The objective of the PICK-ME (Policy Incentives for Creation of Knowledge – Methods and Evidence) research project is to provide theoretical and empirical perspectives on innovation which give a greater role to the demand-side aspect of innovation. The main question is how can policy make enterprises more willing to innovate? This task is fulfilled by identifying what we consider the central or most salient aspect of a demand-side innovation- driven economy, which is the small and entrepreneurial yet fast growing and innovative firm. We use the term “Gazelle” to signify this type of firm throughout the paper. The main concern of policy-makers should therefore be how to support Gazelle type of firms through various policies. The effectiveness of different policy instruments are considered. For example, venture capitalism is in the paper identified as an important modern institution that renders exactly the type of coordination necessary to bring about an innovation system more orientated towards the demand side. This is because experienced entrepreneurs with superior skills in terms of judging the marketability of new innovations step in as financiers. Other factor market bottlenecks on the skills side must be targeted through education policies that fosters centers of excellence. R&D incentives are also considered as a separate instrument but more a question for future research since there is no evidence available on R&D incentives as a Gazelle type of policy. Spatial policies to foster more innovation have been popular in the past. But we conclude that whereas the literature often finds that new knowledge is developed in communities of physically proximate firms, there is no overshadowing evidence showing that spatial policies in particular had any impact on generating more of the Gazelle type of firms.
Authored by: Itzhak Goldberg, Camilla Jensen
Published in 2014
This paper investigates the differences in innovation behaviour, i.e. differences in innovation sources and innovation effects, among manufacturing firms in three NMS: the Czech Republic, Hungary and Poland. It is based on a survey of firms operating in four manufacturing industries: food and beverages, automotive, pharmaceuticals and electronics. The paper takes into account: innovation inputs in enterprises, cooperation among firms in R&D activities, the benefits of cooperation with business partners and innovation effects (innovation outputs and international competitiveness of firms' products and technology) in the three countries. After employing cluster analysis, five types of innovation patterns were detected. The paper characterises and compares these innovation patterns, highlighting differences and similarities. The paper shows that external knowledge plays an important role in innovation activities in NMS firms. The ability to explore cooperation with business partners and the benefits of using external knowledge are determined by in-house innovation activities, notably R&D intensity.
Authored by: Ewa Balcerowicz, Marek Pęczkowski, Anna Wziatek-Kubiak
Published in 2009
The paper discusses the current and potential role of the European Neighbourhood Policy (ENP) in anchoring economic reforms in the countries of the EU's Eastern Neighbourhood. It claims that it is too early to assess the success of the ENP in this sphere especially given that the actual progress of the ENP agenda has been limited. A review of the empirical evidence on external reform anchors confirms that the ENP shares some features with the EU accession process that has proven to be an effective mechanism supporting major economic, political and social changes in the countries concerned. The eventual ENP economic offer is meaningful and integration with the EU is getting stronger public support in several CIS countries and among their political elites. On the other hand several factors limit the reform anchoring potential of the ENP. This paper offers recommendations on policies that could strengthen this potential.
Authored by: Wojciech Paczynski
Published in 2009
Institutional harmonization is an important part of European integration, and its effects are more far reaching than the effects of trade liberalization. In its policy towards neighbors (the European Neighborhood Policy, ENP), the EU puts a lot of stress on the desirability of institutional harmonization, at least in certain areas. In particular, the free trade agreements that the EU envisages concluding with its Eastern neighbors will involve substantial harmonization of product standards, competition policy and a range of other policies and processes. At the very least, the harmonization will have to focus on the areas that relate to improvement of market access, i.e. removing restrictions to trade, harmonizing product standards and the systems of quality control etc. But in order to implement the new standards and rules, the EU neighbors will have to reform many related areas, so that the harmonization will encompass the whole system of economic governance. Not only will such a revamp help attaining better access to the EU markets, but also (and probably more importantly) it will stimulate modernization of the neighbors' economies and bring much needed efficiency gains.
In measurement of benefits of harmonization we refer to two methods: one based on the computable general equilibrium (CGE) modeling of welfare effects of better market access, and the other employing a growth model to estimate the wider effects of European institutions on growth. The estimation of costs of harmonization bases on extrapolation of the analogous costs in other countries, in particular CEE. These costs include expenses by a public sector on introduction of harmonization measures, as well as private sector expenses and investments related to their implementation.
Authored by: Anna Kolesnichenko
Published in 2009
This study surveys the current state of affairs in Poland with regard to the development of knowledge-intensive entrepreneurship (KIE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We place KIE in Poland in the larger institutional context, outlining the key features of the country’s National Innovation System, and then focus on KIE itself. Our findings are perhaps more optimistic than many previous studies of knowledge-based economy development in Poland. We observe significant progress due to Polish access to the European Union. The frequency with which universities are playing a significant role as partners for firms in the innovation process has increased significantly; moreover, we observe a significant degree of internationalization of innovation-related cooperation. Another optimistic development is that the level of activity of venture capitalists seems to be fairly high in Poland considering the relatively low degree of development of capital markets offering VC investors exit opportunities. Moreover, after almost two decades of decline in the share of R&D spending in GDP, there are signs that this is beginning to rise, and that businesses are beginning to spend more on R&D. While demand-side problems continue to be significant barriers for the development of KIE, due to the relatively low level of education and GDP per capita in the country, the trends here are optimistic, with high rates of economic growth and improvements in the level of education of younger generations. Significant improvement is still needed in the area of intellectual property protection.
Authored by: Richard Woodward, Elzbieta Wojnicka, Wojciech Pander
Published in 2012
This paper analyzes the costs of (partial) institutional harmonization with the EU acquis which countries of the former USSR are expected to conduct under their Partnership and Cooperation Agreements with the EU and European Neighborhood Policy Action Plans. The public sector will have to take an effort of the transposition and adaptation of EU norms, as well as ensuring that they are complied with. Yet, the major part of the adjustment costs will fall on the private sector, as enterprises will have to make substantial investments to comply with new product requirements and business practices.
In this study we used the method of extrapolation of average costs for CEE countries’ harmonization with acquis to estimate the potential harmonization costs for the neighboring countries based on internationally comparative macroeconomic indicators like sectoral and total value added. This involved estimating the EU pre-accession support for the CEE countries by main areas as a percentage of the total or sectoral value added, determining the expected degree of limited harmonization in the ENP countries and estimating “coefficients of limited harmonization”, which was subsequently used for adjustment of the estimated cost of full harmonization.
Authored by: Veliko Dmitrov
In this paper the authors undertake an ex-post evaluation of whether the special economic zones (SEZs) introduced in Poland in 1994 have been successful in meeting regional development objectives. They evaluate the policy of as many of its objectives as possible: employment creation, business creation (which includes attracting foreign direct investment), income or wage effects, and environmental sustainability. They use different panel data methods to investigate this question at the powiat and gmina levels in Poland during the 1995-2011 period. It is also possible to include numerous controls to reduce the problem of the omitted variables bias such as education level, dependency rates, state ownership, general subsidies and whether the area is urban or rural. The results indicate that SEZs in Poland have been successful in a number of their objectives such as private business creation. The positive effect of the policy however mainly comes through foreign direct investment (FDI), whereas the effects on e.g. investment and employment are small or insignificant. In other areas, such as securing higher income levels and locking firms into the sustainability agenda through the adoption of green technologies and reduced air pollution, the authors find only a small positively moderating effect of the policy on what are traditionally economically disadvantaged areas in Poland that used to be dependent on the socialist production model. Hence, despite high levels of FDI, the zones policy has not managed to overcome the legacy of backwardness or lagging regions. The main policy implication of the paper is that SEZs may be successful in stimulating activity in the short run but the policy must be seen as one of necessary temporality and can therefore not stand alone. Before launching SEZs, policymakers must have plans in place for follow up measures to ensure the longer term competitiveness and sustainability implications of such an initiative. There is a need to understand the connection between the specific incentive schemes used (in this particular case tax incentives were used) and the kinds of firms and activities they attract, including the behavioral models that those incentives promote.
Authored by: Camilla Jensen
Published in 2014
There is a large body of literature on the relationship between innovations and employment at the firm level, with most of the results indicating positive effects. Thus far, this kind of analysis has not been performed for Poland and it seems to be an important and interesting field for research. On the other hand, there is some empirical evidence that developments in the Polish labour market are at least partially driven by the Skill Biased Technical Change (SBTC) process. This paper tries to fill in this gap by looking at three dimensions of the relationship between innovations and employment in Poland: innovations and job creation, innovations and the skill structure of employment innovations, and wage formation. The results of the analysis indicate that there is a weak but positive relationship between the level of innovations and the probability of job creation. However, we have not been able to prove that innovations have any effect on the skill structure of labour demand in Poland. We have however found a positive and statistically significant relationship between the level of innovations and skill-biased wage changes. The results indicate that innovations positively influence the wages of skilled workers while they negatively influence the wages of the unskilled.
Authored by: Mateusz Walewski
Published in 2009
This paper investigates the differences in innovation behaviour, i.e. differences in innovation sources and innovation effects, among manufacturing firms in three NMS: the Czech Republic, Hungary and Poland. It is based on a survey of firms operating in four manufacturing industries: food and beverages, automotive, pharmaceuticals and electronics. The paper takes into account: innovation inputs in enterprises, cooperation among firms in R&D activities, the benefits of cooperation with business partners and innovation effects (innovation outputs and international competitiveness of firms' products and technology) in the three countries. After employing cluster analysis, five types of innovation patterns were detected. The paper characterises and compares these innovation patterns, highlighting differences and similarities. The paper shows that external knowledge plays an important role in innovation activities in NMS firms. The ability to explore cooperation with business partners and the benefits of using external knowledge are determined by in-house innovation activities, notably R&D intensity.
Authored by: Ewa Balcerowicz, Marek Pęczkowski, Anna Wziatek-Kubiak
Published in 2009
The paper discusses the current and potential role of the European Neighbourhood Policy (ENP) in anchoring economic reforms in the countries of the EU's Eastern Neighbourhood. It claims that it is too early to assess the success of the ENP in this sphere especially given that the actual progress of the ENP agenda has been limited. A review of the empirical evidence on external reform anchors confirms that the ENP shares some features with the EU accession process that has proven to be an effective mechanism supporting major economic, political and social changes in the countries concerned. The eventual ENP economic offer is meaningful and integration with the EU is getting stronger public support in several CIS countries and among their political elites. On the other hand several factors limit the reform anchoring potential of the ENP. This paper offers recommendations on policies that could strengthen this potential.
Authored by: Wojciech Paczynski
Published in 2009
Institutional harmonization is an important part of European integration, and its effects are more far reaching than the effects of trade liberalization. In its policy towards neighbors (the European Neighborhood Policy, ENP), the EU puts a lot of stress on the desirability of institutional harmonization, at least in certain areas. In particular, the free trade agreements that the EU envisages concluding with its Eastern neighbors will involve substantial harmonization of product standards, competition policy and a range of other policies and processes. At the very least, the harmonization will have to focus on the areas that relate to improvement of market access, i.e. removing restrictions to trade, harmonizing product standards and the systems of quality control etc. But in order to implement the new standards and rules, the EU neighbors will have to reform many related areas, so that the harmonization will encompass the whole system of economic governance. Not only will such a revamp help attaining better access to the EU markets, but also (and probably more importantly) it will stimulate modernization of the neighbors' economies and bring much needed efficiency gains.
In measurement of benefits of harmonization we refer to two methods: one based on the computable general equilibrium (CGE) modeling of welfare effects of better market access, and the other employing a growth model to estimate the wider effects of European institutions on growth. The estimation of costs of harmonization bases on extrapolation of the analogous costs in other countries, in particular CEE. These costs include expenses by a public sector on introduction of harmonization measures, as well as private sector expenses and investments related to their implementation.
Authored by: Anna Kolesnichenko
Published in 2009
This study surveys the current state of affairs in Poland with regard to the development of knowledge-intensive entrepreneurship (KIE), or new firm creation in industries considered to be science-based or to use research and development (R&D) intensively. We place KIE in Poland in the larger institutional context, outlining the key features of the country’s National Innovation System, and then focus on KIE itself. Our findings are perhaps more optimistic than many previous studies of knowledge-based economy development in Poland. We observe significant progress due to Polish access to the European Union. The frequency with which universities are playing a significant role as partners for firms in the innovation process has increased significantly; moreover, we observe a significant degree of internationalization of innovation-related cooperation. Another optimistic development is that the level of activity of venture capitalists seems to be fairly high in Poland considering the relatively low degree of development of capital markets offering VC investors exit opportunities. Moreover, after almost two decades of decline in the share of R&D spending in GDP, there are signs that this is beginning to rise, and that businesses are beginning to spend more on R&D. While demand-side problems continue to be significant barriers for the development of KIE, due to the relatively low level of education and GDP per capita in the country, the trends here are optimistic, with high rates of economic growth and improvements in the level of education of younger generations. Significant improvement is still needed in the area of intellectual property protection.
Authored by: Richard Woodward, Elzbieta Wojnicka, Wojciech Pander
Published in 2012
This paper analyzes the costs of (partial) institutional harmonization with the EU acquis which countries of the former USSR are expected to conduct under their Partnership and Cooperation Agreements with the EU and European Neighborhood Policy Action Plans. The public sector will have to take an effort of the transposition and adaptation of EU norms, as well as ensuring that they are complied with. Yet, the major part of the adjustment costs will fall on the private sector, as enterprises will have to make substantial investments to comply with new product requirements and business practices.
In this study we used the method of extrapolation of average costs for CEE countries’ harmonization with acquis to estimate the potential harmonization costs for the neighboring countries based on internationally comparative macroeconomic indicators like sectoral and total value added. This involved estimating the EU pre-accession support for the CEE countries by main areas as a percentage of the total or sectoral value added, determining the expected degree of limited harmonization in the ENP countries and estimating “coefficients of limited harmonization”, which was subsequently used for adjustment of the estimated cost of full harmonization.
Authored by: Veliko Dmitrov
In this paper the authors undertake an ex-post evaluation of whether the special economic zones (SEZs) introduced in Poland in 1994 have been successful in meeting regional development objectives. They evaluate the policy of as many of its objectives as possible: employment creation, business creation (which includes attracting foreign direct investment), income or wage effects, and environmental sustainability. They use different panel data methods to investigate this question at the powiat and gmina levels in Poland during the 1995-2011 period. It is also possible to include numerous controls to reduce the problem of the omitted variables bias such as education level, dependency rates, state ownership, general subsidies and whether the area is urban or rural. The results indicate that SEZs in Poland have been successful in a number of their objectives such as private business creation. The positive effect of the policy however mainly comes through foreign direct investment (FDI), whereas the effects on e.g. investment and employment are small or insignificant. In other areas, such as securing higher income levels and locking firms into the sustainability agenda through the adoption of green technologies and reduced air pollution, the authors find only a small positively moderating effect of the policy on what are traditionally economically disadvantaged areas in Poland that used to be dependent on the socialist production model. Hence, despite high levels of FDI, the zones policy has not managed to overcome the legacy of backwardness or lagging regions. The main policy implication of the paper is that SEZs may be successful in stimulating activity in the short run but the policy must be seen as one of necessary temporality and can therefore not stand alone. Before launching SEZs, policymakers must have plans in place for follow up measures to ensure the longer term competitiveness and sustainability implications of such an initiative. There is a need to understand the connection between the specific incentive schemes used (in this particular case tax incentives were used) and the kinds of firms and activities they attract, including the behavioral models that those incentives promote.
