ENHANCEMENT OF THE BUSINESS ENVIRONMENT IN THE SOUTHERN MEDITERRANEAN

ENHANCEMENT OF THE BUSINESS ENVIRONMENT IN THE SOUTHERN MEDITERRANEAN

Strategy and Policies in Support of Innovation Max Bulakovskiy and Hasan Omar Ramallah, 29 October 2014 2

AGENDA 1. Introduction: definition and trends 2. Innovation policy and measurement 3. Ecosystem approach 4. Examples in the EU 5. Examples in the Mediterranean 6. Conclusions 7. Q & A 3

1. Innovation definition An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations. Oslo Manual,OECD, 2005 4

Paradigm Shift in innovation understanding Fundamental research is still important, but innovation also comes from demand-driven and applied research Innovation is not only reserved to researchers and everyone can play a role (SMEs, entrepreneurs, you!) Innovation does not have to be technological it can be social, in creative sectors, can be in business models etc From sectoral perspective many countries have seen increase in R&D intensity in the more traditional mediumtech industries ( ie: rubber, metals, food) as well as in growing markets driven by societal challenges as waste treatment, cleantech and water. 5

Horizon2020 (2014-2020) Horizon 2020 is a totally new type of research programme for the EU - indeed, it is no exaggeration to call it a "paradigm shift" in how we fund research and innovation.... It will fund not just the best fundamental research, but also applied research and innovation, bringing in small and large companies. This is vital because we know that research and innovation are the foundation of growth and jobs. we will be more demanding about the impacts of research and innovation, and this will be one of the key criteria for selecting which proposals get funding. Máire GEOGHEGAN-QUINN, European Commissioner for Research, Innovation and Science (28 January 2014) http://ec.europa.eu/programmes/horizon2020/ 6

2. Innovation Policy. Government policies can support innovation by continually reforming and updating the regulatory and institutional framework within which innovative activity takes place. Policy instruments to accelerate innovation are either technology(supply) push or demand (market) pull. Technology-push instruments focus on supply-side of innovation (funds, laboratories, researchers, patents etc) Demand pull instruments are rather focused on governmental measures for the uptake of innovations or to improve articulation of demand. (procurement / regulations/ standards etc) 7

Innovation process Funding / Investment Research Creating Awareness IDEA Incubation/ Acceleration Business Start Up Upscalling Market creation Preincubation Incubation/ Acceleration Scaling - up 8

Policy actions Based on empirical evidence policy actions should focus*: Ensure that regulations do not have disincentives to growth [Bankruptcy regimes etc] Ensure access to debt and equity finance ( especially for highgrowth organisations) [VC Funds etc] Favourable tax for young innovative companies Promote internationalisation [cluster policies] Protecting IP and making it less costly for innovators TechTransfer and improving links between science base and the business sector [push for commercialisation] Innovation and entrepreneurship culture through education and training * Based on publication State of the Innovation Union 2012, Publication 2013 9

Measuring Innovation Variety of approaches: Global Innovation Index Innovation Union Scoreboard ERAWATCH Regional Innovation Monitor Plus OECD STI scoreboard Five input pillars capture elements of the national economy that enable innovative activities and two output pillars that capture actual evidence of innovation outputs. Global Innovation Index this year (2014) topped Switzerland, the UK and Sweden as most innovative economies. www.globalinnovationindex.org 10

3. Ecosystem approach Strategy of innovation for a particular nation would rather focus on the expectations of the country, its resources, educational system and international positioning. It can be positioned as on Biotechnologies, ICT as well as on societal areas related to health, social innovation etc. Strategy cannot be one for all: EU traditional mid-tech industries (food machinery) + societal USA 65%- high R&D intensity (ICT/health) Telents Educational institutions Suppliers Enterprise Clients Infrastructure Finance www.competitivite.gouv.fr Research organisations Ideas 11

4. Example of Sweden 100 years ago it was a fairly poor country in Europe It has less then 0.15% of the world s population No specific natural resources Swedish National Innovation System Characteristics: The economy strongly internationally linked The big international companies dominate the R&D-system (dependence on multinationals -> global innovation system trends) Universities dominate the public R&D-system and they have a third task, to cooperate with companies and society (Triple Helix regional nodes) 43 Business incubators, 33 Business parks, numerous seed capital funds Continuous development of stronger high-tech and medium tech specialisation. Drop in R&D intensity (from 4.13% in 2001 to 3.37% in 2011) 12

Major organisations involved in R&D activities in Sweden (2006) 13

VINNOVA VINNOVA (Swedish Governmental Agency for Innovation Systems) Established in 2001 Budget 2006: 150 M / 2013: 350M Staff: some 200 ppl with 25% having PhDs Leading government agency in the field of innovation under the Ministry of Industry, Employment and Communication Mission 2006: Promote sustainable economic growth by financing needs-driven R&D and by developing innovation systems Mission 2014: Develop Sweden s innovation capacity for sustainable growth and for the benefit of society Focus: Strengthening research cooperation between academia, companies and politics/public sector in the Swedish innovation system 14

