector and some computer and office machines and scientific instruments

Electronics, telecom, pharmacy to an equal degree

Electronics, telecom computers and office machines, scientific machines to an equal extend

Electronics, telecom dominant sector and some computers and office machines

Average of FDI inflows and outflows, relative to GDP (%), 201021

0.4% 2.9% (from 1.7%)

0.5% 0.1% 0.4% 0.6% (from 1.9%)

Cooperation

Participation in Framework Programmes (number of projects and financial contributions)

High High Low Low High Low

Source: Eurostat, 2011

It would be theoretically challenging to examine the trade patterns permeating ICT and high-

technology products in general. The external balance in ICT trade is negative in most of the

countries with the notable exception of Hungary, where ICT trade (exports) represent about ¼

to 1/5th of its national trade. Serbia on the other hand presents the most negative external ICT

trade balance, since the country does not present any advantages in ICT manufacturing or

investments. Hungary exceeds the rest of the countries also in high-technology exports, as part

of total manufacturing exports, revealing a clear national advantage in ICT manufacturing.

Greece and Austria also perform well in high-tech exports. Greece and Hungary in particular

have increased the share of high-tech manufacturing exports sharply from 2007 to 2009.

Another remarkable finding of the analysis is the relative specialization in ICT services trade

21 The percentage for Serbia in 2008 is 6%


than ICT goods. This trend is notable in Bulgaria, Slovenia but Romania in particular, where ICT

service exports are about 1/5th of its national service exports. These trends need to be

validated further in order to reveal competitive advantages.

Table 5.7. ICT trade balance and high-tech trade balance in the region

Source: World Bank statistics

Table 5.8. Participaton of SEE countries in funding programmes (AT excluded)

FP6 share FP7 success rates

No of COST actions

Areas of interest

BG 0.62% 17% 109 Physics and Medicine

GR 3% 17% 196 Engineering and Medicine

RS and MEN 0.18% 14% 84 Engineering

RO 0.81% 16% 116 Materials, Physics, engineering

SI 0.83% 18% 122 Materials, Physics, engineering

ICT goods exports (% of

total)

ICT service exports (% of

service exports)

ICT goods imports

High-technology

exports (% of manufacturing

exports)

Austria 2007 6,13% 6,43% 7.5% 11.31%

2008 5,77% 6,14% 6.89% 10.92%

2009 5,49% 6,54% 7.02% 11.48%

Bulgaria 2007 2,37% 4,33% 5.9% 6%

2008 2,62% 5,59% 5.5% 6.56%

2009 3,58% 5,61% 6.4% 8.2%

Hungary 2007 24,52% 7,40% 20.64% 25%

2008 24,62% 8,26% 78.83% 24%

Greece 2007 2,97% 1,61% 6.29% 8%

2008 3,21% 1,68% 5.61% 9.95%

2009 2,99% 2,17% 5.87% 11.25%

Romania 2007 3,14% 18,02% 7.3% 3.66%

2008 5,34% 15,81% 7.5% 7.23%

2009 8,36% 18,93% 9.4% 10%

Slovenia 2007 2,87% 5,15% 4.83% 5.34%

2008 3,52% 6,72% 5.1% 6.10%

2009 3,79% 7,16% 5.6% 6.5%

Serbia 2007 1,49% 6,11% 6.7%

2008 2,22% 6,69% 5.36%

2009 7,99%


Source: (29)

Table 5.9. EC Funding and participation per country

Country Percentage of total participation

Participations

Greece 4.16% 592

Austria 3.56% 502

Hungary 0.56% 129

Slovenia 0.46% 87

Romania 0.32% 82

Bulgaria 0.19% 62

Serbia 0.12% 36

Montenegro 0.002% 4

In a pan-European context, Germany, the UK, Italy, France and Spain remain top recipients of

funding. Greece and Austria are in the 8th and 9th place on a pan-European scale. Greece is

the 6th country in the EU in terms of coordination of projects. A further analysis shows that on

a regional level, Attica in Greece and Wien in Austria are among the top 50 European regions

by participation and funding. On the other hand, the rest of the countries’ participation hardly

equals half of Austria’s participation. Additional information is provided in the Annex. It is

equally noted that it is hard to extrapolate areas of strength from participation in FP7, as in

some countries, national funding might also heavily influence orientation of research and R&D

structure and the variant success rates in different areas complicate the situation further.

It is clear that the financial volume of FP7 grants is received by Greece with signed financial

grants equaling more than €312M. Engineering, physics and medicine are the most common

areas of interest of SEE countries for participating in European Funding Programmes.

In addition, the European Commission’s ICT statistical report for FP& Annual Monitoring (30)

for the ICT theme of the 7th Framework Programme indicates a difference between old and

new Member States in terms of participation and Funding

In terms of clustering on this pillar, the following table presents the results. To date, the EC

financial contribution awarded to signed agreements for SEE participations represent 64% of

the initial requests.

Cluster High Medium Low

Patenting ICT orientation

Greece, Austria Slovenia, Bulgaria Romania, Hungary

Patenting in knowledge-intensive

Greece, Slovenia Austria, Hungary Bulgaria, Romania

High technology Trade orientation

Hungary Austria, Greece Greece, Bulgaria, Slovenia

ICT trade orientation Hungary Austria, Romania Greece, Bulgaria,


Slovenia

5.4 Infrastructure and Funding

Whilst infrastructure can be considered a characteristic of the genesis of an innovation system,

funding is a more “horizontal” issue that merits isolated treatment. However, albeit

heterogeneous, these two elements are presented together as baseline enablers of

innovation.

5.4.1 Funding Considerations

It is equally important to conceptualize the funding mechanisms used for RTDI and innovation

in each country, as at the regional level, the funding models of RTDI policies present significant

differences. The specificities on funding models of RTDI policies might affect regional foresight

since policy-making needs to orient itself according to the modes and differences in each

country. This in turn might affect centralized decision making and implementation of

scenarios, as different contributions of the public and private sector bear different significance

and financial implications.

Regarding the contribution of the private sector in RTDI funding there seems to be a big gap

with countries in which its contribution is insignificant (such as Bulgaria and Greece) on the

one hand and countries in which its contribution is increasing (such as Romania, Austria,

Hungary and Slovenia). Public funding appears to be of high significance especially for Bulgaria

and Greece. In addition, there is a tendency towards the support of applied research for

countries such as Austria and Romania. Moreover, the dependence on the European

Community Funds appears to be very strong for certain countries such as Greece and

important for others such as Slovenia and Romania. Tax incentives assist RTDI only in certain

countries. Goals of achieving higher performance in RTDI funding (GERD as a % of GDP) seem

to be feasible only for few countries (such as Slovenia and Austria).

The discrepancies can be seen as follows:22

Some countries (Austria, Greece, Hungary) receive a significant amount of community

funds for research through framework programmes. According to (31)these countries

receive about 5% of EU funds. Serbia and Montenegro receive about 0.18%

Greece, Bulgaria and Romania as well as IPA countries (Serbia, Montenegro) are quite

dependant of structural funds, although it is difficult to assess what part where

dedicated to R&D

Direct government is very strong in the majority of the countries. Especially, Greece,

Bulgaria, Romania, Serbia and Montenegro are dependent on public funds. In most of

these countries, about one third goes to university funding.

Austria and Slovenia are the only countries with increased BERD levels (Business

Expenditures on R&D) and within their goals is to reverse the percentage of public

22 information is not homogeneous among countries


funding to the minority of funds. These countries also use indirect funding (eg. through

tax regimes) as an instrument for spurring R&D amounts.

Companies in Montenegro appear to spend little amounts on R&D (44th rank out of

142 countries) while Serbian enterprises only spend a minor amount of R&D.

On average, SEE countries were granted around €6 per inhabitant for FP7 projects, compared

to €32 for the EU27. On a per capita basis, Greece and Slovenia have better performed FP7

grants but in contrast, Romania was in top in terms of absolute financial grants and in respect

to the number of eligible. (29). The section discusses synthesized findings on funding; however

for Serbia and Montenegro, data are not available.

In summary R&D expenditure by source of funds can be illustrated as follows:

Figure 9. R&D expenditure by source of funds 23

(Source: Eurostat, 2008 and own calculations)

Another funding aspect is venture capitals, which is among the innovation enablers. Venture

capital investments are defined as private equity being raised for investment in companies

(Eurostat). The volume of venture capital in GDP is rather small ranging from 0 to 0.005% of

GDP. By using the amount of venture capital as a proxy for the relative dynamism of new

business creation, relative data from Eurostat indicate a range from 0.002 to 0.05%. Notable

increases of venture capital expansion can be observed in Austria, Hungary and Greece

(however in Greece this trend was reversed in 2009).

23 ABR refers to other sources

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Austria Slovenia Hungary Greece Bulgaria Romania

Business sector Government ABR national sources


To provide a more holistic picture of R&D, we first present the expenditure on R&D as

percentage of the GDP (government and business sector)

Figure 10. Gross Domestic Expenditure of R&D as % of GDP


The share of R&D as a percentage of the Gross Domestic Product (expenditure of the public

sector) is remarkable for Austria, which is the only country approximating the EU goals of 3%

R&D expenditures as percentage of GDP. Slovenia presents a dynamic share, whilst the rest of

the countries do not surpass 1.5% and in some cases, like Bulgaria, Greece and Romania the

respective amounts are around 0.5% of government expenditure.

GBAORD appropriations (Government Budget Appropriations or Outlays on R&D) referring to

budget provisions for the same reference years, not to actual expenditure are quite similar to

the actual expenditure, with the exception of Austria, presenting about 1.5% budget

appropriations, less than actual government expenditure. Romania and Bulgaria also projected

about a 0.8% expenditure, however actual expenditure were lessened, probably indicating a

change in budgetary priorities (Eurostat data, 2011)

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

2007 2008 2009

Gross Domestic Expenditure on R&D (GERD) as % of GDP

European Union (EU27) Austria Bulgaria Hungary Greece Romania Slovenia


Figure 11. Business R&D expenditure a as % of GDP


Business Sector expenditures on R&D present an analogous picture in terms of country

rankings. Austria actually surpasses the EU average with increasing shares reaching about 2%.

Slovenia has also surpassed the 1% threshold, followed by Hungary which demonstrates an

increasing trend. The lack of data for all years renders further comparisons complex, however

in most of the cases the share falls between 0.01 % and 0.5% which remains below the EU 27

average. We then go a level of detail further and indicate the distribution of BERD shares in the

countries.


I

Figure 12. Distribution of ICT BERD shares in EU countries

(Source: 2010 report on R&D in the EU)

In order to further link RTDI and ICT, we present the R&D expenditure of business in the ICT

sector as a percentage of total R&D expenditure in all sectors. The percentage of the ICT sector

fluctuates between 10%-20%. Bulgaria spends about 19.93% to ICT, followed by Austria and

Slovenia (17,41% and 16.23% respectively). The Hungarian business sector spends about

13.86%, while Greece and Romania 11.5% (Eurostat, Information Society indicators, 2011).

However data availability is valid only for 2007, thus a comparative analysis of the shares

dynamics cannot be achieved for recent years.

5.4.2 Existing infrastructure in the region

This section discusses some of the background drivers for innovation such as existing

infrastructures well as the science and personnel. In terms of infrastructure, hard

infrastructure (such as telematics networks, backbones, participation in connectivity networks

etc) is explored to identify the readiness of the countries in the ICT market and special markets

that have potential of improvement. Progress towards digital agenda, online sophistication

and delivery of services (eGovernment, eBusiness etc) is discussed in the next section to

indicate the maturity of the internet and digital market.

Most of the structural funds in the region where channelled towards the development of such

infrastructure so as to ensure the conditions for research. Such prioritization was given

especially to Greece and Romania. Austria on the other hand was one of the early adopters of

backbone structures.24 Available hard R&D infrastructure in the region consists of:

National Research & Technology Networks: Normally, such networks interconnect

academic and research institutions, education and worldwide networks. For example,

the Greek Research & Technology Network connects education and academic

networks upon a broadband network with optical fibres. The National Network for

24 No relevant information was provided for Hungary and Slovenia


Education and Research in Romania serves the same purposes in conjunction with

scientific databases and inventories for research results. Austrian infrastructure

ensures connectivity. In Bulgaria, the National Research and Education Network is a

partnership connecting science centres, academia and public administration.

National Portals of public administration. In Greece , portal “ Ermis” ensures the use of

eGovernment services upon a high eSophistication level as well as the national public

administration networks ensuring broadband communication for public administration

Regional networks: In Greece Metropolitan Area Networks are optical rings

infrastructures in municipalities and wireless networks in cities.

Grid infrastructure for research: Developed in Bulgaria, Greece, Hungary, Romania,

Serbia by the national Grid Initiatives

Supecomputing centres exist in Romania and Bulgaria, consisting of high level

infracture for modelling and simulation in several science fields.

There are also some International connections and memberships such as:

International partnerships are quite dominant in Romania, where infrastructure was

built or operated under collaborations with conventions and initiatives such as as the

European Space Agency, the European Strategy Forum for Research infrastructures the

European Grid initiative etc. In addition, the Romanian Agency for Administration of

the Romanian Informatics network for Education and Research is a member of the

GEANT network of SEE countries and a member of the High-Performance Computing

Infrastructure for South East Europe’s Research Communities HP-SEE.

Austria’s networks of research is also part of the GEANT network

Bulgaria’s supercomputing centre is a partner of the PRACE pan-european

infrastructure as well as the Bulgarian language electronic resources for language and

culture is apart of CLARIN.

European public administration network ‘s-TESTA’, - Greek National Public

Administration Network is connected

Greek Research & Technology Network is also part of the pan-European GEANT

network, PRACE, and EGI, EGEE, and SEE-GRID.

Such categorisation though may be generic to omit some country-specific R&D infrastructure.

For instance in Greece, some regional initiatives in eHealth exist (e.g., in the Region of Epirus

and Crete) providing integrated environments for health care delivery through telematics

networks. In Bulgaria, there is also adequate infrastructure to support ICT technology transfer,

including Technology Transfer Offices (TTO) and Centers (TTC) as well as High Tech Business

Parks (HTBP) innovation offices, university High Tech parks and the R&D sectors

(administrative units) at the universities that complement the network of TTOs. Nevertheless,

it is noted that cloud computing infrastructure for government and science is not a widespread

and developed concept though the region.

Serbia and Montenegro have primarily invested in internet and 3G mobile connectivity, as well

as broadband strategies so as to reach the European targets (50% of households with

broadband connectivity). Apart from these investments, Serbia has a national research and

academic network (AMRES), an important actor in the Information Society development in


Serbia. Through this network, universities, high education systems, accredited scientific-

research organizations, researchers and students can join. In budgetary terms, investment in

capital and innovation infrastructure is still a priority for the two countries with budgetary

provisions for ICT infrastructure. No clustering can be performed across the parameters of this

section.

5.5 Innovation and Business Environment

The business environment within an innovation system is very hard to delineate or isolate. As a

source of information, assessments within the national report are used along with innovation

patterns in EU publications. In this section the level of analysis is strengthened by presenting

the general market trends in the area with an emphasis on a firm level. The specificities of the

sectors, specialisation and key trends in innovative enterprises are explored to reveal possible

conflicts or identify vicious circles of enterprise performance and policies set.

5.5.1 Market development

Market development mainly refers to innovation patterns and innovation profiles of

enterprises in the region as well as factors spurring innovation policies. As seen in the previous

sections, BERD shares are in general at a very low level in most of the countries. One of the

first challenges is thus to further investigate whether the expenditures of enterprises in R&D

and non–R&D innovation expenditures are connected. Consequently, when measuring non-

R&D innovation expenditures such as investment in equipment etc., Slovenia and Austria

appear to spend less in non-R&D than R&D, however the methodological limitations of the

measurement base of R&D and non R&D expenditure (% of expenditure and % of turnover)

cannot strengthen this argument. It is however a fact that on average, enterprises in the

region spend about 0.83% of their turnover in non-R&D expenditure. This percentage has

increased from 2009 to 2010 (except from Slovenia) by about 0.2%. Concerning the EU-27

average (0.71% for 2010), Bulgaria, Romania and Slovenia seem to surpass it. The general

trend in product and service innovation as well as R&D and non-R&D innovation in the

countries under review and the European Union are shown in the Annex. As far as

technological and non-technological investment is concerned, Greece and Slovenia

experienced an increase up until 2008 in technological innovation, more than EU average,

while Romania, Austria scored in about EU average. Bulgaria and Hungary were amongst the

last places. The situation is similar in non-technological innovation as well, with Greece,

Romania and Slovenia exceeding EU average, whilst Bulgaria and Hungary also take last

positions. As in the previous section, this sections endeavour to perform an initial distinction

between R&D and the ICT profile of enterprises than innovate. The prevailing type of

innovation is both technological and non-technological innovation, with Bulgaria being the

only technological innovator by majority. Non-technological innovation occupies an equally

large share of enterprises in Romania. Austrian enterprises innovate by about a 60% share of

total enterprises, exceeding the EU-27 average, about half of the Slovenian ones, while the

rest of the countries oscillate from 25-35%.


Another parameter under investigation is the sales of new-to-market and new-to-firm

innovation, i.e. the sum of turnover of new or significantly improved products, measuring the

turnover of new or significantly improved products, new to the market or to the firm. This

helps disentangle whether enterprises in the region channel their R&D efforts to introducing

product or service-related innovation.

The table below presents both the sales of new-to-market and new-to-firm innovation as well

as the pattern of innovation followed. As defined at the outset, there are essentially four types

of innovation identified (8):

Product/service innovation: product innovation involves a good or service new or

significantly improved either in technical specifications, components and materials,

software or other functional characteristics.

Process innovation; process innovation again embraces a new or significantly improved

production or delivery method, including changes in techniques, equipment, software,

etc.

Marketing innovation; which involves a new marketing method with significant

changes in product design or packaging, placement, promotion or pricing.

Organisational innovation; this involves a new organisational method in the firm’s

business practices, workplace organisation or external relations

The scores in the first column are indicative or a general failure of innovation to reach the

market and commercialisation routes. As a deviation above the average, Greece achieves the

highest score (25%) indicating a mature market for addressing new to market innovation

(however due to very low BERD amounts, this may not have multiplier effects). Regarding the

type of innovation in SEE countries, product and service innovation is the dominant type, with

most of the countries evolving around the EU average, apart from Hungary. Thus, the

percentage of enterprises that appear to innovate is quite satisfactory. Organisational

innovation is the second preferred type. This especially holds for Greece, in which 75% of its

enterprises introduced new organisational structures, exceeding the EU average by far.

Romanian, Slovenian, and Austrian enterprises, share this rationale by surpassing the EU

average, while Hungarian enterprises only share this type by 16%. Process and marketing

innovation attract approximately similar shares of enterprises. Again Slovenian, Romanian and

Greek enterprises are characterised by a propensity to introduce new processes and marketing

strategies as compared to the EU average. Two facts have to be elaborated at this point: The

share of Hungarian enterprises that innovate, as compared to the country’s RTD performance

and trade patterns and the share of Greek enterprises than innovate, considering the very low

BERD shares of the country.

Table 5.10. Pattern of innovation followed by enterprises in the region

Country Sales of new to market and

new to firm innovation -

2010

Product or service-related

innovation (as

compared

Companies introducing

new or significantly improved processes


new or significantly improved marketing


new or signifinanly improved

organizational


to no innovation)-

2009

strategies structures

European Union (EU27)

13,26% 67% 46% 45% 49%

Austria 11,24% 68% 49% 45% 47%

Bulgaria 14,2% 55% 36% 36% 34%

Hungary 16,44% 38% 12% 17% 16%

Greece 25,65% 62% 59% 56% 75%

Romania 14,87% 71% 45% 48% 52%

Slovenia 16,31% 78% 59% 50% 62%

Serbia 10,01% n/a n/a n/a n/a

Data source: Innovation Union Scoreboard and Innobarometer 2009

Some additional variables can shed some light into these questions by distinguishing the

expenditures of the enterprises in R&D by sector of activity. Manufacturing is the dominant

mode for Slovenia, Hungary as well as for Austria, but to a lesser extent. Bulgaria appears as

the only country that is service-oriented and Greece is more divided between manufacturing

and services. Romania has a slight focus in manufacturing, but other sectors employ about 10%

of its BERD (28). The preponderance of manufacturing can possibly consist an interpreting

factor of the low shares of innovative enterprises in Hungary and its strong trade orientation,

however in the case of Slovenia, domestic market maturity might absorb the majority of

improved products and services (78% of enterprises innovate in product and services). One of

the underlying differences could be the degree of economy extroversion in RTDI and ICT. The

table can be found in the Annex.

