Denmark a nation of solutions. Enhanced cooperation and improved frameworks for innovation in enterprises

Transcription

1 Denmark a nation of solutions Enhanced cooperation and improved frameworks for innovation in enterprises December 2012

2 3 Foreword We are standing in the middle of a global transition. The global middle class is growing. More people are getting an education, have a better quality of health, and have the opportunity of a better life. For the millions of people who now have opportunities never within reach of their parents it is a positive tale of a more resourceful world. This transition also creates challenges, however. Large population growth and increased consumption place a growing pressure on the environment, the scarce natural resources, and raw materials. Emerging economies are generating greater impact. New commercial markets and collaborators create new sources of knowledge and investment. This means stronger competition and greater pressure on enterprises and employees to constantly renew, develop, and improve. most value per work hour. Consequently, in Denmark the level of prosperity is developing less favourably than it is in most other OECD countries. The global transition and the economic challenges require political action and closer collaboration towards new solutions. In order to increase long-term growth opportunities, the Danish government has introduced an ambitious reform agenda. A number of steps have already been taken to create jobs and growth, including a tax reform, the Danish government s initiative to ensure financial stability, the establishment of growth teams in areas where Danish enterprises have particular strengths and potential, the modernisation of the public sector and the establishment of the Productivity Commission. In the wake of the international economic crisis, the growth of the world economy is fragile and a number of countries continue to face great challenges. Since the economic crisis took hold in 2008 in Denmark economic growth has dipped. From the peak of the boom in 2008 to the lowest levels in 2009, GDP fell by at least 8 percent. We still have not made up for the loss. With the innovation strategy, the Danish government will ensure that the substantial public investments in research, innovation, and education will translate to more growth and job creation. Part of the rationale behind this innovation strategy is that we need to become better at finding solutions to the global societal challenges. A number of things will lead us there, including a more demand-driven innovation policy, strengthened exchange of knowledge and greater focus on innovation competencies in the educational sector. Even before the crisis, Denmark faced a significant challenge to its future growth due to a lower rate of growth in productivity than in most other OECD countries. Today, the productivity level of Denmark is much lower than that of the countries which create the Morten Østergaard Minister for Science, Innovation and Higher Education Annette Vilhelmsen Minister for Business and Growth

3 4 Denmark a nation of solutions Innovative enterprises Innovation is a central driver of growth and job creation.1 Innovation is knowledge and ideas translated into products and processes, which create commercial and societal value.2 Innovation often encompasses organisational development, education, testing, marketing, and design across professions and sectors. In enterprises innovation prevails. Innovation policy on the other hand needs to become more specific and measurable. The ambition with the innovation strategy is therefore to create better framework conditions for more innovation in Denmark focusing on growth and job creation. Over the past 10 to 15 years the digital development has increased the speed and globalisation of innovation processes. This requires enterprises to continuously develop new products and processes. This is why access to knowledge and well-educated workers is important for business innovation. Just as it is the case with other aspects of running an enterprise, the innovation performance is influenced by a number of general framework conditions. These include macro-economic conditions, access to risk capital, national and international competition, as well as pressure from new growth enterprises. In many of these areas, the Danish government has introduced initiatives to strengthen the framework conditions for enterprises., Within the last year, a new development package was launched to strengthen growth and export financing, as were a number of initiatives under the Danish state investment fund (Vækstfonden) and Denmark s export credit agency (EKF) which ease access to finance. Furthermore, Danish enterprises can get tailormade assistance for the internationalisation of their innovation and commercial activities via the Trade Council and Danish embassies, general consulates, trade offices and innovation centres abroad. As part of the follow-up on the work of the Danish government s growth teams in areas 1. OECD (2010). The OECD Innovation Strategy: Getting af Head Start on Tomorrow; Danish Ministry of Economic and Business Affairs (2011): Growth through innovation. Economic Analyses. Nr. 3, May 5th. 2. Cf. OECD s Oslo manual innovation means implementation of a new or significantly improved product (good or service), process, marketing method or a significant organisational change. Innovation is about translating new thinking into commercial and societal value. This could be expressed in new ser-vices, products, processes, organisational forms, etc.

