Supporting the Development of R&D and the Innovation Potential of Post-Socialist Countries (Nato Science Series)

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SUPPORTING THE DEVELOPMENT OF R&D AND THE INNOVATION POTENTIAL OF POST-SOCIALIST COUNTRIES

NATO Science Series A series presenting the results of scientific meetings supported under the NATO Science Programme. The series is published by IOS Press and Kluwer Academic Publishers in conjunction with the NATO Scientific Affairs Division. Sub-Series I. II. III. IV. V.

Life and Behavioural Sciences Mathematics, Physics and Chemistry Computer and Systems Sciences Earth and Environmental Sciences Science and Technology Policy

IOS Press Kluwer Academic Publishers IOS Press Kluwer Academic Publishers IOS Press

The NATO Science Series continues the series of books published formerly as the NATO ASI Series. The NATO Science Programme offers support for collaboration in civil science between scientists of countries of the Euro-Atlantic Partnership Council. The types of scientific meeting generally supported are "Advanced Study Institutes" and "Advanced Research Workshops", although other types of meeting are supported from time to time. The NATO Science Series collects together the results of these meetings. The meetings are co-organized by scientists from NATO countries and scientists from NATO's Partner countries - countries of the CIS and Central and Eastern Europe. Advanced Study Institutes are high-level tutorial courses offering in-depth study of latest advances in a field. Advanced Research Workshops are expert meetings aimed at critical assessment of a field, and identification of directions for future action. As a consequence of the restructuring of the NATO Science Programme in 1999, the NATO Science Series has been re-organized and there are currently five sub-series as noted above. Please consult the following web sites for information on previous volumes published in the series, as well as details of earlier sub-series: http://www.nato.int/science http://www.wkap.nl http://www.iospress.nl http://www.wtv-books.de/nato_pco.htm

Series V: Science and Technology Policy - Vol. 42

ISSN 1387-6708

Supporting the Development of R&D and the Innovation Potential of Post-Socialist Countries

Edited by

Walter Leal Filho TuTech, Hamburg, Germany

/OS

Press

Amsterdam • Berlin • Oxford • Tokyo • Washington, DC Published in cooperation with NATO Scientific Affairs Division

Proceedings of the NATO Advanced Training Course on Supporting the Development of R&D and the Innovation Potential of Post-Socialist Countries 3-5 April 2003 Yerevan, Armenia

© 2004, IOS Press All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without prior written permission from the publisher. ISBN 1 58603 399 9 Library of Congress Control Number: 2003115065 Publisher IOS Press Nieuwe Hemweg 6B 1013 BG Amsterdam Netherlands fax:+31 206203419 e-mail: [email protected]

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LEGAL NOTICE The publisher is not responsible for the use which might be made of the following information. PRINTED IN THE NETHERLANDS

V

Introduction This book is one of the outcomes of the NATO Advanced Training Course (ATC) "Supporting the Development of R&D and the Innovation Potential of Post-Socialist Countries", held in Yerevan, Armenia on 2-5 April 2003. The event follows on a previous training event where matters related to innovation in the Black Sea countries were examined. The publication deriving from it, "Prospects of Integration and Development of R&D and the Innovation Potential of Black Sea Economic Cooperation Countries" (edited by Walter Leal Filho, 2002) has also been published by IOS Press and is available for consultation. The purpose of the ATC in Yerevan was to try to address the problems created by a general lack of skills in R&D, lack of local expertise on information and technology transfer and lack of experience on the dissemination of R&D results in NIS countries. It did so by means of a compact programme transferring the experience of experts from NATO countries to experts from Caucasian and neighbouring post-socialist countries, who are involved in innovation activity including R&D in science and technology development, especially those active in terms of technology transfer and implementation plus the development of innovation infrastructure. Matters addressed during the event included sustainable innovation; the use of Innovation Relay Centres (IRCs) as tools for technology transfer; use of information for a sound knowledge basis; financing of innovation; legal rights, and patents and intellectual property. Moreover, the event entailed a panel in which delegates from NIS countries could present country experiences and reflect on their own problems. Most of the issues addressed in the ATC have been documented in this book which tackles the following issues: Trends in innovation in a European context - problems and perspectives The work of Innovation Relay Centres Principles and approaches in national innovation policy in Armenia Legal dimensions of innovation: experiences from a patent agency Mechanisms and Tools for Innovation Management and Business Development INTAS and its activities in innovation Overcoming barriers to R&D in post-socialist countries R&D Developments and Mechanisms in the European Union Patent and Licensing as tools for technology transfer - from theory to practice It is a fact that NIS are transition countries and that they have been experiencing a loss of R&D infrastructure. By means of the ATC and the content it promoted, a step forward towards preventing the further deterioration of facilities and ideas in the C&E Europe region has been made. Thanks to the ATC, whose support from NATO is gratefully acknowledged, participants were trained about the ways to deal with such problems and are now motivated towards providing an active contribution to address them. This book is expected to inform and inspire those working in the field. We are grateful to Susana Borras and Andrzej Jasinski for sharing with us their perspectives, prepared as part of the forum "European Innovation. Dynamics, Structure and Values", facilitated by the University. Their valuable inputs enrich this publication, providing added value to the presentations made by the speakers and participants. This volume illustrates what can be achieved if we really strive to implement

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Introduction

innovation in C&E Europe, by showing how plans may be realized despite difficult conditions. It also illustrates the need for international cooperation and shall hopefully encourage further cooperative works in rapidly growing area. Walter Leal Filho and Bardukh Gabrielyan Co-Directors

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Contents Introduction

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Trends in Innovation in a European Context - Problems and Perspectives W. Leal Filho

1

Legal Dimensions of Innovation L. Rehberg

11

Knowledge and Innovation - New Developments in the UK L. Martin

19

Examples of International Co-operation in Technology Transfer and Environmental Education in Greece C. Skanauis

29

Research and Development as Tools for Developments in Ukraine A. Kuzmenko

37

Problems and Approaches in National Innovation Policy in Armenia B. Gabrielyan and T. Arzumanyan

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Innovation Relay Centres - New Trends in a European Project P. Wolfmeyer

59

(Mis)match between Demand and Supply for Technology: Innovation, R&D and Growth Issues in Countries of Central and Eastern Europe S. Radosevic

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Current Problems of Biotechnology in Armenia E.G. Afrikian

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SME and Innovation Policy in Bulgaria PS. Gramatikov

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The Role of Universities in the Development of an Innovative Economy in Russia V. Atoyan, A. Slepoukhin, Yu. Tchebotareusky and N. Kazakova

109

Development of Scientific and Technological Capabilities in Belarus A.I. Pobol

117

Environmental Management — A Real Area for Innovation in Belarus S. Zenchanka, Ju. Lakouets, A. Zenchenko and S. Malchenko

129

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Contents

INTAS and its Activities in Innovation: What a Research Funding Organization Can Do M. Spiesberger

135

Innovation in Transition: Lessons from Poland A.H. Jasinski

141

Some International Perspectives on Innovation W.Leal Filho

151

Subject Index

173

Author Index

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Supporting the Development of R&D and the Innovation Potential of Post-Socialist Countries W. Leal Filho (Ed.) IOS Press, 2004

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Trends in Innovation in a European Context - Problems and Perspectives Walter Leal Filho TuTech, Harburger Schlofistrasse 6—12, D-21079 Hamburg, Germany Abstract. This paper describes some of the latest trends in innovation in Europe. It also outlines some of the specific problems of innovation and introduces the concept of sustainable innovation as a tool towards ensuring the long-term success of innovation initiatives.

1. Introduction Although there are various definitions of innovation, it is acknowledged that innovation occurs when a business or research institution introduces a new product or service to the marketplace, or adopts new ways of making products or services. The concept may refer to technical advances in how products are made or shifts in attitudes to the way in which products and services are developed, sold and marketed. Innovation cannot be regarded as being a new phenomenon. Innovation has been, and continues to be, studied from a wide variety of points of view. Academics and practitioners, consultants and researchers have extensively discussed the process of innovation and at those breakthrough concepts and products considered innovations, looked for the secrets contained in their success. In addition, government, and policymakers have looked for the keys to innovation as a source of national growth and prosperity. No matter from which perspective one looks at it, innovation invariably implies a great degree of creativity and dynamism, without which it may not occur. It means that enterprises are always looking for better ways of producing and marketing products and services. An economy can be regarded as innovative when it is open to new ideas and technology and when these are supported. This increased flexibility can lead to improved productivity and competitiveness and will result in a higher standard of living. There are various examples illustrating the extent to which innovation is supported in European countries today. In a publication titled "Prospects of Integration and Development of R&D and the Innovation Potential of Black Sea Economic Co-operation Countries" (Leal Filho, 2002) a set of examples from EU countries and from Central and Eastern European countries is given. Some further examples of innovation initiatives and approaches, looked at from different angles, are outlined in the subsequent sections of this paper. In the UK, the London Development Agency supports the technological aspects of the city's economic development on behalf of the Mayor of London. London considers itself the knowledge capital of Europe. The region's 42 Higher Education Institutions constantly generate new innovation through their research, and feed these into industry and government. London also accounts for 17 per cent of the UK's gross domestic product (GDP). GDP per head is more than 40 per cent higher than the UK average.

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There is a quarter of a million businesses in the region, accounting for 15.6 per cent of the UK total. The region has a highly skilled and educated workforce - over a third of London workers hold degrees or their equivalents. Over 100 of Europe's top 500 companies have their headquarters in London. A number of cluster groups and science parks exist within the London region, delivering start-up accommodation in a safe environment with many business support facilities and services available on-site. The Agency tackles constraints to London's economic growth by supporting business development, improving the supply of business premises, encouraging knowledge transfer from higher education to business and addressing shortages of skills. The Agency is also involved in securing new infrastructure and physical regeneration. In Italy, initiatives and actions in the field of innovation are taken at a European level as part of the various programmes undertaken in the context of the Information Society. Part of the responsibilities of the Italian Ministry for Innovation and Technologies is to help coordinate and drive forward European activities relating to the Information Society, particularly activities connected with the e-Europe initiative launched by European Union Heads of State and Government at the European Council in Lisbon in March 2000. The initiative and the "Action Plan" associated with it are pivotal elements for the definition and harmonisation of EU countries' technological innovation policies. In the European context and, more specifically, within the framework of policies and actions relating to the Information Society, the new Ministry for Innovation and Technologies has provided Italy with a key interlocutor in relations with the European Commissioner for the Information Society and the relevant Directorate. More specifically, the new Department is responsible for: a. the supervision, co-ordination and periodic updating of information relating to the entire range of actions, initiatives and projects taking place in Italy that are relevant to the e-Europe initiative; b. coordinating and providing information about the Italian contribution to European Commission working groups dealing with subjects relating to the Information Society; c. providing support to the Committee of Ministers for the Information Society on issues with an EU dimension; d. formulating proposals on subjects falling within the Department's remit and preparing for meetings of European ministers responsible for the Information Society and eGovernment issues. In Sweden, the Swedish Agency for Innovation Systems is allocating SEK 400 million (approximately EUR 40 million) for a period of ten years to promote growth in Swedish regions. The initiative "INNVAXT - Regional Growth through Development of Dynamic Innovation Systems" followed a Government Bill titled "R&D and Co-operation in the Innovation System" (2001/02:2) which states that VINNOVA is to stimulate strong innovation systems by supporting expert environments for research and development, as well as by building competitive and dynamic regional networks. In the opinion of Per Eriksson, Director General of VINNOVA, "Innovative capacity is crucial for achieving growth in Swedish regions. This requires world-class research and education, as well as effective innovation systems for these regions. This initiative is both a 'facilitator', allowing innovation systems to function more efficiently, and a means of a support for research in areas of future growth in the regions". Sweden's capacity for innovation is a decisive factor in the country's economic growth and prosperity. One central component of the Swedish growth policy is the development of effective regional innovation systems which contribute to international competitiveness, with the aim of increasing growth. Innovation takes place within the

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framework of complex processes as a result of a variety of participants learning from and interacting with each other. Experience and research show that the innovation system's capacity for producing this type of result is a decisive factor in promoting growth. Geographical proximity has the potential to create competitive advantages in terms of interaction, learning, access to skills and co-operation in development and business. Regions which have recognised this can consciously develop their own competitive advantages. Increased growth and international competitiveness in the individual regions will also contribute to growth in the country as a whole. Against this background, VINNOVA is also launching a new programme with the title of "VINNVAXT - Regional Growth through Dynamic Innovation Systems". The objective of the programme is to stimulate innovation and growth in the Swedish regions. The programme is an important component in VINNOVA's wide-ranging co-operation with NUTEK (Swedish Business Development Agency) and ISA (Invest in Sweden Agency). The concept behind the programme is the promotion of effective co-operation between companies, research and development organisations and the political system (the triple helix) within each region, with the aim of developing dynamic regional innovation systems, which will allow the region to be competitive at an international level within specific areas of growth. This brief overview of some national initiatives and approaches shows some of the different angles from which innovation is being considered and illustrates its benefits to a country both at the regional and the national level.

2. Some problems with innovation Smith's Law is the theory that innovation precedes management. Smith's law explains technology and business failures that are a direct result of the gap between innovation and the management of such innovation. For example, Karl Benz is most often credited with the invention of the first commercially adopted automobile, unveiling the Benz three-wheeler in 1885. Brakes, however, were an afterthought, with the first patent on disc brakes occurring 16 years later. For years, management experts have been pursuing innovation, trying to find ways of making use of technological breakthroughs. But these advances often cause problems for organisations that implement early-stage technologies. This dynamic is often seen today, even in the context of innovative applications that are crucial to enterprises. Survey evidence (e.g. Kastrinos and Miles, 1996; Miles and Green, 1996) has shown some of the internal or market factors that have led to the delay, cancellation or prevention of particular innovation projects in a given country such as the UK. One or more of these were reported by around 20% of UK businesses. These included lack of appropriate sources or cost of finance which was cited as an important factor by roughly 50% of those reporting constraints on innovation projects. This is around twice the European average. High technology businesses were more likely to encounter financial constraints. Shortage of technical and managerial skills was the next most important constraint, while availability of external technology was cited relatively infrequently as a problem by innovating firms. Success in raising finance depends on the ability of companies to make a convincing case as well as on risk aversion by financial institutions, so there is an important absence of interrelationship between technical and managerial capability and finance raising.

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W. Leal Filho/Trends in Innovation in a European Context ~ Problems and Perspectives

In addition to costs and the matter of financing, there are many other issues (Miles, 1996; Caracostas and Muldur, 1997), problems and logistical barriers associated with innovation. Some of these are: a. lack of reliable innovation policies (Egle and Stabulnieks, 1998) b. uncertainty regarding the outcome of the innovation initiative c. lack of awareness of future developments beyond existing applications (especially in biotech and energy) d. complexity of the technology and required infrastructure, which limits some categories of innovation to a few regions in a few countries (DESY Synchrotron in Hamburg or Airbus Main Factory in Toulouse) e. infrastructure costs such as those associated with road access, high speed internet access or with the transport of electricity f. security and safety issues In some sectors, structural and legal problems related to specific issues such as nuclear energy and renewables have not been adequately addressed, thus hindering further progress. The accession countries which will soon join the European Union and the majority of countries in Eastern Europe and the Caucasus also suffer from these problems - indeed with greater intensity, as outlined by Boiko (1997), Grens (1997) and Ribickis (1997) and solutions for them must therefore be sought. 3. EU funding for innovation The matter of EU funding for innovation is both sensitive and important, so that it will be further considered in this paper. First of all, it may be said that most EU funding is not paid directly by the European Commission but via the national and regional authorities of the Member States. This is the case for payments under the Common Agricultural Policy and for most payments under the structural policy financial instruments (European Regional Development Fund, European Social Fund, European Agricultural Guidance and Guarantee Fund, Financial Instrument for Fisheries Guidance) which make up, in money terms, the great bulk of EU funding. The Commission pays direct grants to beneficiaries (public or private bodies universities, businesses, interest groups, NGOs - and, in some cases, individuals) in pursuance of other common policies in such fields as research and development, education, training, the environment, consumer protection, and information. It also pays direct grants in pursuance of EU external policies. All EU funding is channelled towards precise objectives and priorities under the various common policies which, in turn, are based on provisions of the Treaties. A comprehensive description of EU funding can be found in specific booklets issued by the European Commission or via CORDIS (http://www.cordis.lu). Some of the grants paid directly are paid under programmes whose payment and other conditions are set out in a specific Council Regulation. Others, such as various pilot schemes and grants paid out of the Commission's administrative expenditure as an EU institution, are governed by the terms of a "Vade-mecum" on grant management which came into force on 1 January 1999 and which seeks to establish common rules regarding applications, calculation of the amount of grants, and payment conditions, for all grants not governed by a specific Council Regulation. At the same time as it adopted the "Vade-mecum", the Commission also adopted a policy on the compulsory publication of all grants awarded directly, including the name of the beneficiary and the amount of the grant awarded. At the moment this


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Fig. 1. Key components for EU funding for innovation.

information is not available on a single web page but is being published separately by each Directorate General on its home page. A list of the grants awarded as part of the Commission's administrative expenses (part A of its budget) is sent to the European Parliament each year. In order to ensure that EU money is spent wisely, the Commission carries out a number of evaluation projects each year. A substantial portion of EU funding may serve the purpose of supporting innovation, provided some pre-conditions are met (Figure 1). In addition to the various supporting mechanisms, emphasis may be placed on one in particular, namely the Technology Performance Financing (TPF) pilot project. The Technology Performance Financing pilot project was launched in March 1991 by DG Enterprise/D of the European Commission and involved nine major European commercial banks. Its objectives were to: • Increase the involvement of commercial banks in technology financing by encouraging them to experiment with technology • Performance Financing as a new product in their portfolios • Enable the participating banks to share experience and good practices in financing technology projects • Help innovative SMEs, in particular new businesses, to make their first reference sales • Promote the adoption of new technologies by SMEs. The participating commercial banks agreed to test the extension of the technique of Third Party Financing, used widely in the energy sector, to other sectors and technologies. The Technology Performance Financing technique allows the financing of a new technology based on its performance. The European Commission provided a partial guarantee to cover the technology risk of the financier, as well as a contribution to the setup costs of the system. Financing technology projects originated from the participating bank's own resources. Although the TPF pilot project and the Community support to the participating commercial banks ended in 1997, most of the participating banks continue to finance technology projects and have proven to be open to such opportunities. Innovative SMEs can contact these financial intermediaries directly, or they can first seek guidance on innovation-financing sources and how to prepare for them from the Gate2Growth Initiative. A further support mechanism to innovation is the European Business & Innovation Centres Network (EBN), a well-established supporting structure which has been instrumental in supporting various innovation-related activities and programmes in Europe (Box 1).

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W. Leal Filho/Trends in Innovation in a European Context — Problems and Perspectives Box 1. The European Business & Innovation Centres Network The European Business & Innovation Centres Network (EBN) is an international profit-seeking association, created by the earliest BICs, the EC and a group of industrialists in 1984, to co-ordinate networking activities. By January 2000, EBN had over 200 organisations, including 150 BICs in 21 European countries and associated organisations from across the continent and further afield (e.g. Turkey, China, USA, South America). EBN is now the leading network bringing together BICs and similar organisations in Europe. It has become a reference point when talking about innovation, entrepreneurship, SMEs and regional economic development, in the EU as well as in partner countries. The Association's task is to "promote inside and outside the European Union the development of Business & Innovation Centres". More precisely, EBN's mission is to: • Meet members' needs and requests for services • Provide services and support members in their search for excellence • Organise access to know-how and added-value information, and to mutualise expertise and methodologies • Strengthen member identity and competitiveness through monitoring the quality of the network and the EC-BIC label • Support the positioning of the BICs and members as instruments recognised by policy-makers. The geographical priorities of EBN's action are the European Union and future member states; partner countries of the EU are second-priority targets.

4. Some perspectives: the case for sustainable innovation Based on the need to overcome the various barriers seen in the past in respect of innovation, it is necessary to re-think the current procedures used and to devise new ways of moving forward. In this context, the concept of "sustainable innovation" may provide a solid basis upon which innovation in Europe may be built and increased, with a view to ensuring long-term economic growth and competitiveness. The definition of sustainable innovation used in this paper and one which may indeed also be used elsewhere, draws on the original concept of sustainability (WCED, 1987) and has been enhanced to cater for the particularities of innovation in a globalised world. Sustainable innovation may be defined as: the set of procedures, approaches and methodologies which pursue and support innovation so as to ensure its technological applicability, industrial usefulness and economic relevance in the medium and long term.

This definition thus excludes traditional innovation procedures which may address a need today (i.e. strictly short term) but may become obsolete in the near future. It also excludes "end of pipe" technologies, which aim at mitigating a problem as opposed to resolving it. In order to become operational, the concept of sustainable innovation should avoid the misconceptions seen in respect of sustainability in the past (e.g. Leal Filho, 2000). It is therefore necessary to see sustainable innovation as: a. a complementary tool to ensure innovation is pursued; b. a methodology which ensures return of investment in the long term; c. an instrument for technological and economic development, which catalyses action. It would be wrong to assume that sustainable innovation may, due to its unique approach, replace traditional approaches to innovation. On the contrary, since truly sustainable innovation is difficult to pursue and often expensive to achieve, it may complement ongoing procedures and mechanisms, going over and above them. However, it may be estimated that, in a decade or so, sustainable innovation will ultimately characterise the majority of innovation findings in most industrialised countries, although

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this will take a little longer in the less developed nations where even "basic innovation", as we know it, is yet to become fully available. Traditional messages from governments and technological groups urging companies to adopt innovation-friendly practices need to be reviewed. Many of these messages are too 'naive laden', and instead of 'turning people on' to innovation, they are often 'switching them off'. The next thing that should be dealt with here in the promotion of sustainable innovation is the link between regulation and innovation. Regulation can represent a stimulus to innovative activity - and detailed regulatory requirements need to incorporate this point (Rothstein, Irwin, Yearley and Mc Carthy, 1999; Rothstein and Irwin, 2000). Projects in various fields such as digital television, agrochemicals, pharmaceuticals and clean technologies as well as in the environmental services sector, have regulation as an important motivating influence on innovation. However, as practice also shows, the effectiveness of regulatory influence is critically dependent on a number of factors. Studies in the area of digital television, for example (Shurmer, 1995), suggest that it may be more effective to enhance the conditions for technological development and marketing final services rather than to back particular engineering developments and delivery technologies. Similar points have been made in relation to the adoption of clean technologies, emphasising the enhancement of the capacities and imperatives of companies to innovate rather than specifying particular control technologies. Such studies are particularly important in pointing out the significance of regulatory culture in the stimulation of innovative activity. However, as Kastrinos and Miles (1996) also point out, as industrial sectors become more distanced from the regulatory process, responses tend to be more 'off the back foot' (or simply reactive), with fewer opportunities to effectively and efficiently stimulate innovation and exploit resources. The pharmaceutical and the agrochemical industries show broadly similar patterns, and they are indeed often seen as sister industries. These cases, in particular, suggest the mutual interdependency of organised private interest (in particular multi-national interest) and regulators in shaping both the development and practices of EU regulatory frameworks and in shaping innovative trends within the parameters set by those regulatory frameworks. By the same token, this entails risks to less well-organised commercial concerns that perhaps serve niche markets. Regulation can also reflect the balance of political and economic power across the EU. A commonly found trend is that smaller and less-industrialised countries - as those in central and Eastern Europe - sometimes struggle to maintain an equal technical input to negotiations. The national biases introduced both at the stages of regulatory design and implementation (e.g. in specifying compliance tests, or the credibility of information sources or professional judgements) can have a significant impact on the operation of regulatory systems and, by the same token, patterns of commercial innovative activity. In many cases, the 'technical' and 'social' dimensions of innovation have been inseparable for good reason (Kastrinos and Miles, 1996). In response to these pressures, increased international collaboration, particularly in EU programmes, has become a key aspect of sustainable innovation and also an important source of research income for universities. They also offer a platform from which to secure industrial partners for more lucrative research directly funded by the industry. In many EU countries, research income now constitutes a growing portion of total university income, and a deepening of university industrial research funding has also accompanied this increase. However, it should be noted that the importance, value and volume of research income vary considerably from one university to another. In order to succeed, sustainable innovation needs to be supported by a number of

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measures. The first of these is perhaps the need to fill several gaps between the current understanding of innovation practices and the dynamics of the economy. As such, the road towards sustainable innovation needs to identify solutions to fill the gaps in the common understanding of innovation. A key question to be posed here is: which new or emerging developments can help us to better understand the true meaning of innovation, thus unleashing its full potential? Moreover, sustainable innovation must create value, which we equate primarily with wealth and utility, albeit not to the exclusion of other issues, in particular of social issues such as employment and equity. At the same time, one should keep in mind that new solutions which fail to produce value may indeed be regarded as ideas, but do not necessarily mean innovation. Last but not least, sustainable innovation provides long-term solutions to problems: they fill a gap which may or may not have been made explicit beforehand. 5. Conclusions Innovation, which may be regarded as the successful development and exploitation of new ideas, is a powerful generator for the achievement of improved business performance in highly competitive and changing markets. Innovation may lead to increased market share, to a higher growth rate and to greater profitability. Innovation applies to new technologies, products and processes, as well as to the adoption of best practices in industry. The problems seen in the field of innovation are well known and have yet to be fully tackled. One of the instruments which may be used in addressing the need to move forward the cause of innovation is the employment of sustainable innovation methods. Sustainable innovation may allow a company to measure its innovation performance against world-class practice. It may also allow it to assess its strengths and weaknesses and to use innovative approaches as a strategy to create competitive advantage. Moreover, it may also allow companies to identify opportunities for generating more income from available technology, equipment and expertise. The challenge is now to encourage more companies to use sustainable innovation both in order to survive in existing markets and to secure new ones. References Boiko, A. (1997) Some regional aspects of higher education, research and industry. In International Conference on Higher Education, Research and Industry in European Economies in Transition. Riga, Latvia, 4-7 October, 1997. Caracostas, P. and Muldur, U. (1997) Society, the Endless Frontier. A European vision of research and innovation policies for the 21st century. European Commission Work Paper, July 1997. Egle, V and Stabulnieks, J. (1998) Innovation policy and innovation support structures. NBIA Annual Conf, Philadelphia, USA, 30 May-4 June, 1998. Grens, E. (1997) Latvian RTD policy for collaboration with the European Union. In International Conference on Higher Education, Research and Industry in European Economies in Transition. Riga, Latvia, 4-7 October, 1997. Kastrinos, N. and Miles, I. (1996) "Patterns of Entrepreneurship in the UK environmental industry", paper presented in COST A3 conference, Management and Technology, Madrid, 12-14 June; published as a COST conference report in 1998. Leal Filho, W. (2000) Dealing with misconceptions on the concept of sustainability In International Journal of Sustainability in Higher Education, Vol 1 Issue 1, pp. 9-19. Leal Filho, W. (ed) (2002) Prospects of Integration and Development of R&D and the Innovation Potential of Black Sea Economic Co-operation Countries. Amsterdam, IOS Press.


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Lewis, G. and Abraham, J. (1998) Making harmonisation work: the politics of scientific expertise in European medicines regulation. In Science and Public Policy 25, pp. 155-69. Miles, I. and Green, K. (1996) A Clean Break? From Corporate R&D to Sustainable Technological Regimes. In Welford, R. & Starkey, R. (eds.) The Earthscan Reader in Business and the Environment. London, Earthscan. Miles, I. (1996) Innovation in Services: Services in Innovation. Manchester, Manchester Statistical Society. Ribickis, L. (1997) Experience of innovation activities in Riga Technical University and Latvian Technology Park. In International Conference on Higher Education, Research and Industry in European Economies in Transition. Riga, Latvia, 4-7 October, 1997. Rothstein, H. and Irwin, A. (2000) Re-Constructing the Local and the Global: Europeanisation, Regulation and Changing Knowledge-Relations. In Lawton-Smith, H. (ed.) The Regulation of Science and Technology. London, Macmillan. Rothstein, H., Irwin, A., Yearley, S. and Mc Carthy, E. (1999) Regulatory Science, Europeanisation and the Control of Agrochemicals. In Science, Technology and Human Values, 27 (2), pp. 241-264. Shurmer, M. (1995) Terrestrial Digital TV: The Challenges of Transition. Advanced Television Markets, ATM Amsterdam 95 Issue, pp. 14-20. Paper presented at the International Broadcasting Conference, Amsterdam and published in conference proceedings. World Commission on Environment and Development (WCED) (1987) Our Common Future. Oxford, Oxford University Press.

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Legal Dimensions of Innovation Ludwig Rehberg TUHH-Technologie GmbH (TuTech), Harburger Schlobstr. 6-12, 21079 Hamburg, Germany Abstract. This chapter presents an overview of some of the legal aspects of innovation, with a particular emphasis on patents and licensing.

1. Introduction This chapter was written by a practitioner, so it will differ a little from the normal academic discourse and focus on the legal and practical aspects of innovation. The term "innovation", as outlined elsewhere in this book, is not always entirely clear. Therefore, for the purposes of this chapter, our working definition of innovation is: Innovation is the way from idea to a patent registration - if patent registration is possible via research and development of a prototype, to a real product and - not to be forgotten bringing the product to the market.

Therefore, the research performed before the invention and also at a later stage in developing the marketable product will not be included in this definition. Technical inventions only are considered in this chapter. Other terms such as the idea of "franchising", trademarks such as Nivea or software like Word can also be inventions but will not be part of this analysis. On the other hand, questions of intellectual property rights are closely related to costs, so some remarks on cost will be included. Innovation is also closely related to persons and institutions, and there are legal connections between the two. These legal connections are also considered in this chapter. Furthermore, some practical advice based on our own experience will be added. One point here is: clarify all questions as soon as possible and do not 'wait till later'. This is very important especially in cases where differences of opinion may arise in the future. Also, it is necessary to keep a written record of the results which must be accepted by all partners. At the beginning this sounds very tough and bureaucratic, but in the long run it may save a lot of time and money and even a lawsuit. The Patent Exploitation Agency (PEA) is a new division of TuTech. Its task is to evaluate all inventions of the universities of Hamburg, to make the patent application and to market the patents. It is supported by the German government.

2. Invention and patent The first step of an innovation is the invention. The invention is something new; it has a creative character and it is likely to be applied in industry.