5.5.2 Industrial RTD and Innovation

Enterprises in the region interpret innovation opportunities mainly as increased demand for

sustainable or energy-efficient products and services as well as new export markets in

emerging countries outside Europe (32). Notwithstanding national differences (Greek

enterprises are more oriented to exporting to emerging markets and Hungarian/Bulgarian

enterprises feel there are limited opportunities for innovating) these two opportunities. Three

notable trends are notable:

Increased opportunities in sustainable (energy-efficient products) export markets in

emerging countries

More limited opportunities in terms of innovative products and services to meet

ageing population and new demands for social, education and health services


About 1/5th of enterprises feel that these opportunities will not lead to innovation

which is about the double amount of the EU average. This could be either a more

pessimistic viewpoint towards innovation or it could indicate new emerging

opportunities in the area which are not yet identifiable.

In Serbia and Montenegro the sources of information is different, therefore the results are

presented in accordance with reported information. Montenegrin companies obtain

technology based on licensing or imitating foreign companies rather by conducting formal

research or pioneering their own products and processes. Serbia’s rankings with this respect

are decreased, indicating a very strong tendency towards licensing rather than formal R&D.

There seems to be a lack of coherence regarding RTDI performances inside the private

enterprises of the participant countries. In certain countries such as Slovenia and Austria,

there is a rather satisfying amount of innovative enterprises and the levels of expenditures for

RTDI are high. In Hungary, innovation performance is considered “moderate” in general and

most enterprises do not feel the pressure to innovate. In other countries, such as Bulgaria and

Romania, companies present lower levels of RTDI performance and in some cases indicators

show far lower performance than the EU average. In Greece, there are certain indicators that

appear to be promising, still however there many issues that need to be resolved for the

situation to improve. It is worth mentioning that the whole region appears to be performing

well in the areas of open innovation as most of the countries’ indicators are above the EU

average. For more inclusive conclusions, the following table presents all the relevant

indicators.

Table 5.11. Innovation profiles of enterprises in the region

Indicator (2008) Slovenia Greece Austria Romania Bulgaria Hungary

Innovation in high-tech sectors -- Share of enterprises with

innovation activities

34% n/a 43 % 36% 24% 21%

Innovative enterprises engaged in extra mural R&D expenditure as a

percentage of innovative enterprises

36% n/a 26 % 9% 7% 26%

Innovative enterprises engaged in intra mural R&D expenditure as a

percentage of innovative enterprises

74% n/a 48% 23% 8% 47%

Innovative enterprises involved in all types of

cooperation as a percentage of innovative

enterprises

48% n/a 39 % 13.80% 17% 41%

Innovative enterprises that receive public

24% n/a 40 % 9.70% 9% 27%


funding as a percentage of innovative enterprises

Innovative enterprises, process and product

oriented, as a percentage of total number of

enterprises

19% n/a 22 % 10% 7% 8%

Source: Eurostat-- Science and Technology-- High tech industry and knowledge intensive

services: economic statistics at national level

The following indicators of innovation, depicted on the above table reveal some interesting

trends. Austria scores first in the percentage of innovative enterprises (as a percentage of total

enterprises), followed by Slovenia with a score of 19-22%. Romania, Bulgaria and Hungary

present percentages equal or lower to 10%.

Innovation in high-tech sectors is apparent in Slovenia, Austria and Romania, while in Austria in

specific about half of the enterprises innovate in high-tech sectors. In Bulgaria and Hungary

these trend drops to about 1/4th and 1/5th of the enterprises. Interestedly, extra mural R&D

expenditure is quite significant in Slovenia and to some extend to Austria and Hungary,

(extramural R&D provides expenditure data performed outside the enterprise (eg outsourcing,

joint development etc)) indicating a propensity to innovate, but not always in-house.

Cooperation of enterprises is also notable in Austria, Slovenia and Hungary. The degree of

public funding might be an enabling factor in innovative performance, taking into

considerations that countries scoring admirably in most of the indicators (especially Austria,

Slovenia) receive public funding. Hungary presents the peculiarity of low percentage of

innovative enterprises despite the amounts of funding.

A country-by country analysis is presented in the Annex to elucidate some of the findings,

combining various data from different sections.

Table 5.11 highlights the differences that occur among the participant countries regarding

innovation trends inside companies. Apparently, Slovenia has the best percentages in most of

the indicators and Bulgaria and Romania have the lowest percentages in most of the

indicators. The table presents a more concise picture of the specificities of enterprises in the

region, with regards to their stance and preference towards a number of innovative indicators.

Specifically, with regards to strategic partnerships, Greek and Slovenian enterprises seem to

actively value strategic relationships with customers, suppliers and other companies. However,

strategic relationships with research institutes and educational institutes remain limited in

preference, verifying the narrow links of the countries in the knowledge triangle. A notable

exception is Slovenian enterprises which remain more focused in the links with educational

institutes.

The standpoint of enterprises in the region towards open innovation normally exceeds the

stance of EU-27 enterprises with the exception of Slovenian enterprises that are more mature

in open innovation and Bulgarian that lag behind the rest of the countries. Support to open

innovation consists of product/service creation within forums, allowing free access to test

products or services, involving end-users in the productive process or sharing IP licences. The


importance of open innovation as an emerging issues of innovation-spurring policies seems to

be shared among the enterprises in the region, considering that recent literature indicates that

open innovation practices reinforce the importance of innovation, improve its effectiveness

and diversify its networks. Still, there is a large number of external factors to the firm affecting

is ability to adopt open innovation practices, such as the supply of outside knowledge, highly-

educated personnel, effective legal systems and IP protection. Thus we can conclude that in

the region the factors spurring open innovation-stimulating policies are quite crucial.

Collaboration with foreign countries seems to be a quite unexploited issue of innovation-

spurring activities in enterprises, not only in the region but in the EU as well. Slovenian

enterprises again have a propensity to engage in kinds of cooperation in other countries,

especially in recruiting employees and testing in other markets. This last trend is equally

shared by Greek enterprises as well.

Table 5.12. Strategic trends of enterprises in the region

Indicator EU27 Slovenia Greece Austria Romania Bulgaria

Strategic partnerships to support innovation

Str. Relationship with specific customers

39% 45% 46% 49% 35% 19%

Str. Relationship with suppliers

42% 44% 48% 44% 39% 22%

Str. Relationship with other companies active in their field

29% 36% 28% 37% 35% 21%

Str. Relationship with research institutes

15% 17% 19% 19% 11% 14%

Str. Relationship with educational institutes

24% 44% 24% 32% 24% 17%

Indicators of open innovation

Creation/participation in internet-based forums in support of innovation

13% 17% 19% 12% 21% 18%

Allow free access to test products or services to users

26% 32% 34% 20% 37% 19%

Involving potential users in in-house innovative activities

24% 35% 21% 19% 23% 10%

Share/exchange of intellectual property in support of innovation

22% 30% 29% 31% 16% 19%

Collaboration with foreign countries


Outsourcing tasks to enterprises located in

other countries 10% 13% 18% 8% 7%

Making investments in enterprises in other

countries 6% 12% 7% 3% 5%

Other forms of cooperation with local

partners in other countries

17% 34% 30% 22% 17%

Recruiting employees from other countries

16% 30% 17% 5% 12%

Market testing innovative products in other

countries 13%

30% (1st rank)

19% (7th rank)

11% 8%

Innovation stimulators

Knowledge management systems in support of

innovation 35% 47% 48% 32% 21% 30%

Internal mechanisms for employees to submit

innovative ideas 46% 71% 43% 54% 37% 41%

Staff rotations and secondments

40% 59% 38% 43% 23% 36%

Creation of cross-functional teams on innovation project

35% 45% 28% 46% 16% 36%

Skills/Competencies that enterprises look for

Companies targeting team working capacity in

support of innovation 56% 41% 57% 57%

Negotiation skills 46% 35% 48% 45%

Successful communication with other cultures

32% 32% 40% 31%

Creativity 48% 45% 56% 44%

Source: Innovation Scoreboard, EU innovation report

Enterprises in the region generally tend to use innovation stimulators such as knowledge

management systems, internal mechanisms for innovative ideas, staff rotations and cross-

functional teams on innovation projects. This trend is not particularly shared by Romanian

enterprises. Again, Slovenian enterprises indicate a strong preference to use innovation

stimulators; however these indicators cannot lead to further conclusions, since they depend


on organizational practices especially related to personnel. An interesting aspect however,

interrelated with human resources is the skills and competencies valued by enterprises, a

shared vision towards team working, negotiation, intercultural communication skills and

creativity. Whether organizational practices channel these skills effectively in the innovation-

stimulating processes remains still unexplored.

Although this section examines trends of enterprises (therefore clustering of countries would

be methodologically wrong), it appears that innovation in enterprises and strategic trends in

enterprises towards innovation are more prominent in Slovenia, Greece and Austria. A second

cluster could be Romania and Bulgaria and since there is no further information, no other

clusters can be formed.


6 Focus Theme: The ICT sector in the reviewed countries

This section synthesizes an overview of the comparative performances of the countries

reviewed in the ICT sectors. The key task is to elucidate and map the state of play in the ICT

sector in the countries. We do not employ a sectoral system perspective, as the interplay

between knowledge and technology, ICT actors and networks and institutions are building

blocks which cannot be assessed within the present report (4). As the ICT sector is broad

enough to encompass technologies between ICT and broadcasting and telecom, with extended

complementarities this section presents some results in terms of ICT performance and Digital

Agenda aspects.

6.1.1 Digital agenda aspects

In the present report, it is crucial to embrace and evaluate aspects that can maximise the social

and economic potential of ICT in the region. One possible benchmark is the Digital Agenda,

adopted by the European Commission in May 2010 (33), consisting of a strategy to take

advantage of the potential offered by the rapid progress of digital technologies as part of the

overall Europe2020 strategy for smart, sustainable and inclusive growth.

This benchmark rests on the assumption that the ICT sectors contributes actively to the

European GDP and to productivity growth, due to the level of innovation inherent in the

sector. In the words of the Digital Agenda “successful delivery of the Agenda will spur

innovation, economic growth and improvements in daily life. Wider deployment and more

effective use of digital technologies will thus enable Europe to address key challenges and

provide with a better quality of life”. We thus use the Digital Agenda as a showcase of

standards that could contribute to the same objectives in the region.

The pillars of the Digital Agenda consist of a vibrant digital single market, interoperability, trust

and security, internet access, research and innovation, digital literacy, skills and inclusion as

well as ICT-enabled benefit for the society. The specific objectives demonstrated to pinpoint

progress towards the goals are:

o Broadband coverage for all

o 50% of citizens buying online

o 20% of citizens buying online cross-

border

o 33% of SME’s buying online

o 33% of SME’s selling online

o 75% internet regular use

o 60% internet use by disadvantaged

groups

o 85% internet use

o 50% of citizens using eGovernment

o 25% of citizens using eGovernment

and returning forms

o 11bn R&D in ICT public spending in

2020

o 50% of households have subsciptions

larger than 100 Mbps (2020)

o 100% coverage of larger than 30

Mbps (2020)

Not all objectives are included in the regional analysis, as the goal is to identify the level of

digital maturity in the region as an enabler for growth in the context of foresight. In this

context, disparities in internet penetration rates or different level of absorption of ICT services

WP3 – Activity 3.4: National PESTLE & SWOT Analysis & Regional Synthesis

71/145

can significantly impact envisages scenarios. The results of regional performance in

comparison the EU-27 and against the targets set are shown in the following figure:

Figure 13. Progress of the region against Digital Agenda targets

(Source: data are extracted from http://ec.europa.eu/information_society/digital-

agenda/scoreboard/index_en.htm)

It is explicit from the figure that an emerging regional pattern is a very good performance in

broadband coverage and a relatively poor performance in e-Commerce.25 Austria, Hungary and

Slovenia are more well-prepared markets with an advanced level of maturity in internet use

and eGovernment use. The level of absorption of enabled broadband technologies does not

appear to benefit Greece, Bulgaria and Romania, as these indicators fall behind. In E-

commerce however and buying online behavior, all countries except Austria are lagging behind

the targets set. Cross-border online commerce remains underdeveloped again with the

exception of Austria.

Slovenia remains one of the leading countries in the adoption of e-Government with 100%

availability of citizens' services and 88% availability of businesses' services. Take-up by citizens

is slightly above average while usage by enterprises at 88% remains among the highest in

Europe. Take up of internet services is around the EU average. In Austria, the full range of basic

public services for citizens and enterprises are available online and take-up of eGovernment

services by businesses is relatively good, although lower for citizens. eCommerce appears to be

a popular activity.

25 Serbia and Montenegro state in their reports that broadband coverage is still inadequate.

0%10%20%30%40%50%60%70%80%90%

100%

Broadband coverage for all(2013)

50% of citizens bying online

20% of citizens buyingonline cross-border

33% of SMEs buying online

33% of SMEs selling online

75% internet regular use

60% internet use bydisadvantaged groups

85% internet use

50% of citizens usingeGovernment

25% of citizens usingeGovernment and returning

forms

EU 27 Austria Bulgaria Greece

Hungary Romania Slovenia Target

http://ec.europa.eu/information_society/digital-agenda/scoreboard/index_en.htm

http://ec.europa.eu/information_society/digital-agenda/scoreboard/index_en.htm


72/145

Internet use has expanded in Hungary and the percentages of internet use are similar to the

EU average, but differences exist among services. The availability and use of eGovernment are

also close to the EU average but less for eBusiness.

In Bulgaria, rates of internet use have been gradually improving over the last few years but

take-up is very low, putting the country at the bottom of the rankings. The availability of

eGovernment services is below EU average but progress has been made in certain services.

Broadband take up is quite low in the country. In Greece, regular internet use is the pattern

but the ranking in the use of various internet services remains one of the lowest. eCommerce

is underdeveloped while the availability and take-up of eGovernment services for both citizens

and businesses is one of the lowest in the EU. In Romania, the low connectivity is reflected in

low rates of internet use and low degree of internet services usage. The same holds for the

area of eGovernment, where Romania is classified at the lowest place in the EU for both

citizens (8%) and businesses (34).

An interesting aspect of the regional performance is the seemingly convergent degree of

broadband penetration. A more careful screening of national performances indicates a quite

divergent picture in terms of infrastructure and resulting uptake levels. For instance, in

Hungary, fixed broadband penetration increased and about 86% of connected households

have a broadband subscription. 73% of Austrian households have an Internet connection and

64% have a broadband subscription, slightly better than the EU average. Internet take-up

among businesses reached 97.2% explaining the extended take up of various online services.

Slovenia demonstrates higher broadband coverage of rural areas with well-developed

connectivity while there is also take-up of wireless internet on laptops and mobile phones.

In Bulgaria, Broadband take-up stands at 15% as a percentage of overall population, translating

into both low take-up by households and businesses. A positive trend though is high

broadband speeds. In Greece, broadband performance has improved due to the focus on

infrastructure through structural funds, but take up of broadband is still below the EU average

and wireless broadband is still infant. Correspondingly, internet usage and take-up of services

is not indicative of the progress made in broadband improvements. Last, in Romania,

broadband take-up and coverage lag significantly behind, entailing low take-up by both

households and businesses. Broadband subscriptions are fast nevertheless and the Romanian

government aspires to increase household take-up rate to 80% by 2015. The unsatisfactory

penetration and usage rates can be attributed to the share of the rural population which is

characterized by low income, low PC penetration and low DSL coverage. Penetration rates are

increasing sharply for Montenegro as well.

Therefore the clustering in Digital Agenda aspects consists of 3 clusters: Austria and Slovenia,

Hungary and the rest of the countries. This classification does not encompass the dynamics of

each country in terms of real increase rates, but only present screenings.

6.1.2 RTDI /ICT Comparative Performances

RTDI plays a pivotal role in innovation activities, while other sectors rely more on the adoption

of knowledge and technology. Although we have already referred to differences in innovation


73/145

activity in a broad sense, we increase the level of analysis of analysis sophistication to include

the ICT sector. ICT and innovation are interrelated concepts, since intrinsic innovation takes

place in sectors where ICT plays a catalytic role. In addition, a high level of innovation in the

ICT sector is associated with R&D intensity and the level of skills.

The ICT sector is considered highly pervasive and it underpins most sectors in the economy, as

the largest R&D investing sector of the economy (35). EU data indicate that the ICT sector

represents about 4.8% of GDP and 3% of total employment, employing 32% of researchers. In

specific between 2002 and 2007 the number of researcher in the ICT sector grew by 15%. In

addition employment increased by 27% in ICT services, mostly in computer services and

software (35). In addition, the ICT sector shows a sustained increase in BERD and employment

and R&D investments by EU companies have been increasing in almost all ICT sub-sectors. It is

clear that ICT is a major contributor to the knowledge economy, as the pervasive impact of ICT,

its inherent R&D intensity, performance and dynamics confirm the central role ICT plays in the

EU economy and the EU’s economic recovery.

The ICT sector R&D in the new Member States is also notable in the services sector and in

particular computer services and software. According to the 2010 R&D scoreboard, most of

the new Member States combine low ICT BERD intensity with low BERD intensity of the rest of

their economies giving a decreasing ICT BERD trend, nevertheless most of the new Member

States have been improving their performance. Most of these countries have high rates of ICT

BERD growth, which can be seen as “catching-up” and choice for specialisation. It has been

suggested by the Commission that that the current underinvestment in ICT R&D is a complex

issue due to Europe’s economic and industrial structure and a coordinated policy mix is

required to favour industrial restructuring to high-tech, high-growth, high added-value sectors

fuelled by ICT-enabled innovations (35) (32).

The importance of ICT innovation is that in combination with other innovation it can lead to

new products and services by connecting people and systems, providing remote access to

resources and combining ICT with existing services. The analysis therefore starts with the

pervasiveness of ICT in national accounts and sectors of the economy. According to the 2010

report on R&D in the European Union, from 1999 to 2007, employment increased by 27% in

ICT services sub-sectors and brought the share of ICT services employment to 68% of the total

ICT sector. From 2002 to 2007, BERD increased by 40% and employment of researchers by

56%. A further analysis of the ICT Scoreboard shows that R&D investments by EU companies

have been growing in all ICT sub-sectors.

ICT services account for nearly 70% of total ICT employment. The ICT sector is significantly

ahead of other economic sectors in labour productivity, both in manufacturing and service

industries. The ICT sector employs more researchers than any other sector in the economy (

2010 report on R&D in the European Union)

The new Member States as well as some SEE countries have also recorded an increase of the

ICT sector R&D, where services sectors record half of the total national ICT R&D, denoting a

specialisation pattern and catching-up phase of most of the countries especially in services

sectors. The weight of the ICT sector in the economy of the countries is illustrated below:

http://ftp.jrc.es/EURdoc/JRC57808.pdf





74/145

Figure 14. Weighing of ICT sector components in Europe

(Source: The 2010 report on R&D in the European Union)

Hungary is the 4th European country in ICT weighting, with the following sub-sectors in

increasing importance: telecom services, computer services, components, telecom and

multimedia equipment, measurement instruments and IT equipment. IT equipment is visibly

occupying the largest share in the EU, possibly due to the Multinational Enterprises in the

country and their sales orientation. Bulgaria in specific has outpaced the growth of GDP

though the growth of the ICT sector (especially in telecom services and less in computer

services) and is next to the EU average, compared to the rest of the countries under

investigation. Next, Romania and Slovenia also heavily rely in telecom and less in computer

services, although measurement instruments and components also occupy a small fraction in

Slovenia. Austria is classified next, with a more balanced picture in terms of telecom and

computer services, though the first outweighs the latter. Greece is among the 4 last countries

in classification with a clear orientation to telecom services as compared to computer services.

It is evident that most of the new Member States in general concentrate their R&D efforts

towards the ICT sector; however it is not easy to discern the true significance of technology

diffusion or ICT-enabled growth as explanatory variables.

The following table also recaps the percentage of the ICT sector on GDP for two subsequent

years26 It is equally explicit that Bulgaria and Hungary show a relative increase, followed by

Slovenia and Austria, although in these latter countries the trend is diminishing.

26 Unfortunately data for recent years are not available and therefore the effects of the financial crisis are not discernable.


75/145

Table 6.1. Percentage of ICT sector in GDP

Austria 2007 3,76%

2008 3,21%

Bulgaria 2007 5,98%

2008 5,36%

Hungary 2007 5,84%

2008 5,91%

Greece 2007 2,71%

Romania 2008 3,34%

Slovenia 2007 4,08%

2008 3,41%

Source: Eurostat, Benchmarking Digital Europe Indicators-ICT sector, 2011

Table 6.2. ICT expenditure as % of GPD in the region

Country Year ICT expenditure as percentage of GDP in

communications

ICT expenditure as percentage of GDP in

Information Technology

European Union

2008 2.9% 2.4%

2009 3% 2.5%

Austria 2008 2.2% 2%

2009 2.2% 2%

Bulgaria 2008 5.7% 1%

2009 5.8% 1.1%

Hungary 2008 4.2% 1.6%

2009 4.7% 1.8%

Greece 2008 3.3% 1%

2009 3.3% 1%

Romania 2008 3.5% 1.1%

2009 4.3% 1.3%

Slovenia 2008 3% 1.6%

2009 3.3% 1.7%

Source:Eurostat,ICT indicators, 2011

An emerging pattern is the dominance of the share of ICT expenditure in communications

rather than information technologies, interrelated with the progress made in broadband,

infrastructure and connectivity, especially in Bulgaria, Greece and Romania. The most


76/145

divergent expenditure can be distinguished in Bulgaria and Hungary, where ICT expenditure in

communication is about triple of the expenditure in information technologies. The relative

propensity to spend in communication and telecommunications might bear two distinct

explanations, the first being related to the priorities to invest in infrastructure and connectivity

and the second with the gravity of ICT goods imports from abroad.