Authored by: Camilla Jensen
Published in 2014
There is a large body of literature on the relationship between innovations and employment at the firm level, with most of the results indicating positive effects. Thus far, this kind of analysis has not been performed for Poland and it seems to be an important and interesting field for research. On the other hand, there is some empirical evidence that developments in the Polish labour market are at least partially driven by the Skill Biased Technical Change (SBTC) process. This paper tries to fill in this gap by looking at three dimensions of the relationship between innovations and employment in Poland: innovations and job creation, innovations and the skill structure of employment innovations, and wage formation. The results of the analysis indicate that there is a weak but positive relationship between the level of innovations and the probability of job creation. However, we have not been able to prove that innovations have any effect on the skill structure of labour demand in Poland. We have however found a positive and statistically significant relationship between the level of innovations and skill-biased wage changes. The results indicate that innovations positively influence the wages of skilled workers while they negatively influence the wages of the unskilled.
Authored by: Mateusz Walewski
Published in 2009
This paper examines the motives behind foreign direct investment (FDI) in a group of four CIS countries (Ukraine, Moldova, Georgia and Kyrgyzstan) based on a survey of 120 enterprises. The results indicate that non-oil multi-national enterprises (MNEs) are predominantly oriented at serving local markets. Most MNEs in the CIS operate as 'isolated players', maintaining strong links to their parent companies, while minimally cooperating with local CIS firms. The surveyed firms secure the majority of supplies from international sources. For this reason, the possibility for spillovers arising from cooperation with foreign-owned firms in the CIS is rather low at this time. The lack of efficiency-seeking investment poses further concern regarding the nature of FDI in the region. The most significant problems identified in the daily operations of the surveyed foreign firms are: the volatility of the political and economic environment, the ambiguity of the legal system and the high levels of corruption.
Authored by: Malgorzata Jakubiak
Published in 2008
Foreign subsidiary performance and market efficiency effects are estimated and confronted in this paper using a rich firm-level panel for Polish manufacturing. Besides estimating total factor productivity, other performance measures are calculated and contrasted such as labor productivity, employment growth, markup levels and profitability. The findings show that foreign subsidiaries in Poland pay more (in wages and capital), earn less (in terms of profitability or ROA) and work harder (in terms of TFP and labor productivity) relative to their domestic counterparts. Foreign subsidiaries contribute with higher employment growth than other domestic and new firms. There is no evidence that foreign subsidiaries have significantly reduced market efficiency within the period of study and across the industries and entry modes investigated on average. Controlling for competition (which is found to have a negative effect on efficiency) the paper documents significant intra-industry spillovers. The effect is estimated to be twice as high within the foreign owned industrial communities as compared to the cross effect to domestic firms.
Authored by: Camilla Jensen
Published in 2009
The aim of the project is to analyze government support for innovation in a comparative perspective by first examining the main existing instruments of financial support for innovation in Turkey and Poland, and secondly to assess their effectiveness by applying recent econometric techniques to firm-level data for both countries obtained from the Community Innovation Survey (CIS).
Authored by: Wojciech Grabowski, M. Teoman Pamukcu, Krzysztof Szczygielski, Sinan Tandogan
Published in 2013
This paper claims that the European Neighbourhood Policy (ENP) of the EU, and in particular the elements related to justice and home affairs (JHA), is a complex, multilayered initiative that incorporates different logics and instruments. To unravel the various layers of the policy, the paper proceeds in three steps: firstly, it lays out some facts pertaining to the origins of the ENP, as its ‘origins’ arguably account for a number of the core tensions. It then presents the underlying logic and objectives attributed to JHA cooperation, which can be derived from the viewpoints voiced during policy formulation. The paper goes on to argue that despite the existence of different logics, there is a unifying objective, which is to ‘extra-territorialise’ the management of ‘threats’ to the neighbouring countries. The core of the paper presents the various policy measures that have been put in place to achieve external ‘threat management’. In this context it is argued that the ’conditionality-inspired policy instruments’, namely monitoring and benchmarking of progress, transfer of legal and institutional models to non-member states and inter-governmental negotiations, contain socialisation elements that rely on the common values approach. This mix of conditionality and socialisation instruments is illustrated in two case studies, one on the fight against terrorism and one on irregular migration. Finally, the paper recommends that the EU draft an Action-Oriented Paper (AOP) on JHA cooperation with the ENP countries that indicates how the EU intends to balance the conflicting objectives and instruments that are currently present in the JHA provisions of the ENP.
Authored by: Nicole Wichmann
Published in 2007
This paper discusses the link between the deficit bias in public finance and institutional settings. The Polish experience is put in a wider context and provides an extensive discussion of possible institutional reforms that may be implemented to stabilise the path of fiscal policy and reduce the deficit bias. Although substantial improvements have been made in Poland with respect to fiscal transparency standards set by the IMF and EU there is still much scope for enhancement. The recommended change in fiscal policy would involve the implementation of medium-term budgetary framework that would ensure consistency between the budgetary process and medium-term fiscal goals. This should be accompanied by the introduction of binding constraints on fiscal policy. The expenditure rule could be reintroduced to strengthen fiscal discipline, as it could force policymakers to tighten fiscal policy. It seems to be indispensable to maintain fiscal rules at the local government level. The issue of still limited fiscal transparency and unsatisfactory performance of fiscal rules requires the undertaking of various appropriatemeasures to strengthen the policy framework in Poland. This can be done in our view by involving external institution entitled to examine fiscal transparency and the performance of fiscal rules in the budgetary process. We think that the institution that is fully capable to take the lead in this respect is the NIK, which was granted full independence in 1994 and has since proved to be successful in overseeing public finances. This should, however, be accompanied by simultaneous enhancement of the internal audit.
Authored by: Rafal Benecki, Jens Holscher, Mariusz Jarmuzek
Published in 2006
The empirical analysis of the determinants of institutional development in transition countries as well as the qualitative country studies summarized in this publication allow for some optimism concerning a potential impact of the EU on institution building and governance quality in CIS countries. Regression analysis reveals a positive impact of EU cooperation agreements below a membership perspective. Alternatively to the EU, entry into the NATO accession process also exerts incentives for better institutions which are often overlooked. In contrast, WTO membership is not found to have any impact on institution building in CIS countries. While there is room for some EU-related optimism given the results from the regression analysis it depends on the country-specific ENP action plans and programs whether or not ENP cooperation actually leads to Europeanization or institutional convergence towards EU standards in the CIS. The case studies on the effectiveness of Neighborhood Europeanization through ENP in Ukraine, Georgia, and Azerbaijan reveal that current EU policies towards these countries can be, at best, seen as a catalyst but not as a main driver of institutional convergence. A perspective for a stake in the internal market is on the long horizon for Ukraine only. ENP mechanisms for conflict resolution in Georgia and Azerbaijan have been rather weak before the recent clash in Abkhazia and South Ossetia. The top-down institutional convergence, i.e. an EU-first strategy, worked well for Enlargement Europeanization but implemented in the ENP it significantly reduces the leverage of the EU to create a ring of well-governed neighbour states.
Authored by: Thorsten Drautzburg, Andrea Gawrich, Inna Melnykovska, Rainer Schweickert
Published in 2008
This paper is an overview of the achievements in the area of employee financial participation (EFP) during the last fifty years. It addresses the question of the extent to which EFP is relevant in today’s world. EFP is distinguished from participation in management (industrial democracy), and the various types of EP are discussed. The major arguments for EFP are presented and discussed critically. The evolution of major forms of EFP, the scale of their operation in several advanced economies, and the legal and tax incentives for EFP are described. The efforts of European Union bodies to popularise this idea in all member countries are illustrated. Showing that EFP has become a broadly recognised principle of modern management in thousands of enterprises, we consider opportunities for disseminating these solutions on a wider scale, in particular in Poland. Finally, a number of directions for further research on financial participation are considered.
Authored by: Barbara Blaszczyk
Published in 2014
The authors use the insights from strategy research and innovation studies to address two principal questions regarding the technology strategy of a firm: what are the distinct elements of technology strategy and what are the strategy determinants? Equipped with Zahra’s (1996) concept of measuring technology strategy, we analyze data from two runs of the Community Innovation Survey for Polish service firms. They propose a set of indicators reflecting four principal fields of technology strategy: pioneer-posture, R&D efforts, technology portfolio, and monitoring activities. Interactions between the strategic variables are analyzed and their determinants are assessed. The results suggest that technology strategies are determined by both factors external to the firm, and by the hitherto less stressed in the CIS-based empirical literature, internal factors. The role of internal factors increases with the macroeconomic environment becoming less favourable.
Authored by: Krzysztof Szczygielski, Wojciech Grabowski, Richard Woodward
Published in 2013
This working document offers a conceptual framework for understanding the processes underpinning the external dimension of EU Justice and Home Affairs (ED-JHA). Practically, it defines how the export of JHA principles and norms inform the geopolitical ambitions of the EU, i.e. the use of space for political purposes, or the control and management of people, objects and movement. The author begins by investigating how the ENP reconfigures the ED-JHA, and then goes on to discuss various conceptual stances on governance, specifically institutionalism, constructivism, and policy instruments. To conclude he traces the evolution of this external dimension, emphasising, whenever possible, its continuities and bifurcations. Overall, the aim is to ascertain the extent to which conceptual designs clarify or advance our knowledge of the contents and rationales of the ED-JHA.
Authored by: Thierry Balzacq
Published in 2008
On August 18 2014, Mr. Mikhail Rogachev, Fund Director of the Russian Foundation for Technological Development (hereinafter – RFTD or the Fund) held a lecture for students of the Discovering Entrepreneurship Summer School (arranged by HSE laboratory for studies of entrepreneurship in conjunction with the University of Sheffield/Great Britain, University of Twente /Enschede and the University of Groningen/the Netherlands). The lecture addressed issues of state policy in the field of innovations (Orders of the Prime Minister No. DM-P36-6057 d/d 9 August 2014) and featured typical models of the Fund financial support for R&D projects.
The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.
Authored by: Marek Gora, Oleksandr Rohozynsky, Irina Sinitsina, Mateusz Walewski
Published in 2009
Mobility of doctoral students and post-doctoral researchers between the EU, C...Mantas Pupinis
The presentation discusses:
- Recent developments in the European policy that will have an impact on internationalisation of higher education
- Evidence on mobility of doctoral and post-doctoral researchers between Europe, Central Asia and Asia-Pacific
Does European economic integration create more inequality between domestic regions, or is the opposite true? We show that a general answer to this question does not exist, and that the outcome depends on the liberalisation scenario. In order to examine the impact of European and international integration on the regions, the paper develops a numerical simulation model with nine countries and 90 regions. Eastward extension of European integration is beneficial for old as well as new member countries, but within countries the impact varies across regions. Reduction in distance-related trade costs is particularly good for the European peripheries. Each liberalisation scenario has a distinct impact on the spatial income distribution, and there is no general rule telling that integration causes more or less agglomeration.
Authored by Arne Melchior
Published in 2009
This paper analyzes the direct and indirect income effects of international labor migration and remittances in selected CIS countries. The analysis is based on computable general equilibrium (CGE) models for Moldova, Ukraine, Georgia, Kyrgyzstan, and Russia. All net emigration countries would experience a sharp contraction of private consumption in the absence of remittances. In Russia, the main effect of immigration has been to hold down the real wage (as potential capital stock adjustments in response to immigration are not reflected in the authors comparative-static modeling framework). The paper concludes that because of the important contribution of migration and remittances to stabilizing and sustaining incomes in many CIS countries, enhanced opportunities for legal labor migration should figure prominently in any deepening of bilateral relations between CIS countries and the European Union under the European Neighborhood Policy.
Authored by: Aziz Atamanov, Toman Omar Mahmoud, Roman Mogilevsky, Kseniya Tereshchenko, Natalia Tourdyeva
Published in 2009
Ainura Uzagalieva
Vitaly Vavryschuk
The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/ removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/ mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of “deep” trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.
Authored by: Marek Dabrowski and Svitlana Taran
Published in 2012
This paper analyses the impact of exchange rate regimes on the real sector. While most studies in this field have so far concentrated on aggregate variables, we pursue a sectoral approach distinguishing between the tradable and nontradable sectors. Firstly, we present a survey of the relevant theoretical and empirical literature. This demonstrates that evaluations of exchange rate regimes and their impact on the real economy are largely dependant on specific assumptions concerning, in particular, the parameters of a utility function, the nature of the price adjustment process and the characteristics of analysed shocks. Secondly, we conduct an empirical analysis of the behaviour of the tradable and nontradable sectors under different exchange rate regimes for seven Central and Eastern European countries. We find no firm evidence of a differential impact of given exchange rate regimes on the dynamics of output and prices in the two sectors. We proffer a conceptual and technical interpretation of this.
Authored by: Przemyslaw Kowalski, Wojciech Paczynski, Łukasz Rawdanowicz
Published in 2003
This paper studies costs and benefits of institutional harmonisation in the context of EU relations with its neighbors. The purpose of this paper is to outline the likely forms of institutional harmonisation between the EU and its Eastern neighbors and provide an
overview of the methodologies that can be used in measuring its effects (costs and benefits). This paper serves as a background for two measurement exercises – one on benefits and another on costs – that are to be undertaken during the second stage of research.
Authored by: Veliko Dimitrov, Vladimir Dubrovskiy, Anna Kolesnichenko, Irina Orlova
Published in 2007
The The purpose of this paper is to analyze the various challenges facing European integration and the EU institutional architecture as result of the global financial crisis. The European integration process is not yet complete, both in terms of its content and geographical coverage. It can be viewed as a kind of intermediate hybrid between an international organization and a federation, subject to further evolution. This is also true of the Single European Market and the Economic and Monetary Union, which form the core of the EU economic architecture. Certain policy prerogatives (such as external trade, competition, and the Common Agriculture Policy) are delegated to the supranational level while others (such as financial supervision or fiscal policy) remain largely in the hands of national authorities.
Authored by: Marek Dąbrowski
Published in 2009
This paper examines the motives behind foreign direct investment (FDI) in a group of four CIS countries (Ukraine, Moldova, Georgia and Kyrgyzstan) based on a survey of 120 enterprises. The results indicate that non-oil multi-national enterprises (MNEs) are predominantly oriented at serving local markets. Most MNEs in the CIS operate as 'isolated players', maintaining strong links to their parent companies, while minimally cooperating with local CIS firms. The surveyed firms secure the majority of supplies from international sources. For this reason, the possibility for spillovers arising from cooperation with foreign-owned firms in the CIS is rather low at this time. The lack of efficiency-seeking investment poses further concern regarding the nature of FDI in the region. The most significant problems identified in the daily operations of the surveyed foreign firms are: the volatility of the political and economic environment, the ambiguity of the legal system and the high levels of corruption.
Authored by: Malgorzata Jakubiak
Published in 2008
Foreign subsidiary performance and market efficiency effects are estimated and confronted in this paper using a rich firm-level panel for Polish manufacturing. Besides estimating total factor productivity, other performance measures are calculated and contrasted such as labor productivity, employment growth, markup levels and profitability. The findings show that foreign subsidiaries in Poland pay more (in wages and capital), earn less (in terms of profitability or ROA) and work harder (in terms of TFP and labor productivity) relative to their domestic counterparts. Foreign subsidiaries contribute with higher employment growth than other domestic and new firms. There is no evidence that foreign subsidiaries have significantly reduced market efficiency within the period of study and across the industries and entry modes investigated on average. Controlling for competition (which is found to have a negative effect on efficiency) the paper documents significant intra-industry spillovers. The effect is estimated to be twice as high within the foreign owned industrial communities as compared to the cross effect to domestic firms.