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L. Rehberg /Legal Dimensions of Innovation

3. Inventors By law, the inventor is the owner of the invention. If the inventor is one person, there is no problem. But if there are several inventors, they must come to a binding agreement in which the percentage each person has in the invention has to be specified. This agreement is not important for the application for the patent. In the application, there are only named persons. But for the distribution of costs and of fees this is very important. The distribution usually follows the percentage laid down at the beginning. "Free inventors" are inventors who invent something by themselves and not as part of their profession. But what happens if a person invents something during his work as an employee of a company or a research institution like a university? Let us start with the employee of a company. He has, for example, made an invention. By law he is the owner of this invention. Therefore, there must be special rules within the company if it is to have any credit (or income) from an employee's invention. There are two possibilities (with a range in between, of course). The first one is whether the invention has to do with the work the employee is paid for, or not. This makes a great difference to the fee he will be paid. But first - this is German law, other countries have different laws - the employee must offer his invention to his employer. In this case, the company has four months in which to adopt or accept the invention. If the company does not accept the invention and does not intend to pursue it, the employee is free to use it for himself as a free inventor. If the employer, however, accepts the invention, the inventor has the right to a payment under the German law on employees' inventions. This law leads to a lot of legal paperwork regulating payments for the employee based on the importance of the invention, the novelty, the product and, of course, the market results. If the company accepts the invention not for direct use but for protecting other products, they may have to pay other fees as well. Internationally, it is common to pay a good salary to the employees who usually develop products and therefore make inventions, instead of paying individually for each invention. One might ask why payment for inventions must be regulated at all. On the one hand, inventions are necessary if a company is to gain new products, new markets and new customers. But, on the other hand, to be inventive the employees must be motivated, and money usually is good motivation. So it is good for both sides to share the profit of an invention. 4. Patent application Following this description of the relations between an inventor and his employer, it is now appropriate to move on to the innovation process. To protect an invention, a patent application has to be filed. This is regulated by a set of laws and international conventions. Usually, each country has its own patent law. In general, these laws are similar worldwide because they are all based on the European laws from the late 19th century. Based on these national laws, we have in Europe the European patent application procedures, co-ordinated by the European Patent Office in Munich, which is used by 20 states. On a worldwide scale, procedures follow PCT application procedures, which are applied in 110 contracting states. And, of course, there are not only patent offices but also patent courts for lawsuits. Moving on from these legal issues, let us first look at a patent application. The rule is: whoever files the patent is its owner. This means that the owner has to bear the initial costs. And he can use the patent, sell it or give licenses. That means: if the free inventor files the patent, he owns it. If the company files the patent, it has to name the inventor(s),


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but it owns the patent with the ensuing rights mentioned above. The filing costs are not so high, but costs for patent attorneys and translations for international applications can be huge. On the other hand, the patent owner enjoys the full benefits of the patent. Formally, a patent contains a description of its contents, a technical description and a conclusion, as well as its claims. It is very important to formulate these correctly. If a patent is to be sold or licenses granted, agreements are based exactly on these previous formulations. Therefore, a great deal of care and experience is needed in the formulation of a patent as well as very good knowledge of the subject. In general, the filer and his/her patent attorney formulate the patent together. And if anybody opposes the patent, the technical formulation provides a basis for resolving any disputes.

5. Patent and innovation What is the role of a patent in an innovation context? First: it acts as a protective measure against a third party who may produce the same invention at a later date. This protection exists as long as the annual fees are paid, up to a maximum of 20 years. After this time, the content of a patent is regarded as state of the art and is free for everybody. Therefore, it is appropriate to use a patent a soon as possible. Second: patents are a source of the state of the art. Therefore, a patent has to be published within 18 months after the invention was produced and the patent was filed. Third parties are not allowed to use the patented invention, but they can find new ideas through this knowledge. So a patent is a part of technical development. This aspect is sometimes a reason not to patent an invention. Sometimes it is better to go on the market with an idea and to sell the product or the special know-how. Conclusion: The role of a patent in an innovation is twofold: the protection of the invention for its owner and the stimulation of more inventions.

6. University inventors At the beginning of this chapter it was also mentioned that inventions are also made at research institutions, e.g. universities. A question often posed is, what is the legal position in this case? Very often at universities, a generally accepted principle is that the invention is owned by the university. In this case, the legal relations are the same as in companies, and for inventions made by members of universities, the same rules apply as for companies. But if universities co-operate with the companies which pay for the research and development, there are other, more specific rules. The following questions and problems need to be considered: • Who is the owner of the invention: the university or the company? The ownership includes all the points mentioned above. • What is the relation between the invention and the basic know-how of the partners? The basic know-how may be older patents, basic research results or other technical know-how, all of this may be owned by one of the partners. In this case, i.e. the case of co-operation between a company and a university, we have developed sample contracts with the following solutions: 1. The invention is owned by the company and not by the university, but the company has to pay all costs for patenting and a share to the inventor(s).

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2. The university is given the right of use in research and development and possibly teaching for its own purposes, but not the permission to grant licenses. 3. The right to publish - and this is very important - must always be regulated separately. This depends on the research subject and the aim of both partners. To get a university degree, publishing is necessary. In this case a compromise between university and companies' interests is needed. Often it is possible to publish after filing the patent. Or only the basic research is published and the special connection to products is not published. When a patent is filed it is very important that the invention is not published before the filing date. Some patent laws allow a grace period, but most do not. 7. Product development - licensing - know-how transfer Back to the innovation: after the invention and the patent, the next step is to use the invention. That means developing the invention into a real product or production process. In doing so, there are the following possibilities: 1. The use of the patent within the company. The invention is combined with the available products or a new product is developed. In this case no special legal dimensions need be mentioned except that these companies must keep an eye on both the patent and their competitors. 2. A second modality is for companies to keep the invention and hold the patent without using it in order to protect their own products. In such cases, companies should use legal means of supervising their competitors and establish whether they are using the patent without permission. 3. A further possibility is to grant a licence. This is useful if the company cannot use the invention itself. Or if the product or processing is already developed but cannot be produced or used everywhere. In this case, the legal dimensions of licensing will apply. 4. At universities it is also possible to keep the invention for founding a new company. In this case, the innovation process is connected with the legal dimensions concerning the establishment of a company. This use is a very important one since we need new companies to create new jobs. Of course this possibility is also used by free inventors. 8. Licensing Let us now focus on item number three, licensing. The first problem is to find a licensing partner. There are several ways of doing this. For example: • Referring to licensing by filing the patent • Publishing in scientific or technical journals with reference to licensing • Presentation at fairs • Bringing in a broker for licensing • Direct contact with possible interested companies • Personal contacts with interesting companies, e.g. customers or supplier. All these possibilities include special legal dimensions. Referring to licensing by filing the patent in Germany means that an inventor or company may have to give a license to everybody who wants one. In this case, they cannot give an exclusive license. This may cause problems in larger companies who want a patent to be licensed world-wide. Presentation at fairs is a good way to find interested companies. The legal conditions are those of fairs and will therefore not be mentioned here.


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If a broker is contacted, then the legal conditions of brokerage will apply. In this case, the fee must be agreed, and it is particularly important to stipulate what happens if a company is successfully contacted without the broker. Some brokers want exclusive rights, which would mean in this particular case that you did the work and he earned money doing nothing. The fee usually consists of an initial fixed sum plus a percentage of the licensing fees. The advantage of a broker is that you do not have to present your company at the early stages. This can be very helpful if your company is small and the interested partner much larger. An additional advantage is that the broker may also be highly experienced in obtaining good conditions. 9. Licence agreement A licence agreement contains a set of items, which include: • Subject • Exclusive or non-exclusive licence • Local area or country • Length of the term • Licensing fees • Sublicensing • Liability • Follow-up patents • Cancellation possibilities • Payment of the ensuing patent costs • Right of audit • Patent licensing or additional know-how transfer? The right of audit is usually exercised by an impartial third party. The party who was wrong has to pay the auditor. The payment of the follow-up costs of a patent is usually made by the licensee. Therefore it is most interesting for the patent owner to find a licensee early, that is during the first 12 months. During this period, a patent usually is only applied nationally. Within that time one has to decide in which countries one wants to file the patent using the national priority. A European patent for all 20 states can easily cost around USD 30,000. 10. Know-how transfer This item includes a lot of problems. There are often patents, especially for production processes, which cannot be used without the special know-how of the patent owner. In this case, the licence agreement must contain special rules for the transfer of know-how. The problem is that any know-how which is passed on cannot be taken back. So there must be exact definitions of what has to be passed on and also of when and to whom. All this and all information passed on to others must be confirmed in writing. This sounds very bureaucratic but is absolutely vital if lawsuits are to be avoided. 11. Start-ups Earlier on the possibility of founding a new company was mentioned. This is very interesting for young scientists who have invented something at university. But it is not easy to start a new company. For this reason several universities help young

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entrepreneurs. At our university, the Technical University of Hamburg-Harburg, we help them with special lectures on entrepreneurship. We also offer part-time jobs at the university for entrepreneurs. These jobs include the private use of university offices. So the start-up company has an address, a telephone, fax and e-mail address at low cost, reducing the burdens on the founder of the company. And during this period he/she is able to work on the development from invention to product. At the end the university then gets a share of the company.

12. Venture capital This is another point which deserves mention. The development of a patent into a product usually places considerable demand on time, manpower, equipment and money. But young or small or medium-sized companies are usually short of money. However, if they want to use the invention themselves and not grant licenses they need funding. For this purpose, they can get venture capital. The first step is to write a business plan for the product. An important point is the aspect of secrecy. This aspect is also a part of other steps in the innovation process. Whenever negotiations with new partners take place, at some stage the point is reached where secrets must be revealed. For this case as well as others, it is necessary to draw up and sign a special secrecy agreement.

13. Market Introduction/term of the patent The last step in the innovation process is the introduction to the market. If one has developed a production process the market is one's own company and everything is easy. Except one thing: what happens if a company's best employee who knows nearly everything leaves the company? In such cases, a secrecy clause is needed which must be valid for several years after the employee has left the company. If a company has developed a new product, this must be offered to the customers, presented at fairs, in all kinds of advertisement. All these items have legal aspects but they are better dealt with in a seminar on selling products. So the focus here is on one point only: how long is it useful to maintain a patent? The maximum time, as stated above, is 20 years. But every year the costs for the patent will increase. The total cost depends of the number of countries one wants to cover. But if one has a 15-year-old patent in all important industrial countries, the fees will be fairly high. So it is important to constantly review the issue of whether it is worth maintaining the patent. Patents are often dropped whenever the state of the art has developed so as to permit cheaper ways of achieving the same result.

14. Conclusions with some general remarks The process of innovation has not only legal aspects but also involves time and cost factors. These facts are difficult to estimate. The costs of the patent can, however, be fairly accurately calculated. The fees for filing the patent are fixed, the costs of a patent attorney and for translations are easy to calculate. It is much more difficult to estimate the costs of developing the product. The costs incurred in entering the market are easy to calculate because companies have experience from other products. Moreover, there are costs for patent monitoring.


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All these costs must be covered by the product, i.e. by the income generated by it. Therefore, during the innovation process, it is always necessary to look at both the intended market and the price of the product. Sometimes it is much better to grant a license than to develop the product by oneself. This may disappoint the inventor, but it may help him/her to implement his/her idea. 15. Basic Texts: Beck-Texte (1999) im dtv • Patent- und Musterrecht • Deutsches und europaisches Patentrecht • Arbeitnehmererfmderrecht • Gebrauchsmusterrecht • Geschmacksmusterrecht • Internationale Vertrage Deutscher Taschenbuch Verlag dtv References Bartenbach, K. et al.: Formularsammlung zum gewerblichen Rechtsschutz mit Urheberrecht. Wiley-VCH, Weinheim 1998. Bartenbach/Volz: Arbeitnehmererfindungsrecht. Luchterhand-Verlag, Neuwied 1996. Bartenbach: Arbeitnehmerserfindergesetz. Carl Heymanns Verlag, Koln 2002. Bundesminister fur Forschung und Technologie (BMBF) (editor): Patentwesen an Hochschulen. BMBF, Bonn 1996. Bundesverband der Deutschen Industrie e.V (BDI) (editor): Industrieforschung; Koln 1979. Bundesverband der Deutschen Industrie e.V (BDI) (issue 9): Handbuch der Forschungs- und Innovationsforderung (loose-leaf-collection). Epidos news. European Patent Information and Documentation Systems www.european-patent-office.org. esp@cenet; www.european-patent-office.org/espacenet. H.B. Cohausz: Patente & Muster. Wila Verlag, Munchen 1995. Habersack, H-J.: Erfmdungsverwertung. Hans Holzmann Verlag, Bad Worishofen 1982. Henn, Giinter: Patent- und Know-how-Lizenzvertrag: Handbuch fur die Praxis. Verlag C.F. Miiller, Heidelberg 2003. Ideenmanagement (quarterly magazine). Berlin, Erich Schmidt Verlag. Pagenberg, J.: Lizenzvertrage. Carl Heymanns Verlag KG, Koln-Berlin-Bonn-Miinchen, 1991. Pagenberg/Geissler: Lizenzvertrage License Agreements. Carl Heymanns Verlag KG, Koln-Berlin-BonnMiinchen, 1991. Palandt: Biirgerliches Gesetzbuch. Becksche Kurz-Kommentare. Verlag C.H. Beck, Munchen 2000. Pfaff, D.: Lizenzvertrage. Verlag C.H. Beck, Munchen 1999 Rationalisierungs-Kuratorium der Deutschen Wirtschaft (RKW) e.V (editor): Technologietransfer und Innovation, Eschborn 1976. Rebel, D.: Gewerbliche Schutzrechte. Carl Heymanns Verlag KG, Koln-Berlin-Bonn-Miinchen 2001. Reimer/Schade/Schippel: Das Recht der Arbeitnehmererfindung. Erich Schmidt Verlag, Berlin 1993. Schaub, G.: Arbeitsrechtliche Formularsammlung. C.H. Beck'sche Verlagsbuchhandlung, Munchen 1999. Stumpf/GroB: Der Lizenzvertrag. Verlag Recht und Wirtschaft GmbH, Heidelberg 1984. Uexkiill: Worterbuch der Patent- und Markenpraxis. Carl Heymanns Verlag, Koln 2003. Venrooy, Gerald J. van: Patentrecht. Dusseldorf, Verlag Stahleisen GmbH, 1996.



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Knowledge andInnovation New Developments in the UK Lynn Martin Knowledge and Innovation Group, University of Central England Business School, Perry Barr, Galton 212, Birmingham, UK Abstract. The development of innovation is a key strategy in the growth of a successful knowledge economy. This paper explores some of the current routes to support this process, which have been instigated in the UK and gives some examples of how this has worked in particular organisations.

1. Introduction Over the past ten years, the development of a Knowledge Economy has come to be seen by both academics and governments internationally as key for national competitive advantage, providing a route to wealth creation and employment generation in the twenty first century (summarised in Martin, 2001). The key to developing a knowledge economy is seen in the encouragement of innovation, the empowerment of knowledge creation and knowledge development processes, and the establishment of an entrepreneurial culture. A range of policies and initiatives have been put into place to increase and support innovation, with the key aim of encouraging the UK's national mood to become less risk averse, hence resulting in a prevailing trading climate "likely to encourage innovation or entrepreneurship" (DTI, 1998, executive summary). Despite this emphasis on knowledge creation and innovation, recent surveys show a mixed picture for UK performance in terms of its EU counterparts. The EU itself has been shown to have innovation improvement needs in recent surveys, compared to its main global competitors. While accepting that there are difficulties in terms of relating comparative data, due to different data collection mechanisms etc, Japan has been shown to lead the EU in eight of the ten key indicators, and it has also been shown that the USA leads in seven of these areas. Only in terms of new science and engineering graduates and of the levels of public Research and Development expenditures are the EU and US averages close. The only significant EU lead is in home Internet access, however this is variable across Europe. The UK is behind such countries as the Netherlands, Sweden and Denmark in its home PC access use and development. However, when US : EU trends are compared, the situation may be more encouraging. Five out of eight comparable trend indicators show EU rates of improvement better than those for the USA. Overall positive trend results suggest that the EU may be catching up with its main competitors but also suggest that the two major weaknesses, diagnosed in 2001, continue to exist. High-tech patents show substantial EU growth (up 55%) but US high-tech patenting in Europe is growing still faster (up 67.8%). In business R&D, the lower rate of increase in the EU than in the USA is of particular concern, since this is a main indicator of future technology-based innovations (EU, 2002).

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L. Martin /Knowledge and Innovation ~ New Developments in the UK

Against this larger picture, the UK is probably the most innovative of the larger economies in the European Union, with strengths in terms of the numbers of new science and engineering graduates, in ICT expenditures, and in high technology manufacturing value. Trends related to patents and to new capital raised show major weaknesses, however, compared to European counterparts. The moves to support patent formation, reduce regulation and provide and encourage new capital investment schemes, are hoped to address these issues. However, it was also recognised that the UK has a mixed economy in terms of where innovation occurs. All UK regions are out-performed by the south-east in terms of innovation and competitiveness, assessing such measures as business start-up and survival rates, patent applications, levels of ICT use etc (Martin, 2001, p. 8; Cantwell and lammarino, 2001; Howells et al., 1998). 2. Taking a local approach To address this observed regional variance, a 'local approach' has been developed. This is targeted to raise understanding of local features and differences and to deal with the needs of varying regional deficiencies in the skills base. In this way, 'enterprise' and a stronger capacity for innovation and technology transfer might therefore be effectively enabled. The importance of collaboration however, has also been emphasised. The Regional Development Agencies (RDAs) would be supported in promoting regional competitiveness activities via Regional Innovation Centres and Technology Institutes, these forming a major network to encourage further development of business clusters and business incubators. Similarly, collaboration between public and private sector stakeholders was seen as key to the process of enterprise creation and growth, especially given regional variance in numbers of businesses formed, growth rates etc. (UK West Midlands Regional Innovation Strategy; regional comparisons, 2001). These initiatives reflect again the emphasis on infrastructure, culture and knowledge. 2.1 Infrastructure Infrastructure issues were those related to the regulatory environment, taxation and operating requirements, funding mechanisms and physical resources. Culture relates to the "national mood" identified before, raising the profile of entrepreneurship and encouraging innovation as a natural part of business processes. Knowledge relates to the process of technology transfer, raising the levels of higher education-industry interaction to ensure two-way knowledge sharing. The different levels on which this applies may be seen in the range of support available: • National level - new proposal for regulatory change for small firms to reduce red tape; UKBI, etc • Regional level - e.g., Infrastructure support for technology transfer via the Regional Development Agency programmes, • Individual company level - e.g., SMART fund initiatives, the Innovators Club (www.innovatorsclub.gov.uk) 2.2 Culture Addressing national social and economic culture has been a continual process, with some changes already observable between the 1998 report and more recent UK and European

L. Martin /Knowledge and Innovation - New Developments in the UK

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reports on benchmarking of innovation and of adoption of new technologies. The oftenreported view that, in the USA, business failure is regarded as a stage in the learning process, has gained some ground in the UK but there still remains a legacy of viewing this as dishonourable and as carrying social stigma. This attitude is changing, with the UK now being less "risk averse" than its European counterparts, but it still has some way to go in catching up with the USA. There have been successes in terms of increasing the rate of business start-up and supporting business collaboration, which show key changes in attitudes to "how we do business here". This can be seen in the growth of business incubation and in the development of clusters and collaborative networks. 2.3 Knowledge Knowledge, skills and creativity are now seen as distinctive and valuable assets, and are given key emphasis over more traditional factors such as land and other natural resources. (DTI, 1998, §2.1). Knowledge might be directly related to new products or new technology or it may be involved in the "more effective use and exploitation of all types of knowledge in all manner of economic activity"(DTI, 1998, § 1.5). Organisations that succeed in managing their knowledge are likely to see it as an asset and to develop organisational norms and values, which support the creation and sharing of knowledge. In the same ways this process is anticipated to work at national level, harnessing national knowledge reserves etc., according to the range of current data available on governmental sites. Knowledge is also described within organisations as explicit, documented knowledge, and tacit, subjective knowledge (Nonaka and Takeuchi, 1995) and as scientific and societal (Demarest, 1997). However it is defined, the dissemination and application of knowledge is stressed as the most important part of the knowledge creation and transfer process (CIHE, 2000) and is seen as a measure of success for technology transfer (AUTM, 1998). 3. Collaboration Collaboration is seen as a key focus in this process, with "clusters" seen as an important factor, supported by direct and indirect action, together with informal networking, developing supply chains and improving workforce skills. All are anticipated to increase knowledge and share best practice, thus improving competitiveness and creating growth. The key aspects of collaboration explored in this chapter are: • Higher Education (HE)—industry technology transfer; • Business incubation • Clusters 4. HE-industry technology transfer Here collaboration involves effective technology transfer such as that occurring in new industrial research and technology organisations and in new partnerships between industry and higher education (Martin, 2001, p. 4). Joint partnerships in research and the application of research are seen as having potential benefits for both sets of participants. They are also a very effective route to successful innovation (Mukhtar et al, 1999). Successful clusters will excel at generating and disseminating knowledge and exploiting it commercially; the exploitation of science and technology has a crucial

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role in cluster development. The Department of Trade and Industry (DTI) is therefore encouraging higher education institutes (HEIs) to work with industry via knowledge transfer/exploitation funding programmes such as the Higher Education Innovation Fund, the Science Enterprise Challenge and the University Challenge, all of which aim to encourage greater exploitation of science. While examples include the Enterprise in Higher Education Scheme and more recently the Faraday Partnerships and the Teaching Company Scheme, a growing example is seen in public-private sector partnerships operating in the field of business incubation. The major support body is a prime example of a joint partnership of this kind. UKBI (UK Business Incubators) is a public/private sector initiative, launched by DTI and HM Treasury in February 1998 "to act as a catalyst to extract the maximum benefit from incubation practices in the UK and to raise awareness and understanding of the role and benefits of business incubation" (EU, 2002a).

5. Business incubation The view of incubators as a route to employing regional innovation in the UK is seen in the funding commitments made. As one example, "to create new dynamic hubs for growth" a new £75 million incubator fund was launched to support new business formation (DTI, 2001, § 3.6). The resulting incubators would mean that the right support was available at the right time for small businesses that are committed to substantial growth. New early growth funding would be developed to "fill gaps in the availability of small amounts of risk capital for new and growing businesses and those with intangible assets." (DTI, 2001, §3.7). To encourage technology transfer in the incubation process, five UK universityinnovation centres were set up in 2001, accompanying the creation of new technology institutes. Their purpose was to attempt to boost research and development levels and encourage innovation and technology transfer while increasing much-needed regional ICT skills and high technology. These institutes will provide "specialist ICT and other high tech learning programmes and will work closely with local companies to ensure they have the know-how to apply advanced technology practices" so that skills and knowhow are cascaded to the wider community (DTI, 2001, § 3.15).

5.1 What is business incubation? The business incubator can be viewed as a producer of business assistance programmes while the entrepreneurial firm in the incubator acts a consumer of these products (Rice, 2002; p 163). There is co-production at work as a result, with business incubation supporting the enterprise through start-up, survival and success. Echoing the business assistance background, Lalkaka (2002) sets business incubation firmly within the context of business support strategies since, although incubators are relatively recent and innovative systems, these are still derived from the earlier SME support programmes. Also, the idea of nurturing start-up and early-stage groups at managed workspaces may be more complex in structure and execution than it appears. Given their closeness to local needs and markets, incubators may be expected to provide local, on-the-spot diagnosis and treatment of business problems, hence impacting on the early-stage failure rate. However, Lalkaka further described the success of incubators (and their tenants) as remaining more in the realm of art than of science (EU, 2002, section 3).


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"To date there is no single formula for a successful business incubator" (Nowak and Grantham, 2000, pp. 129erndash;130). Across Europe, a business incubator may be one of a wide range of institutions, all of which are fostering the creation and development of SMEs wherever this has not happened spontaneously, with deliberate efforts made to ensure that the services needed by the entrepreneurs are provided in a comprehensive and integrated fashion. The primary goal of a business incubator is to facilitate economic development by improving the entrepreneurial base. Hence most incubators are the result of national or local government efforts with others set up by universities or private nonprofit organisations. Similar, links with government vary from strong to nearly nonexistent (Condorelli, 2002). The growth of business incubation is expected to increase levels of innovation and entrepreneurship and to enhance the development of the knowledge based economy. There are, however, few research studies assessing impacts on entrepreneurial culture or on innovation rates. Whether business incubation provides better support for the startup firm than existing support modes remains to be seen, given the dearth of research in this area. However, both UKBI and European surveys show an 84% survival rate for new start-ups, significantly higher than might normally be the case, plus higher job creation than normally associated with new start-up enterprises. Further research, which is targeted and offers national and international comparisons, is recommended to explore these issues. While assessment and comparative evaluation has been attempted in individual cases or individual countries, there are few measures in common across different systems. Similarly, previous studies are based upon 'single country' research rather than attempting any Pan-European or other international comparison. There are also no available examples of transatlantic research to compare North American and European experience of business incubation, which might enable the identification of good practice (Mian, 1997; Chaplin and Hannon, 2001; EU, 2002). Currently the UK ranks as fifth in the EU rating in terms of numbers of incubators (related to business incubators per million people employed).

6. Clusters Initially identified as an important area of economic development in the 1998 Competitiveness White Paper, clusters have been defined as concentrations of competing, collaborating and interdependent companies and institutions which are connected by a system of market and non-market links. Further reports in 2001 and 2002 emphasise the regional benefits which clustering initiatives may bring, again to remedy regional competitive and innovation variance. The development of clusters is anticipated to have a key role on the regional economy. Therefore Regional Development Agencies (RDAs) are encouraged to develop existing and embryonic clusters in their region, building on their natural regional capabilities. This process is expected to bring a wide range of benefits to both business and the wider economy. According to the UK government clusters site, the following are examples of the types of benefits than can be gained from clustering activities: • Companies can increase the expertise available to them if they locate amongst a cluster of other firms. • They can also can draw upon others with complementary skills to bid for large pieces of work which each of the individual firms would have been unable to complete.

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• Advantage can be taken of economies of scale by further specialising production within each firm, by joint purchasing of common raw materials to attract bulk discounts or by joint marketing. • Social and other informal links are important and can lead to the creation of new ideas and new businesses. • Reputations spread quickly within the cluster, enabling finance providers to judge who the good entrepreneurs are, and business people to find who provides good support services. The cluster enables an infrastructure of professional, legal, financial and other specialist services to develop. 7. Other support measures for innovation Other measures which have been put into place focus on specific aspects of the economy, related to the small firm sector or to particular business sectors. In terms of small firms supports there are SMART schemes to provide innovation funding and technology transfer so that SMEs can participate more fully in the knowledge economy. In terms of particular sectors there are a range of actions to develop the "creative sector" based on new technologies and linked with multi-media, design innovations. However, there are also measures to address the needs of what is often seen as the bedrock of the economy, the manufacturing sector. 8. New models of manufacturing The identification of high-technology with a manufactured value added as strength in the UK (in the EU Innovation Scoreboard), represents a shift in manufacturing focus. Manufacturing accounts for about 20% of GDP and employs about 4 million people in the UK, with over 60% of UK exports being manufactured goods. However, this represents a lower proportion than that of 20 or 50 years ago. The economy has changed to incorporate different business sectors, which contribute to national wealth. In some areas, traditional industries have been heavily affected by the new globalised marketplace and modern information communication technologies. Those remaining have had to change the nature and process of manufacturing. Successful companies are characterised as embracing new technology; using it to transform their business, helping to promote enterprise and raise productivity. Across the UK, there are "world beating sectors in areas such as car manufacturing, aerospace, Pharmaceuticals, and the electronics industry and food production" (DTI, 2003). Again, there is emphasis on the opportunities available for manufacturing businesses to understand the need for continual innovation, forward planning and investment in skills and capital since "Manufacturers contribute to what has become a knowledgedriven economy". Knowledge again is stressed since access to raw materials, and other traditional factors of production and sources of comparative advantage (finance, premises, manufacturing equipment) has become much easier around the world. The knowledge and know-how that are used to apply these factors in a creative, imaginative and innovative way are seen as vital for competitive advantage. British manufacturing will compete not by being low cost, but by adding greater value through our skills and expertise. (DTI, 2003). To help companies to face the challenges of globalisation, technology and business cycle stages, the Government's manufacturing strategy identifies seven pillars of activity


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to build on strengths and remedy or overcome weaknesses including: Macroeconomic stability, Investment, Science and innovation, Best practice, Skills and education, Modern infrastructure and the Right Market Framework. Practical measures to support this include the Manufacturing Advisory Service (http://www.dti.gov.uk/manufacturing), set up to provide easily accessible assistance from experts for SME manufacturers to improve productivity. Key aspects of the Manufacturing Advisory Service are communication with customers, expert and practical help to exploit the full benefits offered by best practice and up to date technology, technology transfer assistance, development of manufacturing skills, and the development of networks and collaboration at regional and national level. The two main components are a network of regional centres for manufacturing (focal points for the delivery of support services to manufacturers; http://www.dti.gov.uk/ manufacturing/03.htm) and a supporting national network of centres of expertise (http:// www.dti.gov.uk/manufacturing/06.htm#3). Regional centres provide hands-on advice and assistance on technology and manufacturing best practice, issues related to problem diagnosis and access to specialist sources of expertise within or outside the region. 9. What works at individual company level? Clustering activities are expected to provide SMEs with key advantage but there are also individual routes for SMEs via SMART schemes, the use of online skills developments sites such as Learndirect and via targeted aid for innovation such as the Innovators Club. This free new business programme aims to provide tangible practical assistance to business, driving market-led innovation into every aspect from internal processes through to taking a concept to market. It offers the following: - 'The Health Check Zone' a quick business analysis of strengths and weaknesses. First, based on the answers to a simple questionnaire, publications, case studies and events are recommended to improve on any weaknesses. Secondly, the Benchmark Index database of performance information compares the business to 23 key ratios. The third tool is a special diagnostic questionnaire from "Living Innovation", the DTI flagship Best Practice Programme. - 'The Innovation Store' offers over 140 publications, CD ROMS, Case Studies and Events, all focussed on helping potential innovators to understand and benefit from market-led innovation. - 'Pot of Gold' identifies and locates a range of funds available from both the UK Government and the EU to help potential innovators. - 'In the Regions' offers information on the UK regions, with details of local events, seminars, exhibitions run by local business groups or the Innovators' Club; events include local business men and women speaking on relevant local issues. - 'Innovation Showcase' provides profiles of Innovation club partners, members and their products. - 'Trade Counter' provides a route to promote or sell innovative products or services. - "Innovators' Club Help Desk", offering telephone support. 10. Cases where innovation measures have enabled change 10.1 Changes in manufacturing companies Value added technology in large manufacturing firms has been documented before. New designs, new services, etc. have supported the development of new business models in

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this sector. However, there are fewer cases of change at small firm level. The decline in the manufacturing sector in the West Midlands has been particularly hard on what used to be termed "metal bashers", companies whose products depend on metal working and metal finishing. With heavy overseas competition, and the relocation of multinational manufacturing operations in cheaper production areas, these firms have faced difficult challenges. One new source of development of such firms has been the growth of the creative sector, via virtual collaborative networking to bid for work together (Martin, 2002). The lead firm in this loose "supply chain" is the designer or design firm seeking materials which are new to resolve key customer needs. These may include artistic requirements, tensile strength, flexibility etc., where before a similar range of products had been the core business over a long period of time. Here the university sector has provided technical know-how in establishing and developing the properties of materials; the Internet has been the basis for communication throughout the project in pulling disparate partners together. Knowledge sharing has led to suggestions and developments by project partners and then to new bids. In the case cited the manufacturing suppliers moved from 100% construction component makers to 20% with the other 80% related to more flexible uses of metal, utilising the scientific know-how available via local universities. Turnover also increased and new jobs were created over the same period through the re-invention of the firm. This would clearly not be the case for every company in this sector. However, it does represent a case where knowledge and technology transfer has transformed the firm and has led to growth and prosperity.