So far, the analysis has been focused on domestic components of the ICT/RTD sectors. As

shown in section 5.3, external balances for ICT trade are negative in most of the countries with

Hungary as the sole exception (due to ICT manufacturing). A notable performance in high-tech

exports is clear for Greece and Austria and a relative specialization in ICT services trade (than

ICT goods) in Bulgaria, Slovenia and Romania.


77/145

7 Additional Issues

Two more issues are explored in the present report:

1. Sub-Regional Issues

An exploration large diversity regarding patterns of innovation performance where the

countries in the region. This takes place especially for Romania and Greece, where regional

strategies are present and where disparities should not be isolated from the general

framework of innovation capacities. This analysis seeks to touch upon issues that differentiate

the regional typology in innovation performance and let some further cluster emerge. The

Regional Monitor (36) confirms that there is a large diversity regarding patterns of innovation

performance where the countries in the region are characterised as follows:

Table 7.1. Regional innovation typologies in the area

Countries Innovation typology Characteristics

Austria, Slovenia “Balanced innovation regions”

innovative entrepreneurship and high R&D expenditures

entire country of Bulgaria, Romania and most of Hungary

“knowledge-absorbing regions”

innovation performance are below the average, innovative entrepreneurship is lower, small share of innovators , most of R&D expenditure is non-R&D

Capital regions of Bulgaria and Hungary

“Public knowledge regions”

high score on ‘public knowledge’ , the average R&D expenditures in government research organisations are high and good shares of tertiary educated work force.

Greece, Eastern Romania

“knowledge-absorbing innovative regions”

higher average score on innovative entrepreneurship and non-R&D innovation expenditures

low scores on technological innovation and patenting

Greece (Thrace and Western Macedonia)

“industrialised innovating regions”

innovative entrepreneurship is below average, in turn resulting from industrialisation patterns

Source: (36)

2. Emerging Themes

Some further information is provided against the backdrop of emerging patterns of innovation

and emerging themes as a tool to better anticipate changes that the regional is likely to be

faced within the next years such as:

New service opportunities, created by technological change and stimulated by demand for new types of knowledge


78/145

ICT growth allow firms to develop new services and produce existing services more efficiently and increases the tradability of services

Technological change, growing stock of information and knowledge available increases knowledge intensity

Open innovation patterns in user industries The creative industries have large growth potential in supporting innovative activities,

encouraging economic growth and creating jobs Some new member states have very high annual employment growth rates in the creative industries

Knowledge-intensive services (KIS), including knowledge-intensive business services (KIBS), are among the most dynamic industries in the economy

Social enterprises are another emerging aspect in the EI as they are active in launching new services or products and an important source for sustainable and socially engage innovation

R&D investments in the field of energy have been growing rapidly in the past years. This regards in particular, the development of new energy technologies driven by security of energy supply and environmental concerns.

Living labs and cross –border cooperation can create eRegion between Austria, Hungary and Slovenia. Slovenia is more mature in living labs.

These trends are derived from EU reports (top-down approach) and some other information of

National reports (bottom-up) are revealed in terms of national strengths. Additional sources

such as EU targets of the Framework Programmes are also used to provide futher refinement

of issues and themes.

Additional information on both these issues is provided in the Annex.


79/145

8 PESTLE & SWOT Synthesis

8.1 Political, Economic, Social, Technological, Legal and Environmental analysis of

the Region

In formulating strategies, there are external factors with long-term influences and drivers of

change that need to be taken into account. The questions asked by strategists are which

factors are currently affecting and are likely to affect the country and what the relevant

importance of these factors at present and tin the future (Curtis, 2005). The areas covered

under each heading of the analysis are given below:

Political/legal: legislation leading to competition distortion, tax policy, employment

law, environmental protection laws, trade regulations, government continuity and

stability

Economic: inflation rates, unemployment, money supply, costs of material and energy,

economic growth trends, business cycle (national and international).

Socio-Cultural: population changes, age distribution, lifestyle changes, educational

level, income distribution, attitudes to work and leisure.

Technological: new innovations and development , obsolescence, technology transfer,

public and private investment to research

Environmental: energy consumption patterns, alternative technologies for the public

and private sector.

In the context of the present task, PESTLE is undertaken by the partnership as a means to

formulate the ground for future analysis and provide a rudimentary understanding of the

national system and some baseline future trends. In this line, it is partnership-generated and

not expert-validated.

The following regional PESTLE intends to depict the current situation in the SEE region, taking

into consideration the input of the participant countries. The macro-environment of the region

is analyzed in terms of political, economic, social, technological, legal and environmental

factors.

The following table reveals the common elements deriving from the PESTLE analysis and their

relative strengths (most common elements to less common, number in parenthesis denotes

frequency). Isolated data, identifying country-specific elements are not included in the report.

Our attempt to extrapolate general statements is also influenced by the different structure of

the PESTLE reports in Serbia and Montenegro which have some distinct characteristics:

1. A series of national reforms undertook as enablers for EU accession, mostly existent in

other countries

2. Contrasts between dynamic and growing sectors of the economy coupled with

contradictory policy frameworks


80/145

3. Recent NIS with gradual incorporation of systemic R&D elements, cross-cutting the

economy. Innovation and R&D are now being established as priorities.

4. Digital gaps, differentiated penetration rates and investments in infrastructure.

The synthesized regional PESTLE therefore isolates trends that might affect the innovation

landscape on a more general level. It is noted again that in the case of Serbia and Montenegro,

affecting factors are more related to the general environment of the country, rather

innovation-specific factors, due to recently formulated systemic innovation systems.

Table 8.1. Synthesized regional PESTLE

Relative strength

Item Comments

Political /legal institutional issues

Very high (8)

Participation in international organization (EU, OECD, NATO, ISO, UNESCO, Interpol etc), creating stability

For Serbia and Montenegro its actually application for memberships

Medium (5) Incoherent political landscape, having repercussions in the priorities set and the budget used for implementation at a political level. Elections in most of the countries

It may vary from very stable (Austria) to circumstance-specific (Greece), with frequent leadership changes

Low (3) Inefficient country-specific policies This is a generic result, for example in Slovenia, the judicial system is ineffective, in Greece the implementation of policies etc

Low (3) The meaning and importance of innovation needs to be re-established

In countries such as Austria, Greece and Romania, the importance of innovation in policy agendas is not prominent

Low (3) Positive impact of participation in EU and coherence of national goals and regulations

Greece is an exception, as the Europe 2020 targets and flagship initiatives (raise in GDP in innovation, employment etc) are contradictory to the imposed austerity measures

Low (2) Low central budget dedicated to innovation

Montenegro and Serbia -specific finding

Low (2) Trade liberalization policies and reforms For countries not present in the EU (Montenegro/Serbia )

Economic and Market issues


81/145

Very high (7)

Global recession might raise austerity measures and restrictive public spending

Very High (6)

Import-dependent economies, poor trade extroversion

Medium (4) Spending cuts in research affect RTDI activities of relevant actors

Slovenia is currently the only country having increased private sector investment in R&D and public funding for R&D

Medium (4) Increased burden of taxes and contribution for companies, resulting in a business-unfriendly environment

Particularly true for Slovenia, Romania and Greece. Austria is an exception.

Medium (4) Recovering levels of GDP Particularly true for Slovenia, Romania , Montenegro and Austria, but not for Greece or Hungary.

Medium (3) Very good quality of scientific research institutions

Austria, Hungary and Slovenia

Medium (3) Inefficient venture capital market

Medium (3) Improving macroeconomic environment for Austria, Bulgaria and Slovenia, decreasing for Greece

Medium (3) High inflation rates Particularly true for Slovenia, Romania, Greece and Serbia

Medium (3) Unstable competitive rankings Abrupt droppings in competitiveness (Greece, Bulgaria, Hungary)

Medium (3) Market efficiency Decreasing for Greece and Bulgaria

Low ( 2) Gradual reduction of state’s ownership of companies, which might alter orientation

Slovenia and Greece are most likely to privatize companies.

Low ( 2) Low contribution of the private sector in RTDI funding due a lack of an innovation driven type of demand

Romania and Greece are countries most inflicted. Slovenia is the most successful country.

Low (3) Access to joint R&D funds or Dependence on Structural Funds

Particularly true for Slovenia and Greece and Serbia

Low (3) Low levels of Foreign Direct Investment (FDI

Particularly true for Slovenia and Greece

Very Low (2)

Orientation towards open economy and equal economic development , , business environment improvements, harmonization with current EU systems

Montenegro/Serbia

Very Low Recovering funding opportunities for R&D Serbia, Montenegro


82/145

(2)

Social, Cultural and Demographic issues

Very High (6)

Increasing life expectancy resulting to aging population and need for new solutions for health and social care

Very High (5)

Good Literacy rates, improved education levels

Improving structure of adult population

Medium (4) Income inequality, threatening percentages of population towards poverty line

Especially true for Romania, Hungary and Greece

Medium (4) Scarcity of talent in the labour market but in different domains in each country

Might trigger need for skilled immigrants and returning diaspora

Medium (4) Good rankings in social inclusion

Medium (4) Low degree of HSRT in total employment

Medium (4) Reduced employment Might alter consumer preferences and demographic indicators

Medium (4) Uneven regional development resulting to uneven intensity of innovation activity and centralization

Especially pertinent to Slovenia, Greece, Montenegro, Serbia and Romania

Very Low (2)

Slow population growth rates

Very Low (2)

Mobility to urban regions Especially true for Austria and Bulgaria

Very Low (2)

Barriers for the establishment of new businesses

This has implication for the labor market structure, entrepreneurship barriers and business demographics

Very Low (2)

Reducing expenditures on education Especially true for Slovenia and Greece

Very Low (2)

Decreasing feeling of social security Especially true Romania and Hungary

Very Low Multiculturalism Montenegro

Technological issues

Very high (7)

Broadband development

High (5) Good internet use Romania and Serbia as exceptions

Medium (4) Emphasis on hard R&D infrastructure Greece, Austria, Bulgaria, Hungary

Medium (4) Increased ICT expenditure as percentage of


83/145

GDP in communications

Medium (4) Low ICT expenditures percentage of GDP in information technology

Medium (4) New policies to encourage academia-business collaboration (AU), clusters and innovation poles creation (GR) flexible labour market and sustainable job creation (RO)

Low (3) eGovernment rates Limited for Montenegro

Low (3) Availability of latest technologies very good for Austria and Slovenia, non availability for Bulgaria and Romania

Low (3) Low patenting rates for high-rate products Especially true for Slovenia and Bulgaria

Very Low (2)

Innovation in Public services Facilitation of public services due to technological innovation

Very Low (2)

Share of researchers in the economy Especially true for Slovenia and Greece

Very Low (2)

Excellence in mathematics and computational mathematics

Austria and Greece

Very Low (2)

ICT strategic importance in economy Mopntenegro , Serbia

Very Low (2)

Lack of information literacy and monopolies in ASP

Montenegro

Very Low (2)

Regional inequalities (digital gap) Serbia, Montenegro

Environmental issues

Very High (7)

Climate change is either a priority in the government agenda or the core of policy documents/measures

Medium (3) ‘Green Culture’ Green entrepreneurship and green ICT are becoming priorities

Especially true for Greece and Austria, and to a lesser degree in Slovenia

Medium (3) Accession to environmental Treaties through the EU

Low Low awareness among citizens


84/145

Figure 15. Major PESTLE forces with a potential impact in the region

8.2 Strengths, weaknesses, threats and opportunities in the Region

The following table reveals the common elements deriving from the SWOT analysis and their

relative strengths (most common elements to less common, number in parenthesis denotes

frequency). Isolated data, identifying country-specific elements are not included in the report.

It has to be noted that the SWOT analysis for Serbia and Montenegro are quite diversifying, as

they mainly draw on reforms and newly born priorities in RTDI. It is not asserted that their NIS

is immature; however it has recently gained in structural traits comparable to other countries.

The SWOT takes into consideration their statements however the bullets below isolate some

issues pertaining their specific NIS:

Orientation to an open economy paradigm, conducive to innovation and

entrepreneurship

Pertaining ICT barriers such as lack of ICT skills in the wider population

Emerging role of the knowledge based economy and ICT focus in national strategies

Alignment with the “acquis communautaire”, reform-intensive structures

Low investments into ICT RTD but emerging spending in infrastructures

High dependence of RTD on government funding and lack of clear instruments to

satisfy needs for R&D

Relatively small number of international projects across all scientific areas

NIS

Political /legal issues

Participation /accession in the EU

Political landscape, frequent

changes in leadership

incoherent spending priorities

Economic/Market issues

Global recession, austerity measures

Poor knowledge-intensive economy

extroversion

Spending cuts in the RTDI system

Social/cultural issues

Life expectancy and major societal

challenges

Improved education levels

Threatening % of poverty and

unemployment

Technological issues

Broadband and sufficient use rates

R&D infrastructure development

Low ICT expenditures as % of GDP

Reforms and policies conducive to

technological innovation

Diversifying picture in ICT application

areas.

Environmental issues

Priority in climate change and green

culture

Low ICT expenditures as % of GDP

Reforms and policies conducive to

technological innovation


85/145

Weak transfer of research to the market, weak partnerships

Fragmented public policies

These two countries present recent institutional changes in order to promote research and

innovation and strong transition attempts to a knowledge-oriented economy. They have

recently put forward strategies, plans and instruments to encourage innovation and RTDI

however they are faced with policy challenges that most of the countries have surpassed to

some extend due to their membership in the European Union and coordination mechanisms

thereof.

Again, relative strength is denoted by the frequency of the statements present in national

reports. As the countries only had an indicative list on SWOT statements, they had the liberty

to elaborate according to national specificities. Therefore, the fact that some statements only

gained in low relative strength does not necessarily entail that they are not present in the

actual NIS, rather that they did not get acknowledged by partners.

Table 8.2. Synthesized regional SWOT

Relative strength

Strengths Relative strength

Weaknesses

Medium (4)

Investments (and plans) in hard R&D infrastructures and broadband

High (6) Low BERD percentages /weak contribution of the business sector

Medium (4)

High levels of ICT penetration/growth

High (5) Low investments in information technology

Medium (4)

Improved educational structures

High (5) Low level of lifelong learning

High (5) Low usage of ICT in the learning process and in eBusiness

High (5) Few innovative enterprises

High (5) Lack of Venture Capital/Risk Capital Fund for innovative SMEs and start-ups

Medium (4)

Adequate policy mix to support RTDI

Medium (4)

Low international competitiveness levels

Medium (5)

Priority of ICT in national strategies

Low (2) Good orientation to open innovation schemes inside companies

Low (3) High burden of taxes and inflexibility in the labor market

Low (2) Shift from basic to applied Low (3) Little support to innovative


86/145

research start-ups and technology transfer

Low (2) High level of know-how of companies

Low (3) Limited capacity to attract EU funding, Inability to absorb EU funds for R&D or High dependence on EU funding

Low (2) Fundamental and strong knowledge creation, good track record in natural sciences and engineering as key to support other areas

Low (3) Low proportion of researchers in the economy

Low (2) Research integrates with networks (eg ERA, FP6, FP7 etc)

Low (2) Lack of dedicated evaluation mechanisms for innovation

Low (2) Increasing prominence of funding for research, human resources and infrastructure

Low (3) Lack of strategic focus while implementing regional RDI policies to benefit form regional strengths

Low (2) Stable public funding (2) Low (3) Poor exploitability of research output and poor demand conditions

Very low New emerging players and institutions in R&D

Low (2) Administrative barriers and governmental control

Low (2) Low level of online public sector services for companies

Low (2) Lead Market Initiatives non existent or at a primitive stage

Low (2) Low levels of innovation absorption capacity in industry

Low (2) Poor commercialization routes and patenting performance

Low (2) Overlapping competencies of actors in policy implementation

Low (2) Lack of clear focus in research

Low (2) Knowledge transfer to the applied sector is quite weak

Low (2) Limited international cooperation and mobility

Low (2) Lack of awareness on RTD and innovation


87/145

Low (2) Lack of an evaluation culture for innovation policies

Low (2) Lack of focus in eCommerce and other ICT application areas in some countries

Relative strength

Opportunities Relative strength

Threats

High (5) Exploitation of niches/ new domains, based on regional knowledge

High (5) Cuts in expenses for RTDI

Medium (4) Support for increasing science-industry collaboration

Medium (4)

Responsiveness and adaptation of the education system to market demand

Medium (4) Focus on innovative clusters in strategic industries

Medium (4)

Rigid, complex insufficient system for market efficiencies

Medium (4) More strategic implementation of EU policies and programmes

Medium (4)

Regional disparities regarding distribution of innovation

Medium (4)

Educational system can be geared towards strategic advantages

Medium (4)

Lack of vision for an innovation-led culture

Medium (4)

Brain drain to other countries, insufficient HSRT in national employment due to conditions

Low (3) New measures to support private R&D investments

Low (3) Slow implementation/inadequate mechanisms of national RTDI policies

Low (3) Promising reforms for the venture capital and funding sector

Low (3) Potential capital drain to other countries due to investment climate

Low (3) Increase cooperation and knowledge sharing

Low (3) Domination of HEIs in RTDI

Low (2) Promising reforms in educational structures to enable industry-academia responses

Low (3) Need for stronger science-industry links

Low (2) Existence of ICT-dedicated public research centres

Low (3) Dominance of traditional sectors over knowledge-intensive


88/145

technologies

Low (2) Increasing R&D intensity Low (2) Loss of security, privacy and trust in the Internet, leading to the loss of its commercial potential

Low (2) Increase of strategic innovative strategies inside companies

Low (3) Unattractive climate for foreign investment and transfer of potential and know-how

Low (2) Wider implementation of e-commerce/digital services

Low (3) Relevantly low R&D spending of businesses

Low (2) Creation of demand for innovation

Low Demand-supply gap in terms of innovation

Low (2) Measures to increase investments of businesses in R&D

Low (2) Increasing targets of GDP for R&D (might be non applicable due to budgetary cuts)

Low (country specific)

Societal awareness of Europe 2020 challenges and research to address these threats

Low (country specific)

Increase definition of societal role of research

8.3 Short Discussion

From the PESTLE and SWOT analysis, it was obviated that the countries have highly distinct

economic, social, infrastructural, technological and administrative and institutional disparities

and diversities, due to specific historic circumstances. The Innovation Union Policy report has

generated a self assessment tool, concerning the features of a well performing national and

regional research and innovation systems. We use this template as a basis for further

discussion of the capacities of the region. The results once again are not expert-validated. The

table only represents a first endeavour to derive high –level conclusions on the functioning of

the regional innovation system.


89/145

Table 8.3. Self-Assessment Tool on Features of a well-functioning NIS

Self assessment tool: Features of well performing national and regional research and innovation systems

Feature Current situation in the Region

Promoting research and innovation is considered as a key policy instrument to Enhance competitiveness and job creation, address major societal challenges and improve quality of life and is communicated as such to the public.

Public action in the region appears to acknowledge the pivotal role of promoting research and innovation in the national economies. Nevertheless, public action does not cut across all relevant policy areas (eg. financial market, labour mare, business environment, industrial policy, territorial cohesion, etc.)

Policies recently and in some cases only acknowledge addressing major societal challenges without concerted action noted.

Design and implementation of research and innovation policies is steered at the highest political level and based on a multi-annual strategy. Policies and instruments are targeted at exploiting current or emerging national/regional strengths within an EU context ("smart specialisation")

Government structures in the Region are quite blurred as concerns research and innovation policies. Steering at a high political level does occur with clear mandates and based on multi-annual programmes. In most of the cases, national consultation with stakeholders lead to specific policies.

Implementation of policies is rather complex without focusing on diffusing results to all stakeholders.

Smart specialisation is not very widespread in the area in the European context. However, most of the countries state areas of national strengths.

The strategies of the countries (besides Serbia and Montenegro which are in a pre-accession state) reflect EU priorities.

Effective monitoring and reviewing systems with international benchmarking are not in place.

Innovation policy is pursued in a broad sense going beyond technological research and its applications

Most of the examined countries in the region base their policies on a broad concept of innovation, but a clear definition is not always explicit.