Authored by: Camilla Jensen
Published in 2009
The aim of the project is to analyze government support for innovation in a comparative perspective by first examining the main existing instruments of financial support for innovation in Turkey and Poland, and secondly to assess their effectiveness by applying recent econometric techniques to firm-level data for both countries obtained from the Community Innovation Survey (CIS).
Authored by: Wojciech Grabowski, M. Teoman Pamukcu, Krzysztof Szczygielski, Sinan Tandogan
Published in 2013
This paper claims that the European Neighbourhood Policy (ENP) of the EU, and in particular the elements related to justice and home affairs (JHA), is a complex, multilayered initiative that incorporates different logics and instruments. To unravel the various layers of the policy, the paper proceeds in three steps: firstly, it lays out some facts pertaining to the origins of the ENP, as its ‘origins’ arguably account for a number of the core tensions. It then presents the underlying logic and objectives attributed to JHA cooperation, which can be derived from the viewpoints voiced during policy formulation. The paper goes on to argue that despite the existence of different logics, there is a unifying objective, which is to ‘extra-territorialise’ the management of ‘threats’ to the neighbouring countries. The core of the paper presents the various policy measures that have been put in place to achieve external ‘threat management’. In this context it is argued that the ’conditionality-inspired policy instruments’, namely monitoring and benchmarking of progress, transfer of legal and institutional models to non-member states and inter-governmental negotiations, contain socialisation elements that rely on the common values approach. This mix of conditionality and socialisation instruments is illustrated in two case studies, one on the fight against terrorism and one on irregular migration. Finally, the paper recommends that the EU draft an Action-Oriented Paper (AOP) on JHA cooperation with the ENP countries that indicates how the EU intends to balance the conflicting objectives and instruments that are currently present in the JHA provisions of the ENP.
Authored by: Nicole Wichmann
Published in 2007
This paper discusses the link between the deficit bias in public finance and institutional settings. The Polish experience is put in a wider context and provides an extensive discussion of possible institutional reforms that may be implemented to stabilise the path of fiscal policy and reduce the deficit bias. Although substantial improvements have been made in Poland with respect to fiscal transparency standards set by the IMF and EU there is still much scope for enhancement. The recommended change in fiscal policy would involve the implementation of medium-term budgetary framework that would ensure consistency between the budgetary process and medium-term fiscal goals. This should be accompanied by the introduction of binding constraints on fiscal policy. The expenditure rule could be reintroduced to strengthen fiscal discipline, as it could force policymakers to tighten fiscal policy. It seems to be indispensable to maintain fiscal rules at the local government level. The issue of still limited fiscal transparency and unsatisfactory performance of fiscal rules requires the undertaking of various appropriatemeasures to strengthen the policy framework in Poland. This can be done in our view by involving external institution entitled to examine fiscal transparency and the performance of fiscal rules in the budgetary process. We think that the institution that is fully capable to take the lead in this respect is the NIK, which was granted full independence in 1994 and has since proved to be successful in overseeing public finances. This should, however, be accompanied by simultaneous enhancement of the internal audit.
Authored by: Rafal Benecki, Jens Holscher, Mariusz Jarmuzek
Published in 2006
The empirical analysis of the determinants of institutional development in transition countries as well as the qualitative country studies summarized in this publication allow for some optimism concerning a potential impact of the EU on institution building and governance quality in CIS countries. Regression analysis reveals a positive impact of EU cooperation agreements below a membership perspective. Alternatively to the EU, entry into the NATO accession process also exerts incentives for better institutions which are often overlooked. In contrast, WTO membership is not found to have any impact on institution building in CIS countries. While there is room for some EU-related optimism given the results from the regression analysis it depends on the country-specific ENP action plans and programs whether or not ENP cooperation actually leads to Europeanization or institutional convergence towards EU standards in the CIS. The case studies on the effectiveness of Neighborhood Europeanization through ENP in Ukraine, Georgia, and Azerbaijan reveal that current EU policies towards these countries can be, at best, seen as a catalyst but not as a main driver of institutional convergence. A perspective for a stake in the internal market is on the long horizon for Ukraine only. ENP mechanisms for conflict resolution in Georgia and Azerbaijan have been rather weak before the recent clash in Abkhazia and South Ossetia. The top-down institutional convergence, i.e. an EU-first strategy, worked well for Enlargement Europeanization but implemented in the ENP it significantly reduces the leverage of the EU to create a ring of well-governed neighbour states.
Authored by: Thorsten Drautzburg, Andrea Gawrich, Inna Melnykovska, Rainer Schweickert
Published in 2008
This paper is an overview of the achievements in the area of employee financial participation (EFP) during the last fifty years. It addresses the question of the extent to which EFP is relevant in today’s world. EFP is distinguished from participation in management (industrial democracy), and the various types of EP are discussed. The major arguments for EFP are presented and discussed critically. The evolution of major forms of EFP, the scale of their operation in several advanced economies, and the legal and tax incentives for EFP are described. The efforts of European Union bodies to popularise this idea in all member countries are illustrated. Showing that EFP has become a broadly recognised principle of modern management in thousands of enterprises, we consider opportunities for disseminating these solutions on a wider scale, in particular in Poland. Finally, a number of directions for further research on financial participation are considered.
Authored by: Barbara Blaszczyk
Published in 2014
The authors use the insights from strategy research and innovation studies to address two principal questions regarding the technology strategy of a firm: what are the distinct elements of technology strategy and what are the strategy determinants? Equipped with Zahra’s (1996) concept of measuring technology strategy, we analyze data from two runs of the Community Innovation Survey for Polish service firms. They propose a set of indicators reflecting four principal fields of technology strategy: pioneer-posture, R&D efforts, technology portfolio, and monitoring activities. Interactions between the strategic variables are analyzed and their determinants are assessed. The results suggest that technology strategies are determined by both factors external to the firm, and by the hitherto less stressed in the CIS-based empirical literature, internal factors. The role of internal factors increases with the macroeconomic environment becoming less favourable.
Authored by: Krzysztof Szczygielski, Wojciech Grabowski, Richard Woodward
Published in 2013
This working document offers a conceptual framework for understanding the processes underpinning the external dimension of EU Justice and Home Affairs (ED-JHA). Practically, it defines how the export of JHA principles and norms inform the geopolitical ambitions of the EU, i.e. the use of space for political purposes, or the control and management of people, objects and movement. The author begins by investigating how the ENP reconfigures the ED-JHA, and then goes on to discuss various conceptual stances on governance, specifically institutionalism, constructivism, and policy instruments. To conclude he traces the evolution of this external dimension, emphasising, whenever possible, its continuities and bifurcations. Overall, the aim is to ascertain the extent to which conceptual designs clarify or advance our knowledge of the contents and rationales of the ED-JHA.
Authored by: Thierry Balzacq
Published in 2008
On August 18 2014, Mr. Mikhail Rogachev, Fund Director of the Russian Foundation for Technological Development (hereinafter – RFTD or the Fund) held a lecture for students of the Discovering Entrepreneurship Summer School (arranged by HSE laboratory for studies of entrepreneurship in conjunction with the University of Sheffield/Great Britain, University of Twente /Enschede and the University of Groningen/the Netherlands). The lecture addressed issues of state policy in the field of innovations (Orders of the Prime Minister No. DM-P36-6057 d/d 9 August 2014) and featured typical models of the Fund financial support for R&D projects.
The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.
Authored by: Marek Gora, Oleksandr Rohozynsky, Irina Sinitsina, Mateusz Walewski
Published in 2009
Mobility of doctoral students and post-doctoral researchers between the EU, C...Mantas Pupinis
The presentation discusses:
- Recent developments in the European policy that will have an impact on internationalisation of higher education
- Evidence on mobility of doctoral and post-doctoral researchers between Europe, Central Asia and Asia-Pacific
Does European economic integration create more inequality between domestic regions, or is the opposite true? We show that a general answer to this question does not exist, and that the outcome depends on the liberalisation scenario. In order to examine the impact of European and international integration on the regions, the paper develops a numerical simulation model with nine countries and 90 regions. Eastward extension of European integration is beneficial for old as well as new member countries, but within countries the impact varies across regions. Reduction in distance-related trade costs is particularly good for the European peripheries. Each liberalisation scenario has a distinct impact on the spatial income distribution, and there is no general rule telling that integration causes more or less agglomeration.
Authored by Arne Melchior
Published in 2009
This paper analyzes the direct and indirect income effects of international labor migration and remittances in selected CIS countries. The analysis is based on computable general equilibrium (CGE) models for Moldova, Ukraine, Georgia, Kyrgyzstan, and Russia. All net emigration countries would experience a sharp contraction of private consumption in the absence of remittances. In Russia, the main effect of immigration has been to hold down the real wage (as potential capital stock adjustments in response to immigration are not reflected in the authors comparative-static modeling framework). The paper concludes that because of the important contribution of migration and remittances to stabilizing and sustaining incomes in many CIS countries, enhanced opportunities for legal labor migration should figure prominently in any deepening of bilateral relations between CIS countries and the European Union under the European Neighborhood Policy.
Authored by: Aziz Atamanov, Toman Omar Mahmoud, Roman Mogilevsky, Kseniya Tereshchenko, Natalia Tourdyeva
Published in 2009
Ainura Uzagalieva
Vitaly Vavryschuk
The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/ removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/ mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of “deep” trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.
Authored by: Marek Dabrowski and Svitlana Taran
Published in 2012
This paper analyses the impact of exchange rate regimes on the real sector. While most studies in this field have so far concentrated on aggregate variables, we pursue a sectoral approach distinguishing between the tradable and nontradable sectors. Firstly, we present a survey of the relevant theoretical and empirical literature. This demonstrates that evaluations of exchange rate regimes and their impact on the real economy are largely dependant on specific assumptions concerning, in particular, the parameters of a utility function, the nature of the price adjustment process and the characteristics of analysed shocks. Secondly, we conduct an empirical analysis of the behaviour of the tradable and nontradable sectors under different exchange rate regimes for seven Central and Eastern European countries. We find no firm evidence of a differential impact of given exchange rate regimes on the dynamics of output and prices in the two sectors. We proffer a conceptual and technical interpretation of this.
Authored by: Przemyslaw Kowalski, Wojciech Paczynski, Łukasz Rawdanowicz
Published in 2003
This paper studies costs and benefits of institutional harmonisation in the context of EU relations with its neighbors. The purpose of this paper is to outline the likely forms of institutional harmonisation between the EU and its Eastern neighbors and provide an
overview of the methodologies that can be used in measuring its effects (costs and benefits). This paper serves as a background for two measurement exercises – one on benefits and another on costs – that are to be undertaken during the second stage of research.
Authored by: Veliko Dimitrov, Vladimir Dubrovskiy, Anna Kolesnichenko, Irina Orlova
Published in 2007
The The purpose of this paper is to analyze the various challenges facing European integration and the EU institutional architecture as result of the global financial crisis. The European integration process is not yet complete, both in terms of its content and geographical coverage. It can be viewed as a kind of intermediate hybrid between an international organization and a federation, subject to further evolution. This is also true of the Single European Market and the Economic and Monetary Union, which form the core of the EU economic architecture. Certain policy prerogatives (such as external trade, competition, and the Common Agriculture Policy) are delegated to the supranational level while others (such as financial supervision or fiscal policy) remain largely in the hands of national authorities.
Authored by: Marek Dąbrowski
Published in 2009
This paper focuses on knowledge-based entrepreneurship, or new firm creation in industries which are considered to be science-based or to use research and development intensively, in the East Central European (ECE) context. On the basis of case studies of thirteen knowledge-based firms in six ECE countries, we suggest that KBE firms in these countries may differ in some important ways from the conventional picture of new technology based firms. In general, we see the ECE knowledge-intensive firm as a knowledge-localiser or customiser, adapting global knowledge to local needs on the domestic market, rather than a knowledge-creator generating new solutions for global markets. The entrepreneurs who start and run these businesses are skilled at spotting trends early and bringing them to their countries. Based in countries that generally have poor reputations as sources of innovative, high-technology products, but having established strong brands for themselves in their home markets, they are struggling with the challenge of entering export markets with products and services that can achieve global, or at least regional, recognition. The studies of the companies discussed here suggest that ECE firms are still in the early stages of this strategic shift.
Authored by: Slavo Radosevic, Richard Woodward, Deniz Eylem Yoruk
Published in 2011
In this paper the author presents a general assessment of the labour market situation of older workers in the Czech Republic, starting with a more general overview of the demographic situation and emphasizing the generational differences among the young-old and older cohorts, underlying a number of different problems as well as solutions. Further in the paper she addresses the impact of the recent economic situation on employment levels, showing that the recovery in terms of employment has not yet begun and that the impact on older workers is (at least) two-fold: firstly, for older workers it is very difficult to find a new job once unemployed; secondly, if employed, the pressure on workability and the increasing demands of workplaces may be harder to bear for the older the worker. She describes a National Action Plan Supporting Positive Ageing (2013-2017) and other examples of good and transferable praxes which address some of the active ageing issues in an innovative way.
The second part of this report examines the issues of employability, workability and age-management as perceived by some of the key actors. The report goes into greater detail on the topic of paid work after retirement, which is considered an important part of the Czech economy, despite the fact that the employment of sizable groups of older workers after retirement is undeclared. Self-entrepreneurship and independent work in later life are another realm of employment that is increasing in importance in the Czech economy; however, as consulted experts argue, it is not to be taken as an unproblematic solution to late-life careers. In the last chapter the author turns her attention to the lifelong learning of older workers and to their up-skilling/retraining. In the concluding remarks, she reemphasizes the need to address the heterogeneity of the older workforce, in the sense of age/generational affiliation, health, socio-economic and other characteristics.
Authored by: Lucie Vidovicova
Published in 2014
The aim of this work is to present an in depth understanding of the conceptual framework of active ageing policies, which have been created and implemented in Poland. The discussion of active ageing in employment in Poland started relatively late. The first discussions on the unfavourable situation of elderly employment emerged only in the second half of the 1990s, when the debate on the pension system reform started. While only a few ageing policies were developed at the national level during that time, several interesting initiatives were undertaken at a regional level and in the third sector. They were mostly focused on productive ageing and the problems associated with the economic activation of people over 50. The intensive implementation of the active ageing policies in Poland started in 2012, during the European Year of Active Ageing. At present, there is an intense discussion on policies addressed to the elderly, which concentrate not only on the activation of the labour market, but also on healthy, active and socially inclusive ageing, education andcivil engagement.
This paper concludes that despite intense work being done by public authorities, the concept still needs a deeper implementation - especially at the regional level. Furthermore, close observation and evaluation of the activation programmes is still missing and the identification and implementation of good practices which are already being developed in other European countries is under-used.
Authored by: Izabela Styczynska
The impact of innovation on firm performance has been a matter of significant interest to economists and policy makers for decades. Although innovation is generally regarded as a means of improving the competitiveness of firms and their performance on domestic and foreign markets, this relationship has not been supported unambiguously by empirical work. Innovative activities of firms influence their performance not necessarily directly but through the production of useful innovations and increased productivity. Therefore, in recent years, the relationship between innovation and firm performance has been modelled by a multistageapproach. However, the findings from existing studies differ in many respects which suggests that there is the need for further research. In this paper we employ firm level data from the fourth Community Innovation Survey (CIS4), covering some 90,000 firms in 16 West and East European countries in order to assess the drivers of the innovation process in two different institutional settings, a number of mature market economies of WesternEurope and a number of advanced transition economies from Central and Eastern Europe. A four-equation model, originating in the work of Crepon et al., (1998), has been used to linkthe innovation decision of firms to their performance through the impact of innovation input on innovation output and the innovation output on productivity and better performance. Our findings confirm the positive relationship between innovation activities and productivity at the firm level and provide further evidence on the relationship between size and innovation activities.