Initial 5 years of VINNOVA Critical steps in the evolution of VINNOVA during its first five years Establishing the legitimacy of support for needs-driven research Integration of three former funding agencies and building an organization for more than traditional R&D-funding ( Actor-oriented perspective/ Need for better analytical basis) Establishing the Triple Helix model National Incubation Program. VINNOVA focusing on verification and universities own infrastructure for commercialization. R&D-programs as main result of high level strategic dialogue between government and key export industries. Reversing the decline in government basic funding for the Research Institute sector Breaking with tradition with new program for direct support of companyled R&D in SMEs 15

Swedish Policies and Reforms for Innovation The Innovation Bill (2008) Focus on linking research and innovation Funding (performance based grant funding of Universities and programmes) Strategic focus on 24 research areas of interest (cancer/ e-sience/ oceanic environment etc) The Innovation Bill (2013) Emphasis on R&D in strategic innovation and new areas (mining/ wood products) Increased public funding for innovation Specific focus on innovation in SMEs especially in cooperation with universities, seed programmes etc New model: private sector buys R&D services from the institutes while the state funds their facilities and development New Innovation Strategy (2012) Focus on both demand-side measures (new procurement laws) and supply side measures (fund testing and infrastructure) Role of the public sector driving innovation is stressed Focus on new business models / design and services 16

Sweden- summary Mainstreaming funding innovation through development of one dedicated agency. Looking ahead policies focus on societal areas of innovation as future anchor of economic growth. Creating a framework enabling collaboration among variety of actors (ecosystem). Pull policies combined with push policies 17

4. Germany Germany is better at adapting inventions to industry and spreading them throughout the business sector. Much German innovation involves infusing old products and processes with new ideas and capabilities or recombining elements of old, stagnant sectors into new, vibrant ones Dan Breznitz HBR, 27 May 2014 German National Innovation System Characteristics: The economy strongly internationally linked - >n1 in EU Innov Scoreboard Innovation expenditure: 1/3 public and 2/3 private he big international companies dominate the R&D-system (dependence on multinationals -> global innovation system trends) Based on medium-high technology sectors (cars/technical products, machinery) [NB- risk from BRIC] Particular strength in business R&D from SMEs (esp. Mittelstand) - many of which are world leaders in their particular small market segment. Very high patenting activities (energy/environment/health) Excellent public research institutes (Fraunhaufer Society, Max Planck Society etc) 18

Germany - Strategy The High-Tech Strategy 2020 (2006 and review in 2010) Instrument to improve cooperation between science and industry Promotes incremental innovation with output in technical/mechanical fields Focused on improving conditions for innovation and internationalisation Targeted PPP in 10 important societal challenges Focus on health, nutrition, climate and energy, communication and mobility. Not introduced any R&D tax credits. Research Campus "Forschungscampus" a competitive funding scheme to strengthen cooperation between companies and research organisations EXIST progamme to stimulate entrepreneurial environment - focused on technology and knowledge based business start-ups. * *http://www.exist.de/englische_version/ 19

ZIM Mittelstand (2009-2013) Empirical research shows that overall employment growth (creation of new jobs) depends critically upon high-growth innovative firms (gazelles) and they are essential for productivity growth. Zentrales Innovationsprogramm Mittelstand (Central Innovation Programme for SMEs) by Federal Ministry of Economics and Technology The Central Innovation Programme for SMEs enhances the capacity of SMEs to innovate and promote networking and cooperation between industry and research (knowledge transfer). Germany's Mittelstand companies are a very important part of the country's economy. 40% of Germany s export. focus on innovative and high-value manufactured products typically privately owned and often based in small, rural communities. 10000 in Germany compared to 4000 in France. Under the ZIM programme, SMEs receive grants for application-oriented R&D&I projects. They can carry out the projects either in-house with their own personnel or in cooperation with other companies or research institutions. 20

ZIM Programme The Central Innovation Programme for SMEs (ZIM) consists of three modules: ZIM-KOOP:R&D&I Cooperation projects of companies and research institutions. ZIM-SOLO:R&D&I Projects of single enterprises. ZIM-NEMO:Network Projects of innovative SMEs (SMEs organized in these networks also can apply for an R&D&I project in ZIM-KOOP). Funding: The funding rate is up to 50%, depending of the size of the SME and its location. Funding is provided only if the projects surpass the current state of technology and lead to new technological products, processes or services. Because the R&D&I funding is concentrated in a single programme, the promotion of innovation is very transparent for SMEs. Objective: Focus on SMEs with less than 50 employees. Reduction of technical and economic risks of innovation projects - Incentives for SMEs to invest more money in research, development and innovation - Transfer of technology - Initiation of long-term cooperation between research institutions and companies - Improving the innovation management. Impact : Since July 2008, more than a billion euros of funding has gone to the SMEs. Easy procedures and its openness to all technologies and topics. 21

