Download KEY POLICY CHALLENGES IN FOSTERING INNOVATION

KEY POLICY CHALLENGES IN FOSTERING
INNOVATION
International Conference “Industry and Innovation 2014”
Sofia, 30-31 October 2014
SALVATORE ZECCHINI
Chairman OECD Working Party on SME
and Entrepreneurship
• Can a boost to R&D and Innovation (RDI) prop
up currently stagnating economies ?
• Multifactor Productivity (MFP) differences can
explain part of differences in per-capita
income
• RDI is a major component of Multifactor
Productivity
• MFP has provided a sizeable contribution to
economic growth
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From innovation policies to growth: A model link
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MFP drives per-capita GDP differences
(Source: OECD, Johansson et al. 2012)
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MFP as a main contributor to economic growth
(Source: OECD, Johansson et al. 2012)
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Gvt expenditure in RDI rose even during the last
major economic crisis
(Source: EU Lessons…2013)
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But in countries most affected by crisis RDI funding
first had an anti-cyclical effect, then declined
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Bulgaria’s funding to RDI followed the same pattern
(Source: EU Innovation Scoreboard 2014)
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Bulgaria’s performance in innovation is not so
unfavourable
(Source: EU Innovation Scoreboard 2014)
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Focus: Main challenges for government support
policies in RDI
• Is there a need to support RDI, particularly at
a time of fiscal stringency?
• Who should be the target for support?
• How should support be structured?
• What are the most appropriate means to
support?
• How to ensure efficient and effective
implementation?
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• Innovation is a process involving many actors,
forms and institutions in a non-linear sense.
• Product of continuous interaction of many
actors
• It is affected by economic, social and
regulatory environment
• Prone to systemic failures
• Need to intervene on the many components
of national innovation system
• The two main weak links are SMEs and finance
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Bulgaria’s innovation indicators
(Source: EU Innovation Union Scoreboard 2014)
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Barriers to innovation
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•
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SMEs difficult access to outside finance,
lack of competition in the market place,
unfavorable investment climate,
the social culture,
some regulatory constraints,
the weak linkages between large and small
companies,
• the dearth of cooperation between universities
and entrepreneurs, particularly the start-ups.
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Where to intervene? On the main shortcomings of
the national innovation system
(Data source: EU Innobarometer 2014)
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Factors hampering innovation
(% innovating firms with 10 to 49 employees, 2010 – Source: OECD)
difficulty in finding cooperation partners for innovation
lack of qualified personnel
markets dominated by established enterprises
lack of funds within the enterprise or group
lack of finance from sources outside the enterprise
innovation costs too high
uncertain demand for innovative goods or services
45
40
35
30
25
20
15
10
5
0
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Factors hampering innovation
(% innovating firms with 50 to 249 employees, 2010 – Source: OECD)
difficulty in finding cooperation partners for innovation
lack of qualified personnel
markets dominated by established enterprises
lack of funds within the enterprise or group
lack of finance from sources outside the enterprise
innovation costs too high
uncertain demand for innovative goods or services
45
40
35
30
25
20
15
10
5
0
16
Factors hampering innovation
(% innovating firms with more than 250 employees, 2010 – Source: OECD)
difficulty in finding cooperation partners for innovation
lack of qualified personnel
markets dominated by established enterprises
lack of funds within the enterprise or group
lack of finance from sources outside the enterprise
innovation costs too high
uncertain demand for innovative goods or services
35
30
25
20
15
10
5
0
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Still, 2/3 of surveyed firms innovated in the last 3
years
(Data source: EU Innobarometer 2014)
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SMEs invest in R&D and innovate less than large
firms
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SMEs introducing product and process innovation in 2008 and
2010
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Surprising: few innovative firms received any funding
support
(Data source: EU Innobarometer 2014)
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SMEs generally received much less
government aid than large firms
Tax incentives benefit more multinational corporations
than start-ups and SMEs
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Equally surprising: the majority of supported
firms did not consider public support important!
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What policy approach, to overcome system failures,
government failures, SMEs hardship, financial market
failures, incomplete markets for funding RDI?
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Policy approaches are rather homogeneous across countries,
with limited differences in their focus in spite of wide
disparities in innovation performance
• Conclusion: there is no policy model valid for all the
countries.
• The choice has to be based on the country’s
characteristics and its validity tested on the ground in
terms of innovation performance
• Barriers to innovation: SME financing problem, low
competition, poor investment climate, social culture,
low technology transfer, weak linkages between
firms and universities, few collaborative projects
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Government needs to develop a long term
vision and a strategy with clear goals
Issues:
• Policy governance
• Top-down approach vs. bottom-up
• The latter is more successful
• Create an innovation constituency within
private business sector
• Choice of policy instrument mix
• Poor implementation and bureaucracy
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Essential support
• Develop high skills, training, mentoring of firms,
incubators, accelerators
• Improve firms’ absorption capacity and business
environment
• Promote Production and Diffusion of innovation
• New standard settings and regulations
• Debt and equity funding of start-ups, innovative firms
• Policy coherence and effective policy implementation
• Public procurement
• Fine tuning of tax incentives (incremental investment)
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Invest in an innovation culture within the society
at large, not just the entrepreneurs
Main policy message resulting from more than a
decade of experience:
Create an enabling environment conducive to
research, development & innovation
and
Generate a culture that promotes innovation.
Firms themselves should have an important role
in shaping government policy and monitoring
its implementation.
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