Supply-side policies are the main instruments for stimulating innovation, while some countries (Austria, Slovenia, Greece) have started to deliberate on demand-side policies.

There is adequate and predictable public investment in research and innovation focused in particular on

Public investments in education, research and innovation are in most of the cases budgeted in multi-annual plans with complementary measures of the


90/145

stimulating private investment Structural Funds. Stimulation of private investment is very explicit on a policy level.

Still, the countries (expect 1-2) heavily rely on GERD for innovation financing. BERD is very limited in the area.

Excellence is a key criterion for research and education policy

There is a rationale on allocating research funding on a competitive basis.

Nevertheless, higher education and public research organisations are heavily reliable on GERD and national budgets.

Research careers are not particularly attractive in the area. Although some measures are taken to re-attract researchers, countries suffer from brain drain.

Education and training systems provide the right mix of skills

Educational systems perform well in the area and there is sufficient supply of graduates in science and technology. Still, there is limited absorption of graduates in national RTDI systems. There are some mismatches in lifelong learning and education towards addressing innovation skills.

Partnerships between higher education institutes, research centres and businesses, at regional, national and international level, are actively promoted

Partnerships and collaboration schemes are conceptualized and implemented differently in each country The overall situation is characterized by rather low levels of collaboration between science and industry. On a policy level, strong partnerships consist priorities.

Framework conditions promote business investment in R&D, entrepreneurship and innovation

This is probably the main deficiency of the area, as framework conditions are not interconnected with policies and the business environment. Specifically, the venture capital market is deficient, the rules for starting up and running a business are not without complexities. The IP system has not been sufficiently researched in the area.

Public support to research and innovation in businesses is simple, easy to access, and high quality

Market failures are well identified in the provision of private funding for innovation. Funding support is available, however not always tailored to the needs of SME’s. Commercialisation of ideas is not actively sought.

The public sector itself is a driver of innovation

The public sector provides incentives in the delivery of public services only in the case of some countries. Public procurement policies for innovative solutions are considered rather weak.

From the PESTLE and SWOT analysis, it was obviated that the countries have highly distinct

economic, social, infrastructural, technological and administrative and institutional disparities


91/145

and diversities, due to specific historic circumstances. The regional RTDI system has a long-

term vision


92/145

9 Conclusions

The present synthesis report aggregated the results of the eight national innovation reports on


performance in the region. Different implications in terms of research, technology and

innovation (RTDI) policies were highlighted in the process of the synthesis of the national

reports.

Public action in the region appears to acknowledge the pivotal role of promoting research and

innovation in the national economies. Nevertheless, public action does not cut across all

relevant policy areas (e.g. financial market, labour mare, business environment, industrial

policy, territorial cohesion, etc.). Partnerships and collaboration schemes are conceptualized

and implemented differently in each country. The overall situation is characterized by rather

low levels of collaboration between science and industry. Efficient framework conditions

probably remain the main deficiency of the area, as framework conditions are not

interconnected with policies and the business environment. Policies recently and in some

cases only acknowledge addressing major societal challenges without concerted action noted.

Government structures in the region are quite blurred as concerns research and innovation

policies. Steering at a high political level does occur with clear mandates and based on multi-

annual programmes. In most of the cases, national consultation with stakeholders leads to

specific policies. The strategies of the countries reflect current EU policies towards the

paradigm of a knowledge-base society and smart and sustainable growth.

Supply-side policies are the main instruments for stimulating innovation, while some countries

have started to deliberate on demand-side policies. Public investments in education, research

and innovation are in most of the cases budgeted in multi-annual plans with complementary

measures of the Structural Funds. Stimulation of private investment is very explicit on a policy

level. Still, the countries heavily rely on GERD for innovation financing while BERD is very

limited in the area .

Most striking strengths are the investments undertaken in R&D infrastructure and broadband,

ICT penetration rates and improved educational structures, while most striking weaknesses are

the low investments in information technology, the low usage of ICT in the learning process,

the limited amount of innovative enterprises and lack of financing schemes for innovative

SMEs and start-ups. In similar terms, the support for increasing science-industry collaboration

and the role of the educational system towards strategic advantages are marked as important

opportunities, while the complex insufficient system for innovation, the low responsiveness of

the education system to market demand and the centralization of innovation in certain areas

are considered major threats. The main forces that are expected to play a crucial role in the

future are political (unstable political landscape, frequent changes in leadership, incoherent

spending priorities), economic and market forces (the global recession, austerity measures,

poor knowledge-intensive economy extroversion and spending cuts in the RTDI system) as well

as environmental (climate change and green culture) and last some social and cultural

(increased life expectancy and major societal challenges, improved education levels, poverty


93/145

and unemployment. Finally, technological forces include R&D infrastructure development, low

ICT expenditures as % of GDP and a diversifying picture in ICT application areas.


94/145

10 Abbreviations, Glossary, References

10.1 Abbreviations

Abbreviation Full name

BERD Business Expenditure on R&D

EU European Union

EC European Commission

ICT Information and Communication Technologies

GBAORD Government Budget Appropriations or Outlays on R&D

GERD Government Expenditure on R&D

RTDI Research, Technology and Development and Innovation

PESTLE Political, Economic, Social, Technological, Legal,Environmentatl

SEE South East Europe

SWOT Strengths, Weaknesses, Opportunities, Threats

WP Work Package


95/145

11 References

1. Commission, European. Innovation Input and Output. http://www.proinno-

europe.eu/page/innovation-input-and-output-0. [Online]

2. European Commission. Foresight blueprint for upgrade regions: the Upgrade Blueprint

Foresight strategy and actions to assist regions of traditional industry towards a more

knowledge-based community,. 2004.

3. Metcalfe, S. Technology systems and technology policy in an evolutionary framework.

Cambridge : Cambride University Press, 1997.

4. Sectoral systems of innovation: a framework for linking innovation to the knwoledge base,

structure and dynamic of sectors. Malerba, Franco. 1, 2005, Economics of Innovation and New

Technology, Vol. 14, pp. 63-82.

5. Golden, W., Eoin Higgins, Soo Hee Lee. National Innovation Systems and Entrepreneurship.

s.l. : CISC Working Paper No.8, 2003.

6. OECD. The measurement of Scientific and Technological Activities, Proposed Guidelines For

Collecting and Interpreting Innovation Data. 2005.

7. —. The Contribution of Multinational Enterprises to the Upgrading of NIS in the EU new

Member States: policy implications. Paris : OECD Global Forum, 2009.

8. OECD . The Oslo Manual" The measurement of scientific and techological activities:

proposed guidelines for collecting and interpreting technological innovation data. 2005.

9. Science&Technology Policy Institute. Measuring Innovation and Intangibles: A Business

Perspectives. s.l. : IDA, 2008.

10. Lundvall, B. National Systems of Innovation . London : Pinter, 1992.

11. Advisory Committee on Measuring Innovation in the 21ct Century Economy. Innovation

Measurement: Tracking the State of. s.l. : US Department of Commerce (DOC), 2008.

12. Arundel, A. Innovation Survey Indicators: What Impact On Innovation Policy? Science,

Technology, and Innovation Indicators in a Changing World: Responding to Policy Needs .

Ottawa : OECD Blue Sky II Forum, 2006.

13. Rose, A, etc. Frameworks for Measuring Innovation: Initital Approaches. s.l. : Science and

Technology Policy Insitute, 2009.

14. European Foundation for the Improvement of Living and Working Conditions. Handbook

of knowldge Society Foresight . Dublin : s.n., 2003.

15. Europe Innova . Prospective Innovation Challenges in the ICT sector . 2008.


96/145

16. Augusto Lopez-Carlos and Mata, Yasmina. Policies and Institutions underpinning country

innovation: Results from the ICI. . s.l. : The innovation for Development Report 2010-2011,

2011.

17. World Bank. Doing Business . [Online] http://www.doingbusiness.org/.

18. Transparency International . Transparency International. Corruption Index. [Online]

http://www.transparency.org/.

19. European Commission . Europe 2020 Strategy . [Online]

http://ec.europa.eu/europe2020/index_en.htm.

20. European Commission. Reviewing Community innovation policy in a changing world.

Brussels : s.n., 2009. COM(2009) 442 final.

21. —. Service Innovation Yearbook 2009-2010. Brussels : European Commission , 2010.

22. Edler, Kincsö Izsak & Jakob. Trends and Challenges in DemandSide Innovation Policies in

Europe. s.l. : Thematic Report 2011 , 2011.

23. European Commission . Innovation Union Competitiveness Report 2011. Brussels : s.n.,

2012.

24. OECD. National Innovation Systmes . Paris : s.n., 1997.

25. —. Innovative cluster: drivfers of national innovation systems. Paris : s.n., 2001.

26. Role of home and host country innovation systems in R&D internationalisation: a patent

citation analysis. Criscuolo, P, Rajneesh Narula & Bart Verspagen. 2005, Economics of

Innovation and New Technology, pp. 417-433.

27. Internationalization of innovationsystems: A survey of the literature. Carlsson, Bo. 2005,

Research policy , pp. 56-67.

28. Eurobarometer. Innobarometer 2010. 2011.

29. Technopolis . Participation of SEE countries in competitive funding programmes in the

European Commssion . s.l. : UNESCO-BRESCE, 2010.

30. European Commission. ICT Statistical Report for Annual Monitoring 2011. s.l. : Working

Document 29 February 2012, 2011.

31. Ortega, J. L., Aguillo, I. F. Network collaboration in the 6th Framework Programmes:

country participation. s.l. : Scientometrics , 2010.

32. European Commission . European Innovation Scoreboards (2009, 2010). Brussels : s.n.,

2011.

33. European Commission. A Digital Agenda for Europe. s.l. : COM/2010/0245, 2010.


97/145

34. —. Information Society Digital Agenda Scoreboard. [Online] 2012.

http://ec.europa.eu/information society/digital-agneda/scoreboard/countries/index en.htm.

35. —. 2010 Report on R&D in the EU . Brussels : European Commission , 2011.

36. Technopolis Group. Regional Innovation Monitor -2010 Annual Report. s.l. : European

Commission, Enterprise and Industry Directorate-General, 2011.

37. OECD . The impact of the crisis on ICTs and their role in the recovery . Paris : OECD, 2009.

38. European Commission. A European Economic Recovery Plan. 2008. COM (2008) 800 final .

39. Pro Inno Europe . European Innovation Scoreboard. s.l. : European Commission , 2009.

40. IW Istitut der deutschen Wirtschaft Koln Consult GmbH. Innovation Policy and the

Business Cycle: Innovation Policy's Role in Adressing Economic Downturn . s.l. : INNO-Gips

Policy Brief no.1, 2011.

41. European Commission. 2010 EU Survey on R&D Investment Business Trends. Brussels :

JRC,DG Research, 2011.

42. Technopolis Group Belgium. Regional Innovation Monitor Policies and Processes of Smart

Specialisation: Realising New Opportunities. 2011. http://www.rim-

europa.eu/index.cfm?q=p.file&r=aa27a00bcbc7feda69a4deb9b05fdb91.

43. European Commission. Social entrepreneurs as lead users for service innovation, March

2011 policy brief. 2011.

44. Europe Innova Sectoral Innovation Watch. National Specialisation Report. 2010.

45. ePractice . eGovernment Factsheet, National Infrastructure (Greece). 2011.

http://www.epractice.eu/en/document/288255.

46. The system of innovation in Greece: Structural asymmetries. A, Komninos N. and Tsamis. 1,

s.l. : International Journal of Innovation and Regional Development, 2007.

47. European Commission Regional Innovation Monitor . http://www.rim-

europa.eu/index.cfm?q=p.baseline&r=GR30. [Online]


98/145

Annex I: The Implications of the Current Financial

Downturn on Foresight and ICTs.

Most of the countries in the area have been heavily influenced by the currnet economic crisis.

Economic stimulus packages to address the economic situation have been formulated mainly

to restore the health of the banking sectors and stimulate short-term demand. Most of the

countries also apply austerity measures, therefore the projections on R&D might be altered in

the light of government cuts.

According to a recent report by the OECD (37) performance in the ICT sector experienced a

decline during the past years and therefore ICT policies need refinement in the crisis for quick

recovery. During the past, ICT policies have been integrated into broader strategies such as

eGovernment, cohesion, societal challenges, the environment etc. Governments worldwide

aim at fostering growth through supply-side investments and formulating favorable conditions

for innovation.

The ICT sector is particularly sensitive to the financial crisis due to three main drivers of ICT

production:

Good long-term prospects for the ICT sector, as ICTs become embedded in all activities

Volatile ICT investment that might magnify changes downwards in periods of

depression

Sharp downward changes in consumer spending and consumer confidence exerting

pressures particularly on ICT goods expenditures.

Therefore, depending on the overall business cycles, a fall in ICT spending and a period of

under-investment are not being excluded. The economic crisis can trigger both opportunities

and challenges (37):

Table A- 4: Opportunities and Challenges of financial crisis on the ICT sector

Opportunities Challenges

ICT sector restructuring opportunities Declines in R&D and innovation activities

Greater reliance on ICT and the internet

Decreasing access to capital and start-ups and financial difficulties to finance investments

Outsourcing of services

Pressures on IT budgets in all sectors

Public sector investments through procurement

ICT manufacturing countries might experience declines in ICT trade

New ICT R&D innovation priorities as growth Fall in demand


99/145

driver

Growth in digital content applications Dropping priorities and innovation opportunities

Socio-economic challenges as a driver for ICT growth

Resistance to change slowing ICT-enabled innovation

Decline in R&D and innovation activities Slower ICT uptake and diffusion through economy might slow down the sector even more.

According to the Economic Recovery Plan (38) there is a vicious cycle of falling demand,

downsized business plans, reduced innovation, and job cuts. This could further lead the EU

into a deep and longer-lasting recession with stagflation. Nevertheless, there have been

countries that actually used foresight to increase R&D expenditure in turbulent economic

circumstances so as to lay the foundations of a strong position in innovation. In Europe,

specifically, it has been proposed that Public-Private Partnerships (PPPs) could provide a

means for boosting research efforts in sectors affected by the downturn. Differentiation

strategies instead of catching-up strategies are also proposed to build upon existing R&D

strengths, articulating short term and longer term strategies. The overall EU strategy calls for

optimizing European assets, transforming the research systems by providing an attractive

environment for young researchers and creating disruption by the use of foresight, as “a

vision-setting and policy coordination device as well as a catalyst for systemic disruption” (38).

This may involve countries moving towards new sectors before their competitors and target

investment in knowledge and lead structural change. This verifies the strategic role of the

project, especially in a region. Direct-short actions for improving long-term competitiveness

could be based on smart investments (skills for job creation in areas such as energy efficiency

and clean technologies and investing in modernized infrastructure to boost other sectors as

well). According to the same document structural reforms need to be oriented to supporting

employment and improving flexibility and reducing administrative and regulatory burden on

businesses, promoting entrepreneurship through the EGAF and enhance access to finance for

businesses ( loan subsidies, guarantees, start-ups and micro-enterprises).

The impact of the financial crisis can be found on four different layers of innovation, as put

forward by a slighter older innovation report (39):

1. The Social and Economic Framework conditions (actual depth of the crisis on the

financial situation, labor market etc.)

2. The Innovation policy framework i.e. changes in public policies influencing innovation

3. Spending on innovation (both public and private)

4. Internationalisation of innovation (FDI, Trade, scope of activities)

We can thus conclude the multi-faceted impact of the financial crisis upon innovation, as most

of the components of the NIS are interrelated. Although an evaluation per country is not yet


100/145

available, the general trends so far indicate a decline in demand, capital and liquidity

problems, limited access to funding, falling innovation expenditures and decreasing

employment rates.

As concerns the specific behavior of enterprises in times of economic turbulence (BERD-

related issues, the recent Innobarometer (28) indicates that most enterprises did not report

any change in innovation expenditure during 2009. Of those who changed expenditure, 22% of

companies assert they have cut back on innovation spending, as compared to only 9% that

increased the innovation budget. Another report (40) states that during the current economic

crisis, firms are keeping their R&D activities unchanged or slightly increase them. Thus, the

report finds a different firm behaviour from the pro-cyclical norms during times of economic

downturn.

High-tech manufacturing companies adopt a “forward-looking” behaviour as to innovation.

Cost cutting has been very widespread in Greece (44%), due to the specific political and

economic circumstances that may have undermined business and market confidence in the

country. Figure 1 below presents the percentages of enterprises in all European countries.

Enterprises in SEE countries appear particularly vulnerable as innovation followers and mainly

maintain innovation expenditure at the same level with, with decreasing costs of innovation

expenditures at second position.

Figure A-16. BERD in times of economic downturn

Source: Innobarometer 2009

According to the 2009 Survey on investment and business trends, the companies’ R&D

investment is expected to grow by 2% annually over the period2010-12, half the amount

expected according to last year’s survey, reflecting the ongoing effects of the economic crisis.

This expectation does not cut across all R&D areas, as medium R&D intensity sectors expect a

stagnation in R&D investments. Certain ICT areas, such as software and computer services are

expected to produce approximately 5% growth, while technology hardware and equipment

are expected to produce a less than 1.5%. The willingness of many firms to increase R&D


101/145

investment underline the role R&D plays to maintain or enhance competitiveness. Still,

national debt levels, accompanied by low growth rates of the economies place additional

challenges upon companies in dealing with a complex market environment.

Therefore innovation measures should focus on preventing long-term negative impacts on the

competitiveness. Whilst supply-side measures can stimulate short-term impact on private

R&D&I activities (especially in terms of funding and subsidies), the stabilisation of the

innovation system to the benefit of all actors involved could enhance resilience of a NIS.


102/145

Annex II: Background information and analysis

Supplementary information to Chapter 3:

The global financial crisis appears to have affected most of the SEE economies, as the real GDP

growth rate has been violently disrupted in 2008 and 2009 to regain only a part of the growth

momentum in 2010, as depicted in the following figure. It has to be noted ex ante that this

disturbance bears an impact on the investments and GDP percentage channelled to promoting

innovation and growth. Similar conclusions can be drawn from the disruptive nature of

employment growth diachronically which presents a rather gloomy perspective for

unemployment especially for Bulgaria, Romania and Greece. The following figures present the

GDP growth rate, employment growth and trade balances in most of the countries.

Figure A-17. Percentage of Real GDP growth rate in the region 27


Figure A-18. Percentage of employment growth in the region

27 Same growth rates apply to Montenegro, - 5.7% for 2009 and 2.5 for 2010, therefore the

-10,00%

-8,00%

-6,00%

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

2007 2008 2009 2010

Real GDP growth rate (%)

Austria Bulgaria Hungary

European Union (EU27) Greece Romania

Slovenia Serbia


103/145


Table A- 5: Trade Balances in the region (difference between exports and imports)28

Austria 2007 5,77%

2008 5,79%

2009 4,53%

Bulgaria 2007 -19,71%

2008 -20,51%

2009 -7,92%

Hungary 2007 1,59%

2008 1,22%

Greece 2007 -11,97%

2008 -12,72%

2009 -10,61%

Romania 2007 -12,12%

2008 -12,78%

2009 -6,92%

Slovenia 2007 -1,72%

2008 -3,02%

2009 1,52%

28 No available data for Montenegro

-6,00%

-5,00%

-4,00%

-3,00%

-2,00%

-1,00%

0,00%

1,00%

2,00%

3,00%

4,00%

2007 2008 2009 2010

Employment growth (%)

European Union (EU27) Austria Bulgaria

Hungary Greece Romania

Slovenia Serbia


104/145

Serbia 2007 -23,94%

2008 -23,35%

2009 -16,49%

Source: World Bank Statistics, 2011

Table A- 6. Trade Balances in the region

Balance Imports Exports

Austria 2007 0,30% 10,80% 11,10%

2008 0,20% 10,60% 10,80%

2009 0,10% 11,60% 11,70%

Bulgaria 2007 -3,10% 6,60% 3,50%

2008 -2,70% 6,30% 3,60%

2009 -2,60% 7,20% 4,60%

Hungary 2007 2,40% 19% 21,40%

2008 3,00% 17,20% 20,20%

Greece 2007 -3,50% 8,20% 4,70%

2008 -2,60% 8,40% 5,80%

2009 -3,90% 10,60% 6,70%

Romania 2007 -4,90% 8,40% 3,50%

2008 -3,30% 8,70% 5,40%

2009 -2,60% 10,80% 8,20%

Slovenia 2007 -2,50% 7,10% 4,60%

2008 -1,90% 7,10% 5,20%

2009 -2,00% 7,50% 5,50%

Source: Eurostat, Science and Technology Indicators, 2011

Additional information to Chapter 4:

Supplementary Information on Background Information on European Innovation

Policies

Some other emerging technologies in the context of ICT are illustrated in the following figure:


105/145

Figure A-19. Emerging technologies in the context of ICT on a European Level

Source: (21)

Some further information on European policies is given in the following table. the Areas are

derived from European Policy Documents including Lead Markets, Digital Agenda, Key

Technologies reports and ISTAG recommendations to provide additional details on policies and

specific topics that lie in the heart of the European RTDI agenda.