4 where Danish enterprises have particular strengths and potential, the Danish government will, in the coming year, develop growth plans for the individual lines of business. Innovation is specifically about competencies. The innovation strategy must therefore ensure a closer link between research, education, and innovation in enterprises. The point of departure is that individuals are innovative and that enterprises are translating innovation to growth and job creation. The Danish government will support innovation in enterprises through strong framework conditions, intelligent demand, a strong knowledge base, and a well-educated workforce. In the past 10 years, public investment in research and education has been extensively boosted. Today the public sector invests more than DKK 18 billion ( 2.4 billion) annually, equivalent to 1 per cent of GDP, in research and innovation. In 2012, the public sector alone invested almost DKK 24 billion ( 3.2 billion) in teaching and Study Grants and Loans (SU) in higher education. That is an increase of 30 percent since The investments have contributed to Danish research being of the high quality it is today, the doubling of the number of PhD students, and the development of an innovation system that is considered well-functioning internationally. 3. Specific input, etc. can be found at: 5 However, the significant investments in knowledge and education are not sufficiently being translated to growth and job creation in enterprises. Too few new jobs are being created on the background of new knowledge and research. Starting their own company is viewed by too few as a possible career path. Too many innovation and research projects are never commercialized, sufficiently matured, or implemented in large-scale versions, but rather remain as good prototypes and demonstration projects. This is reflected in the fact that Denmark has a lower number of innovative enterprises than most of the countries we usually compare ourselves to, and that public investment in knowledge is translated into too few new growth enterprises. The starting point for the work with the innovation strategy has been an open and broad dialogue with enterprises, organisations, institutions, experts and individuals about the Danish potentials for innovation, including the Danish innovation DNA. 3

5 6 Box 1. Main international trends The EU s growth strategy, Europe 2020, sets objectives for research and innovation, including the objective that by 2020 Member States should use 3 percent of GDP on research and innovation activities. The Strategy also introduces the idea of a paradigm shift in European research and innovation policy in favour of focusing on great societal challenges and a closer connection between research and innovation. The objectives are reflected in the Commission s proposal for the new research and innovation framework programme, Horizon 2020, e.g. in the initiative to establish innovation partnerships. Innovation is also an important element in the roadmap for a resource efficient Europe, which is one of the flagship initiatives in Europe The OECD innovation strategy from 2010, Getting a Head Start on Tomorrow, focuses on increasing innovation capacity via objective-oriented education, creating better framework conditions for innovation with a special focus on new SMEs, the creation and utilisation of knowledge with a focus on ensuring adequate public investments and effective management at knowledge institutions, as well as highlighting the need to use innovation to solve great societal challenges. Furthermore, the management and impact measurement of innovation policy must be strengthened, e.g. by increasing the cohesion between innovation and other policy areas. In recent years, we have also seen new innovation strategies from other countries such as Finland, the Netherlands, Ireland, Singapore, Great Britain, Sweden, South Korea, Germany, and USA. A number of main trends emerged from all the countries: Increased focus on optimising the effect of the innovation effort within the framework of the existing budget level. Challenge-based approach with particular focus on the opportunities within green growth. Better coordination of education and innovation policy that ensures that education supports the innovation policy. Increased commercialisation of research results and especially cooperation between the business community and knowledge institutions. A generally broader view of innovation policy e.g. including the creative industry and social innovation more.

6 As part of the work, the European Research Area Committee carried out an evaluation of the Danish innovation system (the ERAC evaluation). The overall conclusions of the committee was that Denmark has a well-functioning research and innovation system, but there are still a number of challenges. Box 2. Conclusions from the ERAC evaluation of the Danish research and innovation system The results of the ERAC evaluation were presented at a conference on 27 September The ERAC panel s overall recommendations are divided into strengths and challenges. Strengths The main strengths lie in a strong standing in most international indicators for research and innovation, which reflects our strong research and education systems. Despite the crisis, both the public and private sectors have maintained a high level of investment in research, education, and innovation. Denmark has a unique approach and culture for innovation and innovation policy, which reflects the dynamic and open welfare society, the Danish innovation DNA. Challenges A number of challenges, however, require political action. The slow economic growth and Denmark s insufficient productivity level are worrying. There is a need for Danish enterprises to switch their focus from Europe to focusing on being able to compete at a global level. SMEs, not least, need to improve their utilisation of niche markets. A large part of the research and innovation system is dominated by the public sector and there is a need for more focus on those sectors outside of the large pharmaceutical, biotechnology, and energy multinationals. In some areas, there is a need to develop policy instruments so that the whole research and innovation system can achieve its full potential. The results and recommendations can be found at 7

7 8 The vision of the innovation strategy is that Denmark should be a nation of solutions, where innovative solutions to great societal challenges are translated into growth and employment 4 Figure 1. Starting point for the innovation strategy Global challenges New solutions Growth and jobcreation Globale udfordringer Danish business strengths Danish knowledge strengths The Danish government will focus on three areas with the innovation strategy: 1. Innovation is to be driven by societal challenges: Demand for solutions to specific societal challenges must be given higher priority in the public innovation policy. 3. Education is to increase the innovation capacity: A change of culture in the educational system focusing more on innovation. 2. More knowledge is to be translated to value: Focus on mutual knowledge exchange between enterprises and knowledge institutions and more efficient innovation schemes. 4. The vision for the innovation strategy was published on 29 June 2012, cf, Vision for the Innovation Strategy, Ministry of Science, Innovation and Higher Education and Ministry of Business and Growth