10.2 Incubation The second example is of innovation occurring via business incubation, here in a rural area. In the UK, rural areas have been hard hit by a series of disasters, including BSE and foot and mouth disease, during a period when farm prices had already decreased continuously in real terms, due to competition from developing countries following reduction in trade barriers and tariffs. Recent governmental and industry reports show that agriculture is losing ground and that employment opportunities in rural areas have been similarly severely reduced (e.g. through loss of visitor opportunities due to the quarantine accompanying the foot and mouth epidemic). The incubator cited is based in an old mill in a rural area. It has used private capital rather than public sector funds in setting up premises but it has accessed key technology transfer sources to aid the development of the businesses resident in the incubator. A combination of private and public sector resources has provided the firms in this incubator with a much richer source of knowledge than would otherwise be the case. While local universities are involved in terms of specific scientific expertise related to chemical and surface design technologies, they are also enabling overseas links with other incubators with a view to possible funding bids. Clients of the incubator have physical resources including high connectivity (unusual in this area since broadband is hampered by commercial reluctance to risk investment in less built up areas). They also have business support services including an intranet linking firms inside the incubator; and extranet with a further group of firms outside the incubator. Across these firms, the incubator manager operates a support system to encourage debate and discussion, to identify key skills gaps and to develop learning opportunities to meet these gaps. These firms then provide employment opportunities locally and as they leave the incubator, enable regeneration and development. Two firms are now working

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with a local farmer whose defunct farming business has been replaced by a smaller food production operation and small light industry units. 11. Collaboration In each region, key areas have been identified to support the development of clusters. In the West Midlands, there are ten clusters defined for support, cutting across geographical boundaries to provide homogeneous groups of companies sharing specific business sectors' needs. The development of a regional IT cluster began with a privately formed group of 60 firms in a small geographic area. The motives for this development included their ambition to develop a new quality standard to differentiate them from their competition. In this case, there was no common industry standard either for entry or operation as an information technology firm, hence owners felt that they would "all be seen as cowboys"; there was no way for customers to locate good firms except by trial and error. By collaborating to develop a system of quality standards for such firms (a badge by which customers could easily recognise their quality) these firms hoped to gain competitive advantage in an overcrowded market. Over the past year negotiations have been continuing between the IT associations and West Midlands Digital (a portal site for those in ICT or in related industries, such as those offering specialist legal or accountancy advice, plus associated events, e.g. on data security). The result has been the merging of divergent organisations to provide a new IT Association, via funding support from the Regional Development Agency and technology transfer from local universities. Interaction here involves collaborative bidding for work, developing new alliances to bid for larger jobs than had been the case before. The university has provided extra support via management development programmes while the cluster itself works closely, and has formed an alliance, with a further education college to develop students working at basic and intermediate levels in business and information technology, by providing inputs from the business world. 12. Conclusions The range of new ideas and initiatives with an innovation focus impacts on firms of differing sizes and across varied business sectors. Evidence is emerging at individual company level and at regional level of the benefits of some of these schemes. What is needed now is more detailed evaluative research to explore which programmes and processes work best in which set of circumstances, and how these might be transferred to other sectors, other regions and other countries. The key for those seeking to address similar issues still seems to lie in the basic mixture of culture, knowledge and infrastructure referred to above. Improved infrastructure alone will not make the difference without an accompanying change in culture such that managers and owners grasp new entrepreneurial opportunities and are able to both access and conceptualise scientific and societal knowledge appropriately to make this work in their own organisations. References AUTM (1998) "Survey shows small companies are biggest users of academic research innovations", Association of University technology Managers Press release to Technology Transfer Information Centre, February 18, http://www.nalusda.gov/ttic/misc/autmsur.htm

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Cantwell, J.A. and lammarino, S. (2000) Multinational corporations, and the location of technological innovation in the UK regions. Regional Studies 34, 317-332. CIHE (2000) Knowledge Transfer from higher education; identifying excellence. Council for Industry and Higher Education, August. Chaplin P. and Hannon, P. (2001) Are Incubators Good For Business? Understanding Incubation Practice The Challenges For Policy. Paper Presented at the 24th ISBA National Small Firms Policy and Research Conference Exploring the Frontiers of Small Business, November. Condorelli, F. (2002) Business incubators in developing countries, http://www.unido.org/doc/300456.html UNIDO website # 300456. Demarest, M. (1997) Understanding knowledge management. Journal of Long Range Planning 30(3), 374-384. DTI (1998) Our Competitive Future: Building The Knowledge Driven Economy. The Competitiveness White Paper: Analysis and Background, Department of Trade and Industry, London. DTI (2001) "Opportunity for all in a world of change" - a White Paper on enterprise, skills and innovation (Cm 5052), published February 2001 at www.dti.gov.uk/opportunityforall European Union, (2002) Benchmarking of Business Incubators. Centre for Strategy and Evaluation Services, Brussels. European Union (2002a) "EU Innovation Scoreboard", accessed 21 February 2003, http://trendchart.cordis.lu/ Scoreboard2002.html/eu_member_states/eu__member_2.4.html Lalkaka, R. (2002) Technology business incubators to help build an innovation-based economy. Journal of Change Management. London, 3(2), 167. Martin, L. M. (2001) Principles and approaches to the UK national innovation policy; knowledge-based perspectives. Nato Expert Workshop on Black Sea Regeneration, October 30-November 2, Yalta. Martin, L. M. (2002) Building innovation; UK and European business incubation comparisons. Commonwealth Conference on Business Incubation, Paphos, Cyprus, May 21-25. Mian, S.A. (1997) Assessing and managing the university-technology business incubator: an integrative framework. Journal of Business Venturing 12, 251-285. Mukhtar, S.M., Oakey, R. and Kippling, M. (1999) Utilisation of science and technology graduates by the small and medium-sized enterprise sector. Education & Training. London, 41(8/9), 425. Nonaka, I. and Takeuchi, H. (1995) The knowledge-creating company: How Japanese companies create dynamics of innovation? Oxford University Press, New York. Nowack, M. J. and Grantham C. E. (2000) The virtual incubator: managing human capital in the software industry. Research Policy 29, 125-134. Rice, M. P. (2002) Co-production of business assistance in business incubators. An exploratory study. Journal of Business Venturing 1, 163-187. Rowley, J. (1999) Knowledge Management. Library Management 20(8), 416-420.


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Examples of International Co-operation in Technology Transfer and Environmental Education in Greece Constantina Skanavis Department of Environmental Studies, University of the Aegean, University Hill, Mitilini, GR-81100, Greece Abstract. The gathering of environmental information is but the beginning of education. The Department of Environmental Studies at the University of the Aegean in Greece has invested significant resources in the laboratory of Environmental Education and Communication in order to reach out to other nations and disseminate environmental education, information and support. Technological innovations have facilitated the process of environmental awareness, education and communication, and this chapter reports on some trends in Greece.

1. Introduction In remote areas, direct daily contact with basic natural resources is prevalent, especially within man's immediate environment. As societies become urbanised, their intimate association and interaction with natural resources diminishes as does their awareness of their dependency on them. Yet, it is imperative that humans, wherever they live, comprehend that for a quality life they are dependent upon the proper management and use of these resources. People should also have an awareness and understanding of their community and associated problems. While problems such as lack of comprehensive environmental planning, indiscriminate use of pesticides, air and water pollution, traffic congestion, and the lack of institutional arrangements needed to cope effectively are the legitimate concerns of governmental officials, the responsibility for their solution rests with citizens. To an increased extent citizens are being asked to make decisions that affect (directly and indirectly) their environment. Specifically, citizens make these decisions as they vote on community issues, as they elect policy-making representatives, as they directly act upon the environment itself. Citizens contribute to environmental policy-making by asking informed questions at the proper time, of the right people and by serving on appropriate committees. To perform these tasks effectively, it is vital that the population be knowledgeable about their biophysical environment and associated problems, aware of how they can help solve these problems, and motivated to work toward effective solutions. Environmental Education (EE) has the task of promoting and enhancing a responsible citizen behaviour pattern (Stapp et al., 1969). Computers and telecommunications represent powerful technological tools which can, if used appropriately, extend the capacity of the field of Environmental Education, overcome the limitations that this field is facing and empower citizens with the necessary skills and abilities in order to attain responsible environmental behaviour.

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2. The goal of environmental education The primary goals of EE are to develop environmentally literate citizens and to promote responsible environmental behaviour. Considering that the primary goals of education are to foster societal values and to promote certain desirable behaviours, the goals of EE could be viewed as being very consistent with general education goals. Although this parallel exists, EE is still far from being a part of our mainstream educational systems and is even less apparent in non-formal and informal educational settings. There is a lack of commitment to EE in most countries and as a result only a fraction of our young learners are being exposed to logically developed, well articulated EE programmes (Hungerford and Volk, 1990). The goal of developing and promoting responsible environmental behaviour is widely accepted among environmental educators (Childress and Wert 1976, Harvey 1977, Hungerford and Peyton 1976, Hungerford, Peyton and Wilke 1980, Rubba and Wiesenmayer 1985, Stapp, 1978). Other environmental educators call for the development of an environmental ethic or literacy which will ensure that students as well as the rest of the population use their knowledge and skills for resolving environmental problems (Lamb 1975). The research is very clear on the matter. People's behaviour can be developed through EE. The strategies are known. The tools are available. The challenge lies in a willingness to change the way in which we do things (Culen, 1998). The major challenge is to reach educators in all nations around the world and support them with the appropriate training and make available to them the educational tools and materials they need in order to successfully carry on their role as environmental educators. Ecological literacy is important to sound environmental decision-making. In order to approach issue resolution in an informed and responsible manner, the learner must be able to identify the ecological consequences related to the issues and to their proposed solutions (Volk, 1993) and the educators must be able to assist them effectively.

3. Technological innovations Computer-aided EE, the utilisation of computer technology to promote the goals and objectives of EE, has passed through the era of adolescence. Today, while there is still continuous development, computer-aided EE is moving forward with new sophistication and depth. It has proved to be one of our most powerful tools in educating Greeks, and has been our only tool in promoting everything from environmental awareness to environmental action to other countries around the world, especially to those completely lacking in the necessary EE resources and qualified EE educators and trainers. Computer-aided EE is an emerging field, still offering a vast expanse of uncharted territory filled with both problems and promises. Computers now offer environmental educators an uncharted teaching and learning frontier. There are areas, such as environmental hypermedia with the associated utilisation of laser videodiscs and CDROMs, environmental simulation or modelling of complex systems, interactive software, environmental distance learning and actions supported by telecommunications that are of tremendous importance in the promotion of effective EE strategies (Rohwedder, 1990). At the University of the Aegean's Laboratory of Environmental Education and Communication, interactive multimedia combines various instructional technologies to create dynamic educational tools through which learners have the opportunity to explore integrated graphics, animation, colour and sound. These are sent across the country as well as to other countries that need them. A new generation of graphic,

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interactive environmental software programmes now enables self-paced, learner-centred environmental education and investigation. Whole courses can be presented as packages to guide teachers and learners during their EE process. Simulation and modelling programmes enable learners to experience the complicated interaction of environmental systems as well as the impacts of human activities. This way, learners can investigate the consequences of actions and facilitate their decisionmaking process. This is of tremendous value in EE where most of the environmental scenarios can only be understood if one somehow experiences the actual setting and faces the dilemma each decision carries with it. In issues of environmental origin there is no right or wrong solution that can be applied to all people, and teaching environmental values and priorities must fit the needs and background of learners. Through simulation and modelling, learners from different socio-economic groups and with a wide range of cultural and religious beliefs can receive meaningful EE that makes sense in their everyday life and at the same time learn to understand the difficulties each society has to overcome in order to achieve a quality life. Low-cost telecommunication tools allow us to communicate and cooperate with students and educators around the world and enable them to recognise the global perspective of environmental issues whilst equipping them to deal with local environmental problems. Without leaving our geographic area we can now receive high quality instruction and information, as well as train others using state of the art instruction and supply the best possible materials to learners we have never met and most probably will never meet. What is basically done in our laboratory is to develop an effective Environmental Communication strategic plan tailored to the needs of the community we want to reach while at the same time supporting their educational system. We use a step-by-step strategic planning scheme the structure of which remains essentially the same but which is sensitive to the demands, skills and available resources of the various groups of learners. Technological innovations encourage learners to arrive at creative and individual responses to real environmental problems. Through interdisciplinary programmes they build strong skills in the spheres of critical thinking, active participation and problemsolving techniques. Their capability needs are broadened to embrace the cultural and moral context of doing things in order to lead them back to where they live and how to live better (Olsen, 1997). Research tools are consistently used in order to identify and access their personality characteristics as well as their environmental profile. It has been observed (McLaren, 1997) that educators around the world require the confidence to explore their own values and to question the beliefs and perceptions they hold through involvement with real life contexts while at the same time taking social and environmental implications into consideration. As educators try out new teaching strategies, they construct their own understanding of the way in which strategies can be used to facilitate learning. Educators' perspectives and beliefs regarding learning and teaching may change significantly when they employ active hands-on tasks involving the development and implementation of Internet and simulation supported programmes. The educators can then demonstrate the value of EE's goals and pedagogy to their peers and to students whom the efforts endeavour to support (Moore and Huber, 2001). 3.1 Interactive software programmes The current development of new educational technologies has resulted in the design and

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utilisation of user-friendly interactive software which can lead to a clear understanding of environmental issues. Some of the most commonly used simulation software for educational purposes are STELLA software from High Performance Systems, Inc (for educational purposes), FOOD CHAIN (Stella based learning laboratory in Biology), NetSim Creator (for research and science, education and business), ithink (for business) which can be found at http://www.hps-inc.com. Other educational software includes VENSIM Software from Ventana Systems, Inc. (molecules software, venap builder Custom Vensim applications, flight simulators and other interfaces to models) that can be found at http://www.vensim.com and POWERSIM from "the business simulation company" (http://www.powersim.com). Visual tools through software programmes can be grouped into three broad categories based on their purpose. These are brainstorming for fostering individual and group creativity, task-specific organisers for fostering basic skills, and deep content learning and thinking-process maps for fostering cognitive development and critical thinking (Hyerle, 1996). Maps and webs can clear up issues and provide patterns, interrelationships and interdependencies. Interactive software programmes refer to computer-based, dynamic modelling simulation. As the simulation runs, the learner is involved by playing a role. The participation in simulations enables learners to engage in systematic thinking and enhances their understanding of systems as well as of social science and science concepts (Chilcott, 1996). The simulation is designed to replicate a real-life situation as closely as desired and has the learners assume roles by analysing data, making decisions and solving problems inherent to the situation. They also respond to changes within the situation by studying the consequences of their decisions and subsequent actions, and by predicting future problems and solutions so they learn how a real system works in a short period of time. It has been reported (Glynn and Duit, 1995) that existing knowledge and motivation are activated, new knowledge is constructed, applied and evaluated and revisited. Most importantly, students have experienced at a given level how the content is really being used in the real world. Relevancy is not something told to them, but something they realise themselves through working with content. 3.2 Simulation procedures (virtual reality) Simulation procedures provide advantages important for the practice of EE (Taylor, 1983). The evolution of virtual reality simulation educational programmes is currently undergoing radical revision. By no means can the programmes help learners to think better but they can certainly allow them to experience more. They basically provide users with an experience they would, within the realms of practicality, otherwise not be able to experience in the physical world. The environmental pedagogical process has, where possible, to leave the classroom environment, or to import the real world into the classroom. These two become possible with the introduction of virtual reality into the environmental education process. Passive learning is transformed into active learning with the experiential education provided by virtual environments. In virtual environments the scale, information density, interaction and response, as well as the time and degree of user participation, can be defined and altered. Virtual reality also plays an important role in problem detection and solving. Virtual reality simulations should be used when teaching the real thing is impossible, dangerous or inconvenient; when mistakes made by the learner using the real thing could be harmful to the environment; when interacting with the model is as motivating or more motivating than interacting with the real thing; when the simulation experience is

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important to the learning objective; when visualisation, manipulation and rearrangement of information is needed so as to become more easily understood; and when developing participatory environments and activities that can only exist as a computer-generated world (Mikropoulos et al., 1997). Virtual nature is a space dynamically changing in the transition of time, and various aspects of the environment are shown through seasonal changes. Virtual nature is information space that is changing with the passage of time, accumulation of various information. Changes in virtual nature synchronise with changes in the real natural environment (Bradley et al., 1999). Virtual reality is the latest technology that makes creative use of simulations in computerised video technology. Virtual reality may be linked to surround-sound and surround-video whereby a 3-dimensional environment creates a mental illusion that simulates the realities of physical sensations such as those encountered in flying a plane or driving around a bend.

3.3 World Wide Web and Internet Internet-based educational applications promote the goals of EE by providing opportunities for problem-solving, decision-making and good civil behaviours. They also support the development of skills that encourage the ultimate goal of environmentally sound behaviour (Comeaux and Huber, 2001; Mistier-Jackson and Songer, 2000). Several Internet-supported participation programmes support the interests of EE. In the USA there are three programmes which are quite successful. These are The Global Learning and Observation (GLOBE) program, the Global Rivers Environmental Education Network (GREEN) and the Students as Scientists: Pollution Prevention through Education (Moore and Huber, 2001). These programmes engage students in collecting local environmental data, publishing data using the Internet, and interpreting data. Internet activities support experiential outdoor learning activities and provide students with opportunities to engage in authentic scientific discourse that extends and deepens their learning. These applications encourage students to either model or engage in environmentally sound civil behaviour. Learners can easily make others aware of their work and in this way involve more individuals in the environmental education process. Data visualisation tools available on various environmental Internet sites can generate animated graphic displays showing relationships between various environmental variables. The animated graphics are a highly effective way to display complex, multivariable, quantitative information (Tufte, 1983). As a result the Internet can be used to engage students in community-based activities, which are highly valued by many environmental educators (Sanger, 1997). EE has often been practised through recycling, street sweeping and natural experience of nature in an approach which attempts to give learners practical experience at a local level. Even if learners perform such activities as a part of EE, it is not to be expected that the process will be of sufficient educational value unless the learners understand the contribution of local activities to global environmental issues. If learners view global environmental issues simply as events occurring in some distant place the educational effect cannot be regarded as sufficient. The local activities must be supplemented with information, which can be obtained via Internet technology, to help learners comprehend meanings and to have them consider relationships between local activities and the preservation of the global environment (Okada, 2002). Virtual nature on the Internet is a process where people involved in EE can simultaneously gather and freely exchange diverse environmental information. Via

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the Internet, participants from all over the world can become involved in interactive discussions on environmental issues from global viewpoints while sharing learners' real physical experiences and other participants' spiritual knowledge. People's diverse backgrounds, empirical knowledge, practical experience and various expertise are shared through this active environmental communication process. Although a great amount of information can be retrieved locally, the fact that environmental trainers have only a low level of know-how and practical experience jeopardises the success of an otherwise effective EE programme. With the contribution of Internet technology this problem can be overcome. 4. Conclusions Everyone must possess knowledge of the environmental issues at stake and be able to act in order to achieve ecologically sustainable development. Education and training which includes facts, skills, understanding and familiarity are essential for improving citizens' ability and willingness to actively participate in the environmental decisionmaking process. This should be seen as part of a life-long process dealing with ecological conditions associated with economic, social and cultural development. Therefore education and building of know-how for sustainable development must be targeted at people of all ages (preschool, middle-aged people, the elderly). EE is of vital importance all over the world. Increasingly complex and widespread environmental problems demand a knowledgeable, motivated, active population and competent professionals to help enhance and promote environmental quality. Only when EE is wisely planned emphasizing awareness, knowledge, critical thinking, problemsolving skills, and participation, can it help society meet its environmental challenges. The important key to the success of EE is to create spaces and situations where people of diverse backgrounds can participate universally in EE and can mutually exchange their opinions and experiences. Recently, EE has been recognised as one of the most important educational areas, having to deal with global environmental issues, including controversial concepts such as development and preservation, that are increasingly becoming significant social concerns. Processes that enable learners to think critically about environmental issues from a global viewpoint should be regarded as vitally important in enabling learners to develop opinions and a sense of values that have not been implanted by educators but created by the learners themselves. One of the most important factors in these processes is the communication of environmental information among various people who have diverse backgrounds, experience, knowledge and opinions. Living people can be considered as "knowledge sources", and becoming acquainted with previously unknown activities, different opinions. Learning about diverse experiences of others can stimulate the intellectual interests of learners, and can provide them with new and varied ideas and directions regarding environmental action. Exchange of opinions and achievements with others who have different ideas requires learners to reconsider learning achievements, think critically about environmental issues and to express opinions logically. Communication refines and improves environmental values, and integrates physical senses, obtained through direct natural experiences, with spiritual knowledge. Education which focuses on communication and discussion is definitely appropriate for environmental education and its success. It is of crucial importance that a communicative situation be created where learners are able to get to know the genuine opinions of other people and to discuss global environmental issues with them (Okada, 2002). All this can be achieved by ensuring continuous interaction among the participants.


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The Internet promotes discourse that facilitates learners' cooperative efforts to practise environmentally sound behaviour as participating members. On-line multimedia libraries provide environmental information at various levels of competence that are accessed by learners from all over the world, thus broadening appreciation of different cultures. Simulation technology can take anyone to any location to learn a subject - or can bring others, from near or far, to the required geographic location. Experts in any discipline, teachers, community leaders and politicians could become accessible to interested participants in EE programmes. Telecommunications allow learners who must live in certain areas, or who reside in remote, isolated geographic areas, to acquire all essential knowledge and educational materials for successful EE results. Technological innovations such as the World Wide Web and simulation techniques are extremely valuable in the development of co-operation in international EE programmes, particularly in areas that are in great need of educational support. Furthermore, as a result of technological innovations, it is possible to establish networks. Networks have been widely advocated and used as tools for EE because they bring people in touch with one another, catalysing discussion and the establishment of links; they disseminate information on current facts and on matters of common interest such as training opportunities, on joint projects and events such as workshops and training sessions. They also foster the use of successful techniques and ideas in other countries, therefore contributing to the spread of EE in nations where it is not well developed (Leal Filho, 1993). It seems that computer-aided EE will end up being one of our most revolutionary educational processes in achieving the ultimate goal of EE: active participation of all citizens in the environmental decision-making process. The Laboratory of Environmental Education and Communication at the University of the Aegean has given a lot of consideration not only to the development of the requested EE materials and tools which promote EE in areas of need, but has also invested in research processes which assess the environmental characteristics and profile of the participant learners. This way, the EE programmes, which employ the latest technological innovations, are tailored to the exact needs of the participants. References Bradley, J. C., Waliczek, T. M., Zajicek, J. M. (1999) Relationship between Environmental Knowledge and Environmental Attitude of High School Students. Journal of Environmental Education 30(3), 17—21. Chilcott, M.J.D. (1996) Effective Use of Simulation in the Classroom (online) Available on-line: ftp:// sysdyn.mit.edu/ftp/cle/documents/system-ed/SE1996-01EfTectiveUseOfSims.pdf Childress, R.B. and Wert, J. (1976) Challenges for Environmental Education Planners. Journal of Environmental Education 7(4), 2-6. Comeaux, P.A, and Huber, R. A. (2001) Students as Scientists: Using Interactive Technologies and Collaborative Inquiry in an Environmental Science Project for Teachers and Their Students. Journal of Science Teacher Education 12(4), 235-252. Culen, G. R. (1998) The Status of Environmental Education with Respect to the Goal of Responsible Citizenship Behavior. In: Hungerford, H., et al. (eds.), Essential Readings in Environmental Education, pp. 37-45. Stipes Publishing L.L.C. Glynn, S. and Duit, R. (1995) Learning Science Meaningfully: Constructing Conceptual Models. In: Glynn, S. and Duit, R. (eds.), Learning Science in the Schools. Mahwah, NJ: Lawrence Erlbaum Associates. Harvey, G.D. (1977) Environmental Education: A Delineation of Substantive Structure. Unpublished Doctoral Dissertation, Southern Illinois University at Carbondale. Hungerford, H.R., Peyton R.B. (1976) Teaching Environmental Education. Portland, ME: J. Weston Walsh. Hungerford H.R., Peyton R.B., Wilke R.J. (1980) Goals for curriculum development in environmental education. Journal of Environmental Education 11(3), 42-47.

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Hungerford, H., Volk, T. (1990) Changing Learner Behavior through Environmental Education. Journal of Environmental Education 21(3), 8-22. Hyerle, D. (1996) Visual Tools for Constructing Knowledge. Alexandria, VA: Association for Supervision and Curriculum Development. Lamb, W. (1975) Classroom Environmental Value Clarification. Journal of Environmental Education 6(4), 14-16. Leal Filho, W. (1993) The Role of Co-operation and Networking in the Development of International Environmental Education. In: University of Indonesia (ed.), Proceedings of ASEAN Region Conference on Environmental Education for Sustainable Development, Jakarta, Indonesia, June 2-5, 1993, pp. 2-10. McLaren, S. V (1997) Value Judgment: Evaluating Design. International Journal of Technology and Design Education 7(3), 259-278. Mikropoulos, T., Chalkidis, A., Katsikis, A., Kossivaki, P. (1997) Virtual Realities in Environmental education: the Project LAKE. Education and Information Technologies 2(2), 131 — 142. Mistier-Jackson, M. and Songer, N. B. (2000) Student Motivation and Internet Technology: Are Students Empowered to Learn Science? Journal of Research in Science Teaching 37(5), 459-479. Moore, C. J. and Huber, R. A. (2001) Support for EE from the National Science Education Standards and the Internet. Journal of Environmental Education 32(3), 21-25. Okada, M., Tarumi H., Yoshimura, T, Moriya, K., Sakai, T. (2002) Realization of Digital Environmental Education - A Future Style of Environmental Education in Dynamically Changing Virtual Environment. In: Digital Cities, Lecture Notes in Computer Science, vol. 2362, pp. 292-304. Olsen, J. (1997) Technology and Humanities: Opportunities for Educating. Journal of Curriculum Studies 29(4), 383-390. POWERSIM, http://www.powersim.com Rohwedder, W. J. (1990) Computer-Aided Environmental Education: Problems and Promises. In: Rohwedder, W. J. (ed.), Computer-Aided Environmental Education, NAAEE. Rubba, P. A. and Wiesenmayer, R. (1985) A Goal Structure for Precollege STS Education: A Proposal based upon Recent Literature in Environmental Education. Bulletin of Science, Technology and Society 5(6), 573-580. Sanger, M. (1997) Viewpoint: Sense of place in education. Journal of Environmental Education 29(1), 4-8. Simulation Software, http://www.hps-inc.com Stapp, W. B. (1978) From Ought to Action in Environmental Education: A Report of the National Leadership Conference on Environmental Education. Columbus, OH: SMEAC Information Reference Centre. Stapp, W.B., Bennett, D., Bryan, W., Fulton, J., MacGregor, J., Nowak, P., Wan, J., Wall, R. and Havlick, S. (1969), The Concept of Environmental Education. Journal of Environmental Education 1(1), 30-31. Taylor, J.L. (1983) Guide on Simulation and Gaming for Environmental Education, EE Series 2. Paris: UNESCO-UNEP. Tufte, E. R. (1983) The Visual Display of Quantitative Information. Cheshire, CT: Graphics Press. VENSIM Software. From Ventana Systems, Inc, http://www.vensim.com Volk, T. (1993) Integration and Curriculum Design. In: Wilke, R. J. (ed.), Environmental Education Teacher Resource Handbook, pp. 45-76. Corwin Press.


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Research and Development as Tools for Developments in Ukraine Allekssandr Kuzmenko Telecommunications and Partnership, 100 Soumskaya St., apt. 5, 61002 Kharkov, Ukraine Abstract. This chapter considers the main stages in the recent history of Ukrainian research and development potential, and shows possible ways of using this potential for the development of Ukraine.

1. Introduction Ukraine faces the problem of political and economic self-determination and of determining its place in the world economic system. With this problem, the question of a model of development, a model of evolution arises. Developed countries have now reached a post-industrial phase. An increasing percentage of their GDP is a result of innovation processes. R&D activity and the creation of new knowledge play a new and extremely important role in the new postindustrial society (Bell, 1976). The history of Russia, and then of the USSR, was the history of countries which were catching up on developed countries (Milukov, 1995; Inosemtsev, 2000). In the first years of its existence, the USSR (after studying the experience of Germany and the USA) chose a model of industrialisation based on the heavy engineering industry, the metallurgical industry and a high-capacity power supply system as its model of economic development. (In the 1930s, after the crisis, the US economy was re-oriented on mass consumption production; the Soviet economy became an economy with mobilisation features and military orientation.) From the first Soviet five-year plans onwards, large metallurgical and machinebuilding plants, as well as scientific centres were set up in Ukraine and the necessary infrastructure was created as part of a massive defence industry complex. The management system of the Ukrainian economic complex was obliged to conform to central strategic plans, as were the management systems of the other Soviet republics. Thus, the economic complex of Ukraine was designed and created as a part of the Soviet economy, and the management system of this complex as a part of the management system of the USSR. A significant portion of the USSR's R&D potential was concentrated in Ukraine. Ukrainian R&D institutes patented about 40% of Soviet inventions although the Ukrainian population was only 16% of the total population of the USSR. In the 1950s and 1970s both the Soviet and the US defence industries were powerful sources of innovations. But in the USA (a major rival of the USSR), there was a focus on technology transfer from defence to civil production. For instance, the Internet and a computer mouse - "X-Y Position Indicator for a Display System" - were developed in

38

A. Kuzmenko /Research and Development as Tools for Developments in Ukraine

the Advanced Research Projects Agency of the Department of Defense (later Defense Advanced Research Projects Agency). So the USA had the capacity to develop its defence and civil complexes, increasing its economic power and moving on to the post-industrial stage. The process launched in the USSR in 1986 and known as Perestroika, was the USSR's answer to the post-industrial challenge. The goal of Perestroika was a radical transformation of the Soviet economy and acceleration of R&D progress, including the transformation of the Soviet defence complex and the R&D system. 2. Transition in the USSR and Ukraine, 1988-1994 As mentioned above, the Ukrainian economy was an integral part of the economic machine of the USSR. The share of defence production amounted to as much as 60% of the total production in Ukraine. In accordance with the State Conversion Programme of the USSR the conversion depth had to be not less than 15%. Such a process required a government strategy and increased governmental presence in management and decision-making. A conversion programme does not release resources; on the contrary, it requires additional support. The USSR Conversion Programme did not simply involve changes in production, but concentrated on transformation of the management system to provide flexibility and opportunities for innovative development processes. An absence of managerial security to appropriate fixed aids could already be seen in the period 1988-1991. The necessary infrastructure was also absent: personnel training, consulting, broking, etc. In such conditions R&D of world-level quality could not be marketed/traded with top-level R&D products. In 1991 after the disintegration of the USSR, conditions of conversion on the CIS level and on the CIS countries' levels became more complicated. There has been no co-ordinated transition policy for all CI States. It has not been possible to transform industrial and R&D activity effectively in circumstances which are seeing the total transformation of the political and economical systems as well as a state of total economic depression in the CIS countries. In Ukraine the Ministry of Machine-building, Defence and Conversion was set up to be responsible for state management of all businesses and organisations with a defence profile. In 1992 there were 2056 industrial enterprises, 725 R&D organisations, 115 organisations involved in medical care, trade etc. Ukraine now had an unwieldy structure which combined elements dealt with by nine ministries in the USSR. About 520 conversion programmes focusing on individual enterprises and organisations appeared instead of a national programme based on national defence and civil priorities; they were not co-ordinated in terms of goals and resources and were not in line with the country's opportunities. The draft of the Conversion Law was not even considered by the Ukrainian Parliament because in 1992-1993 the country entered into a hyper-inflation period (fig. 1).

