Growth Leaders
Are there any similarities in the CEE countries performance? Actually, we have more in common than you might think! All these countries are relatively strong in human resources, including on indicators such as new doctorate graduates, population aged 30-34 with tertiary education, and youth with at least upper-secondary education. Also, results in economic effects (i.e. employment in knowledge-intensive activities, medium and high-tech products exports, knowledge-intensive service exports, sales of new innovations, license and patent revenue from abroad) are generally satisfactory.
Source: Innovation Union Scoreboard (IUS) 2011
The recently published 2011 Innovation Union Scoreboard makes interesting and thought-provoking reading. The Scoreboard, which is published annually by the European Commission, tracks the performance of 27 EU countries in terms of their progress as innovation economies across a range of indicators. It also benchmarks the performance of the EU against its main competitors including the USA, Canada, Japan, Korea and the ‘BRIC’ countries. It also allows us to benchmark the CEE countries against other EU member states.
Source: IUS 2011
Although none of the countries in CEE ranks among “Innovation leaders” (the top positions are occupied by Denmark, Finland, Germany and Sweden), we needn’t be ashamed. The Czech Republic, Hungary, Poland and Slovakia show a performance slightly below the EU-27 average and are described as “Moderate innovators”.
Source: IUS 211
Bulgaria and Romania ranked deeper below the EU-27 average as “Modest innovators”, but on the other hand they are seen as “Growth leaders” with an average annual growth rate well above 5%. What is also very encouraging is the fact that CEE countries in general are closing the gap between them and those that are ranked as ‘innovation leaders’. However, there is no reason for complacency as the Innovation Union Scoreboard shows signs that the pace of that is slowing down.
Where we do need to improve is in areas such as open, excellent, attractive research systems (this means, among others, quality of scientific publications), linkages & entrepreneurship (SME innovating in-house, collaboration), intellectual assets and innovators outputs.
The importance of collaboration of various parties has also been stressed by the recently launched GE Global Innovation Barometer by StrategyOne which mentioned, among others, the “partnership paradox”: 86%of global executives believe partnerships are an important component of the new model of innovation, but only 21% believe finding partners is an immediate priority to innovate more on a day-to-day basis.
The good news is that some of these weak areas have already seen some change for the better – most CEE countries have been improving in Community trademarks and Community designs (both being important indicators of the level of Intellectual assets) and some countries, like Bulgaria and Hungary, have also seen a sound growth in firm investments.
The opportunities are enormous for the CEE region. For the EU there is a social and economic imperative to ensure that Europe becomes an ‘Innovation Union’ as the European Commission strives for. Our future competitiveness as individual member states, as CEE region and as EU depends on it.
Magdalena Nizik’s is an excellent post, which highlights the importance that innovation has for the economic future of the CEE region. I have very strong ties to CEE developed over the course of my career, and I always found that one of its greatest strengths is exactly its human capital, with a very strong track record in producing highly educated young people, especially in scientific disciplines—well underscored at the very beginning of this post. This is the essential basis for success in innovation, and it is an area where CEE has an advantage over many Western European countries, where the education system has lost ground over the past couple of decades. It is also a magnet that has already allowed CEE countries to attract important foreign direct investment in some high tech industries.
Over the next few years, CEE has the opportunity to leverage this strength and aim for a leadership role in innovation within the EU. With a few exceptions, most CEE countries have strong macro fundamentals and do not suffer from the fiscal and financial challenges which currently beset the Eurozone. This is another great advantage. CEE therefore needs to make fast progress on the other elements which are crucial to innovation, with further improvements to the business environment, and with policies supportive of R&D investment. The GE Innovation Barometer, cited in the post, has shown how the current climate of economic uncertainty and budget limits in many countries is proving to be an obstacle for innovation, with funding harder to obtain and with companies taking a more risk averse approach to innovation. For CEE countries in stronger economic health, this should be seen as an opportunity—especially as progress in the Eurozone is gradually reducing the risk of a full-fledged crisis next door.
CEE countries can and should aim at moving from the ranks of moderate innovators into those of innovation followers and then innovation leaders; this will accelerate the process of rapid improvement in GDP and per capita incomes. Several studies have shown that high marks in innovation rankings are strongly correlated with high levels of per capita incomes, and the correlation is especially strong for countries which are not richly endowed with natural resources. For the US, recent academic research suggests that technological innovation has driven a large part of the increase in output per hour over the last few decades. CEE countries have been for some time the growth engine of Europe, and this will continue for a number of years going forward; faster progress on innovation can also allow them to gradually position themselves at the forefront of some of the most important industries of the future.
But it is also important because the competition is not just within Europe—it is increasingly global. Asian economies are investing more in education and research; Brazil is doing the same. In a globalized economy, we need to look at the competition across the world, and with a long-term horizon in mind. Starting with a strong education system is an enormous advantage, because that takes a really long time to build. CEE needs to decisively capitalize on this in the next few years.
It is thought provoking to see the macroeconomic background of why the CEE region might be able to take on leadership in innovation. As the founder and chairman of a 23 years old high tech company (http://kurt-security.com/) in the middle of the CEE region I’d like to add a cultural insight backed with my hands on experiences.
The socialist regime brought some great advantages for the CEE countries. One of them is that, before 1989 when these countries got liberated, people had to innovate for a better life in many aspects. Therefore innovation was a basic skill for life. Many ideas evolved but only prototyping execution came along as people could mostly innovate for themselves and not for the public. Hence nowadays, when our educated people innovate in the 23 year old capitalist region the best results may be expected from crowdsourcing or when stong execution management is invested as well.
Sandor Kurti, Phd
Ernst & Young Entrepreneur of the Year in 2004
The results of the barometers and scoreboards are encouraging and I agree with the previous two comments about the chances of the region. Let me share my more specific vision on the policies that are the first step on the way to close the gap and join the innovation leaders.
1. younger science – The old hierarchy of science and academic institutions is outdated, new models with young professorships should be implemented. There should be special funding for smaller research groups with young principle investigators for a 5-year evaluation period.
2. mix and collaborate – There are plenty of older and young scientists in top research facilities outside CEE. They have the contact with the top-end development, methods and know-how. Local governments should rapidly allocate budget for cross-border collaboration as well as for repatriation of top-scientists.
3. link with industry – The track record of new professors should contain strong industrial experience (in relevant fields). Private companies and bigger players should sponsor the chairs at universities, similarly to the German (and maybe also other) model. This will help the academia to adopt industrial processes; industry to pipe in into the innovative environment and both sides to understand each other.
4. DON’T LOWER THE BUDGET FOR EDUCATION, and encourage scholars to choose the harder (but much more rewarding) pathway in technology and life-sciences.
Jan Rieger, CTO, MRI.TOOLS GmbH