8 9 Box 3. Objectives, progress and impact Innovation must contribute to growth and job creation. Denmark s standing in relation to countries we usually compare ourselves to is an important goal line for our future competitiveness and growth potential. I ncrease the number of persons with higher education in the private sector so that by 2020 Denmark will be among the top 5 OECD countries* with the greatest number of graduates in the private sector. The Danish government aims to: I ncrease the share of innovative enterprises so that by 2020 Denmark will be among the top 5 OECD countries* for the most innovative enterprises. If we were to live up to the Danish government s objectives today it would require that the number of innovative enterprises and private investments in R&D increase by 15%, while the number of those in the private sector with a higher education increase by 28%. Increase the private investments in R&D so that by 2020 Denmark will be among the top 5 OECD countries where the business community invests the most in R&D as a percentage of GDP. Figure 2. Five key indicators for innovation OECD number 5 DK OECD Innovative enterprises * Private investments in R&D DK OECD Public investments in R&D OECD Highly educated employed in the private sector * DK OECD External financing of public research OECD DK DK Note: DK is Denmark s standing and OECD is the OECD average for OECD countries with available data. There are a total of 33 OECD countries (excl. Luxembourg). The top 5 OECD countries are fixed at index 100. The bottom 40% of the scale is omitted to better illustrate the distance between Denmark and the best OECD countries. Source: Report on Growth and Competitiveness, *) Only European OECD countries.

9 10 International comparisons are often based on data which is between two to four years old. The above indicators first and foremost give an overall picture therefore of the status in Denmark, while the indicators to a lesser extent can be used to directly measure ongoing efforts and new initiatives. Meanwhile, there are limits in relation to the use of international indicators because the data available internationally is not of a sufficient quality in key areas, such as the commercialisation of research investments in both the public and private sectors. To pursue the strategy s objectives of having public investments in research translating more to growth and job creation, it is important to monitor the activities connected to the research results of the universities and research institutes (including hospitals) commercialisation of research results. The commercialisation statistics database has measured the development over the last decade. Figure 3. Development in the commercialisation of research results, Inventions Patent applications Licenses, options and assignments Spinouts Source: Danish Agency for Science, Technology and Innovation (2012): Public research commercialisation survey Denmark 2011 As seen in the figure, over a 10 year period the number of licences increased from around 10 to at least 100. The specific goal is that this development will continue until at least 2020 and that the number of licences, sales, and option agreements more than double between 2011 and To ensure a better knowledge base and follow the impact of the initiatives of the innovation strategy, documentation e.g. the collaboration between the higher education institutions and private enterprises, and entrepreneurship in higher education, will be strengthened.

10 11 1. Innovation driven by societal challenges We are facing a number of complex national and global societal challenges. These challenges require new solutions, for instance within sustainable energy production, reduction in environmental and climate impacts, healthy and safe food production, provision of clean water, cheaper and better healthcare and other welfare solutions, as well as a more efficient public sector. There is a global and growing demand for new solutions. As such, societal challenges present potential growth and exports for those countries and enterprises that can create sustainable, future solutions. New solutions require knowledge, innovation, and cooperation. Innovation policy and the strategic accumulation of knowledge and capacity building must therefore be rooted more firmly in Box 4. International focus on solving societal challenges through innovation In the aftermath of the financial and economic crisis, society including business is looking to government to create frameworks that encourage experimentation and growth but also provide some security in case of failure. At the same time, innovation is increasingly looked to as a way to improve the quality of life and address major social and global problems. Policy can provide the framework for channelling innovation towards application that makes life better for individuals, business and society at large. (OECD, 2010) Fiscal consolidation and structural reform are necessary but not sufficient to secure Europe s global competitiveness. Smart investment, notably in research and innovation, is vital in order to maintain high standards of living while dealing with pressing societal challenges such as climate change, an ageing population, or the move towards a more resource-efficient society. (European Commission, 2011) Given the rather small size of the country and the small, SME dominated scope of the economy, the opportunities for a greater concentration to three or four main activity fields including regional aspects (smart specialisation), which align very closely with Danish economic strengths, should be considered ( ). This would optimise the effective use of tax-payers money. The planned new integrated innovation strategy could lay the ground for this integrated and prioritised approach encompassing research, innovation and education aspects. (ERAC evaluation, 2012)