Fig. 1. Decrease in Ukrainian GDP from 1992 to 1999.


39

In 1994 the Ukrainian Scientific and Technological Centre was established by Canada, Japan, Sweden, Ukraine and the USA. The aid of the Centre was to support R&D activity among Ukrainian specialists involved in the development of mass destruction weapons. The European Union joined the founding members at a later date. In 1999 the countries' investments were as follows: Country USA

Investments ($) 21414962

EU

2109247

Canada

1 763 803

Sweden

1 695 074

Japan

670000

Total

27653086

In spite of efforts at home and of international assistance, the transition process in Ukraine led to a reduction in R&D activity in organisations that were a part of the defence complex and did not result in the commercialisation of R&D production. In the USA conversion was started at the same time. In the USA the conversion process was not so painful. Firstly, it was on a lower scale; secondly, it was based on an existing innovation system; an thirdly, it was realised in stable political and economic conditions with sufficient financial and managerial resources. 3. R&D Potential of Ukraine from 1995 to 2002 3.1 Management system The reform of R&D activity in Ukraine is part of a common process of reforming the economy and government system in the newly self-dependent state. The system of government, created in the USSR between 1917 and 1991 and based on the leading role of the Communist Party and the institution of party organisations that executed control and monitoring functions in enterprises and organisations, was not suitable for the state which had declared itself a democracy. One of the main challenges which arose during the reform was the necessity to develop a system of determining strategic objects because in Soviet times all functions of such a system were concentrated in Moscow. It is difficult to answer this challenge after 70 years of the centralised government system of the USSR, particularly when the economic system has disintegrated. Despite the economic growth of the last few years Ukraine is now approaching 50% of the 1990 level - the period just before the disintegration of the USSR (table 1). The bodies governing R&D activity in past and present are the following: 1991-1992 The State Committee on Science and Technologies 1992-1995 The State Committee on Science and Technology and Industrial Policy 1995-1998 The Ministry of Science and Technologies 1998-2000 The State Committee on Science and Intellectual Property 2000-present The Ministry of Education and Science Such a process of reform and the transfer of R&D activity to the responsibility of the Ministry of Education not only lowered the status of the state authority governing R&D, but lowered its capacity for work due to frequent replacements of leaders and changes in their functions.


40

Table 1. Dynamics of some economic indexes of Ukraine in 1990-2001

1990

1995

2000

2001

Electrical power, kW-h billion

298.5

194.0

171.5

172.0

58

Coal, million t

164.0

83.8

81.0

83.9

51

Steel, million t

52.6

22.3

31.8

33.5

64

Steel pipes, thousand pieces

6494

1595

1740

1669

26

106

10.4

4.0

3.6

3

Mineral fertilizers, thousand t

4815

2221

2304

2228

46

Meat, thousand t

2763

957

400

322

12

Sugar, thousand t

6791

3894

1780

1947

29

Vegetable oil, thousand t

1070

696

972

938

88

Index

Tractors, thousand pieces

2001-1990 (%)

Table 2. Major directions in Ukrainian science and technology programmes Directions

Number of programmes

Problems of demographic policy, human potential development and civic society formation

6

Environmental protection and sustainable development

4

New biotechnology; diagnostics and methods of treatment of the most widespread diseases.

5

New computer technologies and technologies to promote the information society

4

New technologies and technologies for efficient use of resources in power supply, industry and agriculture.

7

New substances and materials.

3

Fig. 2. Dynamics of the numbers of enterprises and workforce involved in R&D activity.

In addition to the Ministry of Education and Science, the National Academy of Science of Ukraine is also engaged in the process of regulating R&D activity. Table 2 lists the major scientific and technological directions adopted in Ukraine. Figure 2 shows the development of the numbers of enterprises and personnel involved in R&D activity, Figure 3 shows the dynamics of industrial, academic, university and labour organisations (involved in R&D activity) separately. There are two processes which determine the development of the number of R&D enterprises and organisations: the detachment of small R&D firms (e.g. 20 small firms were detached from the National Scientific Centre "Kharkov Institute on Physics and


41

Fig. 3. Dynamics of industrial, academic, university and labour organisations involved in R&D activity.

Technology") and decrease in activity. The reduction in R&D personnel is not a planned result but a result of hyperinflation and drastic decrease in the volume of R&D activity financing. From 1992 to 2001 the financing of R&D activity was 0.3-0.6% of the budget despite the fact that Ukrainian law sets the minimum level at 1.7%. Innovative development is an official part of Ukrainian economic policy. The following legislation on innovative development has been passed: the Law about R&D Activity, the Conception of Innovation Activity, the laws concerning the Space Programme, the Seismological Programme, etc. Legislation concerning intellectual property rights has also been developed. The main obstacles on the way to innovation development in Ukraine are the inadequate orientation of the Ukrainian elite, insufficient innovation infrastructure development, lack of qualified high-level managers and leaders. 3.2 R&D specialists Even after all its economic disasters Ukraine still has a high percentage of scientific workers (table 3). The cuts in R&D financing were one reason why specialists left R&D activity and also a reason for the brain drain. A country that has skilled R&D personnel but is unable to make use of them for its own domestic interests, becomes an intellectual donor to countries in which conditions are better. Ukraine has already lost 6-7% scientific workers, most of these being skilled workers. It is possible to consider this process as an evacuation of scientific staff due to the state of the domestic economy and to the establishment of ties with the global scientific community which were more or less absent in the 1930s to 1980s. Many of the scientists who left Ukraine are prepared to come back if conditions for R&D activity are improved Table 3. Number of scientific workers per 10000 employees in Ukraine compared to other European countries Country

Number of scientific workers per 10000 employees

GDP per capita ($, PPP, 2001)

Germany

120

26680

United Kingdom

98

25520

Denmark

95

29792

Austria

65

27610

Ukraine

55

2680

42


Fig. 4. Age groups of employees with a science degree (2001).

Fig. 5. Development of employees with a science degree in the Ukrainian economy.

(Derlugyan, 1995). But delay in improvement may lead to an age gap in the Ukrainian scientific environment. Only economic improvements will attract young people to go home to work (as we can see at present) and scientists who left Ukraine will settle abroad. Today an ageing of scientists can be observed in Ukraine. In 2001 the percentage of scientists under the age of 31 with a science degree was 3.1% (fig. 4). Special investigations are needed to make a precise assessment of the situation regarding the emigration of scientists from Ukraine. Figure 5 shows the development of employees with a science degree in the Ukrainian economy. The decrease in the number of specialists with a PhD (kandidat nauk) degree may be explained by their greater mobility and consequent emigration. Since Ukraine became an independent state the rate of Ukrainian scientific journals has decreased. In February 2003 there were 8 Ukrainian journals in the ISI list (by comparison: there were 119 Russian and 44 Polish journals). In order to obtain a science degree students are only required to publish in a Ukrainian journal; a lowering of the standards has been observed.

3.3 Innovations In modern developed countries technology transfer and innovation processes are the most important ways to increase the competitiveness of production and one of the major sources of profit. The absence of effective technology transfer mechanisms and a developed infrastructure for the support of innovation processes posed a considerable problem for the development of the Soviet economic system, and this was inherited by Ukraine. In the EU countries the percentage of enterprises with implemented innovations is more than 40%, in Ukraine it is about 14% (fig. 6). Raw materials form the basis of exports from Ukraine (table 4).


43

Fig. 6. Implementation of innovation in Ukrainian enterprises. Table 4. Structure of Ukrainian exports Products

2000

2001

Non-precious metals

41.1

41.3

Chemicals

12.2

14.4

Machinery and equipment

11.8

11.5

8.8

11.2

Food, beverages and agricultural products

Striving for improved living conditions and economy-type industry does not stimulate innovations. In spite of considerable debts caused by the import of energy sources from 1992 to 1999 due to old equipment and old technologies, GDP power consumption increased 1.5 times, and CO2 emission by 30% (figs. 7,8). Typical of the post-Soviet period, a neglect of environmental quality is a factor that prevents the use of environmental and engineering standards to intensify innovation activity. This factor is reinforced by the absence of a state policy aimed at decreasing energy consumption. Ukraine has a poor bank system (on 01.01.2001 the balance capital of all Ukrainian bank systems was 12.4 times less than the balance capital of Polish PKO BP S.A.), domestic investment decreased by 22% during 1990-1999, and direct foreign investments per capita in Ukraine are significantly lower than in CEE countries (fig. 9). Ukraine is making efforts to improve the investment climate and to intensify innovation processes. In 1992 the State Innovation Foundation was created; this later became the State Innovation Company. Poor knowledge of the technological market and poor expertise as far as innovation projects are concerned combined with a desire to spend money on projects other than innovation projects have proved to be obstacles preventing this structure from working effectively. In an attempt to improve the Ukrainian environment for innovations, the State created 12 special economic zones and introduced special investment regulations for 9 regions of development priority. But even after the implementation of these measures the volume of investment did not increase sufficiently; e.g. in the Kharkov area from 2000 to 2002 the total volume of investment was $21.8 per capita (with $16 being the average in Ukraine). In order to intensify technology transfer the Ukrainian model of technoparks was developed (Mazur, 2002). There are now 3 technoparks working successfully: 2 in Kiev and 1 in Kharkov. Of all the obstacles to technology transfer, the most serious are the absence of a

44


Fig. 7. Rise of Ukrainian GDP energy consumption compared to GDP power consumption in other countries.

Fig. 8. CO and CO2 emissions from fossil fuel combustion.

Fig. 9. Direct foreign investments per capita.

developed infrastructure and the lack of managerial security. If innovation processes are provided with effective management, R&D results will find a customer. For instance,


45

Ukraine has a leading position in the delivery of ionising radiation sensors; it is successfully moving on to the production of artificial sapphires. Aircraft engineering and power engineering also have good market prospects. 3.4 International R&D collaboration International R&D collaboration supported by the state is based on bilateral agreements between Ukraine and other countries (see table 5) and between Ukraine and international organisations such as NATO and the EU. Furthermore, there is international R&D collaboration as a result of private initiatives of Ukrainian scientists: they compete for international grants and awards, participate in international conferences, and give lectures at universities abroad. Table 5. Bilateral agreements between Ukraine and other countries Countries European (excluding CIS countries) EU countries CIS countries

Number of bilateral agreements 22 14 10

Northern America

3

Central America

1

Southern America

2

Asia (excluding CIS countries)

8

Africa

3

Total

63

3.4.1 R&D collaboration Ukraine—EU The European Commission supports transition processes in the CIS countries and as a result of its intended partnership with Ukraine in the R&D field must promote economic development in Ukraine. According to the Commission's rules Ukraine can participate in the following programmes: - FP6-INCO; - INTAS; - TACIS; - STCU (financed by the EU jointly with Canada, Japan, Sweden, USA); - COST; - EURECA. In the Copenhagen agreement between the EU and Ukraine (2002) regarding R&D partnership the following points were included: • Environment and climate investigations; • Biomedical investigations and investigations in the health care field; • Investigations in the areas of agriculture, forestry, fishery; • Industrial technologies, material science, metrology; • Non-nuclear power engineering; • Transportation;

46


• Information technology; • Investigations in the field of social sciences; • Training and exchanges of scientists. The EU and Ukraine intend to form a joint committee on science and technology partnership. 3.4.2 R&D collaboration Ukraine-NATO The legal base of R&D collaboration between Ukraine and NATO is the Charter on special partnership between Ukraine and NATO (July 1997) and the State Programme of partnership Ukraine-NATO for the years 2001-2004 which defines the way in which the Charter is to be put into practice. About 13000 Ukrainian scientists take part in international projects supported by NATO. The investment of the NATO programme "Science for Peace" alone amounts to about $1 million. 3.4.3 R&D partnership in the framework of the Black Sea Economic Co-operation The Black Sea Economic Co-operation Organisation (BSEC) was created in 1992. It includes 11 countries: Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russian Federation, Turkey, Ukraine. Special bodies and structures of the BSEC were created to support innovation processes in the BSEC countries: The Working Group for R&D Partnership, the International Centre for Black Sea Studies, the Association of Seismologists of the BSEC, the International Technology Transfer Centre, the International Centre for Examination and Protection of Water Environment of the Black Sea Region. The last two structures were created on the initiative of Ukraine, and representatives of Ukraine work in all the bodies and structures mentioned above. The priorities of the BSEC countries in terms of R&D collaboration are as follows: • Seismology; • Environmental protection; • Biodiversity of the Black Sea; • Environmentally friendly power engineering; • Water monitoring and cleaning; • Waste utilisation; • Food supply; • Health care. 4. Prospects for using the Ukrainian R&D potential The experience of the last few decades shows that one of the most important conditions for successful economic development is the ability to use new technologies in the domestic economy. Even if the majority of the new technologies are imported (e.g. in the countries of South-Eastern Asia) the country's own high R&D potential is necessary to be able to use the imported technologies. Comparison of such oil-exporting countries as Norway and Saudi Arabia shows that with nearly the same percentage of this production in total export, the GDP of Norway is more than 2.7 times that of Saudi Arabia. Now Arabian oil-exporting countries are diversifying their industry, developing high-tech branches with strong state support.


47

Table 6. Taxonomy of globalisation of innovations Category

Actors

Forms

International exploitation of nationally produced innovations

Profit-seeking firms and individuals

Exports of innovative goods, Grant of licenses and use of patents, Foreign production of innovative goods internally designed and developed.

Global generation of innovations

Multinational firms R&D and innovative activities both in the home and the host countries. Acquisitions of existing R&D laboratories or green-field R&D investment in host countries.

Global technological and scientific collaboration

Universities and Public Research Centres

Joint scientific projects. Scientific exchanges, sabbatical years. International flows of students.

National and Joint-ventures for specific innovative projects, multinational firms Productive agreements with exchange of technical information and/or equipment.

In the EU the programme for regions lagging behind in development support the creation of infrastructure which promotes the establishment and development of hightech industry. For instance, in the Western Hebrides telecommunication and consulting infrastructure were created with the European Regional Development Fund, which has supported this area towards a regional knowledge-based economy. Russia is for example starting to use innovation processes in regional development programmes. The recent Strategy of the Russian North-West Development is based on the use of domestic technologies and the development of the infrastructure for technology transfer, the Strategy of Siberian Development makes provision for reorientation from low to high-tech industry. The Ukrainian ruling and business elites do not show any readiness to make such moves. It seems that special cultural programmes and social innovations are necessary first of all in Ukraine. According to Archibugi and Michie (1995), several types of international R&D co-operation for technology transfer and development are possible; see table 6. It would seem today that a suitable way for Ukraine to use international co-operation in the field of technology transfer would be to rely on domestic R&D potential and to develop the necessary skills and domestic innovation infrastructure. Existing bilateral agreements (table 5) and agreements with the EU are a fine basis. Integration in the European IRC network, which means including the Ukrainian R&D potential in European R&D and innovation activities, is a powerful incentive for innovation processes in Ukraine. Using opportunities provided by the 6th Framework Programme, Ukraine can participate in the construction of the European Research Area. The launch of innovation processes may be connected with entering regional international projects involved in inter-cultural interaction, environmental protection and regional transportation infrastructure development, including gas and oil transportation systems. In the Black Sea region technologies are currently being developed for co-ordinating different types of international business (transportation, fishery, leisure) and the well-being of the population in the framework of sustainable development of the region (Aybak, 2001). The EU in the TACIS Programme supports environmental protection strategies here and this Programme co-operates with the Global Environment

48


Fig. 10. The Black Sea GEF region.

Facility's Black Sea Ecosystems Recovery Project and with the Danube-Black Sea task force. In November 2001 the Memorandum of Understanding between the International Commission for the Protection of the Black Sea and the International Commission for the Protection of the Danube River on common strategic goals was signed. This activity covers large areas of Europe (fig. 10). Ukrainian scientists and developers may consider international programmes as customers for new technologies. References Archibugi, D. and Michie, J. (1995) The globalisation of technology: a new taxonomy. Cambridge Journal of Economy 19, 121-140. Aybak, T. (2002) Globalisation in Europe and New Regionalism in the Black Sea: Toward Innovative Policies in the Field of Environment. In: Walter Leal Filho (ed.), Prospects of Integration and Development of R&D and the innovation Potential of the Black Sea Economic Co-operation Countries. Amsterdam: IOS Press, pp. 57-69. Bell, D. (1976) The Coming of Post-Industrial Society: A venture in social formation. Harmondsworth: Penguin, New York. Derlugyan, G. (1995) Brain Drain - is it possible and necessary to combat it? Knowledge is Force, 11, 16-21. Inosemtsev, V (2000) Limits of Overtaking Development. Moscow: Economika. Mazur, A. (2002) Technopark: a New Way and New Possibilities for Innovation Development. In: Walter Leal Filho (ed.), Prospects of Integration and Development of R&D and the Innovation Potential of the Black Sea Economic Co-operation Countries. Amsterdam: IOS Press, pp. 79-86. Milukov, P. (1995) Essays on History of Russian Culture. Moscow: Progress.


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Problems and Approaches in National Innovation Policy in Armenia Bardukh Gabrielyan and Tigran Arzumanyan International Relations Department, National Academy of Sciences of Armenia, 24, Marshal Baghramyan Aue., 375019 Yerevan, Armenia Abstract. This chapter focuses on current R&D infrastructure in Armenia and some aspects of innovation policy. Based on an analysis of the present situation, it suggests possible ways of solving existing problems. Examples of some of the latest developments in innovation processes in the country are given.

1. Analysis of the present situation Scientific and research institutions in Armenia played an important role in the economic development of the former Soviet Union. Since the 1960s Armenia has had a ramified and actively operating system of scientific and technological institutions linked with different industries. In the Soviet era central authorities in Moscow for the most part determined the fields of scientific research and development, including military R&D, and these areas of research were centralised and far removed from Armenia's own needs. The government and central ministries defined the policies which were co-ordinated thereafter by the Academy of Sciences and, finally, carried out by academic and industrial scientific and research institutions. R&D personnel worked on certain research problems, and research financing was based on reasonable demand. As soon as the Soviet Union collapsed and the central financing ceased to exist, it became evident that significant institutional reorganisation and modernization was needed in all spheres of life, including R&D. At present, advances in science and R&D in Armenia depend entirely on the economic situation in the country which remains rather problematic. As a result, problems related to economic reforms, industrial recession and the worsening financial situation have a direct impact on R&D. At present, R&D funding accounts for 1.3% of official budget expenditure. Since the allocated money is mainly used for payment of salaries and covering growing operating costs, the budget intended for equipment and other assets has fallen significantly, this also being true in the case of printing & publishing, purchasing of foreign scientific publications, chemical agents, etc. As a result, we observe a reduction in the number of research institutions and a continuing outflow and drain of scientists and specialists, mainly younger people, to other economic sectors and abroad. According to statistics, the number of research institutions in Armenia has fallen from 125 in 1992 to 96 today.

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B. Gabrielyan and T. Arzumanyan /Armenian National Innovation Policy: Problems & Approaches

Fig. 1. R&D management structure in Armenia.

2. R&D infrastructure Armenia developed a robust infrastructure of R&D institutions. The R&D management structure in Armenia and responsibilities of executive bodies are shown in figs. 1 and 2. Owing to the activities of the high-schools, scientific/research, technical and technological institutions, the intellectual potential of many thousands of scientific and technically skilled staff was cultivated during the several decades which saw the development of R&D infrastructure. The creative and intellectual activities of these people formed the base of the Armenian economy. Today's R&D activity in fundamental and applied science is mainly conducted by about 40 research institutes and centres under the Armenian National Academy of Sciences (Table 1), 7 research institutes and centres under the Ministry of Trade & Development, 6 research institutes and centres under the Ministry of Agriculture, 10 research institutions & centres under the Ministry of Health (Table 2) and 10 universities supervised by the Ministry of Education & Science (Table 3). Among them are both the oldest research institutes, founded between 1923 and 1947, and newly organised research centres, founded between 1990 and 1999. Among the most prestigious Armenian "temples" of education, the oldest is Yerevan State University, which was established in 1919. The American University of Armenia and the French University of Armenia were founded in the last decade by the US government and French government respectively. Nevertheless, the number of people working in R&D has dropped dramatically in recent years. Thus, the figure for 1998 was 8133 people, including 6500 researchers. By the year 2000 this number had dropped to 5081, including 4150 researchers. The distribution of research staff by employer is as follows: 45% in the academic sector,


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Fig. 2. Executive bodies: responsibilities.

14% in the industrial sector, and 4% in universities. About 50% of Doctors of Science and PhD holders are employed in the National Academy of Sciences (academic sector). About 20% of Doctors of Science and PhD holders work in universities, and 30% in the industrial sector. A significant decrease in the number of young researchers entering science has led to an ageing of personnel. Thus, the number of scientists younger than 40 dropped from 36% in 1992 to 20% in 2000. At present, more than one third of all PhD holders are older than 50. The share of Doctors of Science older than 50 is 83%, and 53% are older than 60. Difficulties in replacing scientific personnel are related to inadequate funding of the sciences. The difficulties of a transition period, worsening of the economic situation, destruction of previous economic, scientific and other connections, a sharp decrease in the demand for traditional Armenian production (including intellectual) have inevitably led to a significant reduction in the activities of many scientific and technical subdivisions and relevant scientific and technical capacities of industries. Many scientific and technical

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B. Gabrielyan and T. Arzumanyan /Armenian National Innovation Policy: Problems & Approaches Table 1. R&D institutions of the Armenian National Academy of Sciences

Division of Natural Sciences

Division of Physical, Mathematical and Technical Sciences

Division of Human Sciences

Centre for Ecological Zoosphere Studies

Institute for Information Science and Automation Problems

Institute of Archaeology and Ethnography

Institute of Biochemistry

Institute of Applied Problems of Physics

Institute of Oriental Studies

Institute of Botany

Astrophysical Observatory

Institute of Arts

Institute of Chemical Physics

Institute of Geological Science

Institute of Economics

Institute of Fine Organic Chemistry

Institute of Geophysics and Engineering Seismology

Institute of Philosophy and Law

Institute of General and Inorganic Chemistry

Institute of Mathematics

Armenological Study Centre

Institute of Hydroponics Problems

Institute of Mechanics

Institute-Museum of Genocide

Institute of Hydro-ecology and Ichthyology

Institute for Physical Research

Institute of History

Institute of Microbiology

Institute of Radiophysics and Electronics

Institute of Language

State Microbial Depository Centre

Engineering Centre

Institute of Literature

Institute of Molecular Biology

Geophysical Observatory

Molecular Structure Research Centre

Special Experimental & Design Technological Institute

Institute of Organic Chemistry

Space Astronomy Institute

Institute of Physiology Centre of Medical Genetics

staff in Armenia today are either not employed in their professions, or are unemployed. As a result, the following negative processes have occurred over the last decade: • emigration of qualified Armenian specialists to the developed foreign countries; • disqualification of the specialists; • sharp reduction in the inflow of young specialists to science and technology. In addition, the lack of access to information for Armenian scientists is both restricting their opportunities to apply for research funds and causing them to fall behind in their knowledge of the latest developments, thereby degrading the quality of their research. On the other hand, even under such difficult circumstances, a sufficient number of market-oriented scientific results and achievements are available within scientific and technological institutions in Armenia today. However, incompetence on the part of personnel and administration of the Armenian scientific and technological institutions to commercialise R&D results is a serious obstacle in the way of applying scientific achievements in industry or marketing innovative products on local or international markets.


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Table 2. Other R&D institutions in Armenia Ministry of Industry & Trade Armenian Research Institute of S&T Information Institute of Biotechnology Institute of Chemical Technology Institute of Water Problems and Hydro-techniques Research Institute of Radio physical Measurements Research Institute of Stone & Silicates Yerevan Physics Institute Ministry of Health Angio-neurology Research Centre National Institute of Health Research Centre of Oncology Research Centre of Radiation Medicine and Burns Research Institute of Cardiology Research Institute of Environmental Hygiene & Toxicology Research Institute of Epidemiology, Virology & Medical Parasitology Research Institute of Haematology Research Institute of Spa Treatment & Physical Medicine Stress Centre Ministry of Agriculture Research Centre of Vegetable & Melons & Gourd Crops Research Institute of Agricultural Economics Research Institute of Animal Breeding & Veterinary Science Research Institute of Farming Research Institute of Soil Science & Agrochemistry Research Institute of Viticulture & Wine-Making

3. Innovation policy issues It is obvious that the economic crisis, and, consequently, the crisis in R&D, can only be overcome by a structural renovation of the economy, development and application of high-tech products, creating favourable conditions for innovation, and a flow of investment to key industries. A breakthrough can be achieved through the development of long-term investment and innovative state policy supporting innovation that will be directed towards supporting the main structural renovation in the economy and to increasing the flow of investments to innovation. Progressive innovation policy is the precondition if Armenia is to become a country with a developed high-tech infrastructure and an open economy. The issues of innovative policy and activities are of greater interest during transition and critical phases of an economy. At present, the Armenian economy is in such a situation, the way out of which mostly depends on both state innovative policy and the innovative activities of all economic entities, applied financial and credit mechanisms, and organisational

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B. Gabrielyan and T. Arzumanyan /Armenian National Innovation Policy: Problems & Approaches Table 3. The main universities of Armenia Ministry of Education & Science Yerevan State University Yerevan State University of Foreign Languages Yerevan State Medical University Yerevan State Institute of National Economy Yerevan State Architectural & Engineering Institute Yerevan State Art Academy State Engineering University of Armenia French University of Armenia Armenian Agricultural Academy American University of Armenia

and economic approaches in addressing industrial and R&D innovation issues. In the conditions of transition to a market economy innovation policy requires special attention and study, considering its decisive role in reviving economic growth. This is particularly important as an economic crisis inevitably leads to the transformation of technological infrastructure and a rapid reduction in industrial, technological and scientific potential. The economic crisis in Armenia has led to a decline in the spheres of science, technology and innovation that, in turn, affects the technological infrastructure. In these conditions companies are cutting down on the production of high-tech goods, frequently replacing them by unsophisticated and cheaper products. Armenia is currently far behind the modern international innovative economic development level due to the ongoing economic crisis. In this connection many categories and approaches applied in innovative policy need to be revised. Besides, transition to economic methods in the regulation of effective economic growth necessitates the development and application of new mechanisms in the management of the entire economy and, in particular, of innovative development. Macroeconomic stability is necessary but not sufficient in itself for an economic breakthrough. A significant physical and moral depreciation of industrial capacity, reduction of research and technology, and the disorganisation of many research institutions, along with the entire absence of any protectionist policy, all prevent the revival and gradual increase in innovation in these areas which are needed to put them in a position to face both internal and external competition. The situation is further complicated by the inadequate application of economic tools to scientific and technological innovations and, consequently, to ensuring the scientific, technological and economic development of the country. Current possibilities for state regulation of activities regarding the promotion and development of innovations are not sufficiently effective and are inadequately targeted, and innovation activities do not always receive relevant support from official structures. The meagre level of state budget allocations for science makes it necessary to search for other sources of funding. This drives research institutions to create off-budget funds, to promote research outcomes to the market, to seek for consumers of high-technology products in the country and abroad. Providing timely and adequate solutions to problems faced in the field of innovation, science and technology may serve as a basis for preservation and further development of existing scientific and economic potential. Having studied the regulation mechanisms, it is possible to consider the variety of


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objective and subjective factors that together will enable us to work out and implement a policy to promote innovation activities. Such a policy makes it possible to co-ordinate, balance, integrate and substitute the factors influencing innovation processes whilst making use of state and market mechanisms. The Armenian Law on Science and Scientific and Technological Policy also contains a definition of innovative activities. It gives a general idea of the essence, objectives and tasks of innovation policy in the country. The Law states: "Innovative activities are those directed to the production of new products, improving their quality and decreasing primary costs, and the application of R&D outcomes for technological perfection". In our opinion, however, this definition of innovative activity is insufficient and should also include activities aimed at developing new technologies and perfecting existing ones. There has been a discrepancy in our country for a long period of time between scientific inventions and the commercialisation of innovations. Currently innovations do not receive adequate support from state structures. The state budget only allocates funds for basic and applied research. In developed countries, however, the majority of funds allocated to science go to innovation. For instance, in Japan the share of basic, applied research and innovation expenses in the total budget expenditure for science is 12%, 24% and 63%, respectively. As we have mentioned, the official budget expenditure for science in Armenia amounts to around 1.3% and state allocations towards the technical re-equipment of plants to 0.9%, the equivalent of 0.27% and 0.18% of GDP. Under the "socialist model", allocations for innovation were also very insignificant. Thus, considerable funds were allocated for new detailed and basic research, whereas comparatively little went towards the application of innovations. This fact hindered the development of a competitive and science-intensive innovation structure. At present we are observing the same situation where basic science is given priority. Meanwhile it should be mentioned that there has been a considerable reduction in funds for R&D. The creation of a competitive innovation market in our country can greatly contribute to improved application of the modern international level of scientific and technological achievements we have accumulated, and can attract foreign investment companies. In order to ensure economic stability and sustainable growth of the country it is essential to work out a new economic scheme for a chain of "science-innovationproduction" (fig. 3) and to ensure its implementation in the field of organisation and management of innovation activities. Along with the problems mentioned we can observe certain positive shifts taking place in Armenia. In recent years Armenia has been experiencing economic growth, with near double-digit growth in GDP in 2002. The Government of Armenia has undertaken initiatives to promote the development of the IT sector through legislation to protect intellectual Property Rights with patent, copyright and trademark laws as well as business-friendly laws to encourage foreign investment. One such example is the establishment of the Viasphere Technopark, a state-of-the-art technology park located in Yerevan. It provides infrastructure to technology companies worldwide looking to extend their core development offshore. Viasphere Technopark is centrally located in Yerevan; it has been operating since 2001 and is currently hosting several successful US-based subsidiaries developing advanced software in a variety of fields. In Armenia, the Viasphere Technopark interacts with technical universities and institutes in areas of advanced research. Along with this, several tailor-made projects have been initiated and implemented in Armenia in recent years aimed at promoting R&D and innovation activities, as for instance: • Commercialisation programme for R&D results. In connection with this programme and in accordance with a decision of the Armenian government "The

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Equipment

Fig. 3. Scheme: chain of "science-innovation-production".