Table A- 7. ICT policies and challenges at the EU level

Wide Area Description Specific topics

Key Emerging Technologies (KETs)

KET s are knowledge and capital intensive technologies associated with high R&D intensity, rapid innovation cycles and highly-skilled employment, cutting across many technology areas with a trend towards convergence and technology integration

Photonics (n/a)

Manufacturing

Nanotechnologies

Biotechnology

Advanced materials (n/a)

Micro-nanoelectronics

Innovation infrastructures

E-infrastructures for R&D , together with services supporting the management of scientific data and access of open data for specific purposes

E-infrastructures for R&D and related services

Proposed Industrial leadership in ICT (EU level)

ICT based on strengths such as systems-of-systems and urban


106/145

management

New ICT functionalities triggering social change

ICT for societal challenges

Future internet (internet of things, smart cities, smart traffic)

Health, Demographic change and well-being

e-Health, ICT for patient empowerment, innovation in social care systems

Related enabling ICT

ISTAG orientation for ICT R&D and innovation beyond 2013

ICT inventions in societal domains

Social innovation

ICT to meet industrial existing strengths

Eg ICT for green and safe transport, smart energy, smart communities, affordable healthcare

Inclusive, innovative and secure societies challenge

Technological and social innovation

Integrating social challenges

Rediscover emerging themes of innovation

Non-specific

Digital Agenda Single market in telecom and internet services

Trust, security, interoperability and standards, fast internet access

Cloud computing for government and science]

Open innovation

Digital literacy and skills

Major societal challenges

Access to content, data protection, eGovernment

Internet technologies

Cloud computing

Open platforms

ICT for environment, sustainable healthcare, cultural diversity, eGov, transport systems

Lead markets highly innovative marekts, providing solutions ob strategic, societal, environmental and economic challenges but changes in legislation must be taken into consideration

e-Health

Sustainable construction

Protective textiles

Renewable energies

Bio-based products

Recycling

Key sectors for investing in the future

The sectors emerge from previous estimations and the European

Low carbon economy

Infrastructure for technology


107/145

Economic Recovery Plan diffusion

Energy and environment/transport

High-speed ICT networks

Pan European research infrastructures

Clean technologies

Green cars

Other trends Need for collaborative partnerships (PPP’s, tripartite financing, academia-industry, etc).

moving from fundamental research to meeting market and civil society needs, moving towards open innovation, involving industry in agenda-shaping.

Bring stakeholders together through cross-sectoral and cross-borders platforms (both new thematic platforms and building on existing platforms)

EU-wide services and platforms in cross-border, co-funded initiatives and partnerships. This notably includes development and support to common platforms and reference architectures as binding sets of structures, processes, interfaces, and data exchange standards and documentation standards

Focus on creative industries for encouraging economic growth and creating jobs. This is a crossroad between arts, business and technology.

Knowledge-Intensive services (KIS) fuelled by the applications of new technologies, new service concepts and changes in demand (mainly computer services and R&D). Extremely important for creating linkages and services with neighbouring countries.

Emphasis on demand-side policies

Other forms of innovation:

o Open innovation models (user-driven innovation , know-how trading, model in which firms can use external ideas and paths to market)

o Community/Social innovation (referring to strategies and products to meet societal needs from working conditions to education and health)

o Soft innovation (cultural industries, aesthetics, creativity and the creative industries)

o R&D and Innovation in support of major societal problems


108/145

Snapshot on national RTDI and Innovation Policies

The main information presented in this section relate to a theoretical introduction on national

RTDI and innovation policies and supplementary information derived from national reports.

Overview and theoretical introduction on national RTDI and Innovation policies

General policy orientation and the majority of policies in the national innovation systems of

the countries under review have been strongly affected by the accession to the European

Union, the funding provided by the Structural Funds as well as other supranational

institutional structures such as the open method of co-ordination, the Lisbon agenda or the

Innovation Union. However, some reports (Pro-Inno Innovation progress report 2009, FORSEE

country reports) reveal significant divergences between policy declarations and actual

implementation. Poor cross-country interactions and co-ordination is also noted. It is thus

essential to examine STI policies in the region, their political weight in national agendas, and

whether co-ordination and implementation take place in similar settings and with similar

funding dependencies.

Innovation policy in the countries under investigation seeks to couple different kinds of policy

instruments to address challenges, themes or sectors although the level of policy debate and

of concrete actions in the field is very diverse . In Bulgaria and Romania, there is no evidence

of such debates on demand-side innovation policies, as the focus lies in fostering business

innovation. In Slovenia, demand-side innovation policy is not a focus of attention, but the level

of sophistication of national policies is mature enough. Specific demand-side innovation

policies are listed as follows (ibid in conjuction with NIS) :

In Slovenia, public procurement has started to flourish, especially with regards to

green procurement. User-driven innovation and living labs are also more mature in

Slovenia.

In Austria, a new concept or public procurement for societal challenges and innovation

in the public sectors is being developed. Also, regulations on green energy aims at the

efficient use of funding instruments for green energy technologies to reach the

market.

An e-Health, protective textile, sustainable construction, recycling and renewable

energies Lead Market initiative takes place in Western Greece.

Demand-side measures broadly stimulate innovations in energy and the environment, as well

as healthcare, communication and security. According to the (41), market regulation and legal

frameworks are suitable for low R&D intensity sectrors.

Supplementary Information on Main Innovation Policies Orientation


109/145

On a country level, the information on main innovation policies orientation is given in the list

below:

1. Increase of support towards all research-relevant actors, supply of HR for RTDI

Bulgaria (National Scientific Research Strategy 2020), Romania (Governing Programme 2009-

2012), Austria (National Reform Programme), Greece (OP “Education and Life Long Learning”,

Archimedes III, Heraclitus II, Thales), Hungary (“‘Bolyai Janos Research’ Scholarship”,

“Hungarian Eotvos Scholarship”, “Mobility”) and Slovenia (Training and Financing of Young

Researchers in Research Organizations) aim at the development of the knowledge and

innovation based society by increasing the support to all the relevant actors that participate in

research (universities, scientific institutions and other organizations). More specifically,

Bulgaria supports young researchers and the creation of integrated scientific centers in

universities. Romania’s target is to increase the number of researchers with international

scientific results and the attractiveness of scientific careers and promote young researchers.

Austria has set the target of a budget for science and research of 3.76% of GDP with at least

66% deriving from the private sector and a percentage of 38% of population with tertiary

education. Greece intents to upgrade higher education and increase investment in human

capital via better education and skills as well as to increase the stimulation of PhDs. Hungary,

draws the emphasis on outstanding research activities of young researchers and provides

them with financial support and supports their mobility and international experience. Slovenia

promotes the stimulation of PhDs, the recruitment of researchers and science education).

Moreover, Bulgaria and Romania aim at the repatriation of the scientific Diaspora. In Serbia,

Development of Human Resources is one of the priorities in The National Strategy for Scientific

and Technological Development 2010-14, although the main emphasis is still placed on

infrastructures. In Montenegro, the goal is to emphasize the significance of human resources

potentials for science and technology development, primarily through development of young

researchers and inclusion in the European Research Area (ERA) to stimulate technological

development and innovations and promotion of scientific results and development of new

technologies the products of which are attractive to the market through the Strategy of

Development and Financing of Higher Education in Montenegro (2011-2020)

2. Development of Innovative infrastructure, Centers of Excellence, Technology

Transfer (7/8)

Austria, Slovenia (Reform Programme for achieving the Lisbon Strategy Goals and OP

“Strengthening regional development potentials”), Bulgaria (Innovative infrastructure and

infrastructure for SMEs development) and Greece support the strengthening of regional

infrastructure via the creation and support of Innovation Zones, incubators, spin-offs,

technology clusters. Similarly, Hungary has several policies in place (“Support to accredited

innovation clusters”, “Support to innovation and technology parks”) to reinforce the joint

projects of accredited clusters and to facilitate the establishment of innovation and technology

parks in the “pole cities” through the development of the appropriate research and ICT

infrastructure. In Romania, the Registry of accredited entities belonging to the network of

specialized technology transfer and innovation institutions (RENITT) published at 30.03.2011,

includes 53 positions (technological and business incubators, technology transfer centres,


110/145

technology information centres). In Serbia, New Research Equipment (70 mil €) and ICT

infrastructure including “Blue Danube” supercomputing center (50-80 mil €) are envisioned

Initiative for Investment in Science and Technology Infrastructure”. In Montenegro, Necessary

scientific research infrastructure and supporting research-oriented RTDI infrastructure are

major goals of Strategy of Development and Financing of Higher Education in Montenegro

(2011-2020). Montenegro also has an action plan for increasing ICT incubation.

3. Increase of competitiveness- Exploitation of key national strengths (7/8)

Greece (OP “Competitiveness and Entrepreneurship), Bulgaria (Innovation Strategy, OP

Competitiveness), Romania (National RDI Strategy) and Governing Programme 2009-2012 and

Slovenia (Target Research Programmes) have set targets to increase the competitiveness of

their economies and the competitiveness of their enterprises so as to make their regions

attractive places to invest and work and so as to exploit domains with a comparative

advantage. Moreover, Greece (Strategic Development Plan for Research, Technology and

Innovation under 2007-2013 NSRF) supports R&D activities in key areas of national strength. In

addition, Slovenia (OP “Strengthening Regional Development priority: Competitiveness of the

enterprises and research excellence”) provides support to enterprises that conduct research

that is strategically important and promotes inter-sectoral cooperation for R&D projects of

public interest so as to increase the competitive capacity of the country and ensure its

successful development (Target Research Programmes). In addition, Hungary (“National

Technology Programme- Support for Strategic Research”) supports application-oriented R&D

products which can improve life quality and enhance the competitiveness of the country

particularly in the fields of life sciences, competitive industry, competitive agriculture and food

industry, liveable and sustainable environment and security and safety. In Serbia, National

Strategy is putting emphasis on specific national priorities: Biomedicine and human health,

New materials and nanosciences, Environment protection and countering climate change,

Agriculture and food, Energy and energy efficiency, Information and communication

technologies amd Improvement of decision making processes and affirmation of national

identity. In Montenegro, this is not very clear but the country in its national strategy does

emphasise the importance of science and research within the context of further social-

economical growth and transformation into modern knowledge based society; In Montenegro,

the Ministy of Science has approved RTD projects in key areas including energy, new materials,

interdisciplinary projects, natural sciences, competitiveness, science and education,

agriculturist, medicine, ICT and tourism.

4. Support to SMEs- Entrepreneurship (8/8)

Slovenia in particular places a lot of emphasis through several policies on providing support to

SMEs. More specifically, there are policies in place to support investments of SMEs in new

technologies (Programme for the promotion of entrepreneurship and competitiveness 2007-

2013), to facilitate SMEs access to loans (Annual Programme of Slovene Enterprise Fund, OP:1

2007-2013), to provide subsidized costs of consultancy in order for older enterprises to

modernize and new founded SMEs to survive the initial critical years (Programme for


111/145

promotion of entrepreneurship and competitiveness). In addition, Greece (Innovation

vouchers for SMEs, Development and support of new highly knowledge intensive innovative

enterprises, Support newly established firms in R&D and Support groups of SME's in their R&D

activities) provides advanced support services for firms (Venture funding, Business Angels,

Mentoring, seed capital) as well as support for firms at the pre-incubation phase and in spin-

off and spin-out creation. Bulgaria (Innovative Infrastructure and infrastructure for SMEs

development) has in place policies to ensure the improvement of the business environment

and to foster start-up ventures. Austria too regards as a priority the funding of SMEs research

and supports that via innovation vouchers, co-funding and tax incentives. The structural

programme COIN-cooperation and innovation- is in place to stimulate and increase the RTDI

activities of firms, especially SMEs and promote their collaboration with the academia.

Hungary aims at strengthening the innovation capacity of SMEs and their profitability

(“Technological upgrading of firms”) by facilitating market entry, supporting export-oriented

companies with growth potential, increase value-added etc, finances innovative start-up SMEs

with a large growth potential (“Corvinus Venture Capital Fund”), promotes equity financing in

the early stage of risky SMEs (“Start Equity Guarantee Fund”), facilitates loans, promotes

deductions of R&D expenditures from their taxable income and finances projects and

researchers with high potential of generating outstanding results. In Romania examples of

support provided to innovative enterprises are the Network of specialized technology transfer

and innovation institutions, the National technological platforms (32 in 2010), the SOPs

“Increasing economic competitiveness”, “Regional Development” and “Human Resources

Development”, the Inno-voucher, introduced in collaboration with the Europe INNOVA

initiative, with a budget of 2 mil. Euro in 2011In Montenegro the Strategy for Development of

SMEs 2011-2015 envisages a better promotion and investing in innovation and research in

SMEs will positively influence overall business performance of SMEs in Montenegro. In Serbia,

SME’s are targeted through the Access to Finance The ‘Project for Supporting SMEs to Invest in

Innovation (2009)’ supported by the Ministry of Economy and Regional Development, while

the ‘Project for Supporting the Development of Competitiveness of SMEs and Innovation

(2009)’ is managed by the National Agency for Regional Development. Strategy on Developing

SMEs in Serbia 2008-2013

5. Reinforce the participation of the private sector in R&D activities and funding-

Innovativeness of companies (6/8)

Romania (National Reform Programme 2011-2013), Greece (National Reform Programme for

Growth and Jobs 2008-2010), Austria (National Reform Programme), Bulgaria (National

Research Strategy 2020), Hungary (“Support to innovation activities of firms”) and Slovenia

(Programme on promotion of technology development and information society 2007-2013) set

policies that reinforce the participation of the private sector in funding RDI. Slovenia in

particular, reinforces the R&D co-financing actions of micro, small and medium enterprises as

a means of offsetting the consequences of the recession. Bulgaria targets at a more stimulated

private sector attitude which will contribute to RDI as a provider of direct investment and as a

reliable beneficiary of scientific output. Moreover, Greece (Support new businesses for R&D)

supports the collaboration of newly-established SMEs with public research institutions in order


112/145

to increase their participation in R&D funding. Hungary, aims at intensifying the RTDI activities

and the competitiveness of companies by strengthening the growth potential of innovative

companies, fostering experimental activities and the exploitation of research output etc. mIn

Romania projects funded by the National Research Programmes are co-financed by

participating private enterprises. In the National Programme “Innovation”, where projects

consortia are coordinated by beneficiary private enterprises, the private contribution was

about 51% of the budget in 2010. New mechanisms to support the public-private partnership

in RDI are envisaged to be adopted according to the 2011-2013 National Reform Programme,

including the innovation clusters oriented towards high technology areas and strategic sectors

including ICT. In Serbia and Montenegro, the exact proclamation of policies is not present in

the national reports, but may be implied in certain strategies. In Montenegro, the strategy plan

for SME’s outlines most measures for competitiveness, however innovation and technological

development regard the stimulating measure for financing innovation in the economic sector

and marketing support for innovation actors, including public research institutions.

6. Cooperation (5/8)

Bulgaria (National Research Strategy 2020) supports the establishment of a sustainable

education-business-science relation. Greece (Legal Framework for the Development of

scientific and technological research) enhances cooperation among research centers. Austria

(10 Future Messages of the Minister of Science and Research (in the context of the Research

Dialogue)) places the emphasis through various programmes on the cooperation of applied

research organizations and the industry. Slovenia (Technology for Security and Peace 2006-

2012) promotes R&D cooperation between public institutions and private business enterprises

in the area of defense and security technologies. Hungary (“Development and strengthening if

research and development centres”, “Support to market-oriented R&D activities”) has several

policies in place channeled towards the strengthening of the cooperation of research centers

with firms in order to achieve the best exploitation of the research results and their

development into marketable products. In Romania, the collaboration between enterprises

and academia in order to support the implementation of the 2007-2013 National RDI Plan is

considered a major priority in stimulating the RDI investments in the private sector. In

Montenegro, ministries started to be involved in Innovation and RTD activities and participate

in research projects together with the Ministry of Science. One of examples of successful

cooperation is a Call for proposal for RTD projects. Thus, cooperation is not viewed as explicit.

In Montenegro, international cooperation aims at the reorganization of the systems for

researchers mobility and participation in international actions

7. Improve quality of life and services through the use of ICT (3/8)

In Romania (National RDI Strategy), strategies in the field of ICT on universal service in the

field of electronic communications, broadband electronic communications, eRomania

suporting eGovernment services for citizens and business environment), Greece (Digital

Strategy 2006-2013) Austria (Programme Benefit, Programme Ambient Assisted Living Joint

Programme) have policies in place to promote the improvement of the quality of life through


113/145

the use technology. Austria in particular draws attention to improving the quality of life of

elderly people.

8. Restructuring of the RDI system in a more functional and efficient way (3/8)

Romania (Governing Programme 2009-2012) and Greece (Law for the Institutional Framework

of Research and Technology) aim at the reorganization of the research-innovation system in a

more functional way so as to reduce the fragmentation of research activities and move

towards performances of excellence. Other more national-focused orientations include the

optimal use of the national and European funds and programs so as to achieve a more visible

effect (Bulgaria), skill development and energy (Austria), awareness raising and innovation-

friendly attitude (Greece) and the creation of legal infrastructure for RTDI activities, regarding

the IPR protection abroad, the protection of activities of SMEs, individuals, PROs and higher

education organizations (Hungary) ), strengthening the capacity and increasing the

performance of RDI system, stimulating the growth of RDI investment in the private sector,

developing the European and international dimension of RDI policies and programmes as three

main RDI reform directions identified in the National Reform Programme 2011-2013

(Romania). Montenegro’s strategy aims at reforming the institutional framework for engaging

in scientific-research activity, but this cuts across many reforms in many sectors so as to

allocate funds towards research institutions and technological development projects.

• Greece: exploration and exploitation of the earth, environment, exploration and

exploitation of space, transport, telecommunication and other infrastructures, energy,

industrial production and technology, health, agriculture, education, culture,

recreation, religion and mass media, political and social systems, structures and

processes, general advancement of knowledge: R&D financed from general university

funds, general advancement of knowledge: R&D financed from other sources, defence.

• Bulgaria: energy, energy efficiency and transport, development of green and eco

technologies, health and quality of life, biotechnologies and ecological foods, new

materials and technologies, cultural and historical heritage, information and

communication technologies

• Hungary: transport, automotive industry and logistics, health industries, ICT, energy

and environmental technologies, creative industries (no actual measures, more

declarations)

• Austria: Austria demonstrates core competencies in e-areas such as e-commerce, e-

government, embedded systems, grid computing, knowledge based systems,

Mechatronics, Semantic systems, Security and software engineering,

Telecommunications, visual computing. Especially strong topics are signal processing,

sensor systems, GIS, modeling and simulation and formal languages. In addition,

international excellence is identified in both academic and industry research in

embedded systems, microelectronincs, smart cards/RFID/security. Scientific ICT

research can be found in visual computing, semantic systems, artificial intelligence,

organic electronics, quantum information science, algorithmic mathematics,

mathematical and simulation control basics.


114/145

• Slovenia: advanced materials and nanotechnologies, energy efficiency and sustainable

construction, renewable energy sources and environmental technologies,

biotechnology, biomedicine and biological resources, high-performance computing

and networks, analytical capacities, national digital resources, research infrastructure

for social sciences and for applications in the space and safe and healthy food, metallic

and nonmetallic materials, complex systems and innovations, information and

communication technologies and medical sciences.

• Romania: ICT, energy, environment, physics, health, agriculture, food safety and

security, biotechnologies, biology and genetics, materials, processes and innovative

products, space and security, social, economic and humanistic research.

• Montenegro: international cooperation

The tables below provide information on the national operational programmes and cross-

border programmes to check for coherence on a regional level.

Table A- 8. Operational Programmes Coherence

National Programmes

Sectors

Operational Programme “Regional Development” -Bulgaria Operational Programme “Regional Development” –Romania Operational Programme “Strengthening Regional Development Potentials” - Slovenia

Regional Development Bulgaria, Romania, Slovenia

Operational Programme “Environment and Energy” – Hungary Operational Programme “Environment and Sustainable Development”- Greece Operational Programme "Environment"- Romania Operational Programme “Development of Environment and Transport infrastructure”- Slovenia

Environment Hungary, Greece, Slovenia, Romania

Operational Programme “Transport” –Bulgaria Operational Programme “Transport” –Hungary Operational Programme “Transport” –Romania

Transport Bulgaria, Hungary, Romania

Operational Programme “Development of the competitiveness of the Bulgarian Economy” – Bulgaria Operational Programme “Economic Development”- Hungary Operational Programme “Competitiveness and Entrepreneurship”- Greece Operational Programme “Increase of Economic Competitiveness”-Romania

Economic Development and Competitiveness Bulgaria, Hungary, Greece, Romania


115/145

Supplementary Information on Main Innovation Systems Priorities

The Table below synthesizes information from the national reports regarding common priority

axis of national innovation policies and specific measures taken. The table mainly serves at

identifying the corrective measures each country takes for each deficiency identified and how

it conceptualises approximating each priority axis in accordance with the level of sophistication

of its system.

