Malta-Commonwealth Workshop on
Competitive Strategies for Small States
Innovation Policy
A Small Country Perspective
Jennifer Cassingena Harper
ERAPRISM Project
Malta Council for Science and Technology
Outline
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Definition
Rationale
Ongoing and Emerging Trends
Insights from ERAPRISM Project
Benchmarking for Competitiveness
Current Trends in Malta’s Innovation
Policy
• Information Sources/ Links
• Questions for discussion
Definition
Innovation Policy – “the integral of all state initiatives
regarding science, education, research, technology policy
and industrial modernisation, overlapping also with
industrial, environmental, labour and social policies…
(It) aims to strengthen the competitiveness of an
economy .. in order to increase societal welfare through
economic success”
(S. Kuhlmann – Research Policy 2001 Vol.30)
Innovation policy aims to remedy deficits in firms or the
environment in which they operate with the aim of
increasing the rate and success of new and improved
products, processes and services
(L. Georghiou, PREST, University of Manchester)
Competitiveness is…..
• Firms’ ability to produce better or cheaper
products, processes and services and hence to
defend or gain market share;
• A country’s ability to provide the conditions which
enable firms to achieve this;
Ref: Metcalfe & Georghiou (1991)
• the set of institutions, policies and regulations that
support high levels of productivity…..and drive
productivity growth and sustained
increases in output!!
Ref: Global Competitiveness Report (2004)
Ongoing Trends in Innovation Policy
• Linkage of Innovation Policy to Grand Societal Challenges
• Policy watching and evaluation is a prime activity of policymakers and increasingly a range of stakeholders in the innovation
game
• Growing convergence of policy approaches as states monitor
each others’ policies, for copying and more positively for policy
learning. This process is helped along by the use of such policy tools
as benchmarking and open method of coordination within EU
context.
• Foresight approaches to align research and innovation to longterm policy needs and for joined-up policy approaches across
government.
• Increasing involvement of stakeholders in policy
formulation and implementation through foresight In small states,
foresight approaches are particularly effective in addressing
resource constraints and lack of critical mass.
Recent trends in Europe
Farhorizon Foresight on European Innovation Policy
• Innovation has moved to the centre-stage of policy attention
• Facing the double challenge of
▫ Enhancing the attractiveness of Europe as a destination for
investments in innovation
▫ Dealing with Grand Challenges in the ERA
• The deficits of current innovation policy are increasingly
recognised
▫ Need for overhauling rationales
▫ Need for better policies
▫ Need for new forms of governance
EU FP7 Farhorizon Project presentation by Matthias Weber
Rationales for innovation policy
• Governments typically intervene in the national
innovation ecosystem when there are market or
system failures in the innovation process.
• Market failures generally arise through firms being
unable to capture all of the benefits of their investments
in innovation or to deal with uncertainty.
▫ In small economies, most knowledge used will
originate outside the country but to exploit these
knowledge spillovers will require:
a domestic investment in R&D
a highly connected R&I ecosystem
Rationales for innovation policy
System failures occur due to
▫ inadequacies in the physical or knowledge
infrastructures and in the ability of innovation
actors to coordinate effectively.
▫ firms being unaware of new technologies outside
their normal sphere of activity and risk being
displaced by disruptive innovations.
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Rationales for Innovation Policy
System failure in small countries
• This poses a particular threat to small countries, as firms
may be less well placed to monitor developments and
loss of a firm may not be balanced by emergence of
new players. Government needs to step in to
identify and address gaps in support provided.
• It may not be economic for the private sector to provide
innovation support mechanisms such as
technological, business or export advice in a small and
intermittent market for specialised consultancy.
Importing such advice may be impractical because of
lack of knowledge of local conditions. Government may
need to step in to remedy the deficiency.
Forms of Government Intervention
Government measures (at national, regional and local
level) to address problems or failures in the ecosystem:
▫ Framework conditions including laws, social rules, routines,
habits, technical standards which influence the environment
within which firms are operating;
▫ Networking and interactions between firms and other
players in different sectors and/or countries and regions
(including research performers, intermediaries, standard-setting
organizations, NGOs)
▫ Lock-in to obsolete technologies or business models;
▫ Supply-side and Demand-side measures
Towards Open innovation
New broader-based view of innovation highlights:
• critical importance of research and innovation ecology: the
network of relationships between innovation actors and
environment which structures those relationships.
• open innovation - ability to source knowledge developed
elsewhere or to be a knowledge supplier has started to transform
business models and processes.
• This development has led to an embedding of local knowledge
production activities in global innovation networks, whilst
recognizing that users can play a prominent role in innovation
activities -‘user-driven-innovation’
Source: Farhorizon Innovation workshop 2010
Greater concern with …
• User needs and interests reflected in growing recognition
of importance of innovation in services, accounting
for 70% of GDP in most European countries - services
have been neglected targets of innovation for a long
time, but difficulties in measurement.