Authored by: Iraj Hashi, Nebojsa Stojcic
Published in 2010
Research paperhttpwww.kingstonfoodbank.netStrengths.docxronak56
Research paper
http://www.kingstonfoodbank.net/
Strengths:
Weaknesses:
Opportunities:
Threats:
1 – research – what are other foodbanks doing? … who can we learn from? …who is solving this? What is happening during the year in Kingston (windows to fundraise)? What have they done in the past, where are their gaps?
2 – brainstorm – share what you know, (S+W we have) and where are the opportunities and threats …
3 – best opportunities – bring the best ideas forward … work them up, develop ideas/strategies – work them through to a few tactics (short-term, long-term)
4 – small, deliverable … come up with a ‘step forward’ …
5 – write it up
Partnership strategy to proactively get third-party events
Event strategies – a great fundraiser to develop
Take a current event – add to it …
Board development and attraction – to add endowments and bequests
Other ideas…
Writing it up! STAY STRATEGIC
12pt font – Calibri – spacing 1.5
Page one – cover with your name
Page two – current situation analysis – what is happening, right now. You may want to include areas of the SWOT, the strengths and weaknesses. State the area you will ‘tackle’, in hopes of improving, adding or growing. (one page).
Page three - research – what you found out, site sources (one to two pages) you should provide the research, and narrate how this could/would/should/ maybe considered.
Page four – opportunities and threats – forming the strategy for your fundraiser – within your ‘strategy area’, show the areas you feel there is or are growth opportunities or development --- working towards long-term growth and sustainability (one page).
Page five – THE IDEA – this is where you showcase the fundraising idea (idea, possible partners, tactics to ensure success, extra fundraisers at an event to add to the $$$, …) I can assist you with your deliverable!
Addendums – attach pieces to your presentation, to help showcase your ideas (if necessary).
Rubric, in short form:
Followed the format, including cover page – 5pts
Professional – 10 pts
CSA – 15 pts
Research – 20 pts
Forming the Strategy for Fundraising – 20 pts
IDEA and the idea work-up/deliverable – 30 pts
Running head: TRAVEL AND TOURISM INDUSTRY OF THE UK
Research on analyzing Impact of economic and social environmental factors over business of Travel and Tourism Industry of the UK
[STUDENT NAME]
[INSTITUTION]
[COURSE NAME]
[DATE]
Abstract
Purpose: Purpose of this research is to explore impact of economic and social environmental factors over the business of travel and tourism industry in UK.
Design/methodology/approach: This research is designed through using exploratory research design under qualitative and quantitative research formats. Additionally, inductive reasoning is also used to conduct this research for effective presentation of data. Content analysis is conducted to analyze the data by gathering data from primary and secondary so ...
Differences in the growth of firms remain a major topic in economics and strategy research. In this paper we investigated the link between innovation performance and employment growth. First we discuss the problem from the theoretical point of view and then we analyze the relationship between innovation performance and the dynamics of employment in the Polish service firms in 2004-2009. Firms that introduced new services or marketing techniques experienced stronger growth. Process innovations contributed to employment reduction. Tellingly, this effect could only be observed in 2008-2009, a subperiod which saw the lowest levels of aggregate demand. This conclusion yields support to the presumption formulated by Pianta (2005) that the impact of innovation on employment growth depends on the macroeconomic situation.
Authored by: Wojciech Grabowski, Krzysztof Szczygielski, Richard Woodward
Published in 2013
Similar to CASE Network Studies and Analyses 468 - Demand-driven innovation policies in the European Union (20)
The report examines the social and economic drivers and impact of circular migration between Belarus and Poland, Slovakia, and the Czech Republic. The core question the authors sought to address was how managing circular migration could, in the long term, help to optimise labour resources in both the country of origin and the destination countries. In the pages that follow, the authors of the report present the current and forecasted labour market and demographic situation in their respective countries as well as the dynamics and characteristics of short-term labour migration flows between Belarus and Poland, Slovakia, and the Czech Republic, concentrating on the period since 2010. They also outline and discuss related policy responses and evaluate prospects for cooperation on circular migration.
Podręcznik został opracowany w celu przekazania trenerom i nauczycielom podstawowej wiedzy, która może być przydatna w prowadzeniu szkoleń promujących pracę rejestrowaną. Prezentuje on z jednej strony korzyści z pracy rejestrowanej, z drugiej – potencjalne koszty związane z pracą nierejestrowaną. W pierwszej kolejności informacje te przedstawiono w odniesieniu do pracowników najemnych (rozdział 2), podkreślając w sposób szczególny to, że negatywne konsekwencje pracy nierejestrowanej są ponoszone przez całe życie. Ze względu na specyficzną sytuację cudzoziemców pracujących w Polsce konsekwencje ponoszone przez tę grupę opisano oddzielnie (rozdział 3). Ponadto zaprezentowano skutki dotyczące pracodawców z szarej strefy z wyodrębnieniem tych, którzy zatrudniają cudzoziemców (rozdział 4). Uzupełnieniem przedstawionych informacji jest opis działań podejmowanych przez państwo w celu ograniczenia zjawiska pracy nierejestrowanej w Polsce (rozdział 5) oraz prowadzonych w Wielkiej Brytanii, czyli w kraju będącym liderem w walce z szarą strefą (rozdział 6).
European countries face a challenge related to the economic and social consequences of their societies’ aging. Specifically, pension systems must adjust to the coming changes, maintaining both financial stability, connected with equalizing inflows from premiums and spending on pensions, and simultaneously the sufficiency of benefits, protecting retirees against poverty and smoothing consumption over their lives, i.e. ensuring the ability to pay for consumption needs at each stage of life, regardless of income from labor.
One of the key instruments applied toward these goals is the retirement age. Formally it is a legally established boundary: once people have crossed it – on average – they significantly lose their ability to perform work (the so-called old-age risk). But since the 1970s, in many developed countries the retirement age has become an instrument of social and labor-market policy. Specifically, in the 1970s and ‘80s, an early retirement age was perceived as a solution allowing a reduction in the supply of labor, particularly among people with relatively low competencies who were approaching retirement age, which is called the lump of labor fallacy. It was often believed that people taking early retirement freed up jobs for the young. But a range of economic evidence shows that the number of jobs is not fixed, and those who retire don’t in fact free up jobs. On the contrary, because of higher spending by pension systems, labor costs rise, which limits the supply of jobs. In general, a good situation on the labor market supports employment of both the youngest and the oldest labor force participants. Additionally, a lower retirement age for women was maintained, which resulted to a high degree from cultural conditions and norms that are typical for traditional societies.
Until now, the banking sector has been one of the strong points of Poland’s economy. In contrast to banks in the U.S. and leading Western European economies, lenders in Poland came through the 2008 global financial crisis without a scratch, without needing state financial support. But in recent years the industry’s problems have been growing, creating a threat to economic growth and gains in living standards.
For an economy’s productivity to increase, funds can’t go to all companies evenly, and definitely shouldn’t go to those that are most lacking in funds, but to those that will use them most efficiently. This is true of total external financing, and thus funding both from the banking sector and from parabanks, the capital market and funds from public institutions. In Poland, in light of the relatively modest scale of the capital market, banks play a clearly dominant role in external financing of companies. This is why the author of this text focuses on the bank credit allocation efficiency.
The author points out that in the very near future, conditions will emerge in Poland which – as the experience of other countries shows – create a risk of reduced efficiency of credit allocation to business. Additionally, in Poland today, bank lending to companies is to a high degree being replaced by funds from state aid, which reduces the efficiency of allocation of external funds to companies (both loans and subsidies), as allocation of government subsidies is not usually based on efficiency. This decline in external financing allocation efficiency may slow, halt or even reverse the process, that has been uninterrupted for 28 years, of Poland’s convergence, i.e. the narrowing of the gap in living standards between Poland and the West.
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance.
This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland.
Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market.
The rule of law, by securing civil and economic rights, directly contributes to social prosperity and is one of our societies’ greatest achievements. In the European Union (EU), the rule of law is enshrined in the Treaties of its founding and is recognised not just as a necessary condition of a liberal democratic society, but also as an important requirement for a stable, effective, and sustainable market economy. In fact, it was the stability and equality of opportunity provided by the rule of law that enabled the post-war Wirtschaftswunder in Germany and the post-Communist resuscitation of the economy in Poland.
But the rule of law is a living concept that is constantly evolving – both in its formal, de jure dimension, embodied in legislation, and its de facto dimension, or its reception by society. In Poland, in particular, according to the EU, the rule of law has been heavily challenged by government since 2015 and has evolved amid continued pressure exerted on the institutions which execute laws. More recently, the outbreak of the COVID-19 pandemic transformed the perception of the rule of law and its boundaries throughout the EU and beyond (Marzocchi, 2020).
This Study contains Value Added Tax (VAT) Gap estimates for 2018, fast estimates using a simplified methodology for 2019, the year immediately preceding the analysis, and includes revised estimates for 2014-2017. It also includes the updated and extended results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). As a novelty, the econometric analysis to forecast potential impacts of the coronavirus crisis and resulting recession on the evolution of the VAT Gap in 2020 is reported.
In 2018, most European Union (EU) Member States (MS) saw a slight decrease in the pace of gross domestic product (GDP) growth, but the economic conditions for increasing tax compliance remained favourable. We estimate that the VAT total tax liability (VTTL) in 2018 increased by 3.6 percent whereas VAT revenue increased by 4.2 percent, leading to a decline in the VAT Gap in both relative and nominal terms. In relative terms, the EU-wide Gap dropped to 11 percent and EUR 140 billion. Fast estimates show that the VAT Gap will likely continue to decline in 2019.
Of the EU-28, the smallest Gaps were observed in Sweden (0.7 percent), Croatia (3.5 percent), and Finland (3.6 percent), the largest – in Romania (33.8 percent), Greece (30.1 percent), and Lithuania (25.9 percent). Overall, half of the EU-28 MS recorded a Gap above 9.2 percent. In nominal terms, the largest Gaps were recorded in Italy (EUR 35.4 billion), the United Kingdom (EUR 23.5 billion), and Germany (EUR 22 billion).
The euro is the second most important global currency after the US dollar. However, its international role has not increased since its inception in 1999. The private sector prefers using the US dollar rather than the euro because the financial market for US dollar-denominated assets is larger and deeper; network externalities and inertia also play a role. Increasing the attractiveness of the euro outside the euro area requires, among others, a proactive role for the European Central Bank and completing the Banking Union and Capital Market Union.
Forecasting during a strong shock is burdened with exceptionally high uncertainty. This gives rise to the temptation to formulate alarmist forecasts. Experiences from earlier pandemics, particularly those from the 20th century, for which we have the most data, don’t provide a basis for this. The mildest of them weakened growth by less than 1 percentage point, and the worst, the Spanish Flu, by 6 percentage points. Still, even the Spanish Flu never caused losses on the order of 20% of GDP – not even where it turned out to be a humanitarian disaster, costing the lives of 3-5% of the population. History suggests that if pandemics lead to such deep losses at all, it’s only in particular quarters and not over a whole year, as economic activity rebounds. The strength of that rebound is largely determined by economic policy. The purpose of this work is to describe possible scenarios for a rebound in Polish economic growth after the epidemic.
A separate issue, no less important, is what world will emerge from the current crisis. In the face of the 2008 financial crisis, White House Chief of Staff Rahm Emanuel said: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” Such changes can make the economy and society function better than before the crisis. Unfortunately, the opportunities created by the global financial crisis were squandered. Today’s task is more difficult; the scale of various problems has expanded even more. Without deep structural and institutional changes, the world will be facing enduring social and economic problems, accompanied by long-term stagnation.
"Many brilliant prophecies have appeared for the future of the EU and our entire planet. I believe that Europe, in its own style, will draw pragmatic conclusions from the crisis, not revolutionary ones; conclusions that will allow us to continue enjoying a Europe without borders. Brussels will demonstrate its usefulness; it will react ably and flexibly. First of all, contrary to the deceitful statements of members of the Polish government, the EU warned of the threats already in 2021. Secondly, already in mid-March EU assistance programs were ready, i.e. earlier than the PiS government’s “shield” program. The conclusion from the crisis will be a strengthening of all the preventive mechanisms that allow us to recognize threats and react in time of need. Research programs will be more strongly directed toward diagnosing and treating infectious diseases. Europe will gain greater self-sufficiency in the area of medical equipment and drugs, and the EU – greater competencies in the area of the health service, thus far entrusted to the member states. The 2021-27 budget must be reconstructed, to supplement the priority of the Green Deal with economic stimulus programs. In this way structural funds, which have the greatest multiplier effect for investment and the labor market, may return to favor. So once again: an addition, as a conclusion from the crisis, and not a reinvention of the EU," writes Dr. Janusz Lewandowski the author of the 162nd mBank-CASE seminar Proceeding.
Dla wielu rodaków europejskość Polski jest oczywista, trudno jest im nawet wyobrazić sobie, jak kształtowałyby się losy naszego kraju bez uczestnictwa w integracji europejskiej. Szczególnie młode pokolenie traktuje osiągnięty przez nas dzięki uczestnictwie w Unii ogromny postęp cywilizacyjny jako coś danego i naturalnego. Jednak świadomość tego, jaki był nasz punkt wyjścia, jaką przeszliśmy drogę i jak przyczyniły się do tego unijne działania oraz jakie wynikały z tego korzyści powinna nam stale towarzyszyć. Bez tej świadomości, starannego weryfikowania faktów i docenienia naszych osiągnięć grozi nam uleganie niesprawdzonym argumentom przeciwników integracji europejskiej i popełnienie nieodwracalnych błędów. Dla tych, którzy chcą poznać te fakty, przygotowany został raport "Nasza Europa. 15 lat Polski w Unii Europejskiej". Podjęto w nim ocenę 15 lat członkostwa Polski z perspektywy doświadczeń procesu integracji, z jego barierami i sukcesami, a także wyzwaniami przyszłości.
Raport jest wynikiem pracy zbiorowej licznych ekspertów z różnych dziedzin, od wielu lat analizujących wielowymiarowe efekty działania instytucji UE oraz współpracy z krajami członkowskimi na podstawie europejskich wartości i mechanizmów. Autorzy podsumowują korzyści członkostwa Polski w Unii Europejskiej na podstawie faktów, nie stroniąc jednakże od własnych ocen i refleksji.
This report is the result of the joint work of a number of experts from various fields who have been - for many years – analysing the multidimensional effects of EU institutions and cooperation with Member States pursuant to European values and mechanisms. The authors summarise the benefits of Poland’s membership in the EU based on facts; however, they do not hide their own views and reflections. They also demonstrate the barriers and challenges to further European integration.
This report was prepared by CASE, one of the oldest independent think tanks in Central and Eastern Europe, utilising its nearly 30 years of experience in providing objective analyses and recommendations with respect to socioeconomic topics. It is both an expression of concern about Poland’s future in the EU, as well as the authors’ contribution to the debate on further European integration.
Poland’s new Employee Capital Plans (PPK) scheme, which is mandatory for employers, started to be implemented in July 2019. The article looks at the systemic solutions applied in the programme from the perspective of the concept of the simultaneous reconstruction of the retirement pension system. The aim is to present arguments for and against the project from the point of view of various actors, and to assess the chances of success for the new system. The article offers a detailed study of legal solutions, an analysis of the literature on the subject, and reports of institutions that supervise pension funds. The results of this analysis point to the lack of cohesion between certain solutions of the 1999 pension reform and expose a lack of consistency in how the reform was carried out, which led to the eventual removal of the capital part of the pension system. The study shows that additional saving for old age is advisable in the country’s current demographic situation and necessary for both economic and social reasons. However, the systemic solutions offered by the government appear to be chiefly designated to serve short-term state interests and do not create sufficient incentives for pension plan participants to join the programme.