11 12 societal challenges and the demand for specific solutions. We must improve the support of strategic initiatives within all parts of the innovation process. This requires cooperation between the public and private sectors and a simpler, more flexible and cohesive public system A simple and flexible council system Seen in an international perspective, Denmark has a well-functioning research and innovation system. However, for an economy the size of Denmark s, there are relatively many councils and funds granting funding to research, innovation, development, and demonstration. This is something which is also highlighted by the ERAC evaluation. These many councils and funds have been established over a period of years to support specific political and professional priorities. They each have their own function and role in the overall innovation system. But the numerous councils and funds complicate a collective and flexible prioritisation. And it presents significant challenges in supporting large, goal-oriented ventures that straddle the current structures. If the system were to be re-drawn from the start, it would look different. This is especially the case in the part of the system aimed at investing in strategic research, technological development, and innovation. Figure 4. The current research and innovation system Technology and knowledge push The Danish National Research Foundation Demand The Danish Council for Independent Research The Danish Council for Strategic Research The Danish Council for Technology and Innovation The Danish National Advanced Technology Foundation Supply Consumers, enterprises, public sector, foreign countries Green Development and Demonstration Programme (DDP) Knowledge from knowledge institutions Energy Technology DDP Eco Innovation DDP Danish State Investment Fund (Vækstfonden) The Business Innovation Fund GROUND RESEARCH STRATEGIC RESEARCH DEVELOPMENT The Business Innovation Fund DEMONSTRATION Market pull MARKET MATURATION

12 13 Figure 5. Adjustments in the research and innovation system Technology and knowledge push The Danish National Research Foundation Demand The Danish Council for Independent Research The Danish council for strategic research, innovation and advanced technology Supply Green Development and Demonstration Programme (DDP) Knowledge from knowledge institutions Energy Technology DDP Eco Innovation DDP Danish State Investment Fund (Vækstfonden) GROUND RESEARCH Consumers, enterprises, public sector, foreign countries STRATEGIC RESEARCH DEVELOPMENT DEMONSTRATION The Market Maturation Fund MARKET MATURATION Market pull In 2013, The Danish National Advanced Technology Foundation, the Danish Council for Technology and Innovation, and the Danish Council for Strategic Research have approx. DKK 2.2 billion ( 290 million) at their disposal. The Danish government wants to simplify the overall research and innovation system, provide more flexibility, and ensure that investments are more effective. There must still be a broad, foundation-laying effort, an ongoing capacity building, and investments in research infrastructure. But there should be fewer boxes and less overlap. The range and use of support instruments must be guided by the specific projects and not vice versa. A simpler and more flexible system should be able to support larger, transversal ventures. Finally, the coordination and interaction between the different funding bodies must be strengthened and the innovation system must have stronger international connections and global outlook. The high level of quality required to participate in publically financed programmes must be maintained. Like Horizon 2020, there is an ambition to bring the specific projects closer to enterprises without compromising the level of innovation.

13 14 The Danish government will: 1. Implement a revision of structure of the Danish research and innovation councils. The structure must better support a greater return on public investments in strategic research, technological development, and innovation in the form of growth and jobs. This should be achieved through tighter cohesion, better quality and enhanced flexibility in relation to ventures within strategic research and innovation. The Danish government will therefore implement a reorganisation of the area that is currently under the Danish National Advanced Technology Foundation, the Danish Council for Technology and Innovation, and the Danish Council for Strategic Research. The aim is to join the three current bodies into one council for strategic research, innovation and advanced technology. The council will ensure that the specific innovation projects are supported by instruments in various parts of the process from ideas and knowledge to development of products and solutions. Based on the overall aim of a more simple system with fewer instruments, the future Council for Strategic Research, Innovation and Advanced Technology will draw on existing instruments and could for example implement partnerships, strategic research, technological platforms and specific innovation schemes for enterprises. There will be particular focus on SMEs. Concurrently with the restructuring, a simplification of existing innovation schemes will be implemented based on users needs. In the beginning of 2013, political parties will be invited to discussions on how the research council and innovation system should be organised in the future. 2. Restructure the Business Innovation Fund into a market maturation fund. From 2013, the Business Innovation Fund will be restructured to a market maturation fund to ensure that more innovative products and solutions reach the market for the benefit of growth and job creation in Denmark. By using more tenders with functional requirements or pre-commercial procurement the Market Maturation Fund could, as an example, support the public sector to encourage the development of innovative business solutions via its procurement processes. The Market Maturation Fund picks up where innovation, development and demonstration programmes ends and will offer cross-disciplinary help to see innovative products and services reach the market. The Fund will ensure a clearer and simpler division of labour in the public innovation system. 3. Strengthen Danish participation in the European innovation effort. In early 2013, the EU-DK Support-programme will be established to strengthen cooperation and support for Danish participation in EU programmes for research, innovation, business development and entrepreneurship. Stronger cooperation will ensure that Danish researchers and enterprises get well-qualified, effective as well as timely help and guidance in their EU-related work. Danish researchers and enterprises will also get an overview of possible EU support instruments in Horizon 2020, including the co-financed instruments, as well as COSME, Connecting Europe, Creative Europe, opportunities in the European Investment Fund, the European Investment Bank and the Structural Funds.