Table A- 9. Common priority axis and baseline priorities in the region

Priority Axis Relevant Countries

Specific measures

1. Education-Training-Life Long Learning-

Towards the Knowledge Society and

Performance of Excellence

Slovenia

Bulgaria

Greece

Improvement of the quality and investments in human resources, through the upgrade of the educational system and the encouragement of life long learning

Romania

Slovenia

Montenegro

Increase of the number of researchers and improve their professional performance

Hungary Addressing the issue of the shortage of supply of HR for RTDI as well as reinforcing the capacity of tertiary education in RTDI so as to achieve stronger cooperation with the industry and enhance their effectiveness

Greece Improve the investments in Knowledge and Excellence as a tool to assist the reorganization of the economy and aims at generating knowledge in priority sectors of interest and at turning knowledge into innovative products.

Austria Increasing possibilities to achieve higher qualifications, and recognizing non-formal and informal learning for disadvantaged groups. Austria also aims at improving monitoring of adult learning sector and analyze effects of reforms for adult learning.

Montenegro-

Serbia

Professional development of researchers, stimulation of Doctorates in priority development areas; Establishing connections between the Educational system and labor market and enhancing entrepreneurial and innovative character of education.


116/145


Specific measures

2. Research Infrastructure

Bulgaria Creation of new technological centers and parks as well as at strengthening the existing offices for technological transfer.

Greece ICT and broadband infrastructure development but also technology transfer (Innovation Vouchers for SMEs) and cluster development .

Austria Expanding cooperation of research institutions and firms on the basis of shared infrastructure, participation in EU and international infrastructure and support networking infrastructures to achieve critical mass.

Hungary investment in large scientific facilities (Government’s mid-term STI policy strategy) and the development of R&D supply by providing the necessary infrastructure.

Montenegro Necessary scientific research infrastructure; business parks and clusters.

Serbia New Research Equipment and ICT infrastructure including supercomputing center.

Romania Priority investment projects proposed by the Romanian Committee for Research Infrastructures including 19 positions for 10 domains, including ICT (6 projects), basic institutional funding to support the functioning of the research and development infrastructure, allocated to certified national R&D institutions and centers.

3. Addressing Societal Changes- Elimination of

Risks and Inequality

Slovenia

Greece

Romania

Addressing societal changes and improve the quality of life of all individuals in a sustainable way.

Increasing the access to employment, creating a sustainable, efficient health system, reducing the levels of poverty and social exclusion.


117/145


Specific measures

Austria

Greece29

Climate protection and renewable energy

4. Creation and Support of

Partnerships

Romania

Slovenia

Creation of partnerships in RDI fields between national RDI institutes, universities , financial institutions or else between the public and the private sector

Greece Reinforcement of European, Multilateral and Regional R&D cooperation in RDI projects so as to promote excellence

Austria Improving the collaboration between science and industry and creation of competence centers

Bulgaria Establishing national networks to bring together science and business through the creation of centers of excellence

Romania Network of specialized technology transfer and innovation institutions (technological and business incubators, technology transfer centers, technology information centers)

5. Improvement of institutional framework

Slovenia

Greece

(Austria)

Improving the institutional framework to facilitate entrepreneurial action and lead to a more dynamic society

Hungary Addressing failures in terms of legal infrastructure for RTDI activities through STI policy support measures

Austria Improving competition framework and market access conditions, HSRT, contribute to demand-side policies and expanding the basic research sector

Romania Institutional reform regard the coherence of government policies through horizontal inter-ministerial, scientific support in RDI developing policies and strategies, in RDI coordination, evaluation and funding, in evaluation and classification of units and

29 However, Greece has not allocated specific budget on these priorities


118/145


Specific measures

institutions belonging to the national R&D system

6. Promotion of Innovation activities in

enterprises

Bulgaria Participation in Enterprise Europe Union as through its assistance the Bulgarian SMEs

Slovenia Increase investments of the business sector in R&D

Greece Increase of the participation of the private sector in RDI

Austria Performing measures like innovation checks, research premiums, support for the commercialization of results and support of young enterprises

Hungary Extending the R&D activities of enterprises and addressing inadequate private investment in RTDI activities

Montenegro Strengthen and develop SMEs that will be export-oriented and capable to cope on EU markets in the future. Particular focus on strengthening export capacities of SMEs, developing and creating innovative environment and strengthening innovation capacities.

7. Improvement of the Business Environment

Bulgaria Optimizing the relationships between participants of the innovation system and providing conditions for start-up enterprises

Slovenia Support measures for the growth of patents, high-tech exports and value added products and services

Austria Supporting new exporters (1st step of internationalization)

Romania Income tax exemption for IT specialist programmers, a more favourable regime of local taxes for industrial parks

8. Support of Innovative

Entrepreneurship and Competitiveness

Bulgaria Establishing and developing centres for promotion of entrepreneurship in high schools

Slovenia Higher rates of new high-tech firms and spin-


119/145


Specific measures

offs from universities stimulating innovation and entrepreneurship

Austria Technology transfer schemes, encouraging young talents and venture capital

Greece Reorientation of the productive base towards high added value products and personalized services and at attracting new entrepreneur investments

Romania Tax facilities to young entrepreneurs, improving entrepreneurial abilities of young engineers

9. Support ICT use in every domain

Romania

Greece

Support of ICT use as a means of improving the quality of life and the quality of services. Emphasis is placed in the use of electronic public services.

The columns to the right indicate country-relevant information and how each priority axis is

actually represented in a national context

Supplementary Information on Coordination and Capacity

A short overview of coordination mechanisms and capacity of the system in each country

follows:

In Greece, policies are conceptualized and implemented through Sectoral Operational

Programmes, Regional Operational Programmes and European Territorial Cooperation

Programmes. In addition, the alignment of the national research strategy to the Lisbon

strategy is achieved through the Strategic Development Plan for Research Technology and

Innovation 2007-2013 and the new National Strategic Reference Framework (NSFR). The main

policy documents are the 9 Operational Programmes (OPs) and their basis is on the Regional

Development Plan (NSFR), there are also 5 Regional Operational Programmes (RoPs) that focus

on the needs of Greek regions. Sectoral measures to support innovation (support to

entrepreneurship, ICT) and RTDI programmes (innovation vouchers, cooperation etc) exist as

well. There is no single agency dedicated to innovation. Since 2009, the Greek government and

the Special Permanent Committee on Technological Assessment (SPCTA) are the main actors at

the political level of the governance structure of the Greek innovation policy. The main

authority at operational level for the implementation of the RTD policy is the General

Secretariat for Research and Technology (GSRT) which is under the Ministry of Education, Life

Long Learning and Religious Affairs and the main advisory body on research is the National


120/145

Council for Research and Technology (NCRT) which is attached to GSRT. The main public

organizations developing legal instruments and multi-annual programming for policy

elaboration and implementation are the Ministry of Development, Competitiveness and

Shipping (minDev), the Ministry of Finance (MEF) and the Regional General Secretariats of

each Greek Region. The coordination of funding resources is under an Inter-Ministerial

Committee and priority setting is assisted by the National Agency for Research and

Technology. The orientation though of the main policy documents is highly influenced by the

EU priorities. In Greece, coordination is mostly driven by the demand of the structural funds.

In Bulgaria, the formulation of policies in RDI is based on micro and macro level analysis of the

national economy and it is formed according to a series of legal and policy documents such as

the Law on Promotion of Scientific Research, the National Reform Programme Bulgaria 2011-

2015, the National Strategic Reference Programme, the Programme of Measures for

Operational Programme Competitiveness and the Programme of measures for Human

Resource Development 2007-2013. The policies are implemented through the National

Scientific Research Strategy 2020, the National Roadmap for Research Infrastructures, the

Regional Innovation Strategies for Bulgarian Regions and the Innovation Strategy. The

legislative environment as well as the resource provision for scientific research are of major

importance for the country. The Scientific Research Promotion Act is governing the research

activities in the country and it regulates the principles and mechanisms for the implementation

of policies regarding scientific research. There is a division of labour between science and

education (MEYS) and innovation and market development (MEE) in the political system that

governs RDI. The main policy maker is the Parliamentary Commission for Education and

Science and the Council of Ministries acts as an intermediary between the Ministry of

Education, Youth and Science (MEYS) and the Bulgarian Parliament and other ministries. The

formulation and implementation of the policies is under the MEYS and research policy is

shaped by other ministries as well (Ministry of Economy, Energy and Tourism (MEET), Ministry

of Agriculture and Food (MAF), Ministry of Health (MH), Ministry of Defense). The National

Council for Scientific Research (NCSR) and the National Council for Innovations provide

assistance in the implementation of the government policies; however they lack the required

degree of coordination in their operations. Some progress is made in Bulgaria concerning the

distinguishing between policy formulation and implementation

In Austria, the governance structure of the Austrian NIS consist of three levels; the policy

making level under governmental bodies, the operational level that consists of programmes

under agencies and the RTDI- performance level that involves scientific research-related

organizations. The main governmental actors which are directly responsible for RDI are the

federal ministries of Finance (BMF), of Economic Affairs, Family and Youth (BMWFJ), of

Transportation, Innovation and Technology (BMVIT) which manages the biggest share of public

funding for applied research and of Science and Research (MBWF). The Austrian Science Fund

(FWF) and the Austrian Academy of Sciences are under BMWF. The Austrian Research

Promotion Agency (FFG) is under the BMVIT. The Doppler Research Association (CDG) is under

the BMWFJ. There is no formal mechanism for the coordination of the ministries’ activities.


121/145

BMF is responsible for the allocation of funds to other ministries and for the design and

implementation of the policies.

In Romania, the current RDI policy framework is provided by the Governing Programme 2009-

2012 and the new National Reform Programme 2011-2013. In addition, the National RDI

Strategy 2007-2013 which is implemented by the National Research, Development and

Innovation Plan 2007-2013 and sectoral plans is another means of the planning and

implementation of the RDI policies. The legislative framework, the priorities regarding the

implementation of policies and the issues ensuring inter-ministerial coordination is under the

National Council for Science and Technology Policy which is under the Prime Minister

coordination. The management of programmes of the National Plan II is under the Executive

Agency for Higher Education, Research, Development and Innovation Funding (UEFISCDI)

which is under the Ministry of Education, Research, Youth and Sports. Since 2011, several

consulting bodies without legal personality have been created (National Council for Scientific

Research which coordinates the Human Resources, Ideas and Capacities Programmes, National

Council for Development and Innovation which coordinates the Partnerships and Innovation

Programmes). The Institutional Performance Programme is coordinated by the National

Council for Development and innovation, established in 2011. The domains of electronic

communications, IT, information society and knowledge-based society services are under the

Ministry of Communications and Information Society (MCSI). In addition, the National

Authority for Scientific Research (ANCS) is responsible for the implementation, monitoring and

evaluation of the RDI policies.

In Slovenia, RDI policy is conceptualized by specific legal and policy documents such as the Law

on Research and Development, Slovenia’s Development Strategy 2006-2013 (SDS), Resolution

on the National Research and Development Programme 2006-2010(NRDP), National Reform

Programme for Achieving the Lisbon Strategy Goals 2005-2010 (NRP), Programme of Measures

for Entrepreneurship and Competitiveness 2007-2013, National Development Programme

2007-2013 and National Strategic Reference Framework (NSFR) with three Operational

Programmes. All the policy documents are coherent due to their simultaneous preparation or

hierarchical structure. However, the coordination of the measures and their implementation is

a challenging domain for the country and is considered to be caused by the fragmental

governance of the policies. More specifically, the innovation policy is under the Ministry of

Higher Education, Science and Technology (MVZT), the Ministry of Economy (MG), and the

Office for Development and European Affairs (GODEA) and the Office for Local Self-

Management and Regional Policy (GOSP). MG manages the implementation of policies

through the Public Agency for Technology of the Republic of Slovenia (TIA) and the Public

Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments (JAPTI).

Moreover, there are two advisory bodies, the Science and Technology Council of the Republic

of Slovenia and the Competitiveness Council.

In Hungary, a number of government bodies is engaged in science, technology and innovation

(STI) policy-making and each body has a considerably clear mission. The country is a unitary

state and has a centralised decision-making system. In addition, an adequate number of

policies schemes are in place addressing the variety of RTDI issues that emerge. Policies are


122/145

conceptualised and implemented mainly through the Government’s mid-term STI policy

Strategy (2007-2013) and the OPs of the New Hungary Development Plan (2007-2013). Some

of the most important OPs are: the Economic Development Operational Programme (EDOP),

the Social Infrastructure OP (SIOP), and the Social Renewal OP. Since 2011, there are around

two dozens of STI policy schemes and all of them are aligned to the EU STI policy goals. In the

field of STI policy formation, the central government has a dominant role and the highest-level

political bodies are the Education, Science and Research Committee and the Economic and

Informatics Committee of the Parliament. The co-ordination of the governmental STI policy

decision is under the National Research, Innovation and Science Policy Council, which is

comprised by politicians from the Ministry of National Development, the Ministry for National

Economy and the Ministry of National Resources, chaired by a deputy-prime minister and co-

chaired by the president of The Hungarian Academy of Sciences. The National Innovation

Office (NIH) deals with the government’s policies for technology and innovation. The National

Development Agency is responsible for the support schemes financed by the OPs of the New

Hungary Development Plan (2007-2013) or by domestic funds.

In Serbia, the governance system is attuned by political authorities, administrative bodies,

funding agencies and research performers (Kutlaca, 2008). Although there is no official

government policy toward restructuring of the R&D system, R&D organizations are in the

process of transformations. The private sector is loosely integrated into the public public R&D

system with no obvious links. The Government is the key player in Serbian ICT RTI as ICT RTD

activities are funded by government and majority of research institutions are state-owned.

Various Ministries are involved, as well as the National Council for Science and Technological

Development and advisory bodies. In addition, there is a fragmentation in terms of a

distinction between innovation and RTD in national bodies.

In Montenegro, several ministries are involved in national innovation policy, and the Council

for Scientific Research Activities represents the leading advisory bodies responsible for RTD.


Supplementary Information on Educational System performance and Science Base

The distinctive characteristics of the educational system per country is given below:

In Greece, the situation is characterized by low levels of life-long learning participation and

high levels of unemployment in all sectors. The knowledge triangle (research, innovation,

education) policy is underdeveloped and only recently there has been some effort to

implement changes. Although the country presents high levels of secondary education and

tertiary education attainment, the Human Resources in Science and Technology (HRST)

percentages in total employment are relatively low and the average growth indicator for

doctoral degrees is lower than the EU average. Moreover, Greece is considered as one of the

most open countries to outward mobility of researchers and it actually sends out more

researchers than it receives. The update of the skills of the workforce is another important

element that is needed for the upgrade of the RTDI system in the country. In addition, the


123/145

training levels on technological innovation inside companies are considered inadequate and

only recently some action has been taken to address the matter (such as the vocational

training of employees). As for the absorptive capacity of the R&D system, there is a mismatch

between supply and demand for researchers as 500-700 new researchers remain unemployed

each year. Scarcity of talent has been noted on sectors such as professional sales, accounting,

technicians and other but not in RTDI.

The situation in Romania is quite different, as the education sector has a quite active role in

RTDI activities. Universities on the one hand prepare future researchers and on the other hand

participate in applied and fundamental research. In addition, they are allowed to organize

research institutes and laboratories and set up consortia with other research centers of private

companies in collaboration programmes or projects. During the recent years, the country

presents significant growth of graduates in math and engineering, their absorption by the

system is low though and this results to significant brain drain. The most important reasons for

this is the low market demand for researchers, low salaries in RTDI system and insufficient

funding of programmes that stimulate research careers, inadequate research infrastructure

and underestimation of the importance of RTDI for the economic growth of the country.

Another kind of mismatch is noted as well, as the education policies are not efficiently

correlated to the needs that private and public research presents and this leads to losses of

qualified HSRT. Moreover, there seems to be a need for better coordination of education with

initial training and continuing vocational training policies. In fact, the adult population faces

difficulties in obtaining formal accreditation of skills acquired in the labour market and there is

need for the creation of synergies between the existing legal framework, the educational

policies and the lifelong learning policies.

In Austria, the situation is characterized by a low share of graduates in science and technology

and human capital in this area is considered a pressing challenge for the country. Although the

quality of education in engineering, mathematics and natural sciences is rated from fairly good

to top world wide, the country presents a significant shortage of highly skilled labour force in

these domains. In addition, it is striking the fact that only 11.5% (in 2007) of the working

population with tertiary education is actually working in a scientific occupation, a share that is

significantly lower than the EU27 average (17.1%). However, the number of advanced and

generic ICT specialists (such as software developers) is considered high (3.8%) when compared

to the low share of ICT users (17.2) in the country. The attraction of Austrian Diaspora and

foreign research is a means through which the country aims at strengthening its HSRT.

In Slovenia, the high quality of the education system and the high levels of education and

motivation of the workforce as well as the high levels of computer literacy and of foreign

languages knowledge are considered as some of the main competitive advantages of the

country. Both the levels of enrolled population in tertiary education and of expenditures on

education as % of GDP have increased during the last decade. In fact, the ratio of expenditure

on education as % of GDP of the country has always been higher that the EU average during

the same decade (SI: 5.9%, EU: 5% in 2001, SI: 5.22%, EU: 5.01% in 2008). In addition, the ratio

between teaching staff and students is high and the increase in tertiary education has a

positive effect on the innovation capacity of the country. However, the increase of tertiary


124/145

graduates results in the creation of unemployment for young graduates. Another education

issue that affects the innovation capacity of the country is the relevantly low levels of

graduates in math, Science and Technology fields, leading to a shortage of personnel in these

areas. Therefore, the education system aims at addressing this mismatch –despite its time-

consuming nature- by offering scholarships in these fields and by limiting the enrollment in

other programmes such as social sciences, law and business, tourism and other services in

which the country has more graduates than the EU average.

Bulgaria is characterized by various conflicting elements. The amount of PhD students has

increased twice from 2000 to 2006, however, during the past two years, there has not been

noted an increase in the demand for doctoral degrees. A worth mentioning fact is the 46%

increase of the number of positions for PhD students in higher education from 2007/2008 to

2008/2009. Moreover, although the OP “Development of Human Resources” provides financial

support to young scientists, post graduate students and PhD students and even though the

number of PhD scholarships has increased, the expected positive effect of an increase of the

population with tertiary education has not led to the improved innovation capacity of the

country as the actual number of students that defend their theses successfully and on time

remains low. In addition, the amount of PhD students and PhD graduates in technical sciences

varies and the amount of PhD graduates in Informatics studies is very low. However, the

interest for ICT PhD studies seems to be increasing.

In Hungary, the situation is characterized by increasing but insufficient levels (in international

comparison) of Science and Engineering graduates and PhD degree holders and brain drain is a

significant issue as it causes shortages of qualified S&E personnel. The main reasons for this

are the unfavorable working conditions for researchers and the unattractive nature of this type

of career in the country. Although there are several policy efforts to further increase graduates

in scientific fields, there is the need for a more coordinated and effective way of addressing

the issue in the long-term and businesses in particular need to be motivated to invest and

create more positions for this kind of graduates. As for international mobility issues, the

country presents low inward mobility (3% of researchers are foreign researchers in 2010) due

to unattractive salaries and working conditions and stable outward mobility and for this reason

there are several policy measures in place to support native and foreign researchers moving in

and out of the country. The responsiveness of the education system is characterized by a lack

of understanding of the actual industry needs and there is the need for better communication

of the changing industry demands. Last but not least, the participation in lifelong learning is

viewed as weak in international comparison and certain private training companies or some

universities offer courses in entrepreneurship and innovation management.

Note: no relevant analysis has been made for Serbia and Montenegro except for SWOT.

Supplementary Information on Science-industry collaboration

On a country level, the information on collaboration is given in the list below. The scarcity of

sources and information on national reports however has rendered the analysis more difficult.


125/145

In Greece, the most characteristic feature regarding the links between science and industry is

the lack of a dynamic type of relationship between the relevant actors. In addition, the

intermediary units are considered inadequate. The reason for this lies in the traditional

orientation of the productive sector and in the fact that research priorities are driven by

funding opportunities and not by demand leading to the lack of a dynamic market that could

receive and exploit the research output of research centers and universities. There is limited

knowledge circulation and exploitation, even though there have been some efforts by

intermediary mechanisms to reinforce these types of collaboration. A small progress has been

noted regarding the collaboration of innovative firms with universities during the years 2004-

2006 (6% increase) due to the participation of the country in EU FPs for research. Most of the

current measures that aim at improving the situation are under the Operational Programmes

and are still under design. Indicatively, these measures aim at the creation of new knowledge

intensive clusters in areas with competitive advantage and of regional innovation poles, the

mobility of researchers from university to market, collaboration of SMEs with RTDI performers

in high technology fields, collaboration of private companies with research centers in strategic

fields and other.