Committee for the Application of the Achievements of Science", presided over by the Armenian National Academy of Sciences, was established in 2002. The Committee aims to provide assistance and help to the personnel and administration of the Armenian scientific and technological institutions with the commercialisation of R&D results: the application of scientific achievements in industry and marketing innovative products on local or international markets. At present the Committee is developing the programme for the organisation of professional upgrade training for the personnel of Armenian R&D Institutes in business management and technology commercialisation. The training programme will assist scientists in developing their general business knowledge (business planning, project and financial analysis for securing investment), presentation skills (strategies for effective presentations of R&D results to the business community), understanding intellectual property rights, marketing innovative products and marketing research results. Programme for the promotion of domestic capacity-building in information access and dissemination. The programme is aimed at enabling Armenian R&D personnel to obtain access to up-to-date and relevant information and provide assistance in the shape of information access points, and to promote sustainability by supporting or developing activities of Armenian researchers at a level at which they could eventually be sustained by the institutions themselves. The following strategies are proposed: - to improve the use of the Internet and access to technical literature by local libraries and information networks; - to develop tailor-made training schemes within Armenia, to disseminate good Internet practice across libraries, information centres and the scientific community in general; - to promote the use of the Internet in the dissemination of Armenian research capabilities, research results, etc.; - to provide training in information and communication technologies (ICT); - to improve the efficiency of the electronic delivery system for technical literature in Armenia.


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• International co-operation programme. Armenia has agreements with a number of international organisations at governmental level encouraging the recovery and development of scientific/technical infrastructure in the Community of Independent States through the promotion of international co-operation in fundamental and applied research, academic exchange programmes, research infrastructure support programmes, and R&D commercialisation programmes. Among these are the schemes within the 5th—6th European Framework Programmes (INCO-Copernicus-2, International Association (INTAS), ISTC, Alexander von Humboldt Foundation (Germany), Civilian Research Development Foundation (CRDF; USA), Deutscher Akademischer Austauschdienst (DAAD; Germany), North-Atlantic Treaty Organisation (NATO), Royal Society (UK), and many others. 4. Conclusions On the basis of our analysis of the current situation and existing experience we can make some conclusions concerning the trends in innovation development in Armenia. 1. The revival of the Armenian economy depends on the adoption of new approaches in development, renovation and economic policy making. The technological crisis is one of the core reasons for economic decline in Armenia, manifested in an unprecedented reduction of production volume, imbalance in the technological level of high-tech products produced in the country and abroad all of which may lead to the destruction of the industrial, scientific and technological potential of the country. 2. Innovation serves as a driving force in all strategies aimed at economic growth. In a market economy, especially in its formation phase and transition period, innovation policy is the key factor to ensure economic growth. 3. Innovation processes in nearly all spheres of the Armenian economy, including R&D, reflect only inadequately the requirements for the current phase of development of market relations. 4. An adequate legal base is urgently needed to promote innovation activities and develop state innovation policies. It should be mentioned, though, that innovation policy in Armenia is in its initial stages. Recent developments in this direction, however, make us hope that we will see comprehensive changes for the better in the very near future. References Booklet of the National Academy of Sciences of Armenia, 2003. Available on-line at http://www.sci.am/ Karapetyan T. (1998) State regulation of innovation activities in Armenia. PhD Thesis, Yerevan, 1998. Materials of the International Scientific and Educational Centre of NAS RA, 2002. UNDP Annual Report - Armenia, 2001, 2002. Available on-line at http://www.undp.am/ Viasphere Company Leaflet, 2002.



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Innovation Relay Centres New Trends in a European Project Peter Wolfmeyer ZENIT GmbH, Dohne 54, D-45468 mulheim an der Ruhr, Germany Abstract. This chapter describes the structure and operations of the Innovation Relay Centres in Europe and their contribution to innovation.

1. Introduction The network of Innovation Relay Centres is now in its eighth year of operation, having been set up in 1995. If the predecessor project of the VALUE Relay Centres, which ran from 1993 to 1995, is included then the IRCs can be considered to be celebrating an unofficial 10th birthday this year. Those organisations involved from the outset have seen the network develop from "experimental" to "mature" to the increasingly "sophisticated" status it displays today, whilst naturally continuing to evolve through a permanent process of interaction and learning from each other. The IRC NRW plays a particularly active role in the development and refinement of the IRC initiative by participating in think tanks and working groups at regional, national and international (EU and beyond) level. As such it is not only in a position to follow, identify, report and implement new trends but also, on the basis of its long-term and well-founded experience and proactive approach, to make its own contribution to the emergence and realisation of these trends.

2. ZENIT GmbH: Technology trend spotter as IRC host organisation The IRC NRW is in the advantageous position of being located at ZENIT, the Centre for Innovation and Technology in North Rhine-Westphalia. ZENIT (fig. 1) has its finger on the pulse of innovation and technology development in the region and beyond, and is thus the ideal host for the IRC. Tracing, tracking and turning into reality innovations and new technology trends is the core activity of both ZENIT and the IRC NRW. ZENIT GmbH was founded in 1984 and is a non-profit consulting firm providing consulting services to corporate and institutional clients in future-oriented fields of technology, in management of innovations as well as in policy approaches and policy evaluation. The team of experts covers disciplines as diverse as microelectronics, mechanical engineering, empirical social research and economics. ZENIT's target groups first and foremost comprise industrial enterprises, institutions and public authorities in North Rhine-Westphalia. Numerous consulting projects have been carried out in the areas of • market research, • technology screening,

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P. Wolfmeyer / Innovation Relay Centres - New Trends in a European Project

Zentrum fur Innovation und Technik in NRW

Fig. 1.

• adaptation of employees to new technologies, • change-management training, • regional development strategies, • S/T policy design and implementation, • programme evaluation, • technical assistance. ZENIT's services are also sought in the field of financial engineering where financial concepts are developed and implemented by combining various components, i.e. public funding, corporate loans or venture capital. Activities range from publications and seminars targeted at the general public to tailor-made consulting services for individual firms and public organisations. Since ZENIT primarily focuses on SMEs (small and medium-sized enterprises) most of its services are geared to their needs. Clients benefit from ZENIT's close involvement with a multitude of institutions, initiatives and organisations and from its status as a public-private partnership; its recommendations on SME issues are often sought by the respective ministries. ZENIT hosts a Euro Info Centre which was founded in 1987 as one of the pilot EICs. As SME specialists, their aim is to inform, advise and assist SMEs in North-Rhine Westphalia in all Europe-related areas. Since 1994 ZENIT has also hosted an OPET (Organisation for the Promotion of Energy Technologies) which offers support in energy topics. Thanks to ZENIT's participation in the EIC, OPET and last but not least the Innovation Relay Centre (IRC) networks, it is familiar with the modus operandi and working environment of the European Commission. Not only on behalf of clients but also for itself, ZENIT has successfully placed several proposals for funding under European schemes - be they part of the RTD framework programmes or otherwise. Several studies have been carried out on behalf of the European Commission and a large number of projects have been implemented. Services also include financial control and reporting work. The ZENIT quality assurance system has been certified in accordance with ISO 9002 and since this

P. Wolfmeyer/Innovation

Relay Centres - New Trends in a European Project

61

system covers all projects carried out under the auspices of ZENIT, this means that the IRC can also pride itself on its quality standards. From this description it can be seen that the host organisation provides the perfect backdrop for the activities of the IRC, providing relevant expertise, suitably qualified staff, useful regional, national and international contacts as well as facilities with stateof-the-art computer and communication equipment. It must also be emphasised that the activities of the IRC, for example at transnational level, are also beneficial to the development of its host: a mutually advantageous cross-fertilisation.

3. North Rhine-Westphalia: A trend-setting region The activities of the IRC NRW cover the geographical area of the Federal State of North Rhine-Westphalia (NRW, fig. 2), Germany's most densely populated region. Bordering on Belgium and the Netherlands, NRW has some 18 million inhabitants and 30 cities with more than 100,000 inhabitants (almost 22% of Germany's overall population on only 9.5% of its total geographical area). NRW has 6 international airports and a dense network of motorways and railways. NRW is Germany's strongest export state: 18% of goods exported from Germany are "Made in NRW". In economic terms, NRW is a very important region not only in Germany but also in a European context. It is one of Europe's ten most important regions in terms of scientific innovation and home to the highest concentration of technology centres/incubators (69) and research centres (23, including 10 Max Planck institutes and 8 Fraunhofer institutes) which guarantee dynamic research and development activities. 4.300 people are employed at the Julich Research Centre alone. Five of Germany's ten largest universities are in NRW, about 500,000 students are enrolled at 53 universities and technical colleges. Know-how and new technological developments have helped secure

Fig. 2.

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P. Wolfmeyer /Innovation Relay Centres - New Trends in a European Project Table 1. Key industrial sectors in NRW (figures for 2001) Sector

Turnover (billion Euro)

Employees (in 1000s)

Chemical/pharmaceutical industry

44

132

Mechanical engineering

35

225

Electrical engineering/electronics

32

160

Metal production and processing

28

121

Automotive industry

27

90

Food and beverage industry

27

114

Coke production, mineral oil processing

17

5

Paper, publishing, printing

17

92

Production of rubber and plastic goods

11

73

Textile and clothing industry

8

47

Glass, ceramics, stone and earth materials

8

43

Manufacture of furniture

7

50

Mining and quarrying

3

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this federal state's international competitive standing and position as a top-class business location. NRW's trade fair status reflects its national and international importance. The state's four exhibition centres - Dusseldorf, Cologne, Essen and Dortmund - are meeting points for world business. Every year, about seven million guests visit the special trade exhibitions, as well as the trade shows open to the public. 40% of all international fairs in Germany take place in NRW. 40% of Europe's inhabitants live within a radius of 500 kilometres from Dusseldorf, NRW's federal state capital. 46.2% of foreign investment is made in NRW. The gross domestic product of NRW represents 22.3% of the German GDP. There are approximately 700.000 companies in NRW, a region where large companies are also highly concentrated (20 of Germany's 40 largest enterprises have their headquarters here, especially in Dusseldorf, Cologne, Dortmund, and Duisburg). In addition to the expanding service sector, which includes telecommunications and media, NRW boasts an impressive list of various industrial sectors involved in manufacturing and processing, as shown in table 1. These figures show that NRW offers considerable potential for the work of the IRC NRW in terms of R&D capability, innovation capacity and the sheer number of enterprises, initiatives, organisations and other players which make up the innovation and technology landscape in NRW. On the other hand, the IRC NRW has its work cut out to reach all these protagonists and to integrate them in the transnational technology transfer process which is its mission. That is why the IRC has developed two major strategies in the course of its evolution: 1. To present a clearly defined IRC profile to its clientele with special IRC services and expertise, yet in parallel integrating itself in the regional network of technology transfer and innovation. 2. To offer not only wide-scale actions targeted at larger audiences but also individual services tailored to the requirements of specific enterprises or groups of enterprises, i.e. clusters and thematic groups.

P. Wolfmeyer /Innovation Relay Centres - New Trends in a European Project

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Being a highly innovative and technologically trend-setting region, NRW tends to produce rather than require new technologies (i.e. is a donor rather than a recipient of new technologies). This by nature influences the work of the IRC, i.e. it must focus on seeking "takers" of NRW innovations abroad rather than on importing foreign innovations, although it has recently increased its efforts in this area, too.

4. The IRC network: A European project 4.1 The IRC network: Structure The first IRCs were established in 1995 with the support of the European Commission as members of an integrated pan-European platform to stimulate transnational technology transfer and promote innovation services. Today, 68 IRCs cover a wider geographical area than any other technology transfer network in the world, spanning 31 countries all EU member states, the Newly Associated Countries (Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia), Iceland, Israel, Norway and Switzerland (fig. 3). Most IRCs are operated by a consortium of regional organisations with established reputations in local research and industrial communities. These include innovation agencies, Chambers of Commerce, regional development agencies and university technology centres. Altogether, almost 250 partner organisations are involved, ensuring a local presence in most regions of Europe. IRC staff - a total of nearly 1000 - are experienced specialists with backgrounds in business, industry and research. However, there are also single IRCs (i.e. not operating within a consortium), and a developing trend is that of transnational IRCs. Since April 2002 IRC NRW is also a transnational IRC, having been recommended to the Maltese government as a suitable mentor. Our mission is to be instrumental in the setting up and running of a professional IRC in Malta and our tasks encompass co-ordination with the European Commission as well as general administrative co-ordination, staff exchange and training, support in methods, techniques and tools, transfer of know-how in management and marketing and the integration of IRC Malta into the overall IRC network, for example

Fig. 3.

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at transnational events. There are four other transnational IRCs (France/North of England, East Switzerland/South Germany, Luxembourg/Trier/Saarbriicken and Iceland/ IRC Netherlands) and it is likely that in the next call several new transnational IRCs will be proposed.

4.2 The IRC network: Mission and services The mission of the Innovation Relay Centres is to facilitate innovation and transnational technological co-operation in Europe with specialised business services. These services are primarily targeted at technology-oriented small and medium-sized enterprises (SMEs), but are also available to larger firms, research institutes, universities and technology centres. Both traditional and high-tech sectors are covered. In today's highly competitive global markets, SMEs frequently need to acquire technology from abroad, to sell or license technology outside their own country or to enter into joint development arrangements with foreign firms which have complementary know-how. However, many SMEs lack the information, resources or specialised skills to find suitable transnational partners and negotiate satisfactory agreements efficiently and reliably. In all these cases, the local IRC offers a single point of access to the entire range of expert support required - either delivering services in-house or signposting the client to other regional or European agencies.

4.3 IRC services IRC services (fig. 4) include: • assistance with technology acquisition and technology marketing; • support in identifying suitable partners for technological co-operation; • partner matching and technology brokerage events; • technology audit and technology watch; • help in negotiating technology partnership agreements; • access to the results of EU, Eureka and other research programmes;

Fig. 4.


Fig. 5.

Relay Centres — New Trends in a European Project

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Fig. 6.

• access to EU innovation financing and intellectual property rights support services. The approach, procedures and skills of each IRC have been developed in response to the technological structure and business culture of the region it serves and each has established close ties with its local community of technology-based firms. At the same time, all IRCs draw strength from their membership in a European network (fig. 5). The strong technical and personal links within the network equip each IRC to mediate technology transfers (fig. 6) quickly and efficiently. As members of a European network, the Innovation Relay Centres connect their regions to innovative capacity in other countries. They enable local firms to source the technologies they need from the best available suppliers and provide them with a channel for their own know-how to new markets in Europe.

5. Transnational technology brokerage: The core IRC service The process of innovation is complex and takes time. It requires access to research results, adequate means of protecting intellectual property, availability of development finance and a supply of appropriate business skills. And these elements must be co-ordinated to create an environment which encourages entrepreneurs to take risks. At regional level, IRCs are helping to create such an environment by offering entrepreneurs a single point of access to the entire range of expert support they need - both that supplied by their own staff and systems and through links to other regional and European resources. However, the IRCs' core business remains transnational technology brokerage (fig. 7). It is here that they have built their reputation and it is their services in this field which add the greatest value to the efforts of Europe's entrepreneurs and researchers. The IRCs' transnational technology brokerage service is primarily targeted at technology-oriented small and medium-sized enterprises. In today's intensely competitive and rapidly changing markets, most technology-based firms must pursue European and international sales from the outset and need foreign licensing, distribution or codevelopment partners at an early stage. At the same time, many must look outside their own regions for the technologies they require to improve their productivity or to add value to their product. Streamlining the international development of such SMEs is what the IRC service is especially designed for, although it is also available to larger companies, research institutes, universities and technology centres. Each IRC maintains a portfolio of present and potential clients with whom it stays in touch through newsletters and local events as well as through specific technology transfer projects. Wherever possible, an IRC adviser with relevant technological competence is

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P. Wolfmeyer /Innovation Relay Centres - New Trends in a European Project

Fig. 7.

assigned to each client. Understanding and trust, based on personal contact, is often the prerequisite for a successful IRC project. Critical for the IRCs' core task of transnational technology brokerage is a database of technology offers and requests which is maintained centrally by the IRC-IRE Central Unit in Luxembourg and accessed by the IRCs via a web-based intranet. A request for technology partnership submitted on behalf of a client company is distributed electronically across the network within hours - and may quickly produce suitable responses from enterprises in other corners of Europe. Every case is unique, and the IRCs' core technology brokerage service very often depends on extensive prior contact between the IRC and the client.

6. IRC Thematic Groups: An important tool matures A number of IRCs focus their services by targeting sectors which are of particular importance in the region they serve. Where a region contains a significant cluster of SMEs which serve or operate directly in the field of environment, for example, it makes sense to concentrate efforts in this sector. When more than one IRC has a shared interest in a particular sector, they form 'thematic groups'. These serve as platforms for targeted joint activities such as brokerage events and inter-company visits and for the development of close professional links which can streamline the progress of technology transfer projects within the sector concerned. Bringing together IRCs with shared technical expertise, the thematic groups help to build bridges between European regions which are active in common or complementary industrial or technological sectors. To date, IRCs have established 15 thematic groups (see fig. 8).

7. Example 7.1 The Thematic Group "Enuironment" shows why ... European industry and a large number of small and medium-sized enterprises (SMEs) have to face the problems of the negative impact of their business activities on the environment. New European and global environmental standards, as well as consumer



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Fig. 8.

awareness, have forced enterprises to find solutions for these problems. Since various scenarios exist throughout Europe's regions in terms of legislation, environmental awareness etc., and since the state of the art of specific technologies also differs, there is considerable scope in this sector for transnational technology transfer. The Thematic Group "Environment" (TGE, fig. 9) was thus established to assist SMEs in the environmental sector to transfer innovative environmental technologies across national borders. The Group's aims are • to promote the European environmental technology sector; • to provide European environmental technology enterprises with a platform from which to promote their innovative products, processes and services; • to demonstrate opportunities for transnational technology transfer in the environmental sector; • to support transnational transfer projects in this sector in terms of strategy, partner mediation, intellectual property rights, legal issues. 7.2 ... and how

The Thematic Group "Environment" (TGE), currently chaired by IRC NRW, is the largest thematic group, with 24 members in a large number of European countries. Since its inception in Luxembourg in January 1997, the TGE has matured into a professional network of technology specialists experienced in the mediation of environmental innovations. A key approach is to link TGE actions with international trade exhibitions since these are an important source of innovative products and processes, attract a

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Fig. 9.

large international audience and are the ideal backdrop for activities in the areas of technological innovation and transnational business. Thus, business fora, partner mediation events and technology transfer days involving hundreds of enterprises have taken place for example during Entsorga (Cologne), Pollutec (Paris/Lyons), PROMA (Bilbao), IFAT (Munich), Heleco (Athens), RICICLA (Rimini), ECOpartners (Utrecht), ENVITEC (Diisseldorf) and IFEST (Gent). In addition to such major activities, the members of the TGE work on the project on a daily basis. This includes the screening of technology transfer opportunities in the environmental sector, approaching local firms, seeking foreign partners, promoting projects and events, matching company profiles and coaching individual enterprises. The TGE also actively uses the computerised communications system BBS, a tool provided by the European Commission linking all Innovation Relay Centres and TGE members. The Thematic Groups are also establishing an ongoing dialogue with those Innovation Cells of the EU Framework Programme's four thematic research programmes concerned with the topics on which the TGs are focussed. The Thematic Groups are proving to be an increasingly important tool in channelling and focusing IRC resources and expertise and thus in achieving more concrete results in the form of transnational technology transfer agreements between enterprises and other organisations across Europe. 8. Improving network performance: Benchmarking IRC performance is closely monitored both at the level of the network as a whole and at the level of individual Innovation Relay Centres. The progress made in the first seven years of the network's existence reflects the steady growth in its capability as a consequence of strengthening systems and procedures, developing professional skills and by the progressive integration of the network.



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To date the network has assisted over 120,000 client companies and been instrumental in over 11,000 transnational technology transfer negotiations. Its work has resulted in over 1300 signed transnational technology transfer agreements. Most signed agreements have been in the area of technical co-operation (55%), followed by commercial agreements with technical co-operation (25%). Other types of agreement are licensing (13%), manufacturing (5%) and joint ventures (2%). As the network matures, and as relationships between IRCs are consolidated at bilateral and multilateral levels, there is a much more intense exchange of good ideas. Much greater effort has been made recently, also at Commission level, to identify methodologies developed by IRCs systematically which can be considered worthy of being made available to and adopted by other IRCs. In this way, not only can other IRCs benefit from the good ideas of their peers but also the entire network benefits from an increase in its professionalism. This process of identification, validation, engineering (breaking down into logical and sequential steps) and monitoring of good methodologies, in short, benchmarking1, has been realised in discussion groups on the network's Intranet and in working groups and seminars on specific aspects of IRC work and with the support of the IRC-IRE Central Unit in Luxembourg. Examples of benchmarks to date - all with the common aim of improving the IRCs' operational efficiency and effectiveness - include selling process management, brokerage events organisation methodology, charging policy and promotional tools e.g. newsletters. On closer inspection it is clear that these benchmarks are all more or less concerned with marketing and promotion. In the next phase the intention is to identify benchmarks which are more directly related to the core IRC task of transnational technology transfer. 9. The IRC network and the 6th Framework Programme: Outlook It is not yet known in detail what is in store for the IRCs under the 6th Framework Programme. A general positive trend, however, is that innovation has been given much more weighting. This is reflected, for example, in the new term "European Innovation and Research Area". The overview in fig. 10 shows where the IRC network is positioned in the 6th Framework Programme. It forms an important part of the specific programme "structuring the ERA" and falls under the thematic domain of "Research and Innovation". In any case the IRC initiative will continue for another four years. Turkey, as an Associated State, will also be adopted into the network. This shows how the IRC project continues to expand towards the East. It is to be hoped that new IRCs in less technologically developed regions will generate more technology requests, since, unfortunately, an unchanging trend in the IRC network is the predominant imbalance of TOs (technology offers) over technology requests (almost 4 to 1).

10. Final remarks As the IRC network matures, the process of integration and the consolidation of the working relationships between individual IRCs at bilateral and multilateral level is resulting in the evolution of an increasingly sophisticated and effective network. There is 1 A benchmark is a practice which has generated a significant performance, been screened and validated and is ready to be transferred.

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FP6 (2002-2006) - Three Main Blocks of Activities

Fig. 10.

a clear move away from "go-it-alone" IRC actions towards more cluster and sub-group activities such as the Thematic Groups. This mutuality is essential since the overriding IRC goal of transnational technology transfer cannot be achieved in isolation or without the interplay of fellow IRCs. This close co-operation also means that a large number of experts from different countries and backgrounds as well as the entire network can benefit from an interchange of good ideas, now taking concrete shape in the form of benchmarks and best practice methodologies. Transnationality continues to be the key feature of the network, not only in its operations and relations but also in its development as it expands to encompass new countries, and in its very structure reflected in the trend towards transnational IRCs. What we have today is a unique network which is efficient and effective and continues to evolve in a dynamic process of development and progress.

Fig. 11.


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(Mis)match between Demand and Supply for Technology: Innovation, R&D and Growth Issues in Countries of Central and Eastern Europe Slavo Radosevic University College London, School of Slavonic and East European Studies, Senate House, Malet St, London, WC1E 7HU, UK Abstract. This paper analyses the relationship between R&D and innovation in countries of Central and Eastern Europe. It points to a gap between local demand and supply for R&D and innovation as one of the key issues for long-term growth of the region. Analysis is based on innovation surveys, R&D, and patent and business survey data. Based on this analysis, the paper makes an assessment of the implications for future policies.

1. Introduction So far, the growth and recovery of the post-socialist countries of Central and Eastern Europe (CEECs) has been based on efficiency gains from reallocations between sectors and firms, and productivity improvements in companies. Growth was not based on local R&D or extensive innovation activities. In order to grow further, CEECs will have to accumulate new knowledge and acquire new technology. The core of this problem is the (mis)match between local demand for and supply of technology, a problem which we explore in this paper. Economists are usually concerned with the issues of aggregate (mis)match between market demand and supply or supply and demand for products. However, supply and demand for products is not identical to supply and demand for technology (R&D and innovation). Technology is an intermediate input and output in an economic process, and in an increasingly knowledge-intensive economy it has become essential for understanding growth and its structural problems. In this paper, we explore this issue in the context of the CEECs using primarily statistical data, leaving theoretical issues aside and developing policy-relevant conclusions from data analysis. Our evidence on the gap between demand and supply of R&D and innovation and its determinants is not systematic. Nevertheless, we believe that even with this constraint our analysis contains empirically and policy-relevant insights and conclusions. The first part points to the emerging gap between insufficient demand for technology and growth. Due to the absence of demand for technology, there has been sizeable downsizing of R&D in the CEECs. The second part analyses the relationship between R&D and innovation activities as well as the main sources of knowledge for innovation. This points to the (mis)match between the current S&T system and changing sources of innovation. Our conclusions bear implications for future policy-making.

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2. Growth, R&D and innovation Growth and recovery in CEECs during the 1990s has not been linked to domestic R&D and technology effort. Moreover, the recovery in demand has not been accompanied by a recovery in demand for technology. Figure 1 shows that the relationship for eight CEECs has been slightly negative, i.e. countries that grew faster in the period 19941999 experienced a sharper fall in domestic patent applications than economies that continued to decline. Although the number of countries is far too limited to generalise

Fig. 1. Index of GDP and domestic patent applications in the 1994-1999 period. Source: World Bank Development Indicators, CDROM, 2002.

the proposition of a negative relationship, it is safe to conclude that there seems not to be a clear relationship between domestic technology activity and economic recovery. Recovery and decline are not closely linked to domestic technological activity, which seems to have its own autonomy. Elsewhere, we show that the recovery and growth of Poland and the decline in growth of Russia have led to similar declines in their R&D systems. This suggests that the recovery of demand for local R&D and innovation may not emerge automatically with the return of growth. Business surveys in CEECs suggest that there is a clear easing of difficulties in the field of demand in all CEECs for which survey data are available. Demand constraints were notable in the first half of the 1990s. Figure 2 shows that there has been a significant decrease in problems in terms of demand for 'young' firms in CEECs. On that basis, we would expect that improvements in this area would be followed by an increasing demand for technology. However, this improvement in demand has not been followed by equally strong improvements in terms of supply. Figure 3 shows that the picture is much more diversified when we regard difficulties on the supply side. Moreover, one of the increasing constraints for new firms has been a lack of technology and limited access to trained workers. This has been aggravated by the lack of funds and by a worsening liquidity situation (non or late paying customers) in all countries, except the Czech Republic. A clear improvement in conditions on the demand side suggests that the problems for innovators and entrepreneurs have now shifted to the supply side, and especially to issues of access to credit, own funds and liquidity of clients, despite indications by companies that clients are now financially less constrained (see fig. 2). This may suggest that the problem is not the general lack of liquidity but the mismatch between liquid supply and demand. In addition, firms are increasingly facing other supply side problems such as

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Fig. 2. Change in proportion of difficulties in terms of demand of enterprises today (2001) and at start-up (established in 1998). Source: Based on Eurostat, New enterprises in candidate countries, 2003.

Fig. 3. Change in proportion of difficulties on the supply side today (2001) and at start-up (established in 1998). Source: Based on .Eurostat, New enterprises in candidate countries, 2003.

trained workforce, and lack of technology. This is quite a new phenomenon and suggests that the CEECs are entering into a new stage of entrepreneurship where requirements for growth have become more varied and related less to finance alone but increasingly to the quality of supply and matching of supply and demand. From a policy perspective, this points to the problem of the weak financial systems, which are mediating between supply and demand, and to the importance of a national innovation system.

3. R&D in the post-socialist period The R&D system plays a relatively limited role in the current performance of the CEEC economies. Given their income levels, the CEECs still have relatively large numbers of research scientist and engineers (RSE) while the education structure of the population is relatively favourable in many countries. Both these factors should, according to new growth theory, produce much more robust growth than we have observed during the 1990s. Yet, recovery of the CEECs during the 1990s was unrelated to their R&D. Simple

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correlation coefficients between growth of GDP and share of GERD/GDP for the 19921999 period are negative for six out of nine CEE economies. However, we should not assess the importance of the R&D system merely on its current role. Restructuring of R&D is one of the key preconditions for further industrial upgrading. As fig. 3 suggests, we can observe for the first time that technology is seen as a limiting factor for growth. During the 1990s, R&D was not felt as a constraint to growth. Growth has been generated from reallocations rather than from technology accumulation. Hence, demand for local R&D was quite limited. As a result, we have seen radical shrinking of R&D systems in all CEECs. Figure 4 shows the proportion of expenditure on R&D in GDP for CEECs.

Fig. 4. Gross expenditures for R&D in GDP, 1990-1999. Source: EU (2002); for Moldova and Belarus, DB of CIS Statistical Committee, data are not comparable to OECD definitions. For 1990-1991, OECD, Centre for Co-operation with Non-Members.

From having very high shares of R&D expenditure, ranging from 2.5% to 1% (1990) of the GDP, at the end of the socialist period, CEE economies' investments in R&D fell to a range between 0.5% and 1.4% (1999) of the GDP. This reduction can be divided into three distinct periods. First, in the period between 1990 and 1993/94, with the falling GDPs the share of expenditure on R&D also declined sharply, leading to a very high absolute decline in funding of large R&D systems. This was followed by the period of stabilisation (1993/94 to 1996) in which decline continued but at a significantly lower rate. From 1996, signs of recovery in some economies, in both absolute and relative funding of R&D, have emerged. However, in some CEECs, as, for example, Romania, R&D decline continued without interruption. Overall, after an average annual decrease of 13% in the 1991-1996 period, the relative share of money spent on R&D grew on average by 3.2% annually in the 1997-1999 period. From the perspective of growth and restructuring, it is important to see what has happened to the business sector of R&D. Data show that the percentage of R&D funded by the business enterprise sector in CEECs has remained relatively stable over the whole period. In other words, the business enterprise sector has shared the destiny of the absolute and relative overall decline of the R&D sector (see figs. 5 and 6). National differences in the share of R&D funded by business have remained, suggesting that the transition could not change strong structural and nationally specific features in R&D systems. The high share of R&D funding provided by the business sector in the Czech Republic and Slovakia and the very low rate in the Baltic states are the result of differences in industrial structure, particularly in terms of the role of large firms, although neglect of R&D in the Baltic states during the early 1990s also plays a role. The high share of R&D carried out by the business enterprise sector in Russia and Romania indicates a primarily unreformed R&D sector dominated by external industrial R&D institutes rather than strong in-house R&D. At the same time, in both countries


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Fig. 5. Share of R&D performed by the business enterprise sector, 1992-1999. Source: EU (2002).