Belarus was among the few post-communist countries to resign from comprehensive market reforms and attempt to improve the efficiency of the economy through administrative means, leaving market mechanisms only an auxiliary role. Since its inception, the ‘Belarusian economic model’ has undergone several revisions of a de-statisation and de-regulation kind, but still the Belarusian economy remains dominated by the state. This paper analyses the characteristic features of the Belarusian economic system – especially those related to the public sector – as well as its evolution over time during the period following its independence. The paper concludes that during the post-Soviet period, the Belarusian economy evolved from a quasi-Soviet system based on state property, state planning, support to inefficient enterprises and the massive redistribution of funds to a more flexible hybrid model where the public sector still remains the core of the economy. The case of Belarus shows that presently there is no appropriate theoretical perspective which, in an unmodified form, could be applied to study this type of economic system. Therefore, a new perspective based on an already existing but updated approach or a multidisciplinary approach that incorporates the duality of the Belarusian economy is required.
Belarusian economy has been stagnating in 2011-2015 after 15 years of a high annual average growth rate. In 2015, after four years of stagnation, the Belarusian economy slid into a recession, its first since 1996, and experienced both cyclical and structural recessions. Since 2015, the Belarusian government and the National Bank of Belarus have been giving economic reforms a good chance thanks to gradual but consistent actions aimed at maintaining macroeconomic stability and economic liberalization. It seems that the economic authorities have sustained more transformation efforts during 2015-2018 than in the previous 24 years since 1991.
As the relative welfare level in Belarus is currently 64% compared to the Central and Eastern Europe (CEE) countries average, Belarus needs to build stronger fundaments of sustainable growth by continuing and accelerating the implementation of institutional transformation, primarily by fostering elimination of existing administrative mechanisms of inefficient resource allocation. Based on the experience of the CEE countries’ economic transformation, we highlight five lessons for the purpose of the economic reforms that Belarus still faces today: keeping macroeconomic stability, restructuring and improving the governance of state-owned enterprises, developing the financial market, increasing taxation efficiency, and deepening fiscal decentralization.
Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Estonia has Europe’s most transparent tax system (while Poland is second-to-last, in 35th place), and is also known for its pioneering approach to taxation of legal persons’ income. Since 2000, payers of Estonian corporate tax don’t pay tax on their profits as long as they don’t realize them. In principle, this approach should make access to capital easier, spark investment by companies and contribute to faster economic growth. Are these and other positive effects really noticeable in Estonia? Have other countries followed in this country’s footsteps? Would deferment of income tax be possible and beneficial for Poland? How would this affect revenue from tax on corporate profits? Would investors come to see Poland as a tax haven? Does the Estonian system limit tax avoidance and evasion, or actually the opposite? Is such a system fair? Are intermediate solutions possible, which would combine the strengths or limit the weaknesses of the classical and Estonian models of profit tax? These questions are discussed in the mBank-CASE seminar Proceeding no. 163, written by Dmitri Jegorov, deputy general secretary of the Estonian Finance Ministry, who directs the country’s tax and customs policy, Dr. Anna Leszczyłowska of the Poznań University of Economics and Business and Aleksander Łożykowski of the Warsaw School of Economics.
The trade war between the U.S. and China began in March 2018. The American side raised import duties on aluminum and steel from China, which were later extended to other countries, including Canada, Mexico and the EU member states. This drew a negative reaction from those countries and bilateral negotiations with the U.S. In June 2018 America, referring to Section 301 of its 1974 Trade Act, raised tariffs to 25% on 818 groups of products imported from China, arguing that the tariff increase was a response to years of theft of American intellectual property and dishonest trade practices, which has caused the U.S. trade deficit.
Will this trade war mean the collapse of the multilateral trading system and a transition to bilateral relationships? What are the possibilities for increasing tariffs in light of World Trade Organization rules? Can the conflict be resolved using the WTO dispute-resolution mechanism? What are the consequences of the trade war for American consumers and producers, and for suppliers from other countries? How high will tariffs climb as a result of a global trade war? How far can trade volumes and GDP fall if the worst-case scenario comes to pass? Professor Jan J. Michałek and Dr. Przemysław Woźniak give answers to these questions in the mBank-CASE Seminar Proceeding No. 161.
This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018.
This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses.
More from CASE Center for Social and Economic Research (20)
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
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Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
3. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
The CASE Network is a group of economic and social research centers in Poland,
Kyrgyzstan, Ukraine, Georgia, Moldova, and Belarus. Organizations in the network regularly
conduct joint research and advisory projects. The research covers a wide spectrum of
economic and social issues, including economic effects of the European integration process,
economic relations between the EU and CIS, monetary policy and euro-accession,
innovation and competitiveness, and labour markets and social policy. The network aims to
increase the range and quality of economic research and information available to policy-makers
and civil society, and takes an active role in on-going debates on how to meet the
3
economic challenges facing the EU, post-transition countries and the global economy.
The CASE Network consists of:
CASE – Center for Social and Economic Research, Warsaw, est. 1991, www.case-research.
eu
CASE – Center for Social and Economic Research – Kyrgyzstan, est. 1998,
http://case.jet.kg/
Center for Social and Economic Research - CASE Ukraine, est. 1999, www.case-ukraine.
com.ua
Foundation for Social and Economic Research CASE Moldova, est. 2003,
www.case.com.md
CASE Belarus - Center for Social and Economic Research Belarus, est. 2007,
www.case-belarus.eu
Center for Social and Economic Research CASE Georgia, est. 2011
4. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
4
Contents
Abstract ................................................................................................................................. 6
1. Introduction: Background, approach and methodology ...................................................... 7
2. State of the art: The small entrepreneurial firm is here to stay ........................................... 8
2.1. From the level of the scientist to the economy ...........................................................11
2.2. Gazelles and the international and global scene ........................................................12
2.3. Summing up the main policy lessons on Gazelles ......................................................13
3. Factor markets I – Access to finance ................................................................................15
3.1. Venture capitalism – any alternatives? .......................................................................16
4. Factor markets II – Access to knowledge and skills ..........................................................19
4.1. Ontology of knowledge – internal and external forms of knowledge ...........................19
4.2. What can policy-makers do to crowd-in investment in knowledge? ............................21
4.3. Supply of skills from the education system .................................................................24
5. R&D subsidies ..................................................................................................................26
6. Summary and Conclusion.................................................................................................28
References ...........................................................................................................................32
Appendix ..............................................................................................................................37
5. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
Camilla Jensen is Associate Professor in International Business and Entrepreneurship at
the University of Southern Denmark and Research Fellow at CASE – Center for Social and
Economic Research in Warsaw. Prior to this she has worked as Director of Studies at
Nottingham School of Economics, Malaysia Campus, as Associate Professor at Kadir Has
University in Istanbul and as Associate and Assistant Professor at Copenhagen Business
School. She has extensive experience in teaching and conducting research in the field. Her
field experience includes work on Poland, Cuba, Turkey and Malaysia. Camilla holds a PhD
in economics from the University of Southern Denmark, Odense Campus. Her thesis was on
Foreign Direct Investment and Technological Change in Polish manufacturing. Since then
her research has focused on topics in economic development and transition and is related, in
particular, to firm performance and economic growth.
Itzhak Goldberg is currently a Fellow at CASE – Center for Social and Economic Research
in Warsaw, a non-resident Distinguished Fellow of Fraunhofer MOEZ, Leipzig, as well as a
Consultant for the World Bank. He was a visiting senior researcher at the Institute for
Prospective Technological Studies of the European Commission’s Joint Research Centre
(JRC). He worked for the World Bank from 1990 to 2009, most recently as a Policy and
Strategy Adviser with the Europe and Central Asia Region. Itzhak was in charge of private
sector development programs in various countries in the region and was pivotal in the design
and implementation of the privatization program of the government of Serbia. He published
“Can Russia Compete?” with R. Desai (Brookings Institution 2008) and “Igniting Innovation”
with G. Goddard, S. Kuriakose and JL Racine (WB, 2020). Prior to joining the World Bank,
Itzhak was the chief economist and member of the Management Board of Dead Sea Works
Limited in Israel for 11 years. After obtaining his PhD from the University of Chicago in 1976,
Itzhak worked as a research fellow at the Hoover Institution in Stanford, California.
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6. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
6
Abstract
The objective of the PICK-ME (Policy Incentives for Creation of Knowledge – Methods and
Evidence) research project is to provide theoretical and empirical perspectives on innovation
which give a greater role to the demand-side aspect of innovation. The main question is how
can policy make enterprises more willing to innovate? This task is fulfilled by identifying what
we consider the central or most salient aspect of a demand-side innovation-driven economy,
which is the small and entrepreneurial yet fast growing and innovative firm. We use the term
―Gazelle‖ to signify this type of firm throughout the paper. The main concern of policy-makers
should therefore be how to support Gazelle type of firms through various policies. The
effectiveness of different policy instruments are considered. For example, venture capitalism
is in the paper identified as an important modern institution that renders exactly the type of
coordination necessary to bring about an innovation system more orientated towards the
demand side. This is because experienced entrepreneurs with superior skills in terms of
judging the marketability of new innovations step in as financiers. Other factor market
bottlenecks on the skills side must be targeted through education policies that fosters centers
of excellence. R&D incentives are also considered as a separate instrument but more a
question for future research since there is no evidence available on R&D incentives as a
Gazelle type of policy. Spatial policies to foster more innovation have been popular in the
past. But we conclude that whereas the literature often finds that new knowledge is
developed in communities of physically proximate firms, there is no overshadowing evidence
showing that spatial policies in particular had any impact on generating more of the Gazelle
type of firms.
7. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
7
1. Introduction: Background, approach and methodology
The objective of this review of the studies on demand-driven innovation policies in the
European Union produced for the European Commission-financed project entitled PICK-ME
(Policy Incentives for Creation of Knowledge – Methods and Evidence) under Work Package
number 4 is to distill implications and draw policy recommendations for stimulating demand
for innovation among countries, firms and entrepreneurs. To achieve such an objective, we
draw on parallels in recent literature on innovation and especially in those areas where we
think that the Work Package has given cause to important policy implications. The main
theme of this policy analysis will therefore be: Why are some countries, firms and/or
entrepreneurs more innovative than others? How can policy stimulate the demand-side of
innovations in particular?
We tried to write the policy paper from Work Package 4 using an objective approach to the
scientific contributions. First, we classified the contributions into subjects or topics (see
Appendix). Then an overview of the contributions was established by a linear (chronological)
reading through all of the papers with the help of research assistants. This led to an
identification of the papers with strong policy implications. These papers were studied further
in depth; in areas where we were able to identify a critical mass of evidence and ideas to
support strong policy implications, we started to look for evidence in external sources that
supported or contradicted them. At the same time, it is not the intention of this paper to
provide an exhaustive literature review as that is the task of other work packages.
Foundational contributions are typically given less space in the policy paper. We tried to
incorporate all the contributions with sporadic policy implications under the major areas and
where we could find a fit with the line of thought or critical mass of supporting, related and
complementary ideas.
The policy paper follows a very simple structure. Starting with the outset in the
Schumpeterian theories, we choose as focal point the Gazelle firms and trace, from the
nucleus of the economy (the entrepreneur) to the whole (the international economy), why
policy-making should aim to support this type of catalytic firm. This is followed by two
sections that focus on bottlenecks in factor markets for capital and human capital or skills,
respectively. The last section discusses R&D subsidies as an incentive to Gazelle firms.
8. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
8
2. State of the art: The small entrepreneurial firm is here to
stay
The role of the firm in relation to generating new knowledge or innovation is best understood
through the seminal work of Schumpeter (1934). We think of either the dilemmas of
Schumpeter I (emphasis on the role of the entrepreneurial firm for innovation) or Schumpeter
II (emphasis on the role of the large corporation for innovation). In practice we should
probably think of the economy as really in Schumpeter I-II or somewhere in between these
two dilemmas where each economic system (or in short eco-system) is different.
In Malerba and Orsenigo (1997), this is explained as the combined process of widening and
deepening the knowledge base, which is often seen as one of the fundamental ideas or
starting points of enquiry for a large number of the papers in Work Package 4.
The dilemmas for the creative destruction process in Schumpeter I-II are securing: (1)
enough entry of new firms, (2) sufficient rivalry and selection among new firms, (3) that the
best firms are given the right conditions to continue to innovate and (4) the inevitable
necessity of destruction. (For a more detailed discussion and test of some of the propositions
using growth data see also Aghion et al, 2013).
Work Package 4 contributions that focus on the agency of firms cover most of these
dilemmas directly or indirectly as discussed here, even though 4 (the inevitable necessity of
destruction) is less emphasized in the academic research on innovation.
Antonelli and Gehringer 9/2012 articulate a demand-pull innovation framework in which
knowledge creation downstream in the value chain is driven by sales growth upstream in the
value chain. This is what they call a ‗qualified‘ demand. It is where the total factor productivity
growth upstream rather than demand or sales growth as such is the driver of total factor
productivity growth or innovation downstream. Endogenous growth theory shares some
analogy with these assumptions; see for example Barro and Sala-i-Martin (2004) Chapters 6
and 7. But it is the allocation of labor (or scientists) that is decisive in most of these models
which means that they in fact focus on the secondary problems of factor market bottlenecks.
The paper by Colombelli, Kraft and Quatraro 6/2011 analyzes the contribution of high-growth
firms (Gazelles) to innovation. Colombelli et al 6/2011 seek to understand the dynamic
problem of how to get from Mark I to Mark II and what the knowledge characteristics of the
successful firms in this transition and growth process are.
9. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
Gazelles are defined by Colombelli et al 6/2011 as firms that showed an average growth rate
of 20% or more over the period analyzed: 1988-2005. The phenomenon of these rapidly
growing entrepreneurial firms has received increasing attention over the 1990s and 2000s in
research on growth and innovation. For policy-making, the main questions here seem to be
why some countries/environments foster more of the Gazelle type of firms and how policies
can aid Gazelles in terms of reaping the full benefits of these firms, exploiting their potential
demand-led trajectories.
We will address this question using the PICK-ME literature listed in appendix and a number
of contributions by renowned authors in the field of innovation studies such as Josh Lerner
and David Audretsch, as well as work done by the World Bank, the German Ministry of
Economy and the European Commission in recent years.
According to Lerner et al (2012), the pivotal role of small, usually venture-funded, companies
in developing those innovations has added urgency to government efforts to create a venture
capital friendly eco-system. The incentive to a small firm that has developed an innovative
new technology is survival and, at best, success. Facebook, one example of innovative new
technology, was valued at $104 billion when it went public. The difference in the incentive
sets between established firms and startups creates the impetus that drives many engineers
in large companies to leave and form their own small operations, where they can reap the
rewards from their own discoveries.
Another disincentive for large companies to innovate may stem from the comfort of the status
quo and the resulting blind spots when they survey market opportunities. A significant body
of research addresses this phenomenon: incumbents are focused on the current market and
technology and miss opportunities to address new market needs that new companies can fill.
Such a dynamic is particularly acute when innovating to address the new market need would
cannibalize the existing product.
Finally, small new companies have less to lose. A large company that ―bets the farm‖ on an
innovation that fails, risks its brand and respect in the market. A startup has no option but to
try something new. Everything big and proven is already in the market. To established firms,
innovation can be disruptive; for entrepreneurial companies, innovation is essential.