In Slovenia, the situation regarding the cooperation between science and industry is

characterized by small progress (for the years 2002-2006), however, only a particular number

of successful firms has managed to create strong connections with public research centers and

benefit from this cooperation; the dominant aspect is that the output from the side of science

and academia is rather irrelevant to the industry’s needs. In addition, the 3 types of

collaborative tri-sector participation that exist in the country (Centres of Excellence,

Technology Platforms, Clusters) have the aim to enhance the concentration of knowledge at

key technological areas as well as to support strategic partnerships between academia and the

private sector. Moreover, the 8 Centres of Excellence of the country have been created with

the view of supporting inter-disciplinarity among different research fields, providing an equal

basis for industry and academia and promoting joint sharing of the research equipment for

public research units, industry and young researchers or postgraduate students.

In Austria, there has been an increase of institutions of public/private partnerships during the

last decade. More specifically, the Competence Centers play the role of the intermediary

between science and industry and have different objectives, some of them related to ICT. The

Competence Centers under K-plus have the objective of creating long-term initiatives for the

collaboration of public and private research at an advanced level, K-ind Competence Centres

support the creation of R&D centres which are run both by companies and research

institutions, K-net Competence Centres support the co-operation of geographically dispersed

facilities related to research of common issues. Moreover, according to a new naming scheme,

K2 and K1 Competence Centres have been recently established. Other public/private

partnerships that involve the industry are the Christian Doppler Laboratories (CD labs). In

addition, the country’s research organizations participate in two EU Joint Technology

Initiatives, the ARTEMIS and the ENIAC (European Nanoelectronics Initiative).

Regarding university/industry collaboration, Bulgaria ranks 110th among 139 countries in the

Global Competitiveness Rank. The OP Competitiveness and the primary priority axis support


126/145

the creation and upgrade of technology transfer centres, technology incubators, technology

platforms and technology parks. In addition, another objective is to reinforce the synergetic

attitude of all the relevant actors in the innovation system via the implementation of a series

of related operations such as the creation of a “national innovation network”.

In Romania, the companies are below the EU average regarding strategic relationships with

research institutes (EU average: 15%, Romania: 11%) and equal regarding strategic

relationships with educational institutes (EU average: 24%, Romania: 24%). The Sectoral OP

“Increase of Economic Competitiveness” (SOP-IEC) sets among the priorities the support of

partnerships between universities or research centres and enterprises for the production of

output directly applicable to the economy. The state supports the development of innovation

and technology transfer infrastructure through the creation of centres and specialized services

for the dissemination and use of research output, areas and infrastructure with special

facilities such as industry liaison offices, business incubators, technological parks, technology

transfer centres and branch entities with a specialization in technology transfer, responsible

for tripartite contracts.

In Hungary, companies report higher frequency of cooperation in terms of innovation than

most EU countries (6th in CIS 2008, with 41.6%) and there are long-established partnerships

between businesses and higher education institutions.. There are several policy support

measures in place to reinforce the collaboration between the private and the public sector

organizations, knowledge circulation and the exploitation of research results. In addition, joint

university-industry research centers located inside universities are supported through

financing. The impact of these measures is contradictory as native experts support their

efficiency and foreign experts support that science-industry links remain weak due to a lack of

understanding of the actual industry needs by the academic side and due to the mismatching

nature of the incentive structures that are offered to these actors. Moreover, the country

reinforces the exploitation of knowledge by supporting IPR activities inside publicly financed

research centers and technology transfer offices in many of these centers have been

established to facilitate these activities. However, there is a rather significant lack of

cooperation between domestic universities/public research centers and the ICT R&D field

(namely electronic firms which mainly deal with manufacturing).

Supplementary Information on Partnerships

As above, the information on partnerships is given in the list below. The scarcity of sources and

information on national reports however has rendered the analysis more difficult. The level of

sophistication of analysis for each country significantly deviates.

In Greece, one of the most representative characteristics related to the knowledge triangle

links is the fact that although the country performs well in innovation inputs (such as

education, investment in innovation), it does not perform well in output measuring indicators

(such as patents, firm turnover form new products etc) and this seems to be caused by the lack

of strong links and interactions in the knowledge sharing system. Although there has been

noted some increase of collaboration between universities and innovative firms during 2004-


127/145

2006 and although the participation of Greece in the EU FPs has improved partially the

situation, there is the need for more dynamic action. The distribution of knowledge to

investors and SMEs is being supported by the relevantly recent creation of the Centres of

Entrepreneurial and Technology Development but still there are few incentives for the

creation of more intermediaries. Moreover, the country presents a low average for business

funding public R&D). As far as the innovation policies set by the EU are concerned, in the

country, Public Private Partnerships (PPPs) deal merely with the construction of public

infrastructure. In addition, despite the importance of the public procurement policy for the

improvement and rejuvenation of the innovation system, Greece seems incapable of exploiting

this properly as it has neither set any clear-cut goal regarding it, nor formulated any policy to

support it. However, new regulations combining public procurement and the health system

are expected and there seems to be space for the improvement of the pre-commercial

procurement market. Moreover, concerning the Lead Market Initiative (LMI) which is another

innovation policy set by the EU for industrial innovation, Greece reports only a small

participation in such projects and the reason for this appears to be the mistrust of the business

sector towards the country’s market as well as the lack of a massive grant position. Another

issue that characterizes the situation is the fact that the country needs to focus on innovation

creation instead of innovation absorption. In fact, the tendency that the country presents

towards adopting new technology instead of creating it, is proved by the number of patents

which diverges significantly from the EU average. However, the country scores 82% of EU

average in scientific publications per million inhabitants and half as much as the leading

countries in terms of citations. As for the commercialization of public research, there are

limited actions mainly due to the lack of interest and lack of capabilities and there are only few

institutions that deal with this issue (FORTH, CERTH, ISI/ATHENA). Last but not least, the

participation levels of Greek research teams in EU research is considerable and the most active

FP7 research priority areas are ICT, Marie-Curie Actions, Research Potential, Transport,

Nanosciences and Nanotechnologies and Health.

In Slovenia, as already mentioned, collaborative participation appears in the form of

technology platforms, centers of excellence and clusters. Regarding public sector innovation,

Slovenia reports that the public sector motivates employees to submit suggestions and

recommendations for the improvement of the delivery of public services. In addition, the

public sector evaluates the education system, suggests preventive measures and forwards to

ministries regulations for needed changes. As for public procurement strategies, there are two

laws in the country; the Public Procurement Act and the Act in Public Procurement in Water,

Energy, Transport and Postal Services. Concerning the commercialization of public research,

the channels are: networking, continuous professional development, contracted research,

licensing, spin-offs etc. Moreover, the Slovenian research policy, the instruments and the

processes have been significantly influenced by the development of EU policies and

documents. The issue of RTDI and the target of increasing R&D investment are included in

national policy documents and thus the country aligns with the Lisbon and Barcelona targets.

Generally, the country presents high indicators in knowledge internationalization aspects. As

far as scientific co-publications are concerned, the country presents very good performance. In


128/145

terms of patent applications, Slovenia presents an increase from 2000 to 2008 (in 2000: 49

patent applications and 0.501 in ICT patent applications to the European Patent Office, in

2008: 60 patent applications and 0.995 in ICT patent applications to the European Patent

Office), although the EU27 average has fallen.

In Austria, Public Private Partnerships (PPPs) are considered as a means of reducing the

intervention of the government and have become a deliberate policy goal. In addition, the

commercialization of public research is supported at various stages, from early translation of

the results to production of innovative products and services.

In Romania, the creation of centres and specialized services, of areas and infrastructure with

special facilities and branch entities are supported by the government at a national, regional

and local level. The country has in place certain measures that align its policy with the

Industrial Innovation policies of EU such as a law for approving the creation and functioning of

S&T technology parks (2003), a government decision (2004) for the improvement of the

coordination and management of innovation programmes and projects (PPPs with research

institutes, Joint Projects, contract research, licensing etc) and other. In addition, in 2010 there

were 32 technological platforms and in 2011 the Inno-voucher was launched with the aim to

support and exploit the innovation potential of SMEs and the consulting potential of research

institutes as a service, leading to the development of new products, implementation and

testing of patents, technology transfer, evaluation and technological audit, transfer of research

results to SMEs, IPR, certification of products and more. As for scientific publications per

million populations, table … provides certain information for the county. In addition, in 2010,

PCT patent applications per billion GDP were far lower than the EU27 average and license and

patent revenues from abroad as % of GDP was 0.12% for Romania and 0.21% for EU27.

In Bulgaria, the infrastructure for the support of the commercialization of research output and

technology transfer in the ICT sector is reported to be adequate (it includes a network of

Technology Transfer Offices-TTO, and Centres-TTC and High Tech Business Parks-HTBP). In

addition, inside universities there are innovation offices, High-Tech Parks and R&D sectors and

there are several technology transfer centers members of the Enterprise Europe Network

which provide support to innovative SMEs and which are further supported by 3 high tech

business incubators. As far as the patenting activity in ICT is concerned, Bulgaria presents very

low performance with 10-20 patent applications for 2004-2008 at EPO/WIPO. In 2007-2008

there seems to be an increase of interest in IPR protection for the country’s ICT inventions,

most of the new applications derive from SAP researchers with Bulgarian affiliation, though. In

the Bulgarian Patent Office (BPO) the activity is seen as higher, more diverse and stable.

In Hungary, there are measures and laws in place to support the commercialization of HEI’s

research outputs through the creation of spin-offs and favorable IPR regulations. One of the

priorities of the country is the introduction of pre-commercial procurement as a policy tool

with the aim of strengthening the development of the ICT sector. There are no Lead Market

Initiatives (LMIs) in the country and the capacity of ICT firms to absorb and exploit knowledge

appears to be sufficient. In addition, the country participates in Joint Technology Initiatives


129/145

(JTIs) and Joint programmes, however, the country’s cooperation with other countries did not

have the aim of joint policy design and STI policies are designed via joint initiatives only to a

limited extent. Currently (2011-2012), the country holds the EUREKA chairmanship and

Hungarian participants participate actively in its projects and contribute to 5 strategic cluster

projects

Supplementary Information on Infrastructure and Funding

It is equally important to conceptualize the funding mechanisms used for RTDI and innovation

in each country, as at the regional level, the funding models of RTDI policies present significant

differences.

In specific, in Greece, most of funding for RTDI activities derives from the European

Community Funds with the R&D Framework Programmes and the Structural Funds and from

direct government funding. There is no indirect public support via tax incentives. The

contribution of the private sector is insignificant (0.58% of GERD, 2007) due to poor demand

for research based knowledge that derives from the low absorptive capacity of the business

sector and from bureaucratic obstacles whereas Structural Funds represent approximately

10% of GERD. The contribution of the public sector exceeds 2/3 of GERD and is half the EU

average. Half of the public funding is university funding. All in all, the innovation policy in the

country is heavily dependent on external sources of finance.

In Bulgaria, the issue of funding RTDI is considered to be as one of the two main problems that

the science sector faces. More than 80% of funding derives from the government and is based

on the institutional funding principle. The contribution of the private sector is insignificant. In

general, the country seems to be lagging behind nearly all EU countries in RTDI funding. The

financial crisis which began to be felt in the 4rth quarter of 2008 slowed the GDP growth and

led to negative growth in 2009 led to falling levels of RTDI funding (0,5% of GDP in 2008) and

thus low levels of innovation and technology transfer.

In Austria, the support to RTDI is threefold. It focuses on indirect funding via R&D tax

incentives, basic funding to universities and research institutions and direct project funding to

research institutions and firms. The emphasis is placed on applied research with market

potential and direct and direct funding to business has increased considerably whereas public

institutional funding for basic R&D has decreased. . In addition, there are many thematically

open funding opportunities, ICT research is supported by European programmes, by thematic

programmes and structural programmes. The private sector contributes significantly in ICT

related research funding (84% of the overall research funding which is 0.52% of GDP, 2008)

and the public sector contributes with a 16% of the total funding which is 0.52% of GDP (2008).

The goal is to reach 1% funding of ICT RTD as a share of GDP and from this the 88% to be

private funding and 12% to be public funding by 2020.

In Slovenia, public funding to RTDI has increased (118,359,583 Euros in 2006, 234,241,000

Euros in 2009) due to the use of European Structural and Cohesion Policy Funds. GERD as a

percentage of GDP has increased from 1.45% in 2007 to 1.86% in 2009. Financial incentives


130/145

have a positive effect but still the resources are limited compared to the actual needs. Private

sector funding in RTDI has also increased during the recent years (companies invested

380.884.000 Euros in 2009) and it is approaching the EU average. The country plans to achieve

the Barcelona target goal, part of the Lisbon Strategy, of investing 3% of GDP in science and

development (1/3 public funds, 2/3 national economy) in 2012.

In Romania, GERD as % of GDP has decreased from 0.58% in 2008 to 0.47% in 2010. The main

sources are public funding (70.1% in 2008, 54.9 in 2010), private funding (23.3% in 2008, 32.3%

in 2010) and they are devoted to fundamental research (49.5% in 2008, 42.9% in 2010),

applied research (42.5% in 2008, 50% in 2010) and experimental development (8% in 2008,

7.1% in 2010). Public funding has decreased whereas private funding has increased. The

emphasis appears to be placed on applied research. Public funding is allocated mostly to the

governmental sector (47.3% in 2010), and Higher education (31.4% in 2010), the rest is

allocated to enterprises and the private non-profit sector. State funds are allocated to the

financing of the objectives of the National Plan and of the National Strategy as well as to the

research institutes which participate in international programmes. The National Plan budget

(15b. lei, 2007) focuses on the Partnerships Programme with 36% of the allocated budget and

on the Ideas Programme with 18% of the budget. In addition, 13.5% is allocated to the

Capacities Programme, 13.5% to the Innovation Programme, 10% to institutional performance

and 9% to Human Resources. Another important source of RDI funding is the Sectoral

Operational Programmes “Increase of Economic Competitiveness” (SOP-IEC) with an overall

budget of 3.01 billons Euro (84.8% representing Community funding and 15.2% - National

counterpart covered by National Public funding). Relevant for the RDI is the Priority Axis 2 –

“Research, Technological Development and Innovation for competitiveness”, with 21.5% of the

overall budget, while the Priority Axis 3 – “ICT for private and public sectors”, with 15.6% of

the overall budget is focused on ICT.

In Hungary, GERD has presented an upward tendency from 2001-2008 (0.9-1.0% of the GDP)

to 2009 (1.17%). In 2010, it slightly fell to 1.16% (1,126.1m Euros), when the EU average was

2.0%. Furthermore, in 2010, businesses had the biggest share of GERD (HU: 59.8%, EU:

61.51%), Higher Education Institutions performed 19.9% of GERD (respective EU average:

24.2%) and one of the most important actors in the Hungarian research system, the Hungarian

Academy of Sciences (MTA) performed 11.6% of GERD. Government funding has declined from

41.82% of GERD in 2008 to 39.34% in 2010, and business funding has decreased too, from

48.31% in 2008 to 47.37% in 2010. Industry-financed GERD has increased from 0.48% of GDP

(2008) to 0.55 (2010), and government-financed GERD from 0.42% of GDP (2008) to 0.46%

(2010). Another striking element is that domestic public funds for RTDI activities were

disrupted: 36.6% of the 2010 budget of the Research and Innovation Fund was “frozen” in June

2010.


131/145

Supplementary Information on Internationalisation of knowledge

The following table extrapolates from the main FP7 ICT themes, the main performers on each

theme:

Table A- 10. FP7 participation per country and theme /top 20 performers in the EU

Greece Austria Hungary Slovenia Romania Other

Future Networks and Internet

5.2% 1.2% 0.8%

Software, Services and interconnected objects

4.5% 2.5% 0.4% 1.1% 0.6%

Trustworthy ICT 3.4% 4.6% 1.1%

Networked Media 6.1% 2.7% 1.6% 0.4%

Cognitive systems and robotics

2.7% 2.8% 0.9%

Nanoelectronics 1% 5.4% 1%

Micro/nanosystems 1.6% 3.4% 0.5%

Embedded Systems 4.2% 3.6% Serbia 0.3%

Photonics 3.2% 1% 0.8%

Organic and large area electronics

1.6% 3% 0.1% 0.2%

Language technologies

4.4% 1.2% 1% 0.9% Bulgaria 1%

Intelligent Information Management

5.2% 8.5% 0.6% 2.2% Bulgaria 1.5%

ICT for Health 8% 3.1%

ICT and Ageing 7.6% 7.1% 0.5% 0.4%

ICT for Inclusion 6.5% 7.1% 0.6% 0.7% 0.6% Bulgaria

ICT for Governance and Policy

8.1% 13.5% 1.2% 1.1%

ICT for Energy Efficiency

4.7% 3.9% 1.7%

ICT for Transport 3.9% 2.6% 0.4%

ICT for the Enterprise

4% 3.1%

ICT for Learning 2.5% 9.4% 0.5%

Digital Libraries 5% 6.7% 0.6% Bulgaria 1%

Future Emerging 1.9% 3.1% 0.8% 0.3%


132/145

Technologies

International Cooperation

5% 1.3%

Source: (30)

It is explicit that Greece and Austria are important players on a pan-European scale. In Austria,

participation in ICT is successful with more than 3.6% of funding and 64 projects coordinated .

Industrial participation remains relatively low and the main strengths are ICT for Learning, ICT

for ageing, Information management and ICT for inclusion. In Bulgaria, participation remained

stable at about 0.2%. Bulgaria has been very strong in SME participation but participation of

research institutions in very low. Areas of relative strength include Intelligent Information

Management, ICT for Learning and ICT for Inclusion. Areas with low participation include some

of the key enabling technologies. Nanoelectronics, Microsystems, Embedded systems and

Photonics are among the key areas where no Bulgarian organisation is present. In Greece,

research participation is very important and research institutions occupy the first ten positions

in recipients ranking. The main strengths are in the areas of ICT for Health, Ageing and

Inclusion but also technology areas such as Future networks and the internet, software and

embedded systems. Greece seems to have potential to develop its companies in design,

software and services as well as networking in the “knowledge triangle”.

Hungary is very strong in SME participation whereas large companies are very weakly

represented. The main areas of strength are Future networks, Networked media, Trustworthy

ICT, Nanoelectronics and Photonics. Future and Emerging Technologies are also rather

common. Romania has a rather strong participation from SME’s. Research participation is very

focused on a few organizations such as several Universities. Areas of strength include

Networked Media, Future networks and internet, ICT for health, for inclusion and for energy-

efficiency. Some of these areas have particularly high potential and have recently benefited

from an increase in funding level.

In Slovenia, SME participation has been relatively strong while participation of large industry is

low and very concentrated. Areas of strength include intelligent information management,

Cognitive systems and robotics, ICT for energy efficiency, and Software, services and internet

connected objects.

Supplementary Information on Market Development

Three figures below provide more information on how countries engage in product of service

innovation, by type of innovator and by type of BERD activity

Figure A-20. Product –Service innovation

Source: innobarometer 2009


133/145

Figure A-21. Innovative enterprises by type of innovator, as a percentage of all enterprises

Figure A-22. BERD by sector of activity


134/145

Supplementary Information on Industrial RTD and Innovation

Some additional information per country is given below:

In Slovenia, enterprises present very good performances in RTDI activities and are ranked

above the EU average in many cases. More particularly, 34% of Slovenian enterprises in high-

tech sectors are actively innovating. In addition, manufacturing companies are more

innovative than service companies (innovative manufacturing companies: 41.2%, innovative

service companies: 26.8%). Due to the country’s size, the industrial-innovation sector presents

a more extrovert character than other European countries and the percentages of outsourcing

tasks to companies in other countries, of investments in enterprises in other countries, of

other forms of cooperation with other countries and of recruitment of employees from other

countries are higher than the EU average. Moreover, the country outperforms the EU average

in open innovation, in user’s free access to test products/services, in the involvement of

potential users in in-house innovative activities and share and exchange of intellectual

property in support of innovation.

In Greece, the situation is characterized by the lack of dynamic funding for the private R&D

sector. BERD levels are low and the High Potential Entrepreneurship Indicator of the country is

low as well. Moreover, the most representative features of the present situation include the

risk-averse behavior of enterprises, the large number of small and very small firms with low-

medium technological orientation, the heavy reliance on public funding, the low “in-house”

RTDI performance and the dominance of traditional sectors. The domains that attract the

highest share of funding are ICT and biotechnology. Otherwise, the private sector is driven by

the demand of the prominent sectors of the economy (IT services, chemicals, trade and food).