Germany - Summary 1. Germany doesn t just concentrate on high tech (focus on incremental innovation); it also tries to infuse new ideas into existing industries (cars, for example). 2. It has built a network of public institutions that help companies innovate. 3. Germany places a high priority on worker training. 4. Links business to research and helps them to commercialise products and internationalise. NB: OECD: The High-Tech Strategy 2020 targets the development of specific strengths in science and technology in the next ten to fifteen years. The Strategy focuses its supports mainly on high tech, export oriented manufacturing, which runs the risk of ignoring the important role that the services sector plays in Germany s innovation ecosystem and in value creation as well as contribute to addressing global challenges (eg. Sustainable Mobility and Better Health). Education & Training Research Private sector collaboration 22

5. Tunisia The innovation system is based on the triple helix model (collaboration: universities, research institutes and startups). Tunisian NIS Evolution: Phase 1 - (1956-1970): The post independence period: building the first capacities Education & Skilled Professionals Phase 2 - (1970-1991): The start and development of the private industrial sector and the growth of higher education and research activities Science and Technology Policy - 1 st attempt Phase 3 (1991- to date): The launch and implementation of a specific R&D policy and the liberalization and restructuring of the economy 23

Tunisia Strategies, policies and tools promote innovation: Tunisia s Constitution mentions scientific research in article 33 which states that the State provides the means necessary to the development of technological and scientific research. Scientific Research & Technological Development Law 1996 National Strategy on Scientific Research and Innovation: 2009 ICT Strategy The Scientific & Technological Innovation Policy consists of encouraging enterprises and industrial support institutions to integrate innovation, technology transfer, and R&D into their strategies. 24

Tunisia According to the Tunisian Strategic Social and Economic Development Plan, reforms will be directed towards development of the national innovation system through the creation of clusters in promising sectors and the development of partnerships between universities, companies and research centers. In addition, creating technologic zones to attract investment in high technological value activities. Institutions: Secretariat of State for Scientific Research and Technology (SERST) 1991 National Center for Innovation and Research in Education Higher Council for Scientific Research and Technology 1992 25

Tunisia 10x increase in number of R&D laboratories Encourage large firms to devote 1% of their turnover to scientific research & technology innovation 2x increase in patents from R&D institutions R&D (Scientific) spending in 2010: 1.1% of GDP (0.21% in Egypt, 0.42 in Jordan and 0.08 in KSA) 1.5% of GDP in 2014 TTO Project FOR ARAB REGION - WIPO 26

Tunisia Pharmaceutical Sector and Innovation: Incentives to support the foreign investors to hold up to 100% of the capital, guaranteeing the freedom of transfer of capital, IP protection Total number of enterprises with foreign participation - 2013: 1895 (40% French and 28% Italian) - the Agency for the Promotion of Industry and Innovation (APII) National Strategy develop techno poles: El-Ghazala (1999), the first ICT techno pole is ranked 16th / 42 intl techno poles, Davos World Economic Forum (2004). More than 30 incubators, geographically distributed Ranked 40 th / 142 countries in the Global competitiveness - WEF Private Sector Development: Ranked 30 th / 183 in terms of Trading Across Borders - World Bank / IFC Doing Business Report (2010). 27

5. Lebanon National Council of Scientific Research (CNRS) - 1962 2006: Science, Technology and Innovation Policy (STIP) for Lebanon - UNESCO support: ST, economy, high-quality jobs, knowledgebased society, universities and private, regional and intl networks ) Plan of Action, Responsibilities and M&E in place National Council for Scientific Research-Lebanon (CNRS-L) and the World Bank Understanding The Dynamics of Innovation in Lebanon for Policy Needs Safadi-Stanford Initiative for Policy Innovation (SSIPI) National e-strategy 2004 IPR and Online Banking Laws 1999 The Entrepreneurship Network of Lebanon (ENL) by AUB - 2000 28

Lebanon 600 R&D Companies in Lebanon 546 500 481 440 400 389 342 300 R&D Companies 200 100 0 2004 2005 2006 2007 2008 29

6. Conclusions Innovation strategy is needed in order to streamline and focus innovation. Strategy should include inputs coming from variety of stakeholders and users. Innovation ecosystem approach should be considered weighting the national SWOT analysis and it is a cyclical process. Policies should consider focus on knowledge-based economy and demandside pull to boost innovation It is not enough to have policies or funding - an efficiently working ecosystem is crucial in order to ensure cooperation among the research stakeholders, the training provision actors as well as private sector actors with the aim to develop and commercialise innovative products & services. Focus on both demand-side measures (new procurement laws) and supply side measures (fund testing and infrastructure) Innovation can occur in step-to-step approach or in disruptive leaps. Plenty of examples are available also for innovation policy. 30

Thank you for your attention Contact: Name: Max Bulakovskiy Phone: +32 (0)4 73 75 05 76 Email: boulakovski@yahoo.com 31