14 1.2 Societal innovation partnerships A collective and focused effort is needed to create solutions to societal challenges on a national and global scale. Neither the public nor private sectors can solve environmental or energy supply problems for example, on their own. Denmark s size and well-organised model of society should make it possible to turn societal challenges into business opportunities. The Danish government will therefore establish a new model for cooperation on innovation in new societal partnerships. Within a period of three to five years, the partnerships must accelerate innovation in relation to Box 5. Focusing on strategic areas RESEARCH2020 and growth teams In recent years, policy experience has been gained through prioritising the research efforts in a few chosen fields. The public sector invests about DKK 1 billion ( 130 million) annually in selected areas with great societal challenges and particular business or societal potential e.g. energy, the environment and climate. RESEARCH2020, which was released in May 2012, forms the basis for the prioritisation of public investment in Danish strategic research. RESEARCH2020 contains five visions. The visions constitute the main outcome of a year s thorough analysis and dialogue. Universities, organisations, ministries and research councils have been among those identifying the needs for research as required by societal and business development in the coming years. The five visions are: A society with a green economy A society with health and quality of life A high-tech society with innovation capacity An efficient and competitive society A competent, cohesive society As part of the proactive business and growth policies of the Danish government, growth teams have been established with representatives from enterprises, knowledge institutions and public authorities. The growth teams examine growth conditions in selected business areas where Danish enter-prises have strengths and potential, and identify areas where framework conditions are not optimal. It will help ensure growth conditions with the desired breakthrough in the individual business areas, that there are no particular barriers to growth, and that there are good opportunities for developing markets. Growth teams have been established in the following areas: Maritime Water, bio and environmental solutions Energy and climate Tourism and leisure economy 15 Creative business and design Health welfare solutions Food ICT and digital growth The growth teams have been established within internationally-oriented areas of the Danish business community and address a range of societal challenges where there is also significant potential for Danish businesses. Danish enterprises already possess strong qualifications when it comes to seizing new opportunities and the growth teams established identify areas where there is a need for an effort to translate opportunities to growth and employment, including improved knowledge accumulation, knowledge exchange, market development and market maturity.

15 16 specific challenges where there are Danish positions of strength (knowledge and business) and interaction with public regulation and demand. Not all challenges can be solved simultaneously. That is why a solid, professional prioritisation basis for innovation policy will be developed, including for the coming societal innovation partnerships. The effort will build upon the Danish strategic research programmes of recent years, the increased focus on development, testing and demonstration in prioritised areas and the work of the growth teams set up as part of the proactive business and growth policies of the Danish government. The partnerships address several of the ERAC evaluation recommendations. Focus is on areas significant for the Danish economy and where Danish enterprises have a significant growth potential.3 The partnerships can cover different actors dependent of the challenge they must address. For example, they can include both large and small private enterprises, organisations, knowledge institutions, Approved Technological Service institutes (ATS institutes) and innovation networks, public authorities, private foundations and users, as well as regional, national and international actors. Funding for the partnerships will be outlined in the national budgets of coming years. The societal innovation partnerships will help strengthen the link to the EU s new research and innovation programme, Horizon This provides a good basis for increasing Danish participation in European research cooperation and increasing the amount of EU research funding for programmes and projects with Danish participation. This includes relevant European Innovation Partnerships (EIP), and Knowledge and Innovation Communities (KICs) under the umbrella of the European Institute of Innovation and Technology (EIT). At the same time, the Danish government is working on a strategy for intelligent public purchase. The strategy will support competition for public sector tasks with the aim of securing better and cheaper procurement, while ensuring that public demand is increasingly used to promote innovation and support welfare technology and a green conversion of the economy. The partnerships can qualify the public demand and contribute with relevant solutions which, in appropriate extent, can be purchased by the public sector. In this way, intelligent public demand and procurement can supplement one another. The Danish government will: 4. Establish INNO+, a solid, professional basis for the prioritisation of innovation policy. During early 2013, specific societal challenges will be identified challenges where Denmark has a particular potential to create new short- or mid-term solutions. INNO+ will be developed in a broad inclusive process with participation from the business community, knowledge institutions, organisations, councils, foundations, ministries, the wider public sector, etc. INNO+ will comprise a knowledge basis for prioritising future innovation partnerships. 5. European Research Area Comittee (2012). Erac Peer Review of the Danish Research and Innovation System Outcomes Report.

