DR. ANNAMÁRIA INZELT Challenges for Central European Innovation Policy – Framing Innovation Activities CentraLab Mid-Term Conference October 2, 2012 Member of Financial Budapest - Hungary Research Corp. H-1023 Budapest, Felhévízi út 24.www.penzugykutato.hu/en/node/325
Problems in CEECs• Economic crises, lack of stability Creative destruction is crucial - restructuring Slow progress toward innovative economy and society R&D programs have low relevancy to business community Hardly innovative business can create low demand for new knowledge International (cross-border) collaboration in open innovation (foreign business partners, penetration of FDI, participation in innovative business networks) EU / ERA: slowly converges of under-performing countries upwards to the stronger regions (to break ‚newer‟ and ‚older‟ MSs into each other‟s networks)
Innovation Policy may lead to...- Funding - Employs without intelligent tools evaluation - Create- Picking innovation winners friendly instead of environment facilitating - Support- Past-oriented collaboration - Future oriented
Outline of the LectureI. Challenges for innovation policy in EuropeII. Opening up the innovation systemIII. Innovation policyIV. Demand-side innovation policiesV. Concluding remarks
I. Challenges for European Innovation Policy How may Europe get back on the path of growth? How can Europe be again a continent of starting up companies and emerging regions? How can Europe tackle major societal challenges?
Innovate – to get Europe back on the path to growth Research and innovations are essential to cope with Grand challenges increasing environmental, Climate change ecological or social Energy security problems Transformation needs in Health innovation policy making Ageing population and governance of Sustainable mobility innovation High-quality of governance demands intelligence policy-making tools Innovation UnionPolicies developed in the past are no longer ideal Dr. Annamária Inzelt: Challenges for ....
EU countries by their innovation performancesInnovation leadersInnovation followersModerate innovators Innovation leaders: performingModest innovators well above the EU-27 average. All perform well in business R&D expenditures and other firm-related innovation indicators. They created good linkages between science base & business; They are good in commercializing their technological knowledge. Source: Author‟s compilation based on Innovation Union Scoreboard, 2011.
II. Opening up the Innovation System From closed to open innovationKnowledge required for innovating becoming moreorganisationally dispersed innovationincreasingly co-produced with partners (suppliers,users, universities etc.)Literature characterises variously (Powell et al., Chesborough, von Hippel): ◦ open innovation ◦ networked innovation ◦ distributed innovation ◦ interactive innovation ◦ democratic innovationFirms need good links with external knowledge sources +ability to exploit these promptly & effectively
Open innovation... „…is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.” (Chesbrough, 2003, p. xxiv) „systematically encouraging and exploring a wide range of internal and external sources for innovation opportunities, consciously integrating that exploration with firm capabilities and resources, and broadly exploiting those opportunities through multiple channels” (J. West, 2006, p. 2.)
Knowledge triangle in the IS Education and research system Professional education and training Education Higher education and researchIndustrial system Education and Multinational companies research systemNetworks, clusters Large companies Transfer Higher education Mature SMEs & and research New, technology based Brokerag firms e Public sector Research research Innovation
U-I Collaboration in EU Countries Public-private co-publications per million population (2010, normalized data) 1.00 CH=1,00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 LU CY LV SE BE EE ES GR SK HU EU NL AT SI RO BG FR IT LT FI IE CZ DK DE UK PT PL MT Innovatio Innovation followers Moderate innovators Modest n leaders innovatorsSource: EU Innovation Scoreboard, 2010.
III. Innovation Policy...... is actions by public organizations thatinfluence innovation processes (developmentand diffusion of innovations). “Influence” meansto improve these processes in somerespect (by trying to solve or mitigate problems related toinnovation processes). (Borras & Lundvall, 2008) Dr. Annamária Inzelt: Challenges for ....