A recently published study on high growth firms on behalf of the German Federal Ministry for
Economics and Technology (Dautzenberg et al, 2012) analyses the importance of Gazelles
to the German economy. The report identifies 13,021 high-growth companies over the period
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1999-2010 which were founded since 1995. One of the main observations of this study is
that in 2000 the number of new Gazelles reduced dramatically. While, between 1995 and
1999 on average 800 new Gazelles were identified, between 2000 and 2007 on average only
492 new Gazelles could be identified. The number of created jobs thus reduced similarly: in
1997, nearly 30% of all new jobs could be attributed to Gazelles, while in 2005 only 10% of
new jobs were created by Gazelles.
Concerning the sector distribution it turns out that Gazelles are prevalent in nearly all
economic sectors. However they are not equally distributed. 43 out of the 50 industries with
the highest share of Gazelles are in the manufacturing sector.
Audretsch and Aldridge (forthcoming as an EC/JRC/IPTS Working Paper) argue that the
prevalent and traditional theories found in the entrepreneurship literature typically hold the
context constant and then examine how characteristics specific to the individual impact the
cognitive process inherent in the model of entrepreneurial choice. This often leads to a view
that is remarkably analogous to that concerning technical change in the Solow model – given
a distribution of personality characteristics, proclivities, preferences and tastes,
entrepreneurship is exogenous.
They suggest that the scientist i.e. the individual knowledge worker and not necessarily the
firm is the analytical unit of observation. This scientist has an endowment of knowledge and
ideas that is, at least partially, the result of research and interaction within the scientific
community. Possibilities for commercialization may arise from this research. In the view
provided by the knowledge spillover theory of entrepreneurship, knowledge is viewed as
being exogenous and the new firm is created endogenously in an effort by the scientist to
appropriate the value of her ideas.
Audretsch et al (2006), Acs et al (2009) and Audretsch (2012a) posit a knowledge spillover
theory of entrepreneurship which states that Gazelles are associated with market failures
because knowledge, new ideas, and innovation play a key role in the spillover framework.
Knowledge generated by failed firms is absorbed in Gazelles which learn from the market
about the viability and compatibility of a new idea that was rejected, or undervalued by
incumbent organizations. The new startup serves as a conduit for knowledge spillovers from
the source producing that knowledge to commercialization in a new firm.
Since investment activities in Gazelles foster their productivity, support should be provided to
Gazelles for accessing requisite consulting services, specialized technologies, and obtaining
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11. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
information and expertise. Gazelles may benefit from assistance in accessing international
markets which can help facilitate their rapid growth. Hence institution building for innovation
should center on this catalytic type of firm.
The concept of Gazelles is similar to that developed by Wong et al (2005) for
entrepreneurship. Wong et al (2005) distinguish between the following types of startups or
entrepreneurial entities: opportunity, necessity and high growth potential. The cross-country
growth regressions show that only entrepreneurship of the latter kind is robustly associated
with economic growth.
11
2.1. From the level of the scientist to the economy
The paper by Pyka and Saviotti 13/2011 describes the broader problem of the economy from
the perspective that since firms both innovate in terms of variants, quality and efficiency –
they conclude that in the eco-system there must be more creation than destruction. As the
economy evolves it goes through a process of widening (adding new activities, industries or
products – also sometimes called the extensive margin) and deepening (improving or
bettering conditions for existing activities through incremental and process oriented
innovations and product variants – also sometimes called the intensive margin). All else
being equal, total potential economic space increases as more and more types of activities
are made possible through innovation.
As capitalism matures this feature may become more important for policy-making. If
resources are scarce, from a policy-maker‘s perspective, the natural conclusion will be to
make sure that there is sufficient rivalry and selection among firms. Whereas the normal
state of crisis economics is to think exactly the opposite way (e.g. the problem of policy-making
is always thought to be done under a scenario of unemployed factors of production).
2.1.1. The importance of aiding factor markets to cater to the demand of
entrepreneurs
Under an ever widening and deepening scenario, a central problem of new entrants may be
access to sufficiently qualified employees including access to credit in competition with an
increasing number of incumbents over time. The process of innovation may also be
improved by making the trial-error process itself of widening and deepening more efficient.
This is exactly where the demand for innovation comes into the picture. If entrepreneurs and
fast growing firms or Gazelles are better at anticipating what the market needs (Lerner, 2009)
supporting them will lead to more innovation. The fostering of entrepreneurial skills to
12. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
decipher and understand market information related with demand for innovation is therefore
extremely crucial.
This is also the finding of the German study of Gazelles (Dautzenberg, 2012); shortages of
skills and financing are the two most important barriers to the emergence and growth of
Gazelles. A shortage of skills, however, cannot be understood in isolation from the
underlying factor markets such as the education sector and also the perceived advantages of
the skilled to work in a newly established firm compared to a long established firm.
Gazelles by their very nature could be attracting employees that are more willing to take risks
and prioritize other factors besides pay such as freedom and participation in decision-making
in the workplace (Toner, 2011). If the returns are approximately the same, rational behavior
should lead people to choose the less risky employment option (Aronsson, 2004). Therefore
we conclude that securing sufficiently qualified and motivated employees is at least as
difficult for new firms as it is to secure credit or capital.
12
2.2. Gazelles and the international and global scene
One important factor that may fuel the competitive process is the international economy and
the specialization and selection that it gives rise to. The importance of openness to
international competition and rivalry should therefore increase over time under a scenario of
more creation than destruction. Returning to the idea of the widening and deepening of the
creative eco-system that most papers in Work Package 4 build upon, with international trade
and production part of the economic space is so to speak ‗deleted‘ or moved abroad so there
can now be many empty spaces in the economy as these spaces are now taken care of by
producers abroad. Trade and foreign direct investment can lead to displacement effects in
the eco-system that could hamper or further the innovation process and fundamentally
change incentives for where innovation can and will take place (Dachs and Peters, 2013).
Leading up to Work Package 8, we therefore anticipate that under a demand-based rather
than ordinary supply-based approach to innovation, the international aspects of production
take paramount importance exactly because of these displacement effects.
The empirical evidence provided by Antonelli and Fassio 3/2011 suggests that globalization
has sped up the process of technological change in the advanced economies. In the years
1995-2006, it is the R&D intensive sectors, characterized by high levels of product
innovation, increased levels of wages and skills and strongly biased in favor of skill-intensive
13. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
technologies, that expanded. This is also corroborated by other evidence showing that
globalization has led to increasing polarization in particular between skilled and unskilled
workers (Wood, 1998).
For example, with the emergence of many new market economies such as Brazil, China,
India, Indonesia and Russia the demand for innovation as such may perhaps not change
much in the product life cycle at least in the early phases of global change (Vernon, 1979).
However, returns to innovation may be strongly affected as the benefits from deepening will
no longer necessarily accrue to the eco-systems that invest in widening or radical innovation
and this will put pressure on the viability of the trial-error process in the most innovative
countries (Krugman, 1979, Segerstroem, et al, 1990). This observation is corroborated by the
evidence in Antonelli and Colombelli 4/2011. The authors base their evidence on a panel of
European firms over the period 1995-2003. The results here show that smaller firms are
more vulnerable in the international economy as they will react more defensively, whereas
large firms are better able to capture the benefits from globalization for their innovation
programs. This is also corroborated by a cross-country comparison using firm level data
across 18 economies as reported in OECD (2009).
All of these observations only strengthen the policy conclusion that small firms and in
particular the most deserving ones, such as Gazelles, should be the target of policy.
The Gazelle type of firms as introduced above may therefore experience increasingly difficult
conditions at home for various reasons (such as ‗mutant‘ Gazelles that do not invest in
widening but are good at deepening and alliances which can bridge factor market
bottlenecks and lack of international experience more quickly) and be under pressure to go
global from their inception. This is much more difficult than taking an existing product to the
international marketplace (Madsen and Servais, 1997). This could be one explanation for
their relative decline in Europe after 2000 as discussed earlier (see also Dautzenberg, 2012,
Graph 4-1). This evidence was also corroborated by work package evidence on the relative
decline of entrepreneurial firm populations in Italy after the market reforms introduced in the
1980s and 1990s.
13
2.3. Summing up the main policy lessons on Gazelles
For the main policy lessons, the research by Colombelli et al 6/2011 is informative. It is
based on a sample of 335 European firms from various EU countries (UK, Germany, France,
Sweden, Italy and Netherlands) over the period 1988-2005. This study and several related
14. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
studies in the work package show robust evidence on Gazelles as being the most innovative
firms – e.g. they follow an ‗exploration‘ (innovation) strategy unlike their less rapidly growing
peers. Colombelli et al 6/2011 suggest the following policy-implications of their findings: “In
terms of policy, this gives some important arguments to consider higher growth firms as a
distinctive population, outperforming both in terms of sales and in terms of innovation, thus
deserving a specific attention. Our results call for the integration of innovation policies with
industrial policies directed towards the support of high-growth firms so as, first, to strengthen
the dynamics that lead Gazelles to be innovative and, second, to take stock of their ability to
widen the knowledge base to increase further their performance in terms of sales. Innovation
policies are indeed often evoked as strategic tools to foster economic growth, by placing
particular importance, on the one hand, on the interactive dynamics of knowledge production,
hence implementing conditions fostering the creation of clusters, and, on the other hand, on
the identification of key sectors. These are important issues and we think that our analysis
adds another important dimension there.”
The scientists in Work Package 4 thus underscore the importance in policy-making of getting
the incentives right for Gazelles, especially fostering the creation of clusters. We fully support
the Colombelli et al 6/2011 recommendation to ―explore incentives and tax credit towards
high growth firms which are transversal to all industries, and supporting an innovation policy
that could be classified as a horizontal industrial policy. High-growth firms should therefore
be the target of innovation policies aiming at fostering the exploration of new technological
fields susceptible to provide the basis for the elaboration of new business opportunities,
exploration based on the screening of more complementary fields―.
However, the ―identification of key sectors‖ is not necessary to support Gazelles. On the
contrary, any policy that picks the sectors to be supported in advance will not allow the most
innovative Gazelles the freedom to choose to their own sectors based on their creativity and
entrepreneurial instincts. Even if industrial policy has a rationale for large companies or
national champions, it is mostly counterproductive for Gazelles as it rests on fundamentally
supply-based assumptions. (See below where we return to the topic of spatial strategies.)
On the other hand, based on our readings of the broader literature and using the demand-based
perspective, we would advocate for an integration of Gazelle or entrepreneurship
policies with international trade policy. However, this is a separate problem that we return to
in Work Package 8.
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15
3. Factor markets I – Access to finance
One of the most commonly recognized problems of new start-ups and Gazelle firms
concerns their lack of accumulated resources and thereby their ability to invest from their
own earnings (King and Levine, 1993). Gazelles are therefore likely to suffer from problems
of market failure in factor markets. Here we first discuss the problem of money capital as a
resource and in the next section turn to factor markets for knowledge and human capital.
The paper by Kraft, Quatraro and Saviotti 7/2011 investigates the co-evolution of new
technologies (bio technology) and new organizational forms (alliances) using the global
pharmaceutical industry as a case study. The authors use an exhaustive firm level database
that enables them to compare experiences across the USA, the EU and Japan. From this
paper we learn a practical case of how new technologies such as bio-technology can
rejuvenate existing industries and thereby create a reversal or radical change in the industrial
landscape. This paper therefore further confirms the idea that the transition between
Schumpeter Marks I and II is not necessarily linear nor terminal, but constantly recurring or
cyclical.
The emergence of new technologies and new organizational forms are closely interrelated.
From a policy-maker‘s perspective what is perhaps lacking a bit in this picture is the question
of causality. Where should we set in if we want to aid the process? For example is it the
alliances that cause the innovation or is it the potential for innovation that cause the
alliances? As the authors acknowledge this is considered a co-evolutionary process without
any necessarily inherent cause-effect relationship.
However, the data and observations from the three geographically separate continents
demonstrate some major differences. Entry rates, or the emergence of entrepreneurial firms,
are intrinsically much higher in the US than in the EU and Japan. Meanwhile, the propensity
to engage in alliances is highest in Japan.
One reason why the propensity for entrepreneurial firms to enter into alliances with
consolidated players in the US may be lower is their easier access via the market to crucial
resources such as venture capital (see next section). The opposite is true for Japan. Hence
alliances may not necessarily constitute a solution to market failure (for combining
knowledge) but could also be seen as a symptom in the factor markets.
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3.1. Venture capitalism – any alternatives?
In this perspective the contribution by Antonelli and Teubal (16/2011) is interesting to discuss
here as it opens up the possibility of allowing more variability for entrepreneurial firms to
introduce new technologies by giving them alternatives to relying on established corporations
and their established access to sales and finance.
Schumpeter, Antonelli and Teubal retrace the steps in the history of financial institutions as a
means of raising capital for investment-hungry entrepreneurs. In Schumpeter I, finance is
secured through the innovative banker, who is considered the ideal entrepreneur in the early
stages of capitalism, since he has access to finance, knowledge and the critical skills that go
into trying new things. Later in Schumpeter II, Antonelli and Teubal describe how
Schumpeter increasingly finds praise and a significant role for the large corporation in
reducing the distance between the capital market and the entrepreneur.
However, in today‘s perspective there is a relative disillusionment with the continued
innovativeness of large corporations (or bureaucracies), which tend to be taken over by
rational and process-oriented managers rather than innovative entrepreneurs (who often do
not have the political clout and skills necessary to survive with radical ideas inside these
firms).
Hence a renewed role for institutional innovations such as venture capitalism can fill the void
for a reemergence of entrepreneurial firms that are looking for funding in the mature form of
capitalism. Furthermore, venture capitalism may play an important role through the
entrepreneurial and demand-oriented expertise that this particular form of equity investment
gives rise to. For example, it is a ‗qualified‘ type of lending from an innovation perspective
compared to other more ordinary types of credit as venture capitalists are often experienced
entrepreneurs themselves.
The German Mittelstand has become a model that many countries, especially in the
industrialized world, observe with much interest. In effect, one of the main reasons why
Germany was able to successfully overcome the financial crisis was its very solid and
competitive Mittelstand basis. But the Mittelstand companies have not been open to growth.
Since the majority of the companies are family businesses, the owners do not want to risk
loss of control. Yet, recently, more and more German Mittelstand companies are financing
their strategic expansion with venture capital. Venture capital firms focused on Mittelstand
17. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
companies therefore expect a positive development in the venture capital market despite
intense competition for attractive investments and ever increasing company prices.
Several EU countries – including Germany – are not doing well relative to the US (OECD,
2010). Yet, from the Antonelli and Teubal analysis, we gain relatively little knowledge about
how other countries and regions can learn from the US in this area which was the first region
to develop venture capitalism in response to the ICT revolution. For example, what are the
potential mixes of private and public sector engagement to stimulate the development of
venture capitalism?
Commenting on Lerner et al (2012), Goldberg questions the basic tenet of the Lerner report,
namely that the US venture capital-based model is necessarily the only, or even the best,
option for Russia, as the report implicitly assumes. He argues that the Lerner Report should
consider alternative models for Russia from other highly developed countries in Continental
Europe such as Germany. The Continental model is not necessarily a better model than the
US one but perhaps it is a more realistic model for Russia to emulate, given its diverse
objectives and continued systemic problems due to a failed transition in many areas of the
economy.