Within enterprises, the high level of non-R&D innovation is another striking element and the

failure to discriminate between non R&D and R&D innovators is a severe consequence that

leads to ineffective public policies for innovation. On the other hand, there are some positive

0% 20% 40% 60% 80% 100%

AT

BG

GR

HU

RO

SI

Manufacturing Services Other


135/145

elements regarding some of the major trends of Greek innovation enterprises. More

specifically, Greek innovative companies perform better than the EU average in open

innovation (creation/participation in internet-based forums in support of innovation, allow

free access to tests product/services to users, share of intellectual property in support of

innovation). In addition, the country performs quite well in strategic partnerships to support

innovation as well as in cooperation with other countries.

In Austria, there is a fair amount of enterprises that innovate. In addition, the country’s

enterprises perform well in reinforcing employees submitting innovative ideas via internal

mechanisms and cross-functional teams perform well in innovation projects. As far as the

collaboration of the country’s companies with foreign companies and other foreign actors is

concerned, the country presents low levels of collaboration in comparison with the other

participant countries. However, they show higher levels of willingness to share and exchange

intellectual property.

In Romania, although the amount of innovative companies has increased from 17% in 2000/02

to 19% in 2008, the innovation capacity of the country’s industry remains low. The reason for

this lies in the poor competitive environment, the companies’ reluctance to get involved in

financial or commercial risks related to R&D and the lack of services and instruments that can

reduce this risk. A positive element is the fact that private companies present very good levels

of strategic partnerships with other companies which are active in the same field and good

levels of strategic relationships with educational institutions. However, the relationships with

the research institutes, with suppliers and specific customers need to be reinforced. In

addition, the country’s enterprises present satisfactory indicators in all the areas of open

innovation with the exception of sharing and exchanging intellectual property. Regarding the

collaboration with other countries, Romanian enterprises are below the EU average in almost

all the domains. Moreover, they are below the EU average and outperformed by the other

countries in innovation stimulators. The tables at the end of the section provide evidence and

further information for the situation of the country.

In Bulgaria, the private companies present low performance in many innovation-related

trends. First of all, they are below the EU average and outperformed by the rest of the

participant countries in all the kinds of strategic relationships with other actors for the support

of innovation. They perform quite better regarding open innovation; still they remain below

the EU average with the exception of their participation in internet-based forums in support of

innovation where they score better than Slovenian and Austrian enterprises. In addition,

Bulgarian companies do not present an outward nature as far as collaboration with foreign

countries is concerned and they invest in enterprises located in foreign countries the least of

all the rest of the countries. Last but not least, Bulgarian companies present a rather

satisfactory picture concerning innovation stimulators. The following table presents evidence

and further information.

In Hungary, firms report high frequency of innovation cooperation. However, only 6.5% of

Hungarian enterprises reports cooperation with public research centers (16th among EU

countries) and a decreasing pace has been noted since 1999-2001 (8.6%). R&D performed by


136/145

business enterprises present an increase from 52.57% of GERD in 2008 to 59.81% of GERD in

2010 (EU average in 2010: 61.51%). In addition, 7.1% of SMEs are engaged in innovation

cooperation with other partners (2006-2008), a percentage lower than that of the EU average.

One of the challenges that the country faces derives from the dual economy issues emerging

from the existence and performance of large foreign-owned enterprises and the performance

of small innovative firms, medium-sized innovative firms and large innovative companies

regarding cooperation with clients and suppliers of equipment, materials and components of

software. The factors hindering innovation activities are financial constraints and market

conditions. More specifically, in 2004-2006, enterprises with technological innovation reported

the lack of funds inside the enterprise (28.8%), lack of funds from external sources (19.9%), the

high cost of innovation (27.3%), the lack of qualified personnel (14%), the domination of

market by established enterprises (15.4%) and uncertain demand (14%) or lack of demand

(4%) for innovative products and services as factors that hamper their innovation activities.


As part of the Digital Agenda, the figure below isolates the indicator of the percentage of

population interacting with public authorities to illustrate aspects of the discussion above in

government services take-up and provision.

Figure A-23. % of population interacting with public authorities online

(Source: Digital Agenda Scoreboard, European Commission, 2012)


Additional information is given on two issues: Regional issues and new trends in innovation:


137/145

Regional issues

Some further analysis is performed in order to detect whether there is connectivity or regional

actors in global networks and whether mechanisms behind diversifications can generate smart

specialisation. According to (42) smartly specialised regions will be more innovative, resilient

to economic downturns and competitive. Although all-embracing indicators cannot be

analysed on the deliverable level, as comparative evaluations would have to include labour

mobility, network formation, knowledge spill-overs and policy factors, some background

perceptions can be formed upon existing findings. Technopolis (2011) also confirms that there

is a large diversity regarding patterns of innovation performance where the countries in the

region are characterised as follows :

Regional typology in innovation performance

o Half of the region under review belongs to the “knowledge-absorbing

regions”, namely the entire country of Bulgaria, Romania and most of

Hungary. Such regions are characteristics in South Eastern Europe , where

innovation performance are below the average but innovative

entrepreneurship is lower. In addition, the share of innovators is small and the

most of R&D expenditure is non-R&D indicating absorption patterns.

o Austria and Slovenia belong to the “ Balanced innovation regions”,

characterised by innovative entrepreneurship and high R&D expenditures.

o The capital regions in Bulgaria and Hungary are “Public knowledge regions”

with a very high score on ‘public knowledge’ while the average R&D

expenditures in government research organisations are also high and good

shares of tertiary educated work force.

o Most of Greece and a part of Eastern Romania belong to “knowledge-

absorbing innovative regions”, having a higher average score on innovative

entrepreneurship and non-R&D innovation expenditures but low scores on

technological innovation and patenting. In these regions, innovation mainly

results from absorbing existing knowledge.

o Two regions in Greece (Thrace and Western Macedonia) as well a region in

lowest Hungary are labelled “industrialised innovating regions”, where the

scores on technological innovation is above average but innovative

entrepreneurship is below average, in turn resulting from industrialisation

patterns.

RTDI policies and funding

o The same report reveals that the importance of policy level in RTDI in policy

making is important at a national level for Bulgaria, Greece, Slovenia and

Romania, while the regional element is important for Austria and Hungary.

o RTDI policy is most pronounced in regions where the implementation of

policies as such does not have an established tradition (e.g. Bulgaria, Greece)

o The relevance of structural funding for regional innovation policies is

significantly different across regions with no prounounced similiarities, but in


138/145

general they have a strategic role to pilot innovative measures in regions with

no relevant capacities.

Some regional disparities are discussed for Greece and Romania, as it would be insufficient to

isolate factors relevant to innovation growth. Regional disparities are inherent in both

countries, having received community assistance for regional development. In Romania,

regional differences have increased over the last years, in particular between the capital and

the rest of the country.. The South and capital regions concentrate most of the innovation

activities in terms of BERD, personnel, patents etc. The South and capital regions concentrate

most of the innovation activities in terms of BERD, personnel, patents etc. The other regions

face numerous challenges as regards specific aspects on innovation development, insufficient

financing, limited awareness and cooperation among actors and obsolete infrastructure. In

Greece, the economic performance of the regions appears loosely coupled with the country’s

innovation activity and there is limited correlation between the country’s overall economic

performance with the respective performance on knowledge creation and innovation. Some

regions appear to be wavering far away from the country’s average, due to some structural

characteristics of the local economy (unemployment , dominance of traditional sectors, low

share of GDP etc) and deficiencies in terms of infrastructure and linkages with Universities .

The Region of Attiki concentrates the bulk of public and private R&D actors and expenditure in

the country, absorbing 60% of the national GERD and 41% of national BERD, although, there is

still a gap to the EU 27 average due to limited demands from industry. The region of Kriti also

demonstrates high potential, but one of the obstacles these regions face is the slow rate of

restructuring of the local economy and the weak alignment of technological demand by firms

with the supply by the public sector. 30 In general, the common denominator of the

deficiencies of Greek regions to convert themselves into growth dynamos are a combination of

limited demand from the industry, reflecting the low-to-medium technology structure and low

level of extroversion. At the same time the limited formal linkages between the research and

business sector, the low level of public funding and the fragmentation of the research efforts

across numerous disciplines constitute important barriers to further increasing R&D

expenditure in most of the regions.

The following figures illustrate regional performances (best and worst performing regions at at

NUTS 2 level)) of the countries (excluding Serbia) with regard to R&D expenditure, R&D

personnel and employment in high-tech sectors3132. Regions in the countries reviews

apparently suffer from limited funding in R&D expenditure, lagging behind the EU average

with Austria being the notable exception, thus with a robust gap between the best and worst

performing region. Slovenia also approaches the EU average, nevertheless Romania Bulgaria

30 http://www.rim-europa.eu/index.cfm?q=p.regionalProfile&r=GR43&fj=true#economy 31 (source .Eurostat (2011, Science ,technology and innovation in Europe

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-31-11-118/EN/KS-31-11-118-EN.PDF)

32 Red vertical line denotes EU average, black vertical bold line denotes national average. Blue dots denote best performing regions and orange dots the worst-performing regions.

http://www.rim-europa.eu/index.cfm?q=p.regionalProfile&r=GR43&fj=true#economy

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-31-11-118/EN/KS-31-11-118-EN.PDF


139/145

and Greece in overall face low performances with the worst performing regions approaching 0-

0.5%

Figure A-24.Regional disparities in R&D expenditure as a % of GDP, 2007

(Source: Eurostat, 2011 Science, technology and innnovation in Europe)

Interestingly, the situation in personnel is quite different from R&D spending, revealing a

mismatch innovation and R&D structures, expenditure and employment. Most of the best

performing regions in this case, apart from Bulgaria surpass the EU average in R&D personnel

and employment in high-tech sectors, nevertheless differences persist in Bulgaria, Greece and

Romania.

Figure A-25. Regional disparities in R&D personnel as a % of GDP, 2007



140/145

Figure A-26. Regional disparities in employment in high-tech sectors as a % of total

employment, 2007


Additional EU trends

This section revises most of the information provided against the backdrop of emerging patterns of innovation and emerging themes as a tool to better anticipate changes that the region is likely to face within the next years.

According to the 2010 report on R&D in the, there are certain drivers and barriers to these processes for example:

New service opportunities, created by technological change and stimulated by demand for new types of knowledge

ICT growth allow firms to develop new services and produce existing services more efficiently and increases the tradability of services

Technological change, growing stock of information and knowledge available increases knowledge intensity

Open innovation patterns in user industries Barriers mostly consist of different rules and regulation s across countries, diversity of

qualification, entry requirements and language differences. The creative industries have large growth potential in supporting innovative activities,

encouraging economic growth and creating jobs Some new member states have very high annual employoment growth rates in the creative industries

Knowledge-intensive services (KIS), including knowledge-intensive business services (KIBS), are among the most dynamic industries in the economy

Trends:


141/145

There are three trends with potential in the future in; the quality of life: accelerated digital transformations, mass collaborations and a new paradigm of sustainability 33

The key sectors for investing in the future are low carbon economy, infrastructure and energy buildings, environmentally-friendly transport-modes, high-speed ICT networks, energy interconnections, and pan-European research infrastructures as well as clean technologies for cars and construction. 34 High-speed Internet connections promote rapid technology diffusion, which in turn creates demand for innovative products and services.

The creative industries have large growth potential in supporting innovative activities , encouraging economic growth and creating jobs (crossroads between arts, business and technology). Some new member states have very high annual employoment growth rates in the creative industries (ibid)

Knowledge-intensive services (KIS), including knowledge-intensive business services (KIBS), are among the most dynamic industries in the economy. The growth of KIBS has been fuelled by the application of new technologies, new service concepts as well as changes in demand. (innova sectroral report on KIBS) (KIBS are mainly computer services, R&D and other business services) KIBS can create strong linkages to a number of activities inside and outside servie sectors and create new services with neighbouring services.

Social enterprises are another emerging aspect in the EI as they are active in launcihg new services or products and an important source for sustainable and socially engage innovation (43). Social entrepreneurs are much more likely to have introduced new-to-the-market innovations in goods, services or processes. Social enteriprises are a source for innovation generating towards the ambitions of the EU 2020 strategies (health, social work education etc) (Romania and Hungary are have high shares)

Open innovation has emerged as a pattern and source of growth during the last years. Open innovation relies on networking with individuals to exploit knowledge and ideas, collaboration among partners, universities, users and compteititos and alternative methods of commercialisation. This trend is particularly significant in the evolution of the service industry for creating spill-over effects from a socio-economic perspective

Public sector innovation and pre-market procurement: The single most important driver of innovation in the public sector was the introduction of new laws and regulations as well as new policy priorities 35. Public administration organisations most frequently developed new solutions on their own.

R&D investments in the field of energy have been growing rapidly in the past years. This regards in particular, the development of new energy technologies driven by security of energy supply and environmental concerns.

Living labs and cross –border cooperation can create eRegion between Austria, Hungary and Slovenia. Slovenia is more mature in living labs.

The Innova national specialisation report (44) contrasts patent growth rate with technological specialisation form employment data and finds that the most promising innovative fields in the EU in terms of patents are information technology, pharma, biotechnology, medical engineering and semiconductors, whilst specialisation patterns exist in civil engineering, maching tools, space and wapons, agriculture and foods as well as environmental and nuclear

33 service innovation yearbook 2010-2011 34 A European Economic Recovery Plan, European Commission COM(2008) 800 final


142/145

sciences. A relative advantage appears in the European Union in technology fields such as environmental technologies (climate change, sustainable development etc).

Small countries cannot efficiently diversify into a large range of industries. Therefore, they tend to specialise in a limited number of economic activities, chosen on the basis of domestic comparative advantages, the availability of specific resources, advantages related to location etc. According to the same source technological specialisation indicated by the Hirshman-Herfindahl Index (HHI) has been steadily incrasing from 1978 to 2005 for Austria and Greece . In Slovenia in has declined until 1988 and then was stabilised with slight increasing trends. In Bulgaria, Hungary and Romania it has been flunctuating aroung 0.10-0.20 for the last decades with no clear trends. The Krugman Specialisation Index (KSI) measures national specialision based on the degree of similarity of the technology portfolios. This index has been stable in Greece for the last decades (after falling sharply between 1978 and 1993) and relative stable for Austria. The rest of the countries have continuously decreased their degree of sepcialistion

Additional references of the Annex:

1. Commission, European. Innovation Input and Output. http://www.proinno-

europe.eu/page/innovation-input-and-output-0. [Online]

2. European Commission. Foresight blueprint for upgrade regions: the Upgrade Blueprint

Foresight strategy and actions to assist regions of traditional industry towards a more

knowledge-based community,. 2004.

3. Metcalfe, S. Technology systems and technology policy in an evolutionary framework.

Cambridge : Cambride University Press, 1997.

4. Sectoral systems of innovation: a framework for linking innovation to the knwoledge base,

structure and dynamic of sectors. Malerba, Franco. 1, 2005, Economics of Innovation and New

Technology, Vol. 14, pp. 63-82.

5. Golden, W., Eoin Higgins, Soo Hee Lee. National Innovation Systems and Entrepreneurship.

s.l. : CISC Working Paper No.8, 2003.

6. OECD. The measurement of Scientific and Technological Activities, Proposed Guidelines For

Collecting and Interpreting Innovation Data. 2005.

7. —. The Contribution of Multinational Enterprises to the Upgrading of NIS in the EU new

Member States: policy implications. Paris : OECD Global Forum, 2009.

8. OECD . The Oslo Manual" The measurement of scientific and techological activities:

proposed guidelines for collecting and interpreting technological innovation data. 2005.

9. Science&Technology Policy Institute. Measuring Innovation and Intangibles: A Business

Perspectives. s.l. : IDA, 2008.

10. Lundvall, B. National Systems of Innovation . London : Pinter, 1992.


143/145

11. Advisory Committee on Measuring Innovation in the 21ct Century Economy. Innovation

Measurement: Tracking the State of. s.l. : US Department of Commerce (DOC), 2008.

12. Arundel, A. Innovation Survey Indicators: What Impact On Innovation Policy? Science,

Technology, and Innovation Indicators in a Changing World: Responding to Policy Needs .

Ottawa : OECD Blue Sky II Forum, 2006.

13. Rose, A, etc. Frameworks for Measuring Innovation: Initital Approaches. s.l. : Science and

Technology Policy Insitute, 2009.

14. European Foundation for the Improvement of Living and Working Conditions. Handbook

of knowldge Society Foresight . Dublin : s.n., 2003.

15. Europe Innova . Prospective Innovation Challenges in the ICT sector . 2008.

16. Augusto Lopez-Carlos and Mata, Yasmina. Policies and Institutions underpinning country

innovation: Results from the ICI. . s.l. : The innovation for Development Report 2010-2011,

2011.

17. World Bank. Doing Business . [Online] http://www.doingbusiness.org/.

18. Transparency International . Transparency International. Corruption Index. [Online]

http://www.transparency.org/.

19. European Commission . Europe 2020 Strategy . [Online]

http://ec.europa.eu/europe2020/index_en.htm.

20. European Commission. Reviewing Community innovation policy in a changing world.

Brussels : s.n., 2009. COM(2009) 442 final.

21. —. Service Innovation Yearbook 2009-2010. Brussels : European Commission , 2010.

22. Edler, Kincsö Izsak & Jakob. Trends and Challenges in DemandSide Innovation Policies in

Europe. s.l. : Thematic Report 2011 , 2011.

23. European Commission . Innovation Union Competitiveness Report 2011. Brussels : s.n.,

2012.

24. OECD. National Innovation Systmes . Paris : s.n., 1997.

25. —. Innovative cluster: drivfers of national innovation systems. Paris : s.n., 2001.

26. Role of home and host country innovation systems in R&D internationalisation: a patent

citation analysis. Criscuolo, P, Rajneesh Narula & Bart Verspagen. 2005, Economics of

Innovation and New Technology, pp. 417-433.

27. Internationalization of innovationsystems: A survey of the literature. Carlsson, Bo. 2005,

Research policy , pp. 56-67.


144/145

28. Eurobarometer. Innobarometer 2010. 2011.

29. Technopolis . Participation of SEE countries in competitive funding programmes in the

European Commssion . s.l. : UNESCO-BRESCE, 2010.

30. European Commission. ICT Statistical Report for Annual Monitoring 2011. s.l. : Working

Document 29 February 2012, 2011.

31. Ortega, J. L., Aguillo, I. F. Network collaboration in the 6th Framework Programmes:

country participation. s.l. : Scientometrics , 2010.

32. European Commission . European Innovation Scoreboards (2009, 2010). Brussels : s.n.,

2011.

33. European Commission. A Digital Agenda for Europe. s.l. : COM/2010/0245, 2010.

34. —. Information Society Digital Agenda Scoreboard. [Online] 2012.

http://ec.europa.eu/information society/digital-agneda/scoreboard/countries/index en.htm.

35. —. 2010 Report on R&D in the EU . Brussels : European Commission , 2011.

36. Technopolis Group. Regional Innovation Monitor -2010 Annual Report. s.l. : European

Commission, Enterprise and Industry Directorate-General, 2011.

37. OECD . The impact of the crisis on ICTs and their role in the recovery . Paris : OECD, 2009.

38. European Commission. A European Economic Recovery Plan. 2008. COM (2008) 800 final .

39. Pro Inno Europe . European Innovation Scoreboard. s.l. : European Commission , 2009.

40. IW Istitut der deutschen Wirtschaft Koln Consult GmbH. Innovation Policy and the

Business Cycle: Innovation Policy's Role in Adressing Economic Downturn . s.l. : INNO-Gips

Policy Brief no.1, 2011.

41. European Commission. 2010 EU Survey on R&D Investment Business Trends. Brussels :

JRC,DG Research, 2011.

42. Technopolis Group Belgium. Regional Innovation Monitor Policies and Processes of Smart

Specialisation: Realising New Opportunities. 2011. http://www.rim-

europa.eu/index.cfm?q=p.file&r=aa27a00bcbc7feda69a4deb9b05fdb91.

43. European Commission. Social entrepreneurs as lead users for service innovation, March

2011 policy brief. 2011.

44. Europe Innova Sectoral Innovation Watch. National Specialisation Report. 2010.

45. ePractice . eGovernment Factsheet, National Infrastructure (Greece). 2011.

http://www.epractice.eu/en/document/288255.


145/145

46. The system of innovation in Greece: Structural asymmetries. A, Komninos N. and Tsamis. 1,

s.l. : International Journal of Innovation and Regional Development, 2007.

47. European Commission Regional Innovation Monitor . http://www.rim-

europa.eu/index.cfm?q=p.baseline&r=GR30. [Online]

National Innovation Systems, PESTLE and SWOT Synthesis Report · National Innovation Systems,...

Documents

Transcript of National Innovation Systems, PESTLE and SWOT Synthesis Report · National Innovation Systems,...