Shift in Innovation PolicyTraditional – implicit innovation policy Industrial Policy that covers innovation related instruments Changes in the environment: Triumph of high technologies (1970s) broad spectrum of technology policy measures Technology race emergedExplicit Innovation Policy – Policies for Industry (mid 1980s)Demand-side innovation in policy statements (EC, Japan, Finland and UK)Demand-side Innovation Policy (2000s) Rationales for public research and innovation policy: 1) Catalyst, 2) Promoter, 3) Regulators Country and country group specific policies are crucial for .... Dr. Annamária Inzelt: Challenges
EU policy highlightsInnovation Union 2020 Horizon 2020 (replacing FPs)- What needs to be done on New European fundingEU level programme for R & I- MSs have to draw up and Demand-side policies andimplement its own instrumentsinnovation strategy (based on 3C (concentration, cohesion andown assets, strengths and weaknesses) cooperation)Integrate innovation Additional EU funds for sponsoringstrategies into National RDI: structural fund; regional fund;Reform Program cohesion fund- Smart specializationPlatform FPs are small fractions of EU 27 RDI spendingProposals: They areSingle European Patent orienting, stimulating EU initiatives
Policy highlights by levelsEU level National level Regional levelSpreading excellence more Centres of Smartwidely increase partici- Excellence specializationpation from convergence region– stairway of excellence (cohesionfund)- Support researchers to spend • Returnee programs Example: time for working outside EU Flemish • Attract foreigners / to return EU top talents regions- Draw top talent into the • Keep own convergence regions researchers- Upgrade infrastructure and National research equipment infrastructure programs Dr. Annamária Inzelt: Challenges for ....
The instruments for research and innovation policy Direct tools Institutional funding ◦ Financial incentives Surrounding conditions (RDI programs, RDI tax credits, risk capital, innovation voucher for SMEs) ◦ Public finance of education ◦ Other infrastructure and and training technology transfer mechanism ◦ Public policy (Information and consultancy for (Competition policy, de/regulation, SMEs, demonstration / technology public stimulation of private demand)Demand centers, cooperation, network, people)-side ◦ Innovation related regulations • Regulatory instruments Public procurementinnova- (laws and binding ◦ Systemic policies regulations)tion Lead market initiative, support to user-policy centered innovation Standards & ◦ Awareness raising, campaigns, Standardisation processtools labelling
IV. Demand-side Innovation Policies Demand-side innovation policy is understood as „a set of public measures ◦ to increase demand for innovations, ◦ to improve conditions for the uptake of innovations, or ◦ to improve the articulation of demand in order to spur innovations and allow their diffusion” (Edler, 2007) Dr. Annamária Inzelt: Challenges for ....
Predecessors of Demand-side innovation PoliciesIn the literature: The role of demand has been a constant topic since Marshall (19th century): supply of new technologies is triggered by demand and economic value Schumpeterian dichotomy: ‚technology-push‟ & ‚demand-pull‟In the practice: They were part of the old style industrial policy to support specific industries ◦ Large mission-oriented technology procurement policies ◦ Public procurement to support innovations
DsI policy tool 1: Public procurement Public procurement of innovative goods and services relies on inducing innovation by specifying levels of performance or functionality that are not achievable with „off-the-shelf‟ solutions and hence require an innovation to meet the demand. (Erawatch Report, 2011.) - innovation-friendly public procurement: public sector organisations buy ready- made innovative products - public technology procurement: governments request specific technologies or services for the delivery of public services Pre-Commercial procurement is an approach for procuring R&D services which enables public procurers to: ◦ share the risks and benefits of designing, prototyping and testing a limited volume of new products and services with the suppliers, without State aid; ◦ create the optimum conditions for wide commercialization and take-up of R&D results through standardization and/or publication. ◦ pool the efforts of several procurers. (EC, 2007.)Catalytic procurement government is the ‚ice-breaker‟ – mobilise privatedemand
DsI policy tool 2: Regulation Regulation refers to the implementation of rules by public authorities and governmental bodies to influence the behaviour of private actors in the economy. (OECD, 2010.) ◦ Use of regulations (PP sectors collaborate new regulations that is formed to encourage a certain innovative behaviour) Dr. Annamária Inzelt: Challenges for ....
