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Measuring the Innovation Potential of the Bulgarian Economy National Innovation Forum Sofia, 25 October 2005 Ruslan Stefanov Economic Program Center for the Study of Democracy The Process Innovation.bg The Objective The Target Group The Team Innovation Expert Council Consulting with various institutions Value Added Competitive advantages in the Bulgarian import and export (1999 – 2004) 25,0 Clothing and shoes 20,0 Non-ferous metals Cast iron, iron and steel 15,0 Foods, beverages and cigarettes Raw materials for production of foods Drugs and cosmetics 10,0 5,0 Electric appliances Plastic, rubber 0,0 1999 2000 2001 2002 -5,0 2003 2004 Machines, appliances and apparatuses Transport vehicles Textile materials -10,0 -15,0 Source: BNB and Applied Research and Communications Fund Иновации.бг Aggregate innovation product Entrepreneurship and innovation networks Innovation investments and financing Human capital for innovations Information and communication infrastructure Aggregate innovation product Compared to EU-25 the share of the innovative enterprises in Bulgaria is four times lower The technological and the scientific product remains relatively higher than the innovation product Excessive supply Low demand Discrepancies between demand and supply Relative share of the innovative enterprises in Bulgaria and EU-15 Total Extracting Industry Processing Industry Electric Power, Natural gas and Water Wholesale Trade and Trade Mediation Transport, Store and Communication Industry Financial Mediation Computer technologies, R&D, architecture and engineering 0% 10% 20% 30% Bulgaria 40% 50% 60% EU-15 Source: National Statistical Institute (NSI), 2004, Eurostat, NewCronos, 2001. 70% Innovation activity of the Bulgarian firms 2% 4% 6% 16% 14% 1% 7% First place 24% 7% 7% Second place 7% 11% 5% 18% 5% 26% 36% 4% R&D conducted by the com pany R&D conducted by another com pany Attainm ent of m achinery and equipm ent Attainm ent of non-m aterial assets Staff training Marketing of new products or processes Industrial planning and other Other Does not know or N/A Source: Vitosha Research, 2004 Objectives of the innovation activities of innovative companies in Bulgaria (2003) and the EU-15 (2000) Increase of the assortment 40 Provision of standards conformity Market expansion 30 20 Environment protection 10 Improvement of the quality 0 Lowering the material and energy expenditures Attainment of flexibility Lowering of the labor force expenditures Increase of the production capacity ЕU Resource: NSI, Eurostat, NewCronos , 2001 Bulgaria Comparing barriers to innovation in Bulgaria (2003) and EU-15 (2000) Source: NSI 2004, Eurostat, NewCronos 2001. Number of EPO patent applications per million inhabitants in Bulgaria and EU-10 9 8 7 6 5 4 3 2 1 0 1996 1997 1998 1999 Bulgaria Source: Eurostat, 2005 2000 ЕU-10 2001 2002 S&E articles from Bulgaria, registered at the Institute of Scientific Information 2000 1998 1996 1994 1992 1990 1988 0 200 400 600 800 1000 1200 Source: National Science Foundation, Science & Engineering Indicators, 2004. 1400 Relative performance of science systems in EU 8+2 (share of citations in the population) Slovenia 100% 80% The Slovak Republic Romania 70% Poland 60% Lituania 90% 50% Latvia 40% Hungary 30% Estonia 20% The Czech Republic Bulgaria 10% 0% Population Citations Source: National Science Foundation, Science & Engineering Indicators, 2004. Entrepreneurship and innovation networks Low entrepreneurship activity Market-based, rather than innovation and technological networks The domestic science and technology system is not efficiently used Necessity of: Innovation policy that differentiates the various types of enterprises Promoting horizontal relations and cluster formation Level of entrepreneurship (number of enterprises per 1000 inhabitants in Bulgaria) 100 90 80 70 60 50 40 30 20 10 0 Bulgaria Romania Source: EBRD (2004) Croatia Czech Republic Hungary Poland Slovak Republic Slovenia EU-19 SMEs structure dynamics in Bulgaria (1996-2003) Source: 2001 – 2003, NSI, (2004); 1996 – 2000, Report on Small and Medium-Sized Enterprises in Bulgaria (2003). Partnership typology of the Bulgarian innovative enterprises in the development of innovative products and/or processes in 2003 (%) 80,0 70,0 73,0 Product innovators 65,5 Process innovators 60,0 50,0 40,0 30,0 20,0 17,2 12,5 10,0 13,8 12,1 3,3 1,7 3,9 5,2 0,0 Mainly within the The firm with other The firm with other Mainly by other firm local organizations