• Social and organisational innovations as not only
complementary to technological innovation, but as
equally important dimensions of change in their own
right. There is no single innovation model that fits the
requirements of all fields of innovation.
• sectoral and thematic specificities of innovation.
due to greater diversity in research and innovation
patterns
European innovation policy
• Reappraisal of European innovation policy underway
• Changes in societal demands on innovation and changes
in R&I practices lead to realisation that efforts to
underpin the technological base, though vital, were
insufficient in terms of providing the environment in
which innovative firms would flourish and grow.
• Economic crisis and other pressing challenges have
reinforced the urgency to act.
• Demand-side policies (market friendly to innovation)
• Societal challenges require mobilising R&I resources in
parallel with measures to stimulate demand
▫ public support/appreciation of these investments
▫ action required goes beyond domain of research policy
EU 2020 Flagship: Innovation Union
• Focus on innovations addressing the major societal challenges- a
broad concept of innovation involving all actors and regions in the
innovation cycle including SMEs
• key guiding principle: “From idea to market” emphasising a
coordinated approach addressing deficiencies/bottlenecks from
knowledge production, through investment in innovation to providing the
right demand and regulatory environment to support success.
• Areas of action: a renewed effort to achieve the ERA objectives (e.g
researcher mobility and infrastructures) and recognition of nontechnological factors, e.g. design and social innovation.
• use of Cohesion Funds for R&I and “smart specialisation” and a
series of other efforts to improve availability of finance including a legal
framework for transnational VC funds and revisions to the State Aid
framework.
• Demand-side: Single Innovation Market and achieving an EU
Patent, revised regulatory, a review of the EU standardisation system and
the use of procurement for innovation.
• Innovation Partnerships
ERAPRISM
Mission
Helping small European
countries, through more
effective R&I policy design,
to play their role in the
drive to establish the
European Research Area
Premises
• There is an advantage
in helping small
countries understand
better their R&I
challenges
• Small European
countries benefit from
links with larger
member states
Population size
<2.5M
Iceland 0.3M
Malta 0.41M
Luxembourg 0.48M
Cyprus 0.78M
Estonia 1.34M
Slovenia 2.03 M
Latvia 2.27M
Our Concerns:
National Context
Framework conditions
Policy lock-in
Critical mass
Brain drain
FDI dependency
Smart specialisation
Adequacy of indicators
Project Partners
Malta: MCST
UK: UNIMAN
Estonia: HM
Iceland: RANNIS
Slovenia: SRA
Latvia: LTC
Sweden: VINNOVA
UK: BIS
France: UPEMLV
OST
Luxembourg: CHT
and FNR
Advisory Group:
Austria: BMWF
Cyprus: Planning
Bureau
Germany: Steinbeis
Ireland: FORFAS
Concerns for small countries
• All stages from idea to market will rarely be contained
in a small economy –need for internationalisation
emphasised even more strongly.
• Non-R&D based innovation is important for small
countries- due to reliance on service sectors (e.g
tourism) and strengths in sectors such as software
where innovation can come from new configurations
and applications of existing technologies. Few have
extensive means to identify/ promote innovations of
this nature.
• Mobility of researchers is a desirable but limited
facilities and critical mass require they maintain a
balanced two-way flow of researchers and avoid
brain-drain.
Concerns for small countries
• Specialisation is both a necessity and a risk for small
countries as it increases vulnerability to sectoral
downturns or shifts in competitive advantage to
other locations.
• Harmonised policies may be beneficial to the EU as
a whole but may not meet the specific needs of small
countries – e.g. inappropriate benchmarks
• Additional governance requirements of the new
initiative may be burdensome for small countries
Innovation Challenges for Small countries
• Human resources and specifically the need to increase the
supply of science and engineering graduates. exacerbated in
some cases by an imbalance in the inward and outward flows
of qualified people.
• Unsufficient level of business R&D and innovative
activities
• Specific needs of SMEs and micro-enterprises given the
industrial structure of the countries concerned.
• Need to improve productivity for better innovative
performance.
• Need for public-private and research-business links.
• Specialisation in sectoral niches appropriate to economy –
e.g. sectors where competitive advantage is easier to defend.
• Social innovation, non-technological innovation, Creative
industries
The EU2020 Innovation Union
Political context
• Communication adopted by the Commission on October 6th 2010.
• Council Conclusions adopted at the Competitiveness Council meeting of November 26th
2010.
• European Council of February 4th also adopted conclusions on innovation.
Main action lines
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Strengthening Europe’s knowledge base.
Getting good ideas to the market.
Maximising regional and social benefits.
Pooling efforts for breakthroughs – European Innovation Partnerships.
Collaborating internationally.
The linkages between the objectives of the Innovation Union and the new R&I
Strategic Plan are clearly evident.
The New R&I Strategic Plan 2011-2020
- strategic thrusts • Identify and build on the constants and success factors – guiding principles, R&I
Programme, capacity-building.