Fig. 6. Share of R&D carried out by the business enterprise sector, 1999. Source: EU (2002).

there is a low rate of R&D funding by the industry but a high rate of government funding of business sector R&D. This situation is generally rare in market economies and can be taken as an indicator of the slow restructuring process in R&D. Our research (see Radosevic, 1999) suggests that the Russian innovation system is moving towards a situation where the in-house R&D activities of businesses are playing a more important role than the external R&D activities. However, the role of external R&D activities still continues to be significant, suggesting that some elements of the Soviet R&D model as described by Gokhberg (1997) are still operating. A simultaneous fall in government funding and weak demand for R&D from the industry have blocked structural change of sectors within R&D systems which adjusted to poor demand by overall reductions in size. As we analysed elsewhere (Radosevic and Auriol, 1999), downsizing of the R&D systems in CEE was not systematically linked to a specific individual factor on the demand or supply side. It is probably the combination of demand factors (annual changes in GDP and investments) and supply policies (budgetary R&D policy) that in the end have shaped trends in R&D spending. Neither government nor market demand for R&D could buffer this fall. However, this does not mean that there was no change at the micro-level in the R&D system. For an analysis of the Russian situation in S&T from this perspective see Radosevic (2003).

4. Business R&D and innovation The supply of R&D is only a part of the overall process of innovation that leads to a finished product being placed on the market or to economic growth at the national level. The fall in aggregate R&D spending hides the changing nature of innovation and its sources. So, if we want to understand why there has been a decrease in demand for R&D we should look beyond the R&D sector at the nature of innovation processes.

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Fig. 7. Innovation expenditure in manufacturing, in %. Source: R&D and innovation statistics in candidate countries and the Russian Federation. Data 1996-97, EC, Theme 9, R&D, 2000. For Slovakia, Slovak Statistical Office. For Turkey, Turkish Statistics Institute. For EU (2000), Statistics of Innovation in Europe, Eurostat, Luxembourg.

Research and development data measure the size of institutionalised knowledge generation activities. Small and discontinuous R&D activities usually closely linked to production are not covered by R&D surveys (Sirrili, 1998). Moreover, continuous and institutionalised research activities are not necessarily used as input into the innovation process. This is especially apparent in 'catching-up' economies where behind the frontier R&D work is usually much less integrated into innovation activities than in economies at the forefront of world technology. The differences in the structure of innovation expenditures should indicate differences in the main types of innovation activities. Taking into account differences in developmental levels between the EU and the CEE we would expect that the structure of innovation expenditures be significantly different. Countries that are not at the forefront of technological development would be expected to spend relatively more on existing technologies and on downstream innovation activities such as reverse engineering, product and process imitation, than on R&D. The analysis of innovation expenditures by Evangelista et al. (1997a) shows that, firstly, the distribution of innovation costs is relatively coherent across all EU countries. If innovation costs reflect the scope of different innovation activities then the mix of innovative activities appears similar across the EU. The second conclusion based on the EU innovation survey is that the industrial innovative process consists, first and foremost, of the purchase and use of 'physical technologies (innovative machinery and plants), which account for 50% of total expenditures on innovation (ibid). Thirdly, among the 'intangible' innovation expenditures, R&D activities are confirmed to be a central component of the technological activities of firms (see Evangelista et al., 1997b, fig. 2, p. 529). Fourthly, in terms of expenditure, the acquisition of 'non-physical technology through patents and licences emerges as a secondary innovation component in all European countries, when compared to the technological sources (ibid). A comparison of the structure of innovation expenditure for the group of non-EU countries in fig. 7 shows that there are significant differences as compared with the EU cost structure. R&D costs amount to a smaller share of innovation expenditure than in the EU. Only in Slovenia, the most developed CEEC, is the percentage of expenditure on R&D similar to that of the EU. Acquisition of machinery and equipment constitutes the biggest item in innovation expenditure. In Romania, in particular, innovation activity is essentially about installing new equipment. This cost structure reflects the nature of innovation in CEECs which is primarily based around new equipment, mostly imported. Businesses do not innovate on their own. Their technological upgrading is dependent on the supply chain (suppliers and buyers) within which they operate, on the degree of


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Fig. 8. Sources of information for innovation in manufacturing. Source: R&D and innovation statistics in candidate countries and the Russian Federation 1990-1999, Eurostat. Note: External knowledge organisations (average of importance for universities, consultants and R&D institutes); value chain (average importance between clients and suppliers); social networks (average importance of professional conferences, meetings, fairs, exhibitions, electronic networks); other (patents).

Fig. 9. External and internal sources of information for innovation in EU and four CEECs and Turkey. Source: R&D and innovation statistics in candidate countries and the Russian Federation 1990-1999, Eurostat; Turkish National Statistical Office and EU (2002). Notes: see fig. 8.

competition and on 'social networks' on which they can rely. Figure 8 shows the main sources of information for innovation in four CEECs. Data confirm the importance of the direct business environment of firms as the main source of knowledge for innovation. The quality of clients, competitors, buyers, and of social networks within which businesses operate, are the key to their innovation. Universities, consultants and R&D institutes are not the source of direct knowledge but at least seem to be a secondary source. This is not surprising and corresponds to EU innovation surveys. Universities serve as sources of skilled professionals i.e. as indirect knowledge providers rather than as direct sources of information. However, when we compare the importance of external vs. internal sources of information for innovation in the EU and the average of four CEECs and Turkey we observe that in less developed economies the external sources of knowledge are more important than knowledge within businesses themselves1. Figure 9 shows that 1

We compare weighted EU average with the unweighted average of five countries. This makes sense as our EU indicator becomes biased towards bigger and technologically developed countries like Germany, France and the UK. In addition, we do not have data for the CEECs and Turkey to calculate weighted average.

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Fig. 10. Payments for licences and FDI inflows, 1998, $m. Source: UNCTAD, World Investment Report, 2003, Geneva.

competitors, social networks and external knowledge organisations all play a more important role for innovators than in the EU. On the other hand, internal sources of knowledge are more important for innovation in a more developed context than in less developed CEEs and Turkey. Value chain (suppliers and buyers) plays a similarly important role in both groups of countries. This finding has important policy implications. Firstly, it points to the comparatively greater importance of a national system of innovation (competitors, social networks, external knowledge organisations) for innovators in the CEECs. Their innovation capabilities are dependent on systemic features of the external environment in which they operate. Secondly, the weak innovation capability of local firms, which are not able to generate new knowledge within their own R&D activities, points to a need to support company level R&D or to induce demand for internal knowledge. The fact that less developed environments are more dependent on external sources of knowledge suggests that CEECs are dependent on FDI (foreign direct investment) for new knowledge. Weak innovation capabilities of local firms and the gap between the 'old' S&T system and new sources of knowledge for businesses led to an increasing reliance on foreign technologies. Limited data for the CEECs suggest that FDI is an important channel for the inflow of new knowledge, as expressed through payments for licences. The correlation coefficient between payments for licences and FDI inflows for the six CEECs for which data are available, is positive and moderate (0.455)2 (fig. 10). This suggests that local firms have to rely on FDI in order to gain new knowledge. A comparatively high presence of FDI in some CEECs, such as Poland, Hungary and the Czech Republic shows that they have been relatively successful in this respect. This is the strength but also the weakness of innovation in the CEECs. Exclusive reliance on knowledge from abroad as well as on a weak national system of innovation, coupled with very weak innovation capability of domestic firms together represent the most vulnerable aspect of the CEE economies. In the short and medium term, the exclusive reliance on FDI leads to quick productivity improvements. However, in the long term, this creates fragile economies whose narrow specialisations in FDI-related activities and weak national system of innovation may become obstacles to further upgrading. The trade-off between short-term efficiency and long-term strategic orientation and flexibility

2

Identical correlation coefficient for 10 "catching-up" economic (Chinese, Indian, South African, East Asian and Latin American economies) is low (0.122) suggesting that channels of technology inflows are not confined only to FDI.


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is the key emerging issue for the frontrunner economies of central Europe, such as Hungary, the Czech Republic and Poland. Other CEECs, in particular east European economies (Romania, Bulgaria, Russia, Ukraine) will have to rely on FDI as the way to gain quick access to new technologies. However, in both groups of countries the key long-term issue is how to achieve a balance between domestic and foreign sources of knowledge. 5. Conclusions Our analysis has several important implications for development policies in the CEECs. Firstly, recovery and growth will not automatically be followed by recovery of demand for domestic R&D and innovation. In fact, some CEE countries may exhaust sources of growth which come from reallocations, closures and lay-offs, and face structural problems of further upgrading. These new threshold levels for upgrading will not be exclusively related to the institutional system of market economy which has been addressed through transition-related policies, but will be related to the weakness of national systems of innovation and their integration with FDI. Any national system of innovation is a system based on public-private and local-global interfaces and interactions. Policy-makers face the challenge of facilitating the emergence of publicprivate interfaces, which are essential for a market economy. The transformation of the CEECs during the 1990s shows that innovation does take place even with ineffective innovation policy. Slovenia, Poland and Hungary are clear examples of this. If so, is innovation policy indispensable? Indeed, the impact of innovation policy should not be overestimated. However, we should bear in mind that the sources of growth in CEECs are changing. During most of the ten years of transition, growth has been unrelated to domestic technology accumulation. Large-scale reallocations from unproductive parts of industry to services, from less to more efficient firms have ensured growth for a certain period of time. However, there are signs that the sources of productivity growth, which have been mainly in the realm of 'reallocations', are now coming to an end and that the CEECs will have to base their growth on technology accumulation. For example, Kubielas (2003) argues that, in the case of Poland, Ricardian adjustment based on reallocations has been exhausted and that Polish growth is now dependent on imported technology. Since Poland has lost the chance that it had during the 1990s of strengthening the absorptive capacity of its R&D system, it is now entirely dependent on FDI to ensure continuous technology accumulation. Innovation may continue to develop in some CEECs, based entirely on local or export demand. However, if growth is to depend on the strength of the national innovation system then innovation policy is an important factor in facilitating domestic technology accumulation and diffusion. National systems everywhere are hybrid systems and require public-private co-operation. CEECs may still grow for some time unrelated to domestic R&D and without innovation policy. However, the limits of this type of growth may soon be reached and the countries concerned will face structural barriers or threshold levels which will require new national systems of innovation and policies if they are to be overcome. Innovation policy is no easy matter. In order to be successful a broad consensus of the various stakeholders is required. As CEECs show, this policy is easier to establish in periods of growth than in times of depression. However, this also reduces the pressure to develop a suitable policy. In addition, its long-term nature does not ensure clear benefits in 4-year-cycle politics. All this suggests that demand for innovation policy is not easy to articulate and that we should not be too optimistic regarding its establishment in CEECs.

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Secondly, high tech seems to be the dominant paradigm in innovation policy in CEECs despite data which suggest that innovation in these countries is very much linked to equipment and only has a limited R&D component. As pointed out in example by Nauwelaers and Reid (2003), in the case of Estonian innovation policy this leads to a narrow client base of 50 large companies. In other countries this means that attracting high tech through S&T parks actually functions as a substitute for innovation policy. In the best case, this route can create isolated pockets of competencies in new technology but will leave the majority of local firms untouched. This is not to say that this route should not be pursued but only that it should not serve as a substitute for innovation policy. The relevance of this policy can best be seen when comparing the marginal relative position of CEECs in US or EPO patenting. On the other hand, innovation surveys and R&D data, which show a gradual increase in BERD, suggest that innovative firms are increasingly involved in technology activities but that these are not necessary high tech. This points to the increasing gap between R&D and innovation policy (see Kubielas, 2003, for the case of Poland). CEECs will have to close the gap, which currently exists between a dominant R&D policy and a subservient innovation policy. As CEECs increasingly try to emulate EU policies and try to restructure towards knowledge-based activities this gap will become unviable. The shift towards a knowledge-based economy in CEECs will mean (i) a shift towards diffusion-oriented activities within the R&D system, and (ii) a move towards business-based R&D. As an interactive innovation model suggests, this will not mean that R&D becomes irrelevant but that we will see an integration of R&D and innovation activities. While this may sound simple in conceptual terms, this shift is very difficult to make in policy terms. How to move from the current situation where 'science' and 'innovation' are seen in policy terms as a 'zero-sum game' between the science establishment and a weak 'innovation community' towards a 'positive-sum game' situation or a situation where reorientation of both areas will be of mutual benefit. Thirdly, policy should assist the transformation of the S&T system into marketoriented technology or knowledge infrastructure. For this transformation to take place it is essential to develop an explicit innovation policy. After ten years of implementation of transition-based policies, central European economies have started to introduce innovation policy measures. The emergence of innovation policy in these economies shows that there are important changes taking place in their political philosophies. From being reduced to building the institutional framework of an 'open market economy' and the promotion of, at least rhetorically, a minimalist role of the state, we observe the shift towards a more pro-active role of the state. However, innovation policy should be squared with the specific context in which it has to operate. Innovation surveys show that the direct market and the social environment of businesses are the main source of information for innovation3. Yet, this aspect is not taken into account by an innovation policy which is rarely sector-specific or technologyspecific. Innovation surveys show that sector and technology-specific measures could be of greater importance for innovativeness of enterprises when compared to general measures such as tax incentives or horizontal measures such as innovation centres and S&T parks. As innovation surveys in CEECs suggest, innovation links are based on the value chain, i.e. they are strongest with suppliers and buyers followed closely by sources within the company. This is the strength but also the weakness of innovation systems in

This is what the interactive model of Kline and Rosenberg would suggest to be the typical situation.

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CEECs. Production integration through FDI-led value chains ensures high productivity, innovation linkages and regular sales to local firms. However, in the long term, product and technology upgrading does not necessary follow value-chain logic, especially when value chains are changing or breaking up. Again, this means that innovation policy will have to strike a balance between supporting integration of local firms into global value chains (FDI, subcontracting) and domestic linkages with universities, S&T parks, cooperative centres, etc. Integrating local firms through value chains and FDI is a policy so far relatively undeveloped in CEECs. Hungary and the Czech Republic are the only two candidate countries which have developed elements of this policy which go beyond marketing of the country as a production location. There has been much more policy focus on linkage mechanisms such as S&T parks, innovation centres etc., that is to say on linkages for which weak and dependent local firms may not have immediate demand, rather than on value chain linkages. This explains their irrelevance to local firms and their innovation activities, which are primarily driven by the value chain. The CEECs face the challenge of how to integrate FDI and innovation policy. References Nauwelaers, C. and Reid, A. (2003) Learning innovation policy in market based context: process, issues and challenges in EU candidate countries, in: In search of growth strategies: Innovation policy in EU Accession countries. Special issue, Journal of International Relations and Development 5(4), 357-380. EU (2002) R&D and innovation statistics in candidate countries and the Russian Federation, Data 1997-99. EC, Theme 9, R&D, Eurostat, Luxembourg. Evangelista, R., Sandven, T., Sirilli, G. and Smith, K. (1997a) Measuring the cost of innovation in European industry. Paper presented at the International Conference 'Innovation Measurement and Policies', EC, Eurostat, DGXIII, 20-21 May 1996, Luxembourg. Evangelista, R., Perani, G., Rapiti, F. and Archibugi, D. (1997b) Nature and impact of innovation in manufacturing industry: some evidence from the Italian innovation survey. Research Policy 26, 521-536. Gokhberg, L. (1997) Transformation of the Soviet R&D system. In: Gokhberg, L., Peck, J. M. and Gacs, J. (eds.), Russian Applied Research and Development: Its Problems and its Promise. IIASA, Laxenbourg. RR-97-7, April, pp. 9-34. Radosevic, S. (1999) Patterns of innovative activities in countries of Central and Eastern Europe: an analysis based on comparison of innovation surveys. SPRU Electronic Working Papers Series, No. 34. (www.sussex.ac.uk/spru) Radosevic, S. (2003) Patterns of preservation, restructuring and survival: science and technology policy in Russia in the post-Soviet era. Research Policy, 32(6), 1105-1124. Radosevic, S. and Laudeline A. (1999) Patterns of restructuring in research, development and innovation activities in Central and Eastern European countries: Analysis based on S&T indicators. Research Policy 28, 351-376. Sirilli G. (1998) Old and new paradigms in the measurement of R&D. Science and Public Policy 25(5), 305-311.



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Current Problems of Biotechnology in Armenia Evrik G. Afrikian National Academy of Sciences of Armenia, Baghramyan 24, Yerevan, Armenia Abstract. This paper presents the main achievements and trends in biotechnology in Armenia. The current situation of general and applied microbiology is also reviewed.

1. Introduction In the former Soviet Union (FSU), Armenia (the Armenian SSR) was generally accepted as one of the most developed republics in terms of R&D in various fields of biotechnology and industrial microbiology. Recognition of the importance and urgency of this field was the reason for the creation and development of the basis of a biotechnological (microbiological) industry in the mid 1960s, and it should be stressed that the development of national biotechnology in Armenia was accepted at governmental level as a priority area for scientific and technical progress aimed at solving crucial problems of the country in the fields of nutrition, energy and ecology. In the FSU Armenia held a leading position in important fields of the microbiological industry, such as the production of lysine and other amino acids, bacterial insecticides and other products. In the 1970s several plants began production in Armenia: the lysine plant in Charentsavan (the first plant in the FSU to produce crystalline lysine), the biochemical plant in Abovian (production of bacterial insecticides and amino acids for medical use), the baking yeasts plant in Abovian, the vitamin plant in Yerevan. At the same time a large campus equipped with all necessary scientific and technical facilities was completed for the Institute of Microbiology in Abovian and the All-Union Technological Institute of Amino Acids was set up in Yerevan. In order to show the potential of Armenia in this field, it must be pointed out that during this period there were more than 100 scientific and design institutions and many branches and laboratories of central institutes of the USSR engaged in fundamental and applied sciences. The Caucasus is well-known for its ancient fermentation technology applied in the production of traditional high-quality sour-milk products, cheeses, cakes and breads, and alcoholic drinks. In fact, it could be mentioned that Armenia produced around 60-70% of Swiss (Emmental) cheeses in the Soviet Union. From a microbiological point of view, Armenia and other Caucasian regions particularly interesting due to extreme biodiversity. On the other hand, traditional fermentation processes developed over many centuries automatically led to the natural selection of unique forms of micro-organisms and their associations, which are of great biotechnological significance. Along with the collapse of the USSR and the ensuing economic crisis, Armenia suffered a great deal from the catastrophic earthquake of 1988, the war for Nagorni

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E.G. Afrikian / Current Problems of Biotechnology in Armenia

Karabakh, blockade and massive emigration. In spite of such events, which caused such severe problems in Armenia, it must be pointed out that the basic scientific and industrial potential of the Republic was maintained. Within the National Academy of Sciences (NAS) of Armenia there are well-known research institutes carrying out wide-scale investigations in many fundamental and applied fields of biology and chemistry, related to molecular biology and biotechnology. The Institute of Biochemistry, for example, is actively engaged in the study and application of neuropeptides as well as metal-containing enzymes. The Institute of Molecular Biology focuses its research on lipidology and molecular enzymology. The Institute of Fine Organic Chemistry is a well-known scientific centre for chemical synthesis of heterocyclic substances for medicinal use. In recent years, a well-equipped Centre for the study of molecular structure was established on the basis of this Institute. Armenia is a country full of medicinal plants and in this respect the long-term studies of the Botanical Institute on detailed characteristics of the flora of Armenia are very attractive. The Institute of Hydroponics was the only one in this field of science in the FSU. This Institute has done valuable work on the development of hydroponics in the cultivation of plants producing essential oil and the production of expensive essential oils used in the medical, food and perfume industries. In recent years the efficiency of soil-less production of henna and indigo in open-air hydroponic conditions has been demonstrated. The Institute of Microbiology of NAS of Armenia was one of the largest of its kind in the FSU, actively engaged in many aspects of general and applied microbiology and biotechnology. The Institute has large facilities for the screening and use of micro-organisms for obtaining biologically active substances, including their pilot-scale production. As a result of long-term research the regularities of the ecology of chemolithotrophic, nitrogen-fixing bacteria, yeasts, lactobacteria and other groups of micro-organisms have been revealed and new strains have been isolated and well characterised. At the Institute efficient technologies have been developed by using microbial enzymes and cells for the production of L-alanine, L-aspartic acid, different types of cyclodextrins and their derivatives, L-malic and lactic acids, sweeteners and other biologically active substances. The purity of the products mentioned is not less than 98% and a high intensity of processes has been achieved by the application of thermophilic strains and non-carrier immobilization systems. The Institute has developed the following new microbial preparations: the acido-lactic product "Narine" for prophylaxis and treatment of gastrointestinal and other diseases, especially in childhood; the bacterial insecticide preparations "BIP" and "BLP" for the control of lepidopteran pests and mosquitoes respectively; bacterial nitrogen-fixing fertilisers, based on the use of rhizobia. At the end of 1993 the State Microbial Depository Centre of NAS of Armenia (RCDM) with its database has been organised as a legally independent institution. The main goal of the RCDM is to create the National Culture Collection of endangered micro-organisms in Armenia and to collect, study and maintain microbial strains of scientific and industrial importance. It plans to extend its activity to the creation of a 'Culture Collection' of plant and animal cells when the Centre for Biological Resources is re-organised in the near future. The Centre currently holds around 10,000 well-studied cultures of bacteria, fungi, yeasts and streptomycetes. Most of them are strains originally isolated, identified and studied in Armenia. The Collection includes many well-defined extremophilic forms with important biotechnological potential and practical application for microbiological transformations and production of a number of biologically active substances. The Culture Collection contains a vast number of strains of entomopathogenous bacilli for the production of insecticides as well as lactobacteria,


85

yeasts and other micro-organisms for the production of food, feed, probiotics and preparations of practical value. There is a large collection of strains, and biodegradable synthetic polymers. In addition to NAS of Armenia, other well-equipped institutions which deserve mention are the Joint Enterprise "Paren" within the Ministry of Agriculture, engaged in the production of feed products and the C. Gulbenkian Chemical and Analytical Laboratory under the auspices of the Ministry of Health, which is active in pharmaceutical science and the study of biologically active substances of plant origin. Under the Ministry of Economy the CJSC Institute of Biotechnology (formerly Technological Institute of Amino acids) was the leading institution in microbiological synthesis of amino acids. At this Institute a group for gene-engineering has been established to obtain some efficient new strains for the production of amino acids. The Institute is engaged in R&D for the production of other biologically active substances to be used in medicine, agriculture and the food industry. The screening and study of microbial enzymes is carried out with the aim of producing highly purified medicinal grade amino acids. Among the developments could be mentioned: • process engineering for the production of more than 20 L-amino acids for infusion solutions; • obtaining highly efficient strains for the production of L-proline, L-valine, L-alanine, L-ornithine, L-arginine and L-histidine; • technologies for the production of highly purified D-amino acids, alanine, aspartic acid, proline, tryptophan; • methods for the production of more than 50 amino acids and their derivatives by chemical and asymmetric synthesis; • preparation of aspartame, Delta Sleep-Inducing nonapeptide and other peptides; • microbiological preparation of enzymes - asparaginase, phenylalanine ammonia lyase, histidine ammonia lyase, etc. The Institute personnel has registered more than 100 of the USSR Author's Certificates and Patents. Small-scale production of some L-, D-aminoacids, peptides, enzymes and other biologically active substances is available. The Institute has expanded its activities considerably in recent years. A joint Chinese-Armenian co-operation programme has been established. Biotechnological research at the State University in Yerevan is mainly focussed on obtaining and investigating biosynthesis of biologically active substances in cell and tissue cultures of medicinal and endemic plants. Well-growing callus tissues have been obtained and methods of in vitro clonal micropropagation are described. A culture collection of these plants has been put together. In the Department of Botany, which is a well-known centre for the study of fungi, methods of mushroom cultivation on non-food materials were developed. In the Department of Biophysics superior plants are also studied using the method of isolated cell and tissue cultures. Cell cultures of monocotyledons have been obtained, and secondary metabolites in the callus cultures of some medicinal plants of the Armenian flora have been studied. The Department has been actively pursuing the study of the fundamental problems of membrane transport in micro-organisms for many years.

2. Trends and national programmes in biotechnology in Armenia Since the collapse of the FSU and the ensuing economic crisis, several national programmes in biotechnology have been proposed including:

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E.G. Afrikian / Current Problems of Biotechnology in Armenia Table 1. Main biotechnological programmes in Armenia Food Safety • SCP (Spirulina) • Topinambur • Microbial pest control • Microbial fertiliser • Biotransformation/Biocatalysis

Biogeotechnology Bioleaching of copper and other metals Bioenergetics Biogas, Biofuels: liquid and gas

• Production of fructose, fructose-glucose syrup and feed from inulin-containing plants (Programme: Topinambur). • Production of food and feed products from Spirulina microalgae on arid soils (Programme: Spirulina). • Bacterial leaching of copper and other metals from low-grade ores and dumps (Programme: Bioleaching). • Microbiological treatment and utilisation of waste for the production of fuels and environmental control. Table 1 shows further important biotechnology programmes in Armenia. Clearly the most important of these is the use of modern biotechnologies for solving the feed protein shortage, which in Armenia exceeds 50,000 t annually. Keeping in mind the limited geographical area and agricultural resources of Armenia, the most important and more efficient approach in this field could be the production of the single cell protein (SCP) by microbiological fermentation using cellulose and starch containing raw materials. In addition to this approach, the ecological conditions of Armenia make it possible to produce using photosynthetic micro-organisms, and in particular of microalgae. In Armenia there are about 30,000 ha of saline soils of no use for agriculture. The climatic conditions of the country promise excellent prospects for the cultivation of microalgae, particularly of Spirulina, because soda saline patterns are predominant here. Microalgae of the genus Spirulina are alcaliphilic organisms, now largely used for the production of feed, food and biologically active substances in Africa, Central America, South-East Asia, India, Israel and other countries. Spirulina biomass is commonly used as a source of well consumed protein, many vitamins and other valuable products. The yield of this microalgae biomass is ten times higher than that of the well-known traditional agricultural plants. The main characteristics of Spirulina are shown in table 2. In recent years many pharmaceutical preparations have been obtained from Spirulina biomass and marketed. Long-term R&D in Armenia revealed the efficiency of some thermal and alkaline mineral waters as well as underground waters for the growth of Spirulina. In the Ararat valley underground waters with alkaline reactions are mainly located at a depth of 0.5-2m. Laboratory and pilot-scale investigations have indicated high usefulness of superficially located alkaline underground waters in the cultivation of Spirulina at a biomass productivity rate of 10-50g/m2 per day. During cultivation the pH of the medium is maintained at a level between 9.5 and 10.5 at a temperature of 25-35°C. The process engineering developed includes: cultivation of Spirulina, its harvesting, washing, grinding and drying. Microalgae can be cultivated in outdoor (open) or greenhouse (closed) conditions. Cultivation in polymer tubes in continuous growth conditions is also a very attractive alternative. Armenia has no sugar production of its own and in this respect the Topinambur Programme is of essential importance. Topinambur (Jerusalem artichoke, Helianthus


87

Table 2. Characteristics of efficiency of Spirulina microalgae Yield Biomass yield: 10-50g/m2/day, 50-70 t/ha, protein yield: 30-40 t/ha. Soybean: 2-4 t/ha, protein 1-2 t/ha. Wheat: 2-4 t/ha, protein 0,2-0,5 t/ha Composition of Spirulina's Biomass, % Protein - 50-60, consumption - 80-90. Lipids - 7-10, including non-saturated fatty acids - 65-70 (from total contents of lipids) Carbohydrates - 11-15, B-carotene - 0.1-0.3 Amino acids in Spirulina's Protein, g/16gN Amino acid

Spirulina

FAO requirements

Val

4-6

4.2

Leu

9.5

4.8

Iieu

3.5

4.2

Threo

5.4

2.8

Meth

1.4

2.2

Pheala

5.8

2.8

Lys

6.5

4.2

Cultivation conditions (g/1, aeration-mixing) NaNO3: 1.5 (urea: 1.0). Phosphates: 0.5. pH: 9.5-10.5. Temperature: 25-35°C

tuberosus L.) and other inulin-containing plants (chicory) provide an efficient way to solve this problem. The green biomass of topinambur (60-70 t/ha) is good fodder, well sylosed. Topinambur tubers (25-40 t/ha) contain inulin - a polymer of fructose with a small admixture of glucose. Inulin is a low calorie food, very beneficial to health. Inulin hydrolysis results in the formation of fructose and a small amount of glucose. In some countries the production of fructose, fructose-glucose syrup, ethanol and other products has been studied in detail. The technology involved in the production of these products is practically waste-free with high economic and technical indices. Thus, approximately 1.5 times more ethanol and glucose-fructose syrup could be produced from 1 ha (with tubers yielding 40 t/ha) than from sugar-beet, corn and wheat. The yield of fructose-glucose syrup (70%) is 7-8 t/ha. A very important advantage in the use of topinambur tubers or other inulin-containing plants is the one-stage enzymatic production of fructose-glucose syrup (FGS), which is more efficient than other existing methods (fig. 1). In the FGS obtained the content of fructose is not less than 75%, a figure which is impossible when starch or other raw materials are used. Thus, it is possible to produce the third and higher generations of FGS from inulin contained in topinambur tubers in one single stage. It is important to underline the fact the market price of fructose is almost 10 times higher than that of sucrose. Inulin and other fructans derived from topinambur are starting materials for the production of hydroxymethylfurfurol (HMF) and other important pharmaceuticals, pigments and valuable chemicals. Ethanol produced from topinambur and other inulincontaining plants is important as a substitute for petrol. Topinambur has many advantages in terms of the improvement of the ecological situation. Topinambur is one of the plants with the highest photosynthetic activity: a

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Fig. 1. Production of fructose and glucose-fructose syrup.