The Lerner Report argues that the response to the reluctance of company owners to share
equity with venture capital could be that after dilution, ―they (the owners) will have a smaller
share but of a company that will be worth much more‖. This logic does not seem to have
influenced the German Mittelstand over the many years of their success. The German
government (among many) is increasingly interested in such high growth firms. At
Fraunhofer MOEZ in Leipzig, they believe that high growth firms have to be discussed in the
context of the whole economy, particularly in the context of the question: ―Why don‘t the
Mittelstand become high growth firms?‖ The success of the German economy has been
traced back by many to the Mittelstand, which represents middle-sized, oftentimes family-owned
companies with very modest ambitions for growth. Bjuggren and Sund (2001) show
that family ownership decreases the probability of being a high growth firm. According to the
literature (e.g. Poutziouris 2001), the family owners are frequently reluctant to dilute their
ownership; in particular, they refuse venture capital. This presents a question: if the
Mittelstand are not willing to raise funds via a public offering, how will they be able to expand
beyond the scale allowed by bank loans or retained earning? Does the public offering
infrastructure support entrepreneurial firms? The German Mittelstand represent an important
example of a unique type of corporate governance: a family founded and owned company
that has been very successful in exporting worldwide.
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Yet, a key argument for the US venture capital-based model is presented in Lerner‘s section
on Externalities of Venture Capital which states that the (Lerner, 2009, pages 67-68): “arena
created for innovative firms and speculative investors by venture capital can be especially
critical in unlocking economic potential in countries controlled by established family firms.”
In a more history-friendly perspective, the main problem today for governments and policy-makers
in the European Union is to understand: 1/ the specific needs for developing better
institutions to accommodate the matching of risk-willing capital with innovative ideas, 2/the
particular mechanisms such as venture capital whereby they can be filled and 3/opportunities
and constraints imposed by current technologies. The latter could also include some
consideration of how new technologies sometimes lead to unintended and unplanned for
outcomes from the perspective that institutions are always running behind new technologies
trying to find better means of regulating things that are still not fully understood.
Governments increasingly may need to be able to establish special task forces or expert
groups that can add insight to why existing institutions run astray under the combined
pressures of new technologies and globalization. For example, the present banking crisis in
Greece, and in particular Cyprus, seems to be a combination of such factors.
Finally, venture capitalism as a specific mechanism for solving the matching problem in
Europe may also be met with cultural barriers to its adoption, as exemplified by the German
Mittelstand discussion above. The willingness to take and share risk is culturally embedded
(see e.g. Wennekers et al, 2010) and depends both on culture and formal institutions such as
insurance (Park et al, 2002). Hofstede‘s measurement of uncertainty avoidance as a
universal aspect of culture may determine and itself be co-determined by formal institutions
as ways to ensure against risk in all aspects of society (Hofstede, 1983, Bruton et al, 2005).
The ability to ensure or hedge against risk may be quite important for lenders. Societies that
rely heavily on insurance may not be willing to adopt venture capitalism – e.g. there will be a
lack of demand for it – simply because venture capital as an institution does not incorporate
any mechanism of insurance to the lenders.
Lenders under venture capitalism per definition therefore also need to be more
knowledgeable than average lenders and such lenders (e.g. lender entrepreneurs) may be in
undersupply outside the US. A stronger priority for economic equality via mechanisms of
redistribution may also act as a deterrent to the emergence of such lender entrepreneurs in
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egalitarian Europe in particular, though in recent years the class of super-rich has been
expanding even in Scandinavia (The Economist, October 13, 2012.)
Of a much more fundamental nature is the problem that firms and lenders in the capital
market do not trust each other (the claim here is also that insurance can help build trust),
including the government and its institutions. Under such a scenario, the demand for venture
capital is likely to be low as well.
A fourth yet complementary governance form in terms of securing finance for innovation is
discussed in the paper by Antonelli, Amidei and Fassio 5/2012 which offers a historic
perspective on the traditional role of state-owned enterprises in Italy in the national
innovation system. However, pure reliance on the public sector as caretaker of finance for
and the creation of knowledge has been strongly declining over the last 30 years and is not
considered to be important for policy implications.
In summary, different strategies for finance for innovation exist which are mirrored by
different governance systems. One prominent form is venture capitalism. This is likely to be
more in demand in eco-systems that accept risk, have preference for efficiency over equity,
and exhibit high degrees of trust combined with low reliance on insurance as an institution.
Another much discussed form is the German Mittelstand or corporate governance of
entrepreneurial firms through family ownership. This model is more likely to be in demand in
eco-systems that are risk averse.
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4. Factor markets II – Access to knowledge and skills
An equally important problem concerns the availability of knowledge and skills in factor
markets as inputs to the innovating firms. Compared to the looming literature on finance,
problems with the demand for skills among entrepreneurial firms seems greatly under-researched
in economics (LeBrasseur et al, 2003). We first discuss the general problem of
creating markets for knowledge and then turn to the role of the education sector in supplying
skills that are critical for Gazelle firms.
4.1. Ontology of knowledge – internal and external forms of knowledge
The remaining part of the papers in work package 4 that take a focus on the firm are
centered on the question about the ontology of knowledge and the further development of
foundations for the economics of innovation.
20. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
Antonelli (19/2011, page 5) describes the main concern as follows: „the new growth theory
fails however to accommodate the heterogeneity in time and space of the actual rate of
introduction of technological innovations. Much evidence shows that the rates of
technological change are far from being evenly distributed across historic times, industries
and regional spaces. On the opposite they concentrate in historic time within well identified
gales that are located in defined portions of the industrial system and regional space that do
keep changing (Abramovitz and David, 1996; Mokyr, 1990, 2002.‟
In Romer (1994), space does not play any role where innovation or technological change
takes place. Antonelli 19/2011 breaks with the neoclassical tradition by assuming that ―A‖ in
the production function is partly determined by where and therefore also who produces it.
Standard approaches have been either as in Solow (1957), who assumes that ―A‖ or total
factor productivity in the production functions falls as manna from heaven, or as in some of
the more important applications which model ―A‖ or total factor productivity as mainly
consisting in intra-mural R&D and its spillovers (Griliches, 1992). In Romer‘s elegant
neoclassical model it is not possible to confront the question of why some firms are more
innovative than other firms.
The relative size of the R&D sector in Romer is solely decided by the returns to innovation
(that are again fundamentally driven by the interest rate since a lower interest rate gives the
capital goods firms incentive to develop more variants and thereby demand more designs
from the R&D sector). The returns to innovation form the basis on which human capital
decides where to take up work. Hence Romer‘s main policy conclusion is to secure finance
capital at a low cost for the capital goods sector that pays the R&D sector in order to attract
more workers into the R&D sector.
Without emphasizing the ―who‖ question, we are also more prone to get linear predictions for
the knowledge production function which, as Antonelli explains, so poorly mirrors the reality
of the knowledge landscape of the real world.
Instead Antonelli assumes that ―A‖ or total factor productivity is a composite of external and
internal knowledge. The question of how much to use of each is decided in this model by a
similar cost-minimizing problem of choosing between capital and labor in standard production
theory. Therefore, Antonelli implicitly provides a foundation that opens up a new way of
understanding firm strategizing problems in relation to innovation. This new way has a very
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strong character of a public good provision type of problem for the firm, its city, region,
industry etc.
Hence according to Antonelli, and with the help of Marshall, we can add to the
Schumpeterian problem of creative-destruction (page 6 above) a 5th item: give firms
incentives to contribute to the public good aspects of their own internal knowledge.
Knowledge as a fundamentally public good (though partly excludable) or formed partially
through a social innovation process (Taylor, 1970) is subsequently a central theme in several
papers in this work package. Implicitly, we now also understand that innovation is much more
prone to happen in those cities, regions or industries where firms for some reason or another
are willing to contribute to the public good.
Anyone who has tried to work in an innovative or a non-innovative type of organization or
economic environment can relate to this problem. This is exactly what Google did for the
state of California (Vise and Malseed, 2008).
4.2. What can policy-makers do to crowd-in investment in knowledge?
These foundational ideas are followed up by a number of empirical papers in the work
package. The first paper is by Antonelli and Scellato 18/2011. The authors test the idea that
innovation as in this paper proxies with total factor productivity or that ―A‖ may be explained
in part by pools of knowledge that are external to the firm and residing in different places of
the eco-system.
For this purpose the authors use a large panel dataset for 7,020 Italian firms over the 1995-
2006 period. External knowledge is decomposed into a region-specific, a sector-specific and
a combined (both region and sector-specific) effect which is hereafter termed localized effect.
The results underscore the importance of external pools of knowledge in driving the
development of firm-specific total factor productivity levels. All the aforementioned effects are
positive. In one regression (without controlling for potentially spurious effects due to the way
the agglomeration variables are specified), the authors find the following relative ranking of
external pools of knowledge: sector>region>localized. Controlling for the methodological
problems of double counting in some of these effects (there are both arguments for and
against that this should be a methodological problem) – suggests instead the following
ranking: sector>localized>region. Either result suggests that the most important form of
external knowledge resides with the sector and secondarily with the location.
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A related paper by Antonelli and Fassio 5/2011 has a similar objective but measures
innovation using the results from the Community Innovation Surveys from the period 2002-
2004. The dependent variable in this study is the introduction of a product or process
innovation by the firm. The data coverage is cross sectional but now includes a wider
dimension of European Union innovation environments: Belgium, Czech Republic, Germany,
Italy, Norway and Spain. In principle the research question is quite similar to the previous
one, even though the angle and focus are somewhat changed. Another important addition to
this paper is the notion that spillovers are not freely captured. In fact, in this paper the access
to usage of external knowledge is also considered the deliberate outcome of the firm‘s
investment in what Cohen and Levinthal have coined ‗absorptive capacity‘ and proxies very
precisely in this paper as well with investment in extramural R&D.
The results demonstrate again how innovations by firms may be explained by external pools
of knowledge. In this paper, the external pools of knowledge are proxies at the sector level
(horizontal pools of knowledge) using either the sum or the average of sector R&D, whereas
they are proxies for the pecuniary relationships among users and producers (e.g. through up-and
downstream relationships in the value added chain) with firm-specific investment in
capital goods. The results show that innovation is generally spurred by both types of external
knowledge. Furthermore, the authors also find that to produce innovation, horizontal or
sector level external knowledge is relatively more important, unlike in process innovation
where the vertical dimension (or user-producer relations) of external knowledge is relatively
more important.
The paper by Antonelli, Crespi and Scellato 6/2012 uses the aforementioned sample of
7,020 Italian firms over a period of almost a decade to investigate the question of innovation
persistence. They argue that if innovation is purely based on internal processes in firms (e.g.
as explained by the resource-based theory), there should be no role for external factors in
terms of explaining innovation persistence.
Hence they add content to the concept of ‗path dependence‘ as a combined outcome of
innovation in firms taking place in a specific contextual or embedded setting that may be co-explained
by what takes place in the external environment (hence the importance of
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externally available knowledge).
The dependent variable is still total factor productivity but the analysis now shifts to become
centered on the Transition Probability Matrix which is an advanced method that takes into
account something similar to the various sources of serial correlation (correlations over time)
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in economic data. In simple words, the authors investigate whether the total factor
productivity of a firm in the present period is more strongly correlated with its own past total
factor productivity, the past total factor productivity of the sector (and hence of external
origin), or both.
The authors find that the persistence of innovation is explained by a number of factors, not
only the firm‘s own past record of innovation but also BOTH the co-existence of externally
available knowledge and the competitive pressure or the intensity of rivalry in the same
product market.
Taken together these three papers (as complementary and mutually supportive from a
methodological viewpoint) render very robust results to the importance of external pools of
knowledge in the innovation process.
From a policy-making perspective, the results suggest that investment in geographical
clusters or national communities of industries and/or combinations hereof are likely to be
good strategies to facilitate community-building among firms, which, in turn, may make them
more likely to contribute to the public good that is ―knowledge‖. These observations are also
strongly corroborated by earlier evidence in the literature – see for example Audretsch (1998)
and Rocha (2004) even though Gordon and McCann (2005) produce some evidence to the
contrary at the city level for London but they focus specifically on startups.
In order to contribute with more complete answers for policy-makers as to what the best
sector and spatial strategies are, it would be necessary to evaluate particular policies in this
area such as the building of special economic zones or geographical clusters with and
without a sector focus, including e.g. building national communities of firms in certain sectors
without an implicit geographical strategy etc.
Oughton et al (2002) discuss the paradoxes involved in combining spatial strategies or
regional policy with innovation policy. The regional innovation policy paradox here concerns
the problem of transferring technology and innovative capability to lagging regions in
combination with the fact that they are the least capable of absorbing public support such as
R&D funds. Overall there does seem to be an acute lack of knowledge about how these
policies work based on actual data beyond the case study level.
Taken together with the foundational and empirical evidence, there is little doubt that policies
that are generally able to give firms incentives to both contribute to and benefit from external
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pools of knowledge can offer returns for national innovation outcomes. However, there are
also many barriers and problems to the successful implementation of such policies that need
to be understood much better and especially in Europe where regional history is dense and
often complicated.
These ideas therefore also make room for a more responsibility-based type of public policy-making
in the area of support for innovation. For example, if firms receive public support they
must also give part of the knowledge they generate back to society. This should increase the
public return from innovation policy. The uncertain factor seems to be how this will affect the
firm strategizing problem and whether firms would respond to such incentives in
unpredictable ways.
Culture may be very important in this respect, e.g. how much we trust our peers and our
community in general is one of the fundamental explanatory factors of why people are willing
to contribute to public goods in mainstream research, including the novel area of experiments
and behavior. Communication, network, peers and trust may be overshadowing factors in
understanding why geography or locality should matter so much relatively to innovation.
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4.3. Supply of skills from the education system
While firms play a central role in the innovation system as the main actors, the education
sector may perhaps play a much more important role if entrepreneurs and Gazelles are
considered critical in moving the economy and innovation forward. The education system can
help foster entrepreneurship in its own right and supply skills for Gazelles that are in need of
attracting highly skilled workers (Toner, 2011).
In Furman et al (2002), one of the only existing cross-country studies of innovation,
manpower and skills stand out as some of the most important factors contributing to both a
higher demand for innovation and higher R&D productivity at the country level.
First, successful innovation depends to some extent on excellence in education and strong
and active links between knowledge generation, knowledge exchange, and knowledge
exploitation (i.e. between universities and firms).
From the US experience we know that Stanford University has had a tremendous impact on
the emergence of high-tech companies in Silicon Valley, starting with Hewlett Packard all the
way to Google. The research performance of Europe‘s universities seems to lag behind that
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of their US counterparts, particularly in the top 50 universities in the Academic Ranking of
World Universities, also known as the ‗Shanghai ranking‘ (Aghion et al, 2008).
Care should be taken in interpreting the results of any index since they inevitably contain
biases. Moreover, it should be noted that even in the Shanghai ranking, a European ‗top‘
university tends to be among the best 25% in the world in at least one discipline, although
the number of disciplines in which it is world leader is on average substantially lower than
that calculated for a top US university (Moed, 2006). In other words, while there are centers
of elite academic research in the EU, there are simply many more in the USA. These centers
of excellence may well be the engine of innovation. Moreover, it is around these centers that
clusters of innovative companies have formed, such as around MIT and Stanford.
Recent case studies of these clusters show that the past matters relatively more than present
policy context for starting up new clusters (Bresnahan et al, 2008). Cumulative business
history may therefore be a fundamental barrier to innovation that is strongly embedded in the
locality.
A number of papers in Work Package 4 deal specifically with the education sector and how it
affects the innovation system. The focal questions here are on the education sector as a
contributor to the massive amount of knowledge available in the economic environment and
to the firms, and secondarily but no less importantly, the role of the education sector in
delivering knowledge workers to the firms or the ‗R&D sector‘.
Antonelli and Fassio 1/2012 discuss the choice between different models of the education
system related to the impact that the education system has on the innovation system. Here
some models are set up mainly with the objective of education delivering the human capital
that the innovation system demands.
The empirical evidence in Antonelli and Fassio 1/2012 focuses mostly on the question of
whether certain disciplines are more effective in terms of delivering human capital or skills of
a type that will generate higher output? In other words, the authors hypothesize that different
types of academic knowledge exert different effects on economic growth.