DSI policy tool 3: Standards• Standards are documents based on variousdegrees of consensus (industry-wide,national, regional or international) which layout rules, practices, metrics or conventionsused in technology, trade and society atlarge. (OECD, 2010.)◦ Standardisation – voluntary cooperation among industry- consumers-public authorities for the development of technical specifications based on consensus Dr. Annamária Inzelt: Challenges for ....
Additional DsI policy tools Supporting private demand ◦ Tax incentives ◦ Awereness raising campaigns, labelling (bridge the information gap consumers of innovation have about security and quality of novelty) Systemic policies ◦ Lead market initiatives (where the diffusion process of an internationally successful innovation first too off) ◦ Support to user-centred innovation (innovation driven by end- or intermediate users)
Famous success stories...... where regulation, standards and / or publicprocurement played a critical role in spurringinnovations are: (Source: Inno-Policy Trendchart 26 October, 2011)- The Internet- The GSM for mobile telephony,- Aircraft jet enginees Timely- High-speed rail technology standardization- Eco-innovation development Dr. Annamária Inzelt: Challenges for ....
Avoid premature standardization: electric cars The GEM neighbourhood electric vehicleThomas Edison and an electric carin 1913. Smart ED The Renault Fluence charging from a Z.E. electric car Level 2 station within the Better Place network Source: Wikipedia
Trends in demand-side innovation policies 1. Pioneered such 2. Relevant and some instruments, highly experimentation relevant Austria, Ireland, Spain, Germany, Finland, Italy, Iceland, Poland, Denmark, Belgium, Malta, Czech Republic Sweden Countries experimenting Countries are moving with new measures while towards a strategic highly debating DsI policy integrated approach of DsI policy 3. Limited relevancy, scattered actions France, Luxembourg, Hungary, Greece, Lithuania, Bulgaria, Romania, Slovenia, Cyprus, Slovakia, Estonia, Latvia, Switzerland, LichtensteinOECD 2011 Countries devote limited attention to DsI policy
Broad overview on the use of demand-side innovation policiesType of policy tool FI ES AT NO DE NL SW DK FRFostering public procurement of X X X X X X X X Xinnovation 9User-driven innov. 7 X X X X X X XAwareness raising campaigns, labels X X X X X X 6Pre-commercial public procurement X X X X X 5Lead market type of initiatives X X X X X 5Regulation as a tool for innovation X X X Xpolicy 4Tax incentives to foster innov. Xdemand 1Total 7 6 3 2 4 6 4 5 4 3Author‟s compilation based on OECD, 2011, p. 30 and Erawatch report, 2011, p. 20.
Good practices of demand-side policy interventions Green energy law in Austria ◦ This law and its support measures target suppliers of green, renewable energy to increase its share in total energy supply. The measures support the marketability of the technology. Management is by a dedicated organization. Public procurement measure Finland ◦ „Innovations in public procurement‟ promotes innovations in public contracts aiming the renewal of services and activities. Long term commitment, ability and resources to implement, willingness and strategic commitment for large-scale activities are needed to achieve at least regional impact. Second stage funding for RDI activities are also offered.Source: Erawatch Report, 2011.
V. Concluding remarksDemand-side policies should complementrather than substitute supply-side measuresIf demand factors for innovation are included intothe policy mix they can ◦ Induce modernisation of the economy & public services ◦ Accelerate the catching up process of less-developed states and regions ◦ Improve innovation and growthInnovation policy mix should be composed ofboth supply-side measures as well as demand-side instruments (Inno Policy Trendchart 2011)
Concluding remarks cont. Government has important role to encourage innovation activities More stability in financial sources and their regulation can improve their efficiency ◦ However refinement of new policy tools are always very important ◦ Refinement has to base on evaluation instead of short-term budgetary view Development in financial environment can attract more private sources in RDI activities
Concluding remarks cont. Competitive system has many advantages ◦ Moving from picking winners to facilitating innovations Government can facilitate business RDI activities but cannot replace them More innovative business can create better demand for R&D at universities and RPOs Refined transfer system among the sectors, between actors in the same sector are crucial not only national but across bordersHungarian proverb: Clever people can learn from the mistakes by others
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