Table 3. Main characteristics of topinambur Yield (t/ha)

Tubers: 30-50 Green biomass: 50-70

Tubers contents (%)

Inulin: 18-20 (nw), 78-83 (dw) Protein: 6-8 (dw)

Yield from tubers (t/ha)

Fructose-glucose syrup: 7-8 Fructose: 5-6 Ethanol: 4 Pulp (feed): 2-4 Yeast protein: 1.2-2

Advantages - As tubers can be harvested in spring and autumn, saccharides production may be planned for the whole year, - Green biomass is well sylosing feed, - Waste-free production and utilisation of by-products, - Fructose-glucose syrup not less than 70% fructose, - Inulin is low-calorie food with beneficial effect, - Availability of hybrids of topinambur and monoclonal breeding, - Valuable photosynthetic activity and ecological significance, - Resistance to pests and phytopathogens, - High economic indices of industrial production.

given area of topinambur releases twice as much oxygen as the same area of forest. The unique pest resistance of topinambur should make it possible to avoid the use of pesticides and herbicides, and to control the pollution of the environment. The main characteristics of topinambur are summarised in table 3. Apart from saccharides, various other products are also produced from topinambur for use in agriculture, the food industry, medicine and cosmetics (table 4). In the FSU the majority of R&D devoted to microbiological/enzymatic treatment of topinambur has been carried out by Armenian institutions. Efficient process-engineering for a waste-free production of fructose, fructose-glucose syrup and ethanol has been developed, based on microbiological-enzymatic treatment of tubers. All necessary technological documentation is available.


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Table 4. Products obtained from topinambur Sector of Industry

Application areas

Products

Agriculture

Stock-breeding

Fodder

Veterinary

Feed additions Veterinary preparations

Prophylactic and dietetic food

Bread-baking products Pastry Pasta Confectionery

Alcoholic drinks

Liquor products Balsams Alcohol Beer

Tonic and dietetic drinks

Tea Coffee

Food products

Dry extracts Kvass Fructose-glucose syrup Fructose Sweeteners Dairy products: yoghurt, cheese, curd cheese

Drugs

New generation of immune preparations: Capsules, tablets, powders, Dragees

Therapeutic-prophylactic preparations

Biologically active additives: Capsules, tablets, powders

Bacterial preparations

Bifidium, Lactobacteria

Preparations for diabetics

Inulin: Tablets, Capsules

Food industry

Medical industry

Cosmetics

Health care

Bath additives

Curative cosmetics

Decorative cosmetics

The large-scale application of bacterial leaching (bioleaching) of copper and other metals is of vital importance to Armenia. This process is widely used in some countries for the extraction of copper, iron, arsenic, uranium, gold, cadmium, nickel and other heavy and rare metals from sulphide ores. The bioleaching process can be successfully applied to control environmental pollution, which is a major problem restricting the development of the recovery of metals by commonly accepted pyrometallurgical and hydrometallurgical methods. The most important advantage of bacterial leaching is the fact that metals can be recovered from low grade ores, for example from ores containing 0.1-0.3% of copper, etc. Furthermore, conventional methods for the recovery of metals involve problems of energy costs and pollution problems, both of which are very low in the case of bioleaching. This economically profitable technology can be intensified by optimisation of the oxygen and carbon dioxide supply and diffusion, temperature, pH, nutrients, precipitation complexes and the particle size of the ore. Bioleaching is widely used in many countries. About 18% (120,000 to 140,000 tons)

E.G. Afrikian /Current Problems of Biotechnology in Armenia

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Fig. 2. Electron micrographs of chemolithotrophic bacteria isolated in Armenia: (1) L. ferrooxidans cell. (2,3) Ultrathin sections of cells: (2) T. organoparus', (3) S. thermosulfidooxidans subsp. asporogenes.

Table 5. Leaching of dump ores by pure and mixed cultures of chemolithotrophic bacteria' Bacteria and strains

Final ph

Leached, mg/1 Fe

Cu

Control, without bacteria

3.0

252

50

T. ferrooxidans str. 4

1.8

2016

120

L. ferrooxidans str. 50

2.65

532

62

S. thermosulfidooxidans subsp. asporogenes str. 41

1.9

1992

125

T. organoparus str. 13

3.05

224

50

T. ferrooxidans str.4 + T. organoparus str. 1 3

1.8

2292

135

L. ferrooxidans str.50 + T. organoparus str. 13

2.9

730

71

S. thermosulfidooxidans subsp. asporogenes str. 4 + T. organoparus str. 13

1.6

2346

146

1

Incubation period 21 days; pH 2,4, PD -2.0%, 30°C.

of the copper production in the USA is estimated to recovered in situ, by dump and "heap" leaching. Research has been carried out on bacterial leaching of copper and other metals in Armenia for over 30 years. The characteristics of bioleaching in many ores pyrite containing have been presented. Research has also shown that it is possible to realize this process with low-grade ores and dumps. During long-term research work new species and efficient cultures of bacteria for bioleaching have been isolated and studied in detail (fig- 2). In Armenia there are large reserves of low-grade ores containing copper. Vast areas of dumps and abandoned mines in Kapan, Vanadzor, Stepanavan and other regions of Armenia are available for the bioleaching process. The ores and dumps in Armenia most useful for bioleaching were identified in longterm studies. The efficiency of the use of mixed bacterial cultures including thermophilic strains as well as process-engineering for metal production has been shown (table 5).


91

Technical and economical calculations indicate the advantages of bioleaching as against other traditional methods used in metallurgy. Biotechnology and microbiology provide Armenia with a chance to combat its shortage of fuels and energy. It concerns the microbiological production of liquid (ethanol) and gaseous fuels (methane, hydrogen). The calculations made indicate that by microbiological fermentation of organic materials, mainly agricultural wastes, it is possible to produce methane at a rate of approximately 1 million cc daily. This provides a good chance to solve the country's energy crisis. On the other hand, it is also a good approach to control environmental pollution. Several methane fermentation installations are now working successfully in Armenia. 3. Conclusions Many Armenian institutions have sufficient experience in the use of efficient biotechnologies for pollution control. In combination with efficient biotechnological/ microbiological treatment of wastes these methods must be seen as important tools for improving environmental and in pollution control, particularly in the case of the ecology of Lake Sevan. As far as the chemical industry is concerned, the R&D conducted in our institutions provides a good opportunity to produce chemicals and biochemical reagents by biocatalysis. This well-founded background provides Armenia with a good opportunity to develop an economically sound production of fine chemicals. In the Republic there are promising areas for the production and use of bacterial insecticides and biological pest control methods as well as microbial fertilizers. As a result of long-term screening in Armenia, many thousands of isolates have been obtained from various insects, soils and other natural substrates collected all over the world. In co-operation with biomedical and industrial organisations in the FSU the technology for the production of some insecticide preparations was developed. Two of them - BIP for the control of lepidopteran pests, and BLP for mosquito control - were introduced in large-scale industrial production in the former Soviet Union. At present the collection of entomopathogenous bacilli in RCDM comprises more than 2000 strains of entomopathogenous bacilli, including new subspecies and serotypes. Over the last few years RCDM succeeded in isolating new bacterial strains for combating severely harmful pests, reflecting a keen interest in the production of new insecticides. The development of biological pest control and the substitution of chemicals by safe microbiological pest control will contribute to an improvement of the environmental situation.


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SME and Innovation Policy in Bulgaria Plamen S. Gramatikov Associate Professor, Faculty of Natural Sciences, Physics Department, Southwestern University "Neofit Rilsky", 66, Ivan Mihailov Blvd, 2700 Blagoevgrad, Bulgaria Abstract. This chapter presents an overview of the subject of innovation policy in Bulgaria, focusing in particular on the role of SMEs.

1. Macroeconomic environment for SME development in Bulgaria Despite unfavourable international economic conditions over the past few years — the crisis on the international financial markets of Southeast Asia, Russia, and Turkey, and the unrest in Yugoslavia - there has been significant progress in the process of restructuring and financial stabilisation in Bulgaria. This has contributed to the acceleration of economic growth in the country. Bulgaria registered positive economic growth of 5.8% in 2000 - the highest rate since 1990 (3.5% in 1998; 2.4% in 1999). In 2000 exports of goods and services, domestic consumption and capital investments all had a positive effect on GDP growth (table 1). Changes in the level of real money supply and total lending were indicative of economic revitalisation and a precursor to economic growth (fig. 1). A characteristic feature of Bulgaria's economy over the three-year period 1998-2000 was the macroeconomic stability due to a currency board system introduced on July 1, 1997 when the Bulgarian national currency (lev) was pegged to the Deutsche Mark, and respectively to the euro. Table 1. Main macroeconomic indicators for Bulgaria Indicator

Unit

1997

1998

1999

2000

GDP growth rate

%

-6.9

3.5

2.4

5.8

GDP

USD million

10173

12257

12395

11984

GDP per person

USD

1224

1484

1510

1459

Inflation (average annual rate)

%

1058.4

18.7

2.6

10.3

Average annual exchange rate

BGN/USD

1.68

1.76

1.84

2.12

Export

USD million

4940

4194

4006

4812

Import

USD million

4559

4574

5087

5988 3460

Gross foreign exchange reserves (at year-end)

USD million

2483

3051

3222

Unemployment rate (at year-end)

%

13.7

12.2

16.0

17.9

Consolidated state budget deficit

% of GDP

-3.1

1.0

-1.0

-1.1

Source: Statistical reference book 2001, NSI; BNB Annual Report, 2000.

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P.S. Gramatikou/SME and Innovation Policy in Bulgaria

Fig. 1. Bulgarian GDP dynamics. Source: Sample survey of the Agency for SME, Sofia, 2001.

Fig. 2. Unemployment in Bulgaria. Source: NSI Statistical Publications.

The process of privatisation has accelerated in the last few years. The private sector's share of GDP totalled 56.7% in 1998 and more than 70% in 2000. The structural changes in the economy were reflected in the employment figures. The speeding up of reforms reduced the number of non-competitive businesses, causing a rise in unemployment (fig. 2). The regulatory role of the state budget increased under the Currency Board arrangements. Over the past five years, the budget income at the year's end exceeded the target levels set by the government at the beginning of each year while expenditure fluctuated. The three and a half year life of the Currency Board has had a positive impact on business. It has helped to restore confidence in, and increase expectations of, activity

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P.S. Gramatikov/SME and Innovation Policy in Bulgaria

by the financial sector. At the same time, the Currency Board has been an important stimulus to the development of the economy and SMEs in particular.

2. Situation and trends in SME development by planning region Article 20 of the Constitution of the Republic of Bulgaria stipulates that the State create conditions for balanced development of individual regions and support the territorial authorities and their activities by means of its financial, lending and investment policy. The objectives underlying this regional policy are: addressing regional disparities; reducing the number of municipalities and regions where income has reached critically low levels; the application of a differentiated regional approach in structural reform; elaboration of project proposals for participation in European programmes for regional development and cross-border co-operation, etc. Bulgaria is divided into 262 municipalities (local self-government) and 28 districts (decentralised administration of central government). Additionally, six planning regions have been created (comparable to EU NUTS II regions) - an aggregation that corresponds to the EU regional monitoring practice. The territorial scope and the centres of the planning regions are set out in table 2. Table 2. Planning regions1 Planning region

Centre

sq. km

%

#

%

Number of districts

Number of municipalities 262

Population (1999)

Territory

110971.4

100.0

8190876

100.0

28

Northwest

Vidin

10598.6

9.6

585512

7.1

3

33

North-central

Rousse

17943.5

16.2

1226052

15.0

5

40

Northeast

Varna

19966.6

18.0

1343382

16.4

6

49

Bulgaria - total

Southeast

Burgas

14647.5

13.2

824491

10.1

3

22

South-central

Plovdiv

27515.3

24.8

2068739

25.3

6

66

Southwest

Sofia

20300.0

18.3

2142700

26.2

5

52

Source: NSI and in-house calculations.

Activities related to planning, implementation of programmes and projects, and preparation for EU pre-accession funds are carried out within each of the planning regions by the Social and Economic Cohesion Commissions (SECC) for implementation of the National Programme. The commissions are assisted in their activity by the six territorial offices of the Ministry of Regional and Urban Development. The offices play the role of a secretariat and develop the strategies and operational programmes for the region, monitor their implementation and provide co-ordinating functions. An SME is represented in every commission to ensure the implementation of SME development programmes in the planning regions.

2.1 Conclusions • The size structure of the Bulgarian economy, which experienced an increase in the share of small and microenterprises and a decrease in the share of large companies

96

• •

•

•

•

•

P.S. Gramatikou / SME and Innovation Policy in Bulgaria

in terms of the number of employed; the sales revenue of the companies, generally coincides with that of the EU. Small companies have prove to be the first to take advantage of the stabilisation of macroeconomic conditions in the country; they react promptly and register growth. The sales revenue growth rate fell within the larger-size groups in the period 19971999. It was highest for microenterprises, 88.8%, and lowest for large enterprises, 3%. This confirms the greater flexibility and adaptability of SMEs in general to the conditions of the market economy and more intense competition. In 1998 and 1999, the net profitability of companies in the Bulgarian economy suffered a significant decline compared to 1997. The only size group in the economy, which achieved a (gradually growing) positive profitability ratio for the entire period 1996-1999, were the microenterprises. The wide variation of profitability in the individual regions confirms the fact that the regional distribution of companies, including SMEs, has not yet been optimised. The SME share in total employment has gone up over the last few years, reaching 46,7% in 1999. This shows that there has been an increase in the importance and contribution of SMEs to total employment during the past four years. A higher rate of employment was observed in economically developed regions, but this relationship is not pronounced. A similar development can be expected in the future when the increase in SME efficiency will lead to an increase in the average number of people employed in SMEs. Private companies achieved a larger share of export income in their total income than state-owned enterprises. This reveals the greater enterprise and initiative of private companies as well as the improvement in business conditions which has taken place over the past few years as a result of state policy. In 1999 the ratio of the average value of fixed tangible assets in big companies compared to that in microcompanies registered a decline for the first time since 1996. The conclusion that SMEs were the first to react to the stabilisation of macroeconomic conditions in the country and the first to register growth was confirmed.

3. SME competitiveness in the labour market Competitiveness1 in current economic conditions is the potential to achieve high productivity based on an innovative approach to human resources, capital and real assets. The challenges are many in number and diverse in nature: achievement of economic growth, exporting successfully, withstanding competitive pressure within the EU, liberalisation and globalisation, and development of 'the knowledge economy'. One of the major features of SMEs is their capacity to create jobs. Consequently, the issue of SME competitiveness in the labour market becomes crucial.

3.1 Barriers to hiring new staff The barriers to employment growth in SMEs stem from the influence of two groups of factors: external (reflecting the overall economic and social environment) and internal (fig. 3): 1 Competitiveness is a complex category which combines the outputs of the overall economic policy. It requires that a multitude of interrelations between various factors be taken into account.


97

Fig. 3. Barriers to increasing the number of people employed in SMEs.

Examples of external factors are: • low rate of economic growth and limited consumption; • conservative policy of the financial sector and constraints on SME access to sources of finance; • high tax rates and social security contributions and employment law The main internal factors are: • the relatively low levels of labour productivity in SMEs in Bulgaria; • the increasing pressure of growing competition and the opening of the economy, which are in contradiction to the efforts of SMEs to keep their costs at a competitive level. The majority of SMEs are microenterprises operating in sectors which have low capital requirements for entry. The main objective of their owners is to make a living, and they do not aspire to develop their business and respectively increase the number of employed. 3.2 Training in SMEs SME competitiveness in the labour market is strongly affected by a set of factors related to staff training and professional development (figs. 4 and 5). In 1999 and 2000, increasingly greater attention was devoted to encouraging entrepreneurship through the educational system.

Fig. 4. Where did your staff acquire the necessary skills? Source: Project "Dynamic entrepreneurs: comparative study of Bulgaria and Poland", Centre for Entrepreneurship Development, University of National and World Economy, Sofia, 1999-2000.

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Fig. 5. Reasons for SMEs not to make use of training. Source: Project "Dynamic entrepreneurs: comparative study of Bulgaria and Poland", Centre for Entrepreneurship Development, University of National and World Economy, Sofia, 1999-2000.

Entrepreneurship training programmes in professional schools of economics have changed rapidly and radically. Twenty percent of all students (132,244 students) were trained in these schools - polytechnic and vocational high schools. A training programme in entrepreneurship will be developed and introduced in non-economics vocational schools in grade 13. Partnerships between Bulgarian and foreign universities are a very important component of entrepreneurial training. These are the primary projects implemented under the Tempus and Phare Programmes. Departments delivering training in entrepreneurship have been set up in Bulgarian universities. It has been more than six years since the establishment of an advisory network by the Bulgarian Industrial Association and the university centres in Rousse, Svishtov, Varna and Sofia: Training and Business Advice Centre (the University of Rousse), International SME Centre (D.A. Tsenov Business Academy, Svishtov); University SME Advisory Centre (the Technical University of Sofia), International Centre for Small and Medium-Sized Businesses (University of Economics, Varna), Consultancy Centre (Institute for Postgraduate Training at the University of National and World Economy, Sofia) etc. An example of co-operation between industry and universities, as a precondition for successful business, is the consortium formed by the Bulgarian Industrial Association and 8 Bulgarian universities, which has now been operating for five years. The consortium's activities seek to achieve high competitiveness of companies and to maintain this competitiveness in a dynamically developing economic environment, as well as to increase staff competitiveness and skills through continued training in compliance with the requirements of international markets and consumer demand. ASME and the Hellenic Organisation of Small and Medium Sized Enterprises and Handicrafts (EOMMEX) have been organising special training seminars for Bulgarian businessmen, SME owners and managers for three years with the close co-operation of the Embassy of the Republic of Greece. BARDA members hold a licence for delivering training courses in business start-up. The associations, the Bulgarian Chamber of Commerce and Industry and the Bulgarian Industrial Association have designed special training programmes for entrepreneurs in the fields of finance, legislation, marketing, improvement of product quality and competitiveness. The Bulgarian Industrial Association organises and provides consultancy and


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training in the design and implementation of environmental management systems in conformity with ISO 14000. It also supports Bulgarian industrial enterprises, associations and companies in the design and implementation of ISO 9000 quality management systems. The Ministry of the Economy organises and monitors the implementation of a project Training in Management in Bulgaria, which is a part of the 1999 Phare Programme, whose objectives are: • assistance to enterprises in the modernisation and improvement of organisation and management in the process of restructuring; • training 30-40 trainers/consultants. 3.3 Conclusions • There has been a tendency towards a rise in the number of people employed in microenterprises and in their operating income. Small enterprises ranked second. Medium-sized and large companies reported a decrease (although insignificant) in the number of employees and a smaller percentage of increase in operating income. • There were obstacles posed by the regulatory and legal environment, as well as psychological barriers to hiring new employees. The stimuli and administrative measures for limiting unofficial employment constitute a significant potential for the active employment of the workforce. 4. Assessment of barriers to business The main problems which the SMEs faced in 2000 were the depressed market and increased competition. SMEs in the regions in industrial decline recurrently stated intentions of winding up or selling the business - in 12,3% of all cases. The next most frequently mentioned problems were state bureaucracy, unfair competition and the limited amount of capital available to companies. However, in terms of importance, unfair competition appeared to be a far bigger problem than state bureaucracy. Economic barriers had a greater weight than regulatory ones. The major problem that the enterprises faced at the start-up stage (for the businesses which started in 1999 and 2000) was attracting customers. The problems affected business start-up in the development regions. The Lack of skilled workers was a problem mainly for businesses in the underdeveloped rural regions and growth regions. The SME survey did not identify infrastructure as a major problem for business. However, it is a fact that, in the regions in industrial decline and the underdeveloped rural regions, there are no well-developed road and communication networks meeting EU standards. The survey of the four types of regions showed the continuing great importance of administrative barriers. In the growth regions, for instance, the interests of over 60% of the companies were affected, while in the underdeveloped rural regions the percentage was above 90%. The situation was comparatively better in the development regions and the regions in industrial decline. The first problem cited was bureaucracy, the second was corruption and the third was legal practices. The difficulties that companies encountered when dealing with the tax administration also constituted a problem. Analysis of access to external finance showed that more than half of the enterprises (over 50% in the development and growth regions and more than 70% in the regions in

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Fig. 6. Type of advice used by SMEs. Source: Sample survey.

Fig. 7. Type of information required by SMEs. Source: Sample survey.

industrial decline and the underdeveloped rural regions) did not apply for bank loans in 2000. The general conclusion is that the banks are not prepared (or more likely have no real interest) for offering loans and ancillary services to meet the needs of SMEs. The survey showed that only one-fifth of all companies interviewed used the consulting services in 2000 (fig. 6). The SMEs in the reviewed regions used bookkeeping services most frequently. Advice on Bulgarian legislation ranked second in terms of frequency of use by the SMEs. The source of information (fig. 7) most frequently used by SMEs in all regions was unofficial contacts with friends and relatives. The unofficial sources were the most

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frequently used in the regions in industrial decline. The types of information that SMEs sought most often were about market and prices, taxes and bookkeeping, and suppliers.

5. Support of innovation in "dynamic" and "academic" SMEs During the last four years, rapidly expanding small and medium enterprises have been an object of increased attention from researchers, government institutions and politicians. These are known in the specialised literature as "dynamic companies". The Bulgarian dynamic entrepreneur can be characterised as male, aged 35—45 years, a university graduate, without previous entrepreneurial experience, a former employee of a state enterprise, and motivated by the desire for independence, self-development and higher income. 51.5% of the Bulgarian "dynamic SMEs" are production companies. They generate higher added value than the SME sector in general. At the same time, about 70% of them also undertake trading activities. They are predominantly situated in the capital city and secondly in the main regional centres. The fast growing companies are not distributed evenly and this will have an unfavourable impact on certain regions of Bulgaria. The average age of Bulgarian "dynamic SMEs" is six years and ten months. This means that they possess sustainable competitive advantages, which have enabled them to survive and maintain growth for a relatively long period of time. An indicator of the technological level of "dynamic SMEs" is the age profile of their equipment. In this context 42% of the "dynamic SMEs" surveyed use equipment aged between 4 and 10 years (fig. 8).

Fig. 8. Do you employ IT in your business? Source: Project "Dynamic entrepreneurs: comparative study of Bulgaria and Poland", Centre for Entrepreneurship Development, University of National and World Economy,

Sofia, 1999-2000.

5.1 Barriers to the development of "dynamic SMEs " The most serious problems perceived by dynamic entrepreneurs are weak domestic demand and strong international competition, as well as the provision of loans, the level of taxes and collection of debts/receivables.

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Fig. 9. Barriers to new product development.

Barriers to the innovation of new, competitive products are, firstly, the lack of financing, 61.8%, followed by inappropriate production equipment, 23.7%, and the lack of knowledge about new technology, 21.1% (fig. 9).

5.2 Academic SMEs In recent years, a new group of entrepreneurs - the so-called "academic entrepreneurs" has appeared in both the developed industrial countries, and, more recently, in Bulgaria. These are people from national research institutions and universities who start their own businesses. The academic entrepreneur's role is increasing because of the nature of the tasks they are trying to tackle, such as successful marketing of their own research results and involvement in supporting the innovation process in the SME sector as a whole. The possibility for collaboration between universities and scientific research institutes, on the one hand, and SMEs on the other, in the process of marketing new ideas and research, is important to both parties. For scientists and researchers, this co-operation may serve as a source of additional institutional funds. It also helps SMEs to introduce new high-tech products and services and makes the process of innovation easier, faster and cheaper. The possibility for collaboration in the field of technological development, through combining SMEs in so-called "clusters", enables them to achieve the necessary critical mass when designing new projects, to share the risks, the consultancy costs, to achieve economies of scale and to reduce the time involved in launching new products and services on the market. The experience of so-called "spin off" companies established by academic institutions, researchers and leading companies, as active participants in the development of high technologies in many industrial countries is evidence for this.

5.3 Conclusions and recommendations • academic entrepreneurship" is a specific form of small business; • there are close connections between the entrepreneur, the academic community and the academic institution; • the activity of academic entrepreneurs is concentrated primarily in services, consultancy and specialised production.


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a high intellectual content of products/services and higher value added. targeted (selective) support should be ensured for "academic entrepreneurs"; it should focus on start-up technologically-based SMEs (establishment of "spin-off" companies), particularly with the involvement of young lecturers and doctoral students; the participation of "academic entrepreneurs" in European programmes and projects for research and technological development should be encouraged. 6. Government policy for SME development in Bulgaria Government policy in 2000 for the development of SMEs in Bulgaria maintained and continued what was accomplished in the period 1997-1999. In 2000, the application of the policy to the sector was successfully continued through implementation of the National Strategy for the promotion of SME development, adopted in 1998. The implementation of the strategy targets the following: - Development of private property, freedom of competition and entrepreneur ship; - Creation of jobs; - Development of the entrepreneurs' managerial skills; - Increasing the export operations of the SMEs; - Introduction of high-tech production; - Promotion of investment in the SME sector; The major objectives of the strategy are: - Simplification of the administrative and regulatory framework applicable to SMEs; - Improving financial services for SMEs; - Strengthening the competitive environment and competitiveness of SMEs; - Supporting the internationalisation of SMEs and, in particular, their economic activity within the European Union. The specific measures and initiatives of the National Strategy have been set out in a Work Programme for Strategy Implementation. The Agency for Small and Medium Sized Enterprises (ASME) is the institution responsible to the Council of Ministers for the implementation and updating of the Strategy. The implementation of the Strategy was based on two complementary approaches for achieving the Strategy's objectives: - Creation of an overall favourable environment for business; - Specific support for the start-up and development of SMEs through the provision of direct support to entrepreneurs. Several levels of policy implementation stand out in the context of the two approaches: - Macroeconomic policy; - Administrative legal policy; - Sectoral, regional and problem-oriented policy; - Financial support; - Support through the provision of information, consultancy and training; - Collaboration with SME organisations in the country. 6.1 Information, advice and training support One of the important functions of ASME is the provision of information and advice for the SME sector. A series of information newsletters, brochures and handbooks providing information for the companies was prepared in 1999-2000. Also, the Agency's web site (www.asme.bg) was further developed and regularly updated.

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A high priority for ASME is the establishment of contacts between Bulgarian and foreign companies for the creation of joint ventures, establishment of commercial contacts, provision of information about Bulgarian enterprises and possible co-operation with them. Joint events (seminars, conferences, workshops, co-operation exchanges, training courses) have been organised, including information for Bulgarian entrepreneurs about the conditions for participation in international projects and programmes, and possible sources of funding. Under a PHARE project, ASME continued the delivery of "Training of Trainers" courses. The training is targeted at the personnel of these agencies, and the objective is to enhance skills for providing advice to entrepreneurs. In 1999 and 2000 increasing, attention was paid to promoting entrepreneurship through the educational system. An important feature of the system for vocational education and training is free access to vocational training, regardless of age and level of education. The promotion of entrepreneurship, specifically in vocational secondary and higher education, is one of the priorities of the educational reform.

6.2 SMEs in the process of integration into the European Union Chapter 16 "Small and Medium Enterprises" was one of the first to be closed in the negotiations for accession to the EU. The finalisation of negotiations related to Chapter 16 is a recognition of the success of Bulgaria. In 2000 the third multiannual programme of the European Union for SMEs was completed. Under the 2000 Programme, 42 Bulgarian companies took part in the exhibition "Europartenariat" held in Aalborg, Denmark. In June 2000, 45 Bulgarian, Austrian and Greek companies operating in the field of information technology participated in the forum "Interprize" held in Bulgaria. Another priority of the multiannual programme is the support of Euro-info Centres (EICs) in the country. The network of EICs continues to develop and expand the range of information and advisory services provided to Bulgarian entrepreneurs concerning EU programmes. The programme was extended and the European Commission prepared the Fourth multiannual programme of the European Union for SMEs, which started in 2001. The country will be included in the programme that will be in place until 2005. The key priorities of the programme are aimed at encouraging the growth and competitiveness of businesses through promotion of the electronic trade for SMEs and at training in information and communication technologies. Other important tasks are to encourage risk taking and simplification of the regulatory framework of the business towards building a dynamic environment which facilitates the creation, growth and innovative potential of the companies. In 2000, the project BG 9704.0202 "Support to SME development" under the PHARE Programme was completed. The project enabled the provision of technical assistance and consultancy support to five regional business centres. Training programmes for SMEs were prepared and delivered and the Report for Small and Medium Enterprises 1996— 1999 was produced. In September 2000, a new project under the PHARE Programme BG 9908.02 "Capacity Building for the accelerated growth of the SME sector in Bulgaria " was launched. Its goal is the improvement of the business environment for the development of small and medium enterprises in Bulgaria. The project supports the strengthening of newly established district offices of the ASME and of the national network of BARDA regional development agencies and business centres.