16 5. Establish a model for societal innovation partnerships. The partnerships will form the basis for innovative ventures within areas where Denmark has innovation potential and where there is a specific demand for solutions to great societal challenges. 360 innovation ventures will be undertaken with relevant actors to accelerate innovation and support large-scale implementation within limited time periods (three to five years). Different societal challenges require different responses, activities and competences. Therefore, a model will be established that is flexible in relation to different types of specific challenges. The partnerships will reflect the scale and character of the challenge they are aimed at solving. The partnerships will present a thorough analysis of the specific challenge e.g. with the involvement of design methods and knowledge of behavioural changes. When the partnership is launched, relevant stakeholders will be involved and relevant research and development activities will be initiated to contribute with solutions to the specific challenge. From 2014 and onwards it is expected that up to three societal innovation partnerships can be initiated annually. And in the long run, it is estimated that the partnerships will account for up to a third of the funding from current public investments in strategic research, technological development, and innovation. The partnerships pre-suppose additional co-financing from participating enterprises, private foundations etc Initiate pilot innovation partnerships in A number of pilot partnerships will be established to ensure experience with different models of cooperation. The experience gained will form the basis for establishing the final model for partnerships by The pilot partnerships will be established in areas where there are knowledge and business positions of strength, where public funds have already been allocated to support research, innovation, testing and demonstration. For example within food, environmental technology, climate adaptation, health and energy. Four partnerships are already set up at the beginning of 2013: a. P ilot partnership on sustainable and efficient pork production A pilot partnership is being established that will contribute to the green conversion of the agricultural industry. The objective is to have a fully functional model livestock facility for pig production by The model shall demonstrate how pig production can be adjusted based on the actual environmental impact. The aim is further rollout of the demonstrated production. In that way, the partnership will contribute to improving conventional animal livestock so that the agricultural industry has the opportunity to develop dynamically without impacting its surroundings with smell, nitrogen, phosphorus and greenhouse gasses and thereby creating new jobs in pig production and related industry, including through the export of environmental technologies. Public authorities, industry, interest

17 18 organisations and knowledge institutions are participating in the partnership. Participating ministries: Ministry of Food, Agriculture and Fisheries, Ministry of the Environment, Ministry of Business and Growth, and Ministry of Science, Innovation and Higher Education. b.pilot partnership on better use of alternative water sources (non-potable water) In recent years, decentralised cleaning technologies have become better and cheaper making treated water and rainwater look like an attractive alternative to using ground water. There is great global market potential for technologies that enable the use of treated water as it has the potential to reduce the cost level for production enterprises as well as the fact that there is the prospect of significant water shortages in many global regions. A pilot partnership is being set up to promote technological development and examine whether the current controls are up-to-date and sufficiently conducive to innovation. The objective is that within five years we will have noticeably greater utilisation of non-potable water. The partnership will involve public authorities, knowledge institutions, water enterprises and technology producers. Participating ministries: Ministry of the Environment, Ministry of Business and Growth, and Ministry of Science, Innovation and Higher Education. c.pilot partnership on innovative climate adaptation solutions A pilot partnership will be established to address the growing problems of more frequent and destructive weather patterns resulting from climate change. The objective is that, within five years, a significantly greater share of municipalities climate adaptation measures will incorporate new solutions and/or be based on new technology. This pilot partnership will promote the development of innovative solutions, including integrated climate adaptation solutions for cities and rural areas; it will also establish a shared data base for climate adaptation, including a hydrological conditioned elevation model. The model can be used in calculations of water flow and floodrisk. The partnership will create a greater demand for an intelligent public planning platform a platform which can identify less expensive and more futureproofed solutions than expansions of urban drainage systems. The partnership comprises research institutions, public authorities, utilities and private enterprises. The partnership will ensure testing and development of new technologies and new innovative solutions at full scale e.g. for buildings or watercourses. The partnership is a result of the 2013 financial agreement between the Danish government and Local Government Denmark, in which the parties agreed to an increased investment of DKK 2.5 billion ( 320 million) in climate adaptation, with special focus on flood prevention. Participating ministries: Ministry of Business and Growth, Ministry of the Environment, and Ministry of Science, Innovation and Higher Education.