This is tested using OECD data for the period 1998-2008 covering 16 countries. The results
suggest that investment in human capital in the hard sciences and social sciences give
positive returns, whereas medical sciences and human sciences have no independent or
even a weakly negative effect on economic growth.
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Similarly in Antonelli et al 4/2012, we are provided with quite robust historical econometric
evidence for Italy (1900-1959) that economic growth responds more strongly to advances in
hard sciences such as engineering and chemistry compared with societal investment into
other disciplines.
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5. R&D subsidies
We can classify government interventions in the innovation system into four distinct groups:
1. Providing supporting institutions for R&D in private companies
2. Conducting R&D in state-owned laboratories or similar organizations
3. Providing subsidies to R&D in private companies
4. Offering public procurement of R&D from private companies
Most of the papers in Work Package 4 focus on the supporting institutions for R&D in private
companies, but de facto public policies to subsidies R&D in private companies are an
important aspect of the innovation system. A few papers in Work Package 4 focus in
particular on the role of these policies in the eco-system.
Another central problem in the literature on giving out R&D subsidies is the question of
selection which relates more strongly to a demand-side policy perspective. For example, if
Gazelles should be the target of policy, the next crucial question becomes how to more
specifically target them using particular policy tools such as R&D subsidies?
This is discussed specifically in the context of Work Package 4 by Antonelli and Crespi
15/2011 as the so-called Matthew effect. The effect concerns the fact that early on in the
development of an industry, a bifurcation takes place, separating high and low performing
firms into two groups that tend to be sustained over time. Translated to the problem of the
policy-maker, the question then becomes how to detect, as early as possible, which firms are
in the winner group (picking winner strategy) and select them for R&D grants.
The evidence emerging from Antonelli and Crespi‘s study of Italy for a sample of 750
manufacturing firms in the period 1998-2003 concludes: „The empirical results show that past
grants increase the probability to access further funding. Both the descriptive and
econometric evidences confirm our hypothesis on the persistent character of R&D subsidies,
that can be interpreted as an indication that some mechanisms related to a Matthew effect is
at work for the observed firms. Moreover, the results suggest that the stable pattern in the
27. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
access to R&D public subsidies by firms is associated with a „picking the winner‟ strategy
adopted by public authorities, which, positively contributed to the effectiveness of the policy
instrument.‟
These findings corroborate the evidence in Lerner (1999) who finds that firms receiving R&D
grants under the US government-funded Small Business and Innovation Research program
grow significantly faster than other firms after the policy was introduced. But Lerner‘s results
are ambiguous as well in suggesting that the effect may relate more to ‗quality certification‘
by the government enabling the firms to raise funds from private sources. Wallsten (2000)
found that the Small Business Innovation Research program crowds out the firm‘s own
research spending about dollar-for-dollar, reversing Lerner‘s findings (1999) for this same
program.
Trajtenberg (2001) reviewed a number of studies of Israel‘s R&D grant programs and found
that there is some evidence, though limited, of a positive relationship between the grant
programs and productivity improvements in R&D intensive industries. Lach (2002) found that
research support of commercial firms in Israel increased the firms‘ total R&D expenditure by
$1.41 for every dollar of public research expenditure received. Branstetter and Sakakibara
(2000) found that Japanese funding of research consortia increased the R&D of participating
firms. Ali-Yrkko (2004 and 2005) showed that the increase of public funding in Finland did not
lead to a crowding out of private R&D funding. Crepon, Duguet and Mairesse (1998)
estimate a model composed of three equations: (a) an equation explaining the amount of
R&D, (b) an innovation output equation where R&D appears as an input, and (c) a
productivity equation, in which innovation output appears as an explanatory variable. This
model has been estimated for a number of countries individually: Chile, China, Estonia,
France, Germany, Italy, the Netherlands, Portugal, the Russian Federation, Scandinavia and
Spain. It has also been run on a pooled sample for France, Germany, Spain and the United
Kingdom. Using the French CIS dataset, Mairesse and Mohnen (2005) find that R&D is
positively correlated with all measures of innovation output and that innovation is generally
more sensitive to R&D in low tech than high tech sectors. They explicitly treat R&D as
endogenous and account for the selection of R&D performing firms. They argue that
common causal factors of R&D and innovation do not bias their R&D coefficient estimates to
the extent that the explanatory variables in the R&D equation are indeed exogenous. Further,
Garcia and Mohnen (2010) quantify the effect of public support for innovation on innovation
inputs and outputs in Austria. They conclude that government support for R&D to private
firms has impact elasticity on sales shares derived from new products with up to 3.4.
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6. Summary and Conclusion
In the new growth theory or endogenous growth theory that currently forms the state-of-the
art in terms of informing policy-making for innovation, consumers will deterministically absorb
all inventions once they have been discovered (Antonelli and Gehringer 09/2012). Hence,
endogenous growth theory does not confront one of the important problems of innovation:
barriers to the absorption of new ideas on the demand side1. A lot of trial and error goes into
the process of innovation. The heroes of the Schumpeterian process of creative-destruction,
the entrepreneurs and Gazelles, are absent from these theories.
The PICK-ME project as a whole seeks to further the idea that policy incentives should also
target the demand-side in order to improve the trial-error process that creative-destruction or
innovation is since it will increase innovation, improve innovation efficiency, and reduce
wastage of otherwise employable resources.
The main conclusions from the project are that a demand-oriented approach can only be
achieved by placing small and fast-growing firms at the forefront of policy-making. Institution
building for innovation at all levels should cater to the needs of these firms which do the
important job of widening the economy according to what the market demands whilst
providing the foundation or seed for future large successful corporations (Pyka and Saviotti
13/2011).
The intervening firm in this process is the Gazelle firm (Colombelli, Kraft and Quatraro
6/2011). This is the catalytic firm that can close the gap between the widening and
deepening of the economy which is important for economic growth2. This is because (as
Colombelli, Kraft and Quatraro‘s study demonstrates) the Gazelle firm in itself is an
expression of demand-pull growth. Only in a combination of its entrepreneurial capacity and
a rapid expansion due to sales growth can a Gazelle firm come about.
1 The ―knowledge Filter‖ introduced by Audretch et al (2006) argues similarly that knowledge will not
flow automatically from research institutions, universities and large corporation to entrepreneurs.
2 Where widening stands for the process of adding new products or activities (radical innovation) to the
economy and deepening stands for the process of expanding and/or improving (e.g. through learning
or incremental innovation) on existing products, processes and activities. Some researchers in the
Schumpeterian tradition also see this as synonymous with adding new firms – see e.g. Breschi et al
(2000). However, this tautological assumption is more a research question than an established
empirical fact.
29. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
A Gazelle is a young high-growth firm. David Birch (1990) found in the 1980s that rapidly
growing firms, which he termed ―Gazelles‖, are responsible for most of the employment
growth in the economy. While Birch‘s definition of Gazelles was based on outliers in terms of
an unusually high revenue growth rate, Acs (2011) examines firms with significant revenue
growth and expanding employment. Acs uses the terms ―high-impact firms‖ to distinguish
them from Gazelles.
Besides building fundamental institutions that support Gazelles, policy-makers can target
bottlenecks in factor markets that hinder their growth rates. A demand-side policy will give
better incentives for skilled people that are open to risks to work for Gazelles, and better
incentives for risk-willing capital to lend to Gazelles. Policies for giving Research &
Development (R&D) subsidies should, in a demand-side policy perspective, be constructed
so as to target the Gazelle firms.
There is a relative lack of policy-relevant knowledge (e.g. fact-based) about which rules and
mechanisms more specifically can help achieve such an important goal. For an early review,
see Mowery and Rosenberg (1979)3. Mowery and Rosenberg argue that policy needs to
combine both the supply and demand perspectives. The traditional supply perspective is
well-served by the view that markets generally lead to an under-supply of innovation (market
failure).
An alternative policy action program that emerges from giving more attention to the demand
side does in our opinion lead to the perspective that policy-makers must facilitate a different
kind of process which is more related with coordination and matching demand and supply.
Towards the end of the policy paper for Work Package 4, we try to give some qualified
answers to the particular question of how to achieve this. Government interventions and
instruments to support both demand-led innovation instruments (e.g. Public Procurement for
Innovation (PPI)) and supply side instruments are important and thus we consider them
below in conjunction. We classify these interventions into four distinct groups:
29
1. Providing supporting institutions for R&D in private companies
2. Conducting R&D in state-owned laboratories or similar organizations
3 Mowery and Rosenberg argue that better policies will emerge from combining the demand and
supply side perspectives on innovation. Neither can be ignored in the formulation of policy. Exclusive
preoccupation with one or the other side of the market for innovation is what they criticize for often
leading to failed attempts at formulating sound innovation policy.
30. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
30
3. Providing subsidies to R&D in private companies
4. Offering public procurement of R&D from private companies or PPI
Group 1 aims to improve the investment climate for innovative firms, which includes
reinforcing the regulatory reform agenda, removing barriers to competition, setting standards
that aim in particular for product quality and fostering skills development.
Venture capitalism can, in this perspective, be thought of as a novel type of credit institution
of late 20th century capitalism which serves as an exchange for buying and selling the rights
to participate in the development of new ideas or innovations (Lerner, 1999). Venture
capitalists step in as a different kind of entrepreneur, representing the demand side by
casting their vote for what the expected verdict of the market will be on a given innovation.
In parallel with launching initiatives that support institution building, policymakers should
adopt policies to spur participation in world R&D, as collaboration with researchers and
multinational corporations abroad is an effective way to tap into the global knowledge pool,
enabling both the technological and intellectual transfer of know-how. These policies include:
a collaboration-friendly intellectual property rights regime, subsidized exchange study abroad
programs for scientists and those with doctoral degrees, free immigration of researchers, and
incentives for multinational corporations to establish their R&D centers in host countries
(Goldberg et al, 2011, Page 11).
Group 2 uses state ownership as the main tool for supporting innovation. Famous examples
include renowned national research labs such as the Department of Energy and the
Department of Defense in the USA, the Fraunhofer Society in Germany and the Centre
National de la Recherche Scientifique in France. The rationale behind state ownership is that
key areas vital to state security and energy are where direct state control over R&D may be
highly desirable.
Group 3 includes: matching grants, loans, incubators, industrial parks, loans, guarantees,
equity in venture capital funds, special economic zones etc.
Group 4 includes public procurement for innovation (PPI). Here the public sector steps in at
the user rather than the producer side of innovation – e.g. the role is exactly the opposite of
traditional state-ownership under number 2. Instead, PPI aims to stimulate the demand-side
of innovation and alleviate barriers for markets to emerge in the first place. The aim is that
31. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
through PPI, the government can provide the necessary demand-side incentives to bring
about and/or sustain the innovation process at its very early and critical stages.
Each of these instruments might be appropriate in a specific country situation or policy setup.
For example, PPI and state-ownership could, under certain conditions, be preferable to
subsidies because they involve more direct forms of interventions, allowing closer control
over the early stages of the innovation process in particular.
However, subsidies are more appropriate when flexibility is required of the instrument and
allow for stimulating products or services that governments cannot procure or for which there
is no immediate demand within the public sector.
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Appendix
Main topic Sub theme PICK-ME Work Package 4 papers
Framing the
problem
Transition to a
knowledge
economy
Antonelli, Cristiano (02/2012) The foundations of a
slow growth economy: Globalization and induced
technological change towards a knowledge
economy
The Firm Entry Pyka, A. and Saviotti, P.P. (13/2011) Economic
Development – Less Destruction than Creation.
Colombelli, A., Krafft, J. and Quatraro, F. (6/2011)
High Growth Firms and Technological Knowledge:
Do Gazelles follow exploration or exploitation
strategies?
Entry and finance Krafft, J., Quatraro F. and Saviotti, P.P. (7/2011)
Knowledge characteristics and the dynamics of
technological alliances in Pharmaceuticals:
Empirical evidence from Europe, US and Japan.
Antonelli C. e M. Teubal (16/2011) From the
corporation to venture capitalism: new surrogate
markets for knowledge and innovation-led economic
growth
Ontology of
knowledge
Krafft, J., Quatraro F. and Saviotti, P.P. (8/2011)
Evolution of the Knowledge Base in Knowledge
Intensive Sectors
Antonelli, C. (1/2011) The economic complexity of
technological change: interactions, knowledge and
path dependence.
Krafft, J. and Quatraro, F. (10/2011) The Dynamics
of Technological Knowledge: From Linearity to
Recombination.
Colombelli A. e F. Quatraro (03/2012) Persistence of
innovation and knowledge structure: Evidence from
a sample of Italian firms
External pools of
knowledge
Antonelli, Cristiano (19/2011) Knowledge
Governance Pecuniary Knowledge Externalities and
Total Factor Productivity Growth
Antonelli C. e G. Scellato (18/2011) Complexity and
Technological Change: Knowledge Interactions and
Firm Level Total Factor Productivity
Antonelli, C. and Fassio, C. (5/2011) The role of
external knowledge in the introduction of product
and process innovations.
Antonelli C., Crespi F. e G. Scellato (06/2012)
Internal and external factors in innovation persistence
38. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
38
Main topic Sub theme PICK-ME Work Package 4 papers
Quatraro, F. (9/2011) Knowledge Structure and
Regional Economic Growth: The French case
Mechanisms for
knowledge
governance
Antonelli, Cristiano (19/2011) Knowledge
Governance Pecuniary Knowledge Externalities and
Total Factor Productivity Growth
Krafft, J., Quatraro F. and Saviotti, P.P. (7/2011)
Knowledge characteristics and the dynamics of
technological alliances in Pharmaceuticals:
Empirical evidence from Europe, US and Japan.
Antonelli C., Barbiellini Amidei F. e C. Fassio
(05/2012) The mechanisms of knowledge
governance: State owned enterprises and Italian
economic growth, 1950-1994
Antonelli C. e G. Scellato (18/2011) Complexity and
Technological Change: Knowledge Interactions and
Firm Level Total Factor Productivity
The Education
Sector
Evaluation of
public strategies
Antonelli C. e C. Fassio (01/2012) Academic
knowledge and economic growth: Are scientific
fields all alike
Antonelli C., Crepax N. e C. Fassio (04/2012) The
cliometrics of academic chairs. Scientific knowledge
and economic growth, the evidence across the
Italian regions 1900-1959
University-industry
relations
Antonelli C. e C. Fassio (07/2012) The heterogeneity
of knowledge: University-industry relations and the
evolution of knowledge governance. The Italian
evidence in the first part of the XX century
Antonelli C., Crespi F. e G. Scellato (08/2012) Inside
innovation persistence: New evidence from Italian
micro-data
The Government R&D subsidies Antonelli C. e F. Crespi (15/2011) The "Matthew
Effect" in R&D Public Subsidies: The Italian Evidence
Antonelli C. e F. Crespi (17/2011) Matthew Effects
and R&D Subsidies: Knowledge Cumulability in
High-Tech and Low-Tech Industries
Procurement Antonelli C. e A. Gehringer (09/2012) Knowledge
externalities and demand pull: The European
evidence
Other Globalization Antonelli, C. and Fassio, C. (3/2011) Globalization
and innovation in advanced economies.
Antonelli, C. and Colombelli, A. (4/2011)
Globalization and directed technological change at
the firm level. the european evidence.
39. CASE Network Studies & Analyses No. 468 – Demand-driven innovation policies in the EU
39
Main topic Sub theme PICK-ME Work Package 4 papers
Institutions Antonelli, C. and Ferraris, G. (11/2011) Innovation
as an emerging system property: an agent based
simulation model