• Identify and address the bottlenecks, barriers and gaps – in particular need for
dedicated innovation policy.
• Mission, vision and strategic principles still valid and will be retained, thus retaining
flexibility in the detail and consistency in the overall vision.
• Priority setting, efficient and effective use of resources will be key common threads in
the 2011-2020 strategic plan.
• European and international context and developments will form part of the
background landscape for this new R&I strategic plan.
• Measures and actions will be tailored within the inherent constrains brought about
by Malta’s small size and openness of its economy.
• Need to balance ambition in the vision-setting with realistic action plans and
requests for resources.
The New R&I Strategic Plan 2011-2020
- principles An ecosystem approach
to R&I
• Supporting innovation in
its widest sense.
• Ensuring linkages and
continuity of support from
one stage to the next.
• Ensuring the right
framework conditions are
in place.
Smart specialisation
• Identifying and investing
in specific niches.
Grand Challenges
• Building critical mass,
excellence and research
competitiveness.
• Alignment with and
capitalisation on European
approach of using research
investments to address
societal challenges.
• Balancing advantages
and risks of this approach.
• Strive towards an
analogous model
supporting the alignment
of national challenges to
national research and
innovation efforts.
Information Sources/ Links
ERAPRISM – www.eraprism.eu
FARHORIZON –
http://farhorizon.portals.mbs.ac.uk/ActivitiesandOutputs/Activities/tabid/1645/language/
en-US/Default.aspx
World Economic Forum – Global Competitiveness Index http://www.gcr.weforum.org/
EU http://www.proinnoeurope.eu/index.cfm?fuseaction=page.display&topicID=5&parentID=51
Trendchart http://trendchart.cordis.europa.eu/tc_policy_measures_overview.cfm
http://europa.eu.int/comm/research/era/3pct/pdf/report-directmeasures.pdf
Erawatch
http://www.erawatch-network.eu
OECD http://www.oecd.org/home/0,2605,en_2649_34273_1_1_1_1_1,00.html
Malta http://www.mcst.org.mt
/
http://www.mbs.ac.uk/research/innovation
Horizon scanning and foresight
EU http://cordis.europa.eu/foresight/actors_eur.htm
http://cordis.europa.eu/foresight/regional_blueprints2004.htm
http://ec.europa.eu/research/agriculture/scar/index_en.cfm?p=3_foresight
http://www.foresight-platform.eu/
http://forera.jrc.es/documents/eur20128en.pdf
http://forlearn.jrc.es/guide/0_home/index.htm
http://www.eranet-forsociety.net/ForSociety/files/document/Deliverables/D17New_Foresight_Training_Schemes.pdf
http://www.futurreg.net/toolkit.html
European Science Foundation http://www.esf.org/activities/forward-looks.html
OECD www.oecd.org/department/0,3355,en_2649_33707_1_1_1_1_1,00.html
UNESCO
http://portal.unesco.org/shs/en/ev.phpURL_ID=1520&URL_DO=DO_TOPIC&U
RL_SECTION=201.html
UNIDO Manual http://www.unido.org/doc/45321
Institute for Alternative Futures http://www.altfutures.com/
UK http://www.doingforesight.org/doingForesight.php, www.sigmascan.org,
www.deltascan.org, http://prest.mbs.ac.uk/prest/SCOPE/index.htm
Malta: http://www.cs.um.edu.mt/~gpac1/Teaching/Foresight
Bibliography
• Innovation Policies in Europe and the US: The New Agenda Biegelbauer and Borras
(Ashgate, 2003)
• Creating an Innovative Europe: Report of the Independent Expert Group on R&D
and Innovation appointed following the Hampton Court Summit: January 2006
• The Green Paper on the European Research Area (2007)
http://ec.europa.eu/research/era/consultation-era_en.html
• Creative System Disruption towards a research strategy beyond Lisbon: Synthesis
report: Key technologies expert group: 4th September 2005
• Communication from the Commission: Building the ERA of knowledge for growth:
Commission of the European Communities
• Sustaining Innovation-Driven Growth – 2010 Plan: Ministry of Trade and Industry
Singapore: 2006
• The ten-year Science & Innovation Investment Framework Annual Report 2005: HM
Treasury; DTI HM Revenue & Customs: July 2005
• Lambert Review of Business-University Collaboration: Final Report: 2003
• Defining Innovation: a consultation on the definition of R&D for tax purposes: HM
Treasury; DTI HM Revenue & Customs: July 2003
• Competing in the global economy: the innovation challenge: DTI: December 2003
For discussion
• The degree to which small countries require either
different innovation policy instruments or different
mixes of these instruments.
• Whether the moves towards open innovation and
towards broader concepts of innovation have particular
significance for smaller countries?
• The significance of the Innovation Union policies for
small countries; and
• Recent changes in small countries innovation policies,
including those resulting from responses to the
economic crisis.