18 d.pilot partnership on the development of an intelligent energy system smart energy By 2020, half of Denmark s energy will come from wind energy. In line with Denmark using more green energy, it is necessary to promote the development of an intelligent energy system a smart grid. It is also necessary to use future opportunities of utilising and storing wind energy in other energy systems, including district heating and gas systems. In the district heating system, wind energy can be utilised via heating pumps and elements. In the gas system, wind energy can be stored seasonally through the production of hydrogen. This can then be used directly in the gas network or through the upgrading of biogas to a natural gas quality. In coordination with the Ministry of Climate, Energy and Building s coming smart grid strategy, a pilot partnership is being established that will promote development towards a smart energy system. The partnership will be comprised of authorities and key stakeholders. The objective is that within the next three to five years, the partnership will ensure that the strategy s initiatives are followed up on, including demonstration of future smart grid and smart energy solutions, testing of specific market models for trading with flexible electricity consumption and suitable regulatory frameworks. The specific objective of the partnership will be determined in connection with the follow-up to the coming smart grid strategy. Participating ministries: Ministry of Climate, Energy and Building, Ministry of Business and Growth, and Ministry of Science, Innovation and Higher Education Create a national strategy for Danish participation in EU programmes. Danish participation in the EU s framework programme for research and innovation must be improved. A strategy will be formulated on Danish participation in EU partnerships, programmes and co-financed instruments in the research, innovation and business area. The strategy will identify the instruments with particular interest for Denmark and with the greatest potential for Danish participation and utilisation of EU funding. The potential for Danish participation in European innovation partnerships should also be investigated.

19 20 2. More knowledge translated to value Increasingly innovation processes are rooted in different forms of knowledge including R&D activities, practice, technology, market knowledge, consumer patterns and cultures, etc. Innovation often happens in open processes where enterprises cooperate with a broad range of actors nationally and internationally. The Danish government will therefore gear the innovation schemes in a way which has users as its starting point and thus increase the mutual knowledge exchange and cooperation between knowledge institutions and enterprises. Knowledge is important for the productivity and innovation of enterprises. Enterprises which invest in R&D are on average 15 per cent more productive than enterprises that do not. Productivity is even greater in enterprises which cooperate with knowledge institutions. The circle of innovative and knowledge-based enterprises should be widened through enhanced cooperation with knowledge institutions. More new innovative enterprises should also be created, using public and private research as their launching pad. The public sector currently supports knowledge and innovation in enterprises through a range of innovation schemes, and through knowledge exchange and cooperation between enterprises and business academies, university colleges, universities and other knowledge institutions. Today, enterprises can find support for innovation and knowledge through innovation schemes on regional, national and international levels. The focus stretches from knowledge accumulation and cooperation to market maturation and commercialisation. The ERAC evaluation emphasises that the public innovation effort in Denmark is largely comprehensive. The funding system itself, however, is fragmented into several programmes. This can be a particular challenge for enterprises which have little or no experience in utilising public innovation schemes. Many new product types, new manufacturering processes and other types of innovation are created through the interaction ATS institutes have with SMEs. This role should be maintained and developed further with focus on positive growth and innovation effects in enterprises Better and simpler support of knowledge cooperation 6. Danish Agency for Science, Technology and Innovation (2010). Productivity effects of research, innovation and innovation in business. See also Danish Agency for Science, Technology and Innovation (2011). Economic effects of research cooperation between businesses and public knowledge institutions.

20 Clusters, specialised regions and global knowledge and innovation networks contribute to knowledge exchange and cooperation. To support the accumulation of effective cooperative relationships with enterprises, knowledge institutions, authorities and other parties, Danish innovation networks and clusters must be among the best in Europe. The loss of jobs in Danish industry in recent years has created a need for increased cross-disciplinary links between knowledge, innovation and manufacturing as well as between knowledge institutions and manufacturing enterprises. 21 The Danish Council for Technology and Innovation provides advice and guidance on innovation. It has identified the need to develop further the innovation incubators that invest risk capital on behalf of the Danish state into new knowledge-based enterprises. The council estimates that the private risk capital market will be at a standstill for a number of years to come. To compensate, there will be a need to concentrate efforts in fewer innovation incubators with greater economic volume and robustness. The incubators can better help new entrepreneurial enterprises reach a stage where other investors are ready to take over. It should be easier for enterprises that are currently not innovative or lack the necessary experience with research and knowledge cooperation, to receive help in accessing and developing knowledge and innovation. This is particularly true in new growth markets, where there could be a need for local Danish support. The Danish government will: 8. Support more professional clusters and networks. Enterprises engaging in knowledge collaboration have greater productivity on average than other enterprises. In the spring of 2013, a strategy for collaboration on Denmark s clusters and networks policy will be presented. The strategy will strengthen the coordination of local, regional, national, and international cluster and network efforts, certify Danish innovation networks and cluster organisations to European standards, and strengthen their international orientation. The initiative is aimed at strengthening and developing Danish clusters and networks and increasing the international involvement of Danish enterprises. Information about relevant schemes and application deadlines must be widely communicated to the target group. Schemes with common elements should have common marketing channels and, to the best of their ability, coordinated communication efforts so that the target group experiences a cohesive innovation system. 9. Establish a collective programme for knowledge-based innovation in SMEs. A collective programme for knowledgebased innovation in SMEs will be established, known as DK-SME. The programme will take existing instruments in the Ministry of Science, Innovation and Higher Education as its starting point e.g. the inno- Closer coordination must be ensured just as undesirable overlap between individual schemes in the research and innovation system should be avoided. The ERAC evaluation notes that the Danish innovation system is unnecessarily complex. Instead of competing schemes at for example, regional and state levels, cooperative agreements should be established on relevant areas.