foreign local organizations organizations Source: Vitosha Research (2004) Mainly by other foreign organizations Share of innovative enterprises in Bulgaria, which have indicated as “very important” to their joint innovation projects the listed partners European Union Local partners 40 35 31 International partners 29,8 30 National and local authorities Suppliers of equipment, materials, components and software 28,6 25 20 15 Financing organizations 12,5 10 7,1 4,8 5 Clients, users 39,3 1,8 0 3,6 4,2 Industrial enterprises/centers conducting R & D 6 2,4 7,1 Consultancy agencies/enterprises 7,7 State and private non-profit research institutes Competitors and other sector enterprises Universities and other institutions of higher education Enterprises from other sectors Big international companies Source: Vitosha Research (2004) Innovation investments and financing Not enough depth in the accumulated fixed capital in the economy – importance of the channels for transfer of foreign innovations One of the lowest business R&D expenditures in Europe Considerable structural misbalance: the public sectors dominates, without attracting enough funds The credits for the private firms has increased 7 times, but their innovative activities are funded by the firm’s own revenues Relying on market-oriented financing on competitive basis or on EU grants and programs FDI intensity (FDI stock as % of GDP) 40 EU-15 35 EU-8 Bulgaria 30 29 CEE 25 23 20 20 20 18 15 13 10 10 6 5 3 0 1995 1996 Source: UNCTAD (2005). 1997 1998 1999 2000 2001 2002 2003 R&D intensity (% of R&D expenditure in GDP) 2,00 1,80 1,60 1,40 1,20 1,00 Bulgaria 0,80 EU-15 0,60 0,40 0,20 0,00 1993 1994 1995 1996 Source: NSI, Eurostat, 2004. Bulgaria 1997 1998 1999 2000 2001 2002 2003 Misbalance: Structure of R&D expenditure by sectors of performance Bulgaria Higher education sector 9,7% Private nonprofit sector 0,3% Government sector 70,1% Business enterprise sector 20,0% European Union (EU-15) Higher education sector 21,0% Government sector 13,0% Source: NSI (2004), Eurostat (2005) Private nonprofit sector 1,0% Business enterprise sector 65,0% Misbalance: Structure of R&D expenditure by sources of funds Abroad, nonprofit organizations, higher education 6,3% Bulgaria Government sector 66,9% Business enterprise sector 26,8% Abroad, nonprofit organizations, higher education 9,0% Government sector 35,0% Source: NSI, Eurostat, 2004. European Union (EU-15, 2001) Business enterprise sector 56,0% Main sources of financing of the innovation activity of innovative enterprises in Bulgaria in 2003 (%) 1,8 0,6 2,4 5,4 Own sources 2,4 1,2 Local banks 8,3 Venture capital State budget Bulgarian partners Foreign partners Parent company 78,0 Source: Vitosha Research, 2004 NK-NA Human capital for innovations Good education level in the secondary and higher education Decrease in the quality of the secondary education Institutional variety in the higher education Lack of life-long learning education Low business demand of R&D » Employment decrease and smaller interest in scientific career Public funding for employment in the R&D sector – long-term unstable misbalance Necessity of comprehensive long-term vision for the education development Falling average performance of Bulgarian 8-graders Mathematics 560 545 Science studies 540 527 518 520 511 500 476 480 460 440 1995 Source: IEA, TIMSS 1999 2003 479 Life-long learning (share of population aged 25-64, taking part in education and training) 12,0 9,9 10,0 8,0 9,2 7,9 7,8 6,0 4,0 2,0 1,4 1,3 1,4 1,3 0,0 2001 Source: Eurostat (2004) 2002 2003 EU-25 Bulgaria 2004 R&D personnel per 1000 persons of the workforce (1995-2002) 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 13,9 8,6 8,9 8,4 6,2 1995 1996 1997 Bulgaria Source: NSI, Eurostat (2004) 6,3 5,5 1998 1999 5,2 5,1 5,2 2000 2001 2001 2001 2002 EU-10 EU-15 Information and Communication Infrastructure Bulgarian firms, which use ICT are more innovative than the rest The ICT density is constantly increasing and the more effective use of ICT proves to be key issue The innovation policy should be directed towards the infrastructure and the improvement of the general ICT education level Innovativeness of Bulgarian enterprises by level of ICT use Use computers 43 Do not use computers 23,4 Use Internet 47 Do not use Internet 20,2 Average age of computers used in production is under 2 years 58,4 All enterprises 32,9 0 Source: Vitosha Research, 2004 10 20 30 40 50 60 70 Thank you! The full text of the report can be found at: www.innovation.bg