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

EBESM Project 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

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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

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“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 medium-

tech industries ( ie: rubber, metals, food) as well as in

growing markets driven by societal challenges as waste

treatment, cleantech and water.

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Horizon2020 (2014-2020)

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“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/

2. Innovation Policy

Government policies can support innovation by continually reforming

and updating the regulatory and institutional framework within which

innovative activity takes place.

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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)

.

Innovation process

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Market creation Pre-

incubation Incubation/ Acceleration Scaling - up

Research Creating

Awareness IDEA

Incubation/

Acceleration Business

Start Up Upscalling

Funding / Investment

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 high-

growth 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

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* Based on publication State of the Innovation Union 2012, Publication 2013

Measuring Innovation

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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

Variety of approaches:

Global Innovation Index

Innovation Union Scoreboard

ERAWATCH

Regional Innovation Monitor Plus

OECD STI scoreboard

Enterprise

Research

organisations

Educational

institutions

Clients

Suppliers

InfrastructureInfrastructure

Finance

Ideas

Telents

3. Ecosystem approach

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“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)

www.competitivite.gouv.fr

4. Example of Sweden

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• 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)

Major organisations involved in

R&D activities in Sweden (2006)

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VINNOVA

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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

Initial 5 years of VINNOVA

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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 company-

led R&D in SMEs

Swedish Policies and

Reforms for Innovation

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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

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

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4. Germany

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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)

“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

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. *

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*http://www.exist.de/englische_version/

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.

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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.

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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.

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Research

Private sector

collaboration

Education & Training

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).

5. Tunisia

The innovation system is based on the ‘triple helix’ model

(collaboration: universities, research institutes and start-

ups).

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” - 1st attempt

Phase 3 (1991- to date): The launch and implementation of a specific R&D

policy and the liberalization and restructuring of the economy

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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.

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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

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Tunisia

TTO Project FOR ARAB REGION - WIPO

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10x increase in number of R&D laboratories

2x increase in patents from R&D institutions

Encourage large firms to

devote 1% of their turnover to

scientific research & technology

innovation

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

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 40th / 142 countries in the Global competitiveness - WEF

• Private Sector Development: Ranked 30th / 183 in terms of

“Trading Across Borders” - World Bank / IFC Doing Business Report (2010).

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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, knowledge-

based 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

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Lebanon

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546

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2004 2005 2006 2007 2008

R&D Companies in Lebanon

R&D Companies

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 demand-

side 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.

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Thank you for your attention

Contact: Name: Max Bulakovskiy

Phone: +32 (0)4 73 75 05 76

Email: boulakovski@yahoo.com

EBESM Project 31