21 22 vation voucher scheme, the Industrial PhD programme and the Innovation Assistant Scheme, generating a strengthened focus of SMEs on innovation. One joint applicant access point will be established to all schemes under the programme, just as better access to knowledge institutions will be secured. More types of projects will also be able to attain support. The programme will also ensure better links to other regional and state-level services such as the international innovation and export guidance at the Trade Council. 10. Prioritise R&D which supports Danish manufacturing. Locating production and manufacturing in Denmark is crucial to maintaining a high level of innovation. The Danish government has therefore allocated DKK 40 million ( 5.3 million) in 2013 for strategic research in future production systems. The effort will form the basis for strengthening all aspects of the process from knowledge institutions to the Danish manufacturing sector to retaining industrial jobs in Denmark. 11. Establish a StartupGraduate scheme. A StartupGraduate scheme will be established in connection with the innovation assistant scheme and the Industrial PhD programme. This new scheme will be aimed at graduates who want to start their own company. Those involved will receive advice and financing for up to a year in connection with starting their own company. The initiative will motivate graduates to be innovative and support the establishment of new knowledge-based enterprises. 12. Establish three new international innovation centres. Three new innovation centres will be opened in 2013 in Seoul, Sao Paulo and Bangalore respectively. The centres will contribute to increasing education, research and innovation cooperation between Danish and international institutions and enterprises. They will also help with the setting up of networks and partnerships with foreign partners and attract investment and talent to Denmark. 13. Implement a simplification package for all public innovation schemes. The innovation schemes must be simplified and improved taking four common principles for cross-level and cross-disciplinary innovation schemes as their starting point: (1) Common collaborative areas between innovation schemes must be better utilised and there must be a clear division of labour between the different schemes. (2) Administration of innovation schemes must be simplified and uniform. (3) Service and communication of schemes must be coordinated with the user as the focal point. (4) Ensure that public funding of innovation schemes results in a greater effect through a common method design for evaluations as well as a systematic transversal evaluation and measurement of results of the schemes. 14. Increase the critical mass and gather competences in the framework of fewer innovation incubators. A new tender of innovation incubators will be initiated in The tender will support the increase of critical mass in the innovation incubators and gathering competences in fewer innovation incubators with greater volume and closer ties to private venture funds. The incubators will maintain and improve the ability to attract and service entrepreneurs, also outside of the large university cities.

22 2.2. Focus on innovation at knowledge institutions Many public knowledge institutions have organised knowledge centres and innovation units to strengthen collaborative relationships and mutual knowledge exchange with enterprises. Others such as business academies and vocational colleges have particular insight into SMEs. It provides a good basis for transforming knowledge into practice in enterprises, and contributes to bridging knowledge to enterprises in cooperation with ATS institutes among others. The positive development of recent years must continue and institutions are expected to contribute with even greater and more active responsibility. More cooperation with the business community, authorities, interest organisations and other actors is needed. The development must be supported by a strengthened effort to measure and document knowledge exchange and increased focus on innovation in education, as well as an increased focus on the prevalence of best practice. 23 The increased investments and capacity building at educational institutions in recent years will continue to be supported. The universities have received a three-year funding security. University colleges and business academies will receive almost DKK 1 billion over the next three years to improve quality. A distinct focus will also be granted to supporting practiceoriented innovation activities in enterprises. There is a clear need to increase the societal effect of investments and to translate the degree of freedom at institutions of higher education, especially universities, into considerably more cooperation and knowledge exchange with enterprises in the future. This calls for a radical change of culture in the educational system. Attractive career paths are needed for employees who work determinedly with knowledge exchange or innovative competences for students. Students should also be seen as an independent resource that can strengthen linkages between knowledge institutions and enterprises. Box 6. Development contracts for higher education institutions The development contracts are multiannual agreements between the Danish Ministry of Science, Innovation and Higher Education and the institutions of higher education. The agreements lay out a number of specific objectives for every institution within a prioritised area. The 2012 development contracts with each of the 36 institutions of higher education include an overall objective to increase innovation capacity. The institutions themselves will set the specific objectives. Some of these objectives include the following: Increase the scale of cooperation with private enterprises that is conducive to innovation, including in particular with SMEs. More collaboration between students and enterprises, including exams based on collaboration with enterprises. Increase the degree of external co-financing of R&D activities. More scientific articles with co-authors from industry and other external collaborative partners.