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The "European Innovation Network" project within the Horizon programme "Promotion of innovations and support to SMEs", under the Fifth Framework Programme of the European Union for research and development, aims at implementation of a series of seminars for raising awareness regarding the participation of Bulgarian SMEs in the Community programme. Within its scope the project will support the further development of the existing information network. Optimisation of the existing structures will facilitate the access to the research programmes of the EU. SMEs in the agricultural sector have an opportunity to participate in the Special Accession Programme for Agriculture and Rural Districts (SAPARD). The Programme will be implemented in the period 2000-2006. The assistance, which will be provided to the country during the seven-year period, will amount to US$ 52 million per annum. 7. Government sector The government Agency for Small and Medium Sized Enterprises (ASME) was established by the Council of Ministers' Decree 314/31.07.1997 and made accountable directly to the Council of Ministers. ASME is the institution responsible for carrying out state policy for the promotion and support of the development of Bulgaria's SMEs. The Foreign Investments Agency (FIA) is a state body accountable to the Council of Ministers for co-ordination of the activities of state institutions in the sphere of foreign investment. The FIA provides assistance for promoting, attracting and supporting foreign investment and prioritises investment projects. The Centre for Promotion of Exports (CPE) assists the Ministry of Economy in defining and implementing export policies, and in particular the measures for the promotion of exports. The CPE was established in 1997 by a Decree 45/11.02.1997 of the Council of Ministers. The centre performs the function of a specialised body for the promotion, facilitation and support for exports and for the prioritised export sectors within the country; co-ordinates the activity of state bodies and non-government organisations in the field of exports and gives methodological guidance for the promotion of Bulgarian exports and for information servicing of the export process. With the adoption of the Export Insurance Act in 1998, the Bulgarian Agency for Export Insurance (BAEI) was instituted. The objective of BAEI is to support Bulgarian exporters, including SMEs, in international markets through balancing risk and protection from financial losses as a result of non-payment on the part of the foreign client. The National Employment Service (NES) executes the policy developed and coordinated by the MoLSP for the promotion of employment. NES organises vocational and qualification training courses, performs mediation activities for informing and supporting unemployed persons starting their own businesses, as well as consulting employers about the existing preferences for the creation of new jobs. In 2000, the NES held tenders for the selection of companies for vocational training courses, and BARDA members were licensed to deliver courses for training, following the methodology "Start your own business" of the International Labour Organisation (ILO). 8. Non-governmental sector 8.1 Business associations Business Associations in Bulgaria are non-profit organisations based on voluntary

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membership. Priorities in their work are related to defending the interests and providing support to their members. The Bulgarian Chamber of Commerce and Industry (BCCI) offers a wide range of services for companies such as: registration of export trading activity, advice regarding foreign trade, tax and financial advice, drawing up offers, assistance with the issue of visas for business trips, and the issue of ATA vouchers. BCCI is particularly active in involving Bulgarian businesses in the process of European integration. Bulgarian Industrial Association (BIA) represents all those involved in business activities. Subsidising training for Bulgarian entrepreneurs, members of BIA, as well as enabling them to participate in international exhibitions was one of the objectives of the international projects developed and implemented during the year and financed by German governmental and non-government organisations. In 2000, BIA became an initiator of the development of a network of employers' federations of the countries applying for EU membership. The activity of the Bulgarian Chamber of Crafts (BCC) was aimed at the preparation and passing of an act to govern the establishment, membership and functions of the craftsmen's association. One of the major objectives of both BCC and the individual member chambers was to defend the interests of the members against the effects of the legislation concerning patent taxation of merchants and craftsmen. The Bulgarian Association of Regional Development Agencies and Business Centres (BARDA) is the only decentralised non-government association of independent regional agencies whose operations are focused on SME development. In 2000, BARDA accepted 15 new associate members in the towns of Vratsa, Montana, Veliko Tarnovo, Pernik, Silistra, Razgrad, Yambol, Kardjali, Gabrovo, Lovetch, Karlovo, Devin, Gotse Deltchev, Sofia and for Sofia County. BARDA offers a system of support for SMEs ranging from assistance and collaboration on a regional level to full membership. The National Union of the Small and Medium Business (NUSMB) was established in 2000. The goals of the union are to ensure that SMEs are heard by state bodies with a view to improving the business environment. 8.2 Information and innovation research centres Euro-info centres (EIC) offer services in relation to the adjustment of enterprises to the requirements of the common European market. They provide information, advice and assistance with respect to EU enlargement and EU legislation issues. Three new business incubators have been set up - one in Vidin and two others in Rousse, one of which is a virtual incubator. In addition to the standard package of services, the business incubators offer a hire-purchase scheme for equipment with a repayment period of 24 months. The European Innovation Centre provides a range of services such as information and advice on specialised EU technology transfer programmes, assistance in the formulation of project proposals, co-operation with foreign partners and access to electronic databases. Conclusions and Recommendations 1. NGOs working with SMEs play an increasingly important role in the formulation of the overall policy for the sector and specific SME support. The involvement of NGOs in the development of regional and sectoral policies is a condition set by


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the EU for financing through the EU pre-accession structural funds. Undoubtedly, the more varied and refined the services offered are, the better the prospects of sustainability of business associations and respectively their influence on the activity of their members. 2. The issue in Bulgaria is the limited range of quality business services and the insufficient promotion as well as the inadequate communication of business associations with their members. Business associations in Bulgaria are still not sufficiently active in lobbying for the interest of SMEs. Instead, lobbying tends to be driven by personal or political interests. 3. The harmonisation of Bulgarian and EU legislation and the rapid development of NGOs coupled with their increased influence are an objective condition for active interaction between the public and private sectors. Coordination between NGOs, research centres and SMEs needs to be enhanced, and interaction within state administration has to be strengthened.



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The Role of Universities in the Development of an Innovative Economy in Russia Vazgen R. Atoyan, Alexander Yu. Slepoukhin, Yuri T. Tchebotarevsky and Nina V Kazakova Saratov State Technical University, Polytechnicheskaya Street 77, 410054 Saratov, Russia Abstract. This chapter describes the contribution of universities towards innovation using a case study from Russia.

1. Introduction The social and political changes which have occurred in Russia during the last ten years have helped us see economic development from another perspective. As a result of the economic crisis which has been dragging on for almost ten years, the Russian economy has acquired a clear-cut primary orientation, and the bulk of its exports consists of fuel and power resources. But if it is to preserve and strengthen national security and competitiveness Russia's transition to innovative development is inevitable. Considering the characteristics of scientific and industrial potential of the Russian Federation (RF), this transition is necessary and, moreover, it is possible. At the beginning of the new millennium the necessity of transition to innovative development was realised by the leaders of the Russian Federation. In 2001 the first fundamental document "The Principles of R&D Policy in the Russian Federation up to 2001 and Further Perspectives"1 was approved by the President and the Government of Russia, (see table 1). In November 2001 the Council for Science and High Technology was created by the President of the Russian Federation. The functions of this advisory body are to inform the President about the situation of R&D policy, to support his co-operation with research organisations and to suggest the priorities of this policy2. Currently, there is a working group which consists of top scientists and heads of ministries, whose task it is to prepare the materials for the development of Presidential and Government documents in the area of national innovation policy. Our Saratov State Technical University also plays an active part in preparing these materials. However, it should be noted that these processes, which are now recognised on government level, began much earlier. In the early 1990s the first programmes on innovation activity in higher education institutions were initiated within the system of the RF Ministry of Education.

1 "The Principles of R&D Policy in Russian Federation up to 2001 and Further Perspectives". Poisk. No. 16(674). April 19, 2002. pp. 8-10. 2 "On President Science and High Technology Council". President decree of 8.11.2001. No. 1301.

110 V. Atoyan et al. /The Role of Universities in the Development of an Innovative Economy in Russia Table 1. Basic documents of transition of the Russian Federation to Innovative Economy Date

Document

1995

Government Decree (Dec. 26, 1995, Russian Federation) "The Most Important Measures in the Development and Support of Innovative Activities in Industry" 1996 Russian Federation Act "On Science and Technological Politics" 1998 Government Decree (July 24, 1998, Russian Federation) "The Concept of Innovative Politics in the Russian Federation" March 2001 The Principles of R&D Policy in the Russian Federation up to 2001 and Further Perspectives November 2001 The President of the Russian Federation, Decree (8.11.2001 No. 1301) "About the Council for Science and High Technology of the Russian Federation"

Fig. 1. Organisation of research and innovative activity in Russian higher education.

Now (2003), a developed organisational structure of innovation programme management exists in the system of the RF Ministry of Education (fig. 1). The innovation programmes in this system are as follows: a. Federal and regional programme: State support of regional R&D policy in higher education and development of its scientific potential; b. R&D programme "The innovation activity of higher education institutions". These programmes provide for the development of the ideology and methodology of innovation activity in the higher education system, and interaction of this system with other elements of the national innovation system. The scientists of Saratov State Technical University have been taking an active part in all these programmes for a long time. Currently (2003), the system of the RF Ministry of Education comprises 334 higher

V. Atoyan et al. /The Role of Universities in the Development of an Innovative Economy in Russia 111

Fig. 2. Research Funding at Higher Education Institutions.

education institutions and 159 research organisations. The Privolzhsky Federal District has 61 higher education institutions and 25 research organisations. According to these statistics, our district takes second place in Russia behind the central district. The expenditure on science in the budget of the Ministry of Education amounted to 1.9 billion roubles in 2002. In 2003 the Ministry plans to spend 2.4 billion roubles, that is 6% of the total sum of the federal budget item "Fundamental Research and Assistance for the Science and Technology Progress". In 2002 the sum total of funding for research in Russian higher education institutions from different sources, including the Ministry of Education, local budgets, etc. was 8.73 billion roubles. The sum total spent by all sources on research funding in Russian Higher Education Institutions, including funds from regional budgets of the Ministry of Education, Ministry of Science, Industry and Technology, private contracts and others was 8.73 billion roubles in 2002 (fig. 2). Contributions can be broken down as follows: Ministry of Education - 1.9 billion roubles. Ministry of Science, Industry and Technology - 261 million roubles. Regional budgets - 207 million roubles. Private contracts - 4 billion 665 million roubles. Other sources - 1 billion 690 million roubles. About 15 percent of the funds allocated by the Ministry of Education to science are assigned to the development of innovation activity in the higher education system, this sum being about 1 billion roubles. The experience of developed countries shows that it is impossible to intensify innovation activity without adequate legislative support in this area. Unfortunately, in Russia there is no Federal Act which could control innovation activity in the country as a whole. But, at the same time, you can observe legislative activities at the regional level - more than 30 regions have their own acts to control research, technology and innovation activities. The first regional act in the Russian Federation, "On Innovations and Innovation Activity" was approved in the Saratov region in 1997 on the initiative of scientists from Saratov State Technical University, and it appears to have been the foundation for similar acts in other regions of the Russian Federation (see table 2). Great changes have taken place both in the country as a whole and in the Saratov region over the last decades. Because of these changes, it has been necessary to

112 V. Atoyan et al. /The Role of Universities in the Development of an Innovative Economy in Russia Table 2. The development of legislative regulation of innovation activity in the Saratov region Date

Documents

1997 February, 2003 2002-2003

Saratov Region Act "On innovations and innovation activity" Saratov Region Act "On innovations and innovation activity" (revised) Saratov regional project "Support of specialized agents of innovation activity"

strengthen innovation activity and state support of innovation, and to renew the definition of innovation agents, regulatory mechanisms, etc. So, at the beginning of 2003, the Saratov Region Duma adopted a new, revised act "On innovation and innovation activity", clarifying these concepts. Fortunately, this variant was initiated not by researchers, but by the regional government, showing that they understand the importance of innovations in the new economy. The scientists of the Saratov universities (mainly Saratov State Technical University) are working diligently on the project of the new Act for the Saratov region "Support of specialized agents of innovation activity ". It has been developed on the basis of the first act and contains more specific regulations regarding state support for participants in the innovation process. These mechanisms include financial and organisational techniques, tax concessions, intellectual property defence etc. The development and practical realisation of these acts will favour the formation and development of the innovation systems both in the Saratov region and nationally. The regulation and management of innovation activity is not restricted to legislation. An integrated system of corresponding measures and structures is also required. In many Western countries such systems act at a federal level: there are national committees or ministries for R&D and innovation policy. There are also similar structures which work at the regional level. In Russia there is no such vertical management system in the sphere of innovation, with the exception of the Ministry of Education. Each region prefers its own model. There are different types of management structures, including Vice-Governors, innovation ministries and committees in the regional governments and administrations. In the Saratov region the Governor's Council of Science and High Technology was set up on 1st April 2002 to provide efficient implementation of regional R&D and innovation policy. The main tasks of the Council are: to make the major proposals on priorities of regional R&D and innovation policy with a view to solving the most pressing problems of the region; development of proposals aimed at providing state support of research and implementation of new technologies; the development and realization of R&D programmes; holding scientific conferences and organisation of exhibitions of innovative products; development of international research collaboration. There are many people from science and education on the Council. Of the 23 Council members there are 6 representatives of higher education institutions and 9 members of the Russian Academy of Sciences (65% of the Council's total). The Council of Science and High Technology deals with current regional problems. In 2002 it clarified the main trends of regional policy in the field of science and engineering, the improvement of the legal base of science, and interaction of regional government bodies. The Governor's Council of Science and High Technology of the Saratov region considers the scientific and technological priorities to be as follows: • new production technologies in the high-tech sector; • information/telecommunication technologies (ITT); • electronics; • biotechnology;


Fig. 3. Governor's programme "Saving Energy in the Saratov region".

• ecology; • agricultural technologies; • heat and energy. The institutes of higher education in the region are involved in the practical side of regulating and encouraging innovative activity. The most highly qualified specialists in higher education are involved in the development of legislation, strategic plans, concepts and programmes for the Saratov region. They are also engaged in industrial and district development, provide expertise and promote implementation. Thus, scientists from four leading Saratov Universities have taken and are taking part in the development of the Act of the Saratov region "On innovations and innovation activity" (1997), the strategic plan for the development of the Saratov region (2000), the concept of innovative activity in the Saratov region (2001-2005), programs for industrial development of the Saratov region and other legislation. Innovative programmes and projects, corresponding to the priorities of the development of the region, districts, some enterprises and industries are being developed. Universities, as suppliers of intellectual products and qualified personnel, play an important part in their realisation. An example of an effective regional innovative programme in which Saratov State Technical University is involved is the Governor's Programme "Saving Energy in the Saratov Region 1998-2005" (fig. 3). Earlier consolidated non-budget funds of energy-supplying organisations were the first sources of funding for the programme. The programme has now proven to be effective and is funded from the regional budget. In 2002, 20 million roubles were allocated from the regional budget together with 80 million roubles from external funds. In 2003, 30 million roubles will be received from the regional budget and 120 million roubles from external funds. In general, innovative activity in Russia is financed at a number of levels. At the federal level, funding comes from programmes of the Ministry of Education, the Ministry of Science, Industry and Technology as well as other sources. In particular, the Federal Supporting Fund of small entrepreneurship in science is financing more than 40 innovation projects in the Saratov region at a cost of over 60 million roubles in 2003. Of these, 12 projects - at a cost of 10 million roubles - are being carried out by researchers of Saratov State Technical University. Innovative activity is also funded at the regional level but each region prefers its

114 V. Atoyan et at/The Role of Universities in the Development of an Innovative Economy in Russia

Fig. 4. Structure of SSTU Science Park "Volga Technics" (on 1 January 2001).

Fig. 5.

own model. For example, in the 2003 Saratov region budget, a separate category exists, to which 1 million roubles is allocated to fund innovation projects. Other regions also provide funds for this purpose. The development of innovative activity requires the formation and improvement of an adequate infrastructure. In Russia this is done by the creation of science parks at universities. "Volga-Technics" of Saratov State Technical University (SSTU) and "Volga" of Saratov State University are science parks comprising about 50 innovation firms, producing and marketing new products and rendering more than 40 services in the


Fig. 6. Educational, research and innovation complex SSTU - "SBP" Corporation.

certification and protection of intellectual property for industry. In 2002 the SSTU science park "Volga-Technics" carried out R&D at a cost of more than 50 million roubles. At the same time an innovation infrastructure is developing in the science park. This system provides patenting, expertise, marketing, advertising, information and personnel services for the innovation firms (fig. 4). Our next step is to create Innovative Technological Centres (ITC) and Innovative Industrial Complexes (IIC). The aim is to co-ordinate all structures and innovation processes in the region. These units are organised jointly by one or more enterprises and research and educational organisations. Their goal is to carry out innovation projects and programmes. The development of these structures involves industrial enterprises, especially during the first steps of the innovation process. The co-operation between universities and enterprises not only ensures the effective promotion of new R&D results, but also of staff training. In recent years, based on the co-operation of Saratov State Technical University with industrial enterprises, some Innovative Technological Centres (ITC) and Innovative Technological Complexes (IIC) have been founded. These have proven very efficient in the development of new products and technologies. The ITC of the "Saratov Aircraft Plant" Corporation with Saratov State Technical University (1999) and the ITC "Contact" of a state research and production company with Saratov State Technical University are both examples of co-operation between universities and industry (fig. 5). An excellent example of the most complete and effective form of such integration is the educational, research and innovation complex "The Institute for the Construction of Precision Machines" which was set up in 1999 based on the "Saratov bearing plant (fig. 6). The separate research and educational subdivision of this plant provides research in high-tech precision- machine-building, projects, creation and application of new technologies and certification of the machine-building products. It also provides personnel training and retraining in new precision- machine building technologies.

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Judging from our experience we can say that Russia has begun the towards development of innovation. We see a new role for universities in this process. Universities must be the main innovation base, the main strategic resource in a region. However, we need international co-operation in research and education. We would like to learn about the experience of the countries of the European Union and the United States in the fields of legislation, organising, taxing and others forms of regulating innovation activity. Russian universities are making a great effort to improve in these respects. For example, Saratov State Technical University takes part in the Tasis Tempus and INKO-Kopernikus programmes, in projects of the Euro-Asia Foundation, and in international conferences on technology policy and innovations. These university activities should prove to be very useful for the transition to innovative development.


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Development of Scientific and Technological Capabilities in Belarus Anna I. Pobol Institute for Economic Research, Department of Economy of Belarus, Slavinski str. 1/1, 220084 Minsk, Belarus Abstract. This chapter outlines developments in respect of scientific and technological capabilities and infrastructure in Belarus.

Introduction During the last decade the scientific and technological sphere in the economy of Belarus has undergone important transformations. Having historically accumulated a significant share of scientific and technological potential of the former Soviet Union (FSU), Belarus now faces the challenge of building on its base of a strong national innovation system, which requires tightened economic and research links within the national system and with the world's R&D and innovation structure. To meet this challenge, the solid background is qualified scientific staff and a disciplined work force, as well as the developed system of institutions of higher education and research organisations of the Academy of Sciences and of branch departments carrying out fundamental and applied research. With 4.6 percent of all research organisations and 3 percent of all researchers, Belarus held third place for S&T among the republics of the USSR (Nesvetailov, 1991, p. 81). Its capital, Minsk, ranked sixteenth in the world (and fourth in the FSU) in scientific output. Scientific schools leading in the world have been developed and research has been conducted in optics and spectroscopy, theoretical physics and mathematics. The Industrial R&D sector was characterized by a high share of design offices and research organisations operating in the metal-processing industry; many were engaged in applied defence R&D. The demand side for R&D results and innovations in the economy is supported by the high absorptive capacity of the developed industrial sector (which, in terms of its share of total GDP, made Belarus one of the most heavily industrialised countries in the world), and its continuing need of technological re-equipment and restructuring (the average deterioration rate of capital assets in 2001 ranged from 50 to 70 percent in industries). There are good preconditions for integrating Belarus into the economic and technological world, as far as close vicinity of Belarus not only to traditional Russian markets but also to European markets, with their sophisticated needs, supports the technology transfer, as does the history of heavy reliance on external trade. The process of adaptation of R&D to new social conditions was characterized by conversion of military production - hence the change of orientation of R&D, and the high level of state participation in science. The legal and organisational basis has been created for development of science and innovations in new conditions; scarce but more or less regular targeted support is given to university and academic science.

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Transformation of managing and organisational structures in science occurs in the direction of commercialization of research results to build a market-oriented innovation system.

1. General characteristics of the scientific and technical potential of Belarus The distinctive feature characterising the existing scientific and technological system of Belarus (as well as the whole economic system) is that a very small share of scientific and technological (S&T) potential is in private ownership, very little progress is observed in privatising the S&T sphere. Scientific potential of Belarus is mostly concentrated in the National Academy of Sciences (its president is appointed by the President of the country and has the status of Head of Department), the Department of Education, Department of Industry, Department of Agriculture, Belarusian State University and the concern "Belneftehim" (mineral oil and chemical production). These institutions comprise 82% of employees in R&D and 84.6% of current domestic expenditure on science. It is important that in the structure of the scientific system of Belarus the expenditure ratio "research to developments" at different stages of the research process currently is approximately 1 : 1 (table 1). In the European agenda the policy of market-oriented innovation systems with emphasis on the development stages' prior to financing is proclaimed. In many countries of the FSU there is more funding for research than for development, which is caused by this fact and the prevailing share of applied research. This is supported by budget funds on one side, and the lack of alternative sources of funding applied R&D on the other. During the last three years the share of fundamental research in Belarus increased, which is evidence of growing state control of science, and the financial exhaustion of the business sector's capacity to finance R&D. That is why the innovation policy in Belarus calls for putting more efforts into the commercialisation of investigation results. Newly introduced schemes of organising the applied research provide closer links between science and industry by means of rigid control on whether the results of state S&T investigations are industrially used and mastered by enterprises. The general notion of the branch structure of scientific and technical potential necessary for gaining a vision of the place of the country in the global innovation system can be achieved from analyses of the structure of expenditure for R&D, or considering the share of projects carried out in the given branch of science. In 2001 the share of total expenditure for technical sciences has fallen from 61.5% to 57.8%, reducing the share of R&D carried out in industry. Correspondingly, the share of natural sciences (physics, chemistry, biology) where the share of fundamental research is traditionally high has risen. Table 1. Structure of expenditure for R&D by stages of the innovation process, in % Stages of research process

1997

1998

1999

2000

2001

Fundamental research

19

18

14.7

18.9

23

Applied research

25

27.8

15.1

23.9

24.6

Development

56

54.2

70.2

57.2

52.4


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Table 2. Branch structure of R&D, research projects carried out, 2001 Projects carried out in branches

1999-2000 Number %

2001 Number

%

10158

100.0

6150

100.0

Information science, electronics, radio engineering

894

8.8

409

6.7

Automation, telemechanics, cybernetics

750

7.4

433

7.0

Physics

525

5.2

379

6.2

Biology

305

3.0

238

3.9

22

0.2

87

1.4

Chemistry

213

2.1

191

3.1

Chemical technologies and production

311

3.1

245

4.0

Total

Biotechnologies

1236

12.2

784

12.7

Precision instruments

296

2.9

140

2.3

Agriculture and forestry

531

5.2

350

5.7

Environmental protection, ecology

387

3.8

203

3.3

Medicine and public health

611

6.0

323

5.2

1586

15.6

560

9.1

2491

24.5

1808

29.4

Mechanical engineering

Humanities and social research Others

There are also long-term general economic preconditions that lead to a reduction of the industry's share in R&D. Firstly, the majority of enterprises (the most important of which are still in state and mixed ownership) do have their own design offices where significant scientific developments have been born and brought up. Still, these do not only have restricted financial possibilities to carry out domestic R&D or finance the R&D and science-intensive innovations of external research organisations, they are simply not interested in introducing innovations, having got used to work under soft budgetary limitations. Secondly, typical for FSU countries is the factor that due to the low rate of salaries, it is often not economically justified to substitute them by expensive new technologies. Thirdly, when it comes to restructuring an enterprise, or to introducing a more efficient technology that could significantly reduce the workforce, managers for political reasons prefer to maintain the old technological level in favour of social stability: in Belarus there are many towns, where the economic activity of the whole population is connected with one enterprise (textile, for example) and depends on it heavily due to unbelievably low economic mobility rate of the population of small towns. Still, statistical data on R&D results by branches available in Belarus (table 2) is insufficient for objective estimations of the formed priorities in Belarusian science to be made and the directions to target at in scientific and technical policy to be determined. Further systematisation of information about the state of the art in R&D is needed to serve as the basis for scientific and technical forecasting. 2. Resource base of S&T activity 2.1 Funding of science A traditional indicator for macroeconomic estimations of the development level of

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science in a country is the ratio of expenditure for R&D to Gross National/Domestic Product, or scientific intensity of GDP. Science-intensity can also be counted as the volume of all expenditure for science related to the output of products (which produces a somewhat higher level of indicators and is used for purposes of statistical illustration of the situation in FSU countries). Application of this statistical method provides the indicator of science-intensity in Belarus at the level of 0.8-0.9% of GDP, whereas in accordance with European methodology it is about 0.7%. In the Program of social and economical development of Belarus for 2001-2005 science-intensity of GDP is to be doubled. In 2001 the share of expenditure for science in state budget was 2.4%. Domestic expenditure for R&D was equivalent to 85.7 m. USD. Of these, 80.5 m. USD is current expenditure, and 5.2 m. USD is capital expenditures.

Fig. 1. Volume of R&D (% GDP).

The major source of these funds still is the state budget - its share in total expenditure has been growing since 1999; and was 49% in 2001. At the same time the level of the research organisations' self-financing (on contractual base) has increased from 12.8% in the year 2000 to 14.3 in 2001. The share of the entrepreneurial sector (enterprises which manufacture products and deliver services independent of their form of ownership) has fallen from 11 to 10%. Foreign investment in Belarusian R&D is low. Most foreign funds come by means of international grants for research projects. More thorough consideration should be devoted to the structure of expenditures. The share of wages and payments for social needs continues to grow by comparison with the share of expenditures for equipment and other material expenses; hence, the level of taxation for scientific organisations in industries of material production is very high, and almost nothing is left for technical provision of research process. The situation of R&D funding has not improved during the last years when the GDP has grown as well. The budget funds for state S&T programmes were transferred by the Treasury to institutions with significant delays. It is commonly agreed that the current scheme and rate of financing R&D activity in Belarus require significant improvements, so that the status of science and education would be changed: now it is often regarded as the secondary; the short-term "holes" in the state budget can be filled at their expense. 2.2 Scientific staff The educational system of Belarus is one of the factors maintaining to a large extend its Index of Human Potential Development, and its graduates enjoy a high reputation all over the world. The system of postgraduate and postdoctoral study is rather developed; lately a positive phenomenon of an increase in the number of postgraduate students and stabilization of the rate of postdoctoral students has been noticed. Still not many

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of them "survive" as students, looking for more decent sources of material well-being. Only 36% of those accepted for a postgraduate study course finish it, and only 7.7% of those who have finished the postgraduate course have defended their dissertation. The other reasons for this state of scientific training are social aspects (future employment possibilities and level of wages in public science). It is a positive fact that the level of attestation, after some decline in the mid-90s, has risen again and stays stable or even grows. In 2001, as many as 32119 people were involved in research activity. At a general employment rate in the economy of 4435000 (44.5% of the whole population), employment in the sphere of science amounts to 42000 (0.95% of general employment). The early 1990s saw a tendency of decrease in the number of researchers involved in R&D, a slow but continuous trend. In 2001, this drop was 2.5%, while the share of all researchers (including doctors and professors) went down to 2.8%, and the share of candidates of science to 4%, revealing the tendency of scientific staff aging. Internal and external migration of scientific staff (or, rather, emigration) is maintained on the whole by the outflow of the most qualified and youngest (hence mobile) group candidates of sciences, as well as assisting staff (technical support). Internal migration usually occurs in favour of commercial organisations - usually in the trade sphere. It is highly alarming that less and less qualified experts, engineers, and researching staff work in manufacturing enterprises. Thus, not just the capacity of enterprises is lost to create knowledge-intensive innovations but also the capacity to perceive technological innovations which developed externally, and to modernise the structure of production in accordance with world market requirements. Experts are lacking in the fields of organising innovation activity and technology transfer. To build a strong CIS the system of incentives to attract people to more knowledgeintensive activity is strongly required to be advanced at the governmental level. There already exists a system of incentives and social security for scientific staff in Belarus: a number of extra charges to wages led to a higher level of wages in the sphere of science and scientific services than in the industrial, medical, pedagogical and cultural spheres. But the wages are still too low to lift the general uncertainty about the future attitude of the state towards science which prevents qualified experts from staying at public research organisations. One of the positive consequences of the high mobility of scientific staff is that some researchers establish their own businesses, where they apply their innovative technologies and ideas of science-intensive products, bringing the scientific knowledge closer to the market. This sector of economy (private research-based firms) needs strong encouragement for bridging the gap between the academy and the industry. Thus, the main tendencies characterising the development of scientific staff potential in the transformation period of the scientific system are as follows: • aging scientific staff, • lack of balance between the age groups and qualification structures of particular age groups, • lack of motivation for youth to scientific work due to overall economic instability. 2.3 Material and technical base of science In 2001, state support of material and technical (M&T) supplies to science was granted in the framework of two programmes: - Programme for the restoration of the material and technical base of science and the creation of Centres for collective use of scientific equipment and devices for the years 1997-1998, and

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- Programme for material and technical equipment of scientific organisations in 19992000. 7-10% of total funds of the science budget are allocated for their financing The distribution of property of equity is very important for the capacity to carry out R&D activity in various sectors of economy in Belarus is: most equity for R&D is owned by the state (84% in 2000 and 87% in 2001), whereas the share of mixed ownership (by joint stocks with a share of state ownership) has decreased from 15 to 12%, with private ownership being less than 1%. The question of transfer of ownership rights of main assets for R&D activity to more effective decision-makers (as small innovative businesses) is crucial for a coherent development of the CIS in Belarus. The major difficulties in sufficient M&T base provision are connected with insufficient financing and imperfect mechanisms of the allocation of funds. According to prognostic indicators, it was planned to send 5 620 millions BRB (the equivalent of 3.95 m. USD) from the state budget to the M&T base, the sum actually allocated was 30.6% less. According to the common principles of research financing, parts of the funds for buying equipment are transferred to enterprises in the course of the year, as if they were the current expenses, though in essence they are capital investments. The problem is that the allocated funds are very small and to be able to buy new equipment institutes need to accumulate the quarterly instalments (losing a significant part of their value due to inflation) till the end of the year. The non-rhythmic transfer of funds from the Treasury contributes to the financial problems for scientific organisations. The strategy for the development of the M&T base of science in Belarus is based on the agenda "science without departmental borders". It includes the targeted state support by means of buying modern expensive equipment, the creation centres for jointly used equipment, which are equipped with modern experimental, technological and other devices and computing machines (such as the Centre for Nanoelectronics and New Materials, Centre for Nano-sized Structures and Spectrographs of Surface, Centre for Chemical Analyses, Metrology Centre for Sensor and Gas-Analytical Devices, Centre for Solid Body Electronics, Centre for Prospective Elements and Systems of Information Processing, etc). It is also planned to create a general network of such centres coordinated by specialists. 3. Major results of scientific and technical activity 3.1 Fundamental scientific research The management system of fundamental scientific research in Belarus is traditionally based on targeted programmes. The state programmes for fundamental research (SPFR) have recently become the major form of organisation and co-ordination of fundamental research). Their financing is executed by organisations—executors from the state budget. Executors of these programs have participated in more than 190 joint international scientific or scientific-technical projects on SPFR thematic directions. 3.2 Applied research and development Applied R&D is carried out and realized mostly in the framework of State scientific and technical programmes (SSTP), as well as innovation projects (IP), branch and regional scientific and technical programmes.

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The legislative base for state management of the S&T sphere in conditions of transition was worked out in 1993. The most flourishing period for SSTP in Belarus was in 1996-1997, when expenditures on these programmes amounted to more than 40% of all budget expenses for science. Since 2000, the problem has been exacerbated due to the delay of payments from the state budget (only 80.5% for SSTPs, and 89% of funds allocated for IPs were paid out, some programs have not been funded at all). It should be particularly stressed, that the shift has lately been made from funding organisations (research institutes, design offices, etc.) to project funding. Thus, the policy of orientation on applicable results is pursued, though further advances in tools and mechanisms of deeper use of scientific potential and bringing the innovations closer to the market are needed. Results obtained due to SSTPs have led to developments in the sphere of laser and plasma technologies, optical electronics, new materials with peculiar characteristics, methods of technical diagnostics, mechanical engineering, chemical synthesis of substances, selection of plants, biotechnology, ways of information processing, special computing devices.

3.3 Intellectual property rights (IPR): protection and use Necessary conditions for protection of intellectual property rights and their commercialization are being created in Belarus. The system of legal IPR protection has been developed. This fact and the high level of inventive activity has contributed to a very positive tendency of constant growth observed in the number of applications for registering the objects of intellectual ownership which come from national applicants. For the last 10 years about 11500 applications for inventions were made, about 800 of applications for useful models and as many for industrial samples. Applications mainly come from state enterprises and organisations (36%), individuals (30%), universities (20%), and entrepreneurial structures (10%). The major part of inventions is made by Belarusian scientists in the sphere of chemistry (18%), machine building and metal-processing (12%), electronics and radio-engineering (10%), and construction (8%). The inventions created in Belarus are the basis for technical decisions of the world novelty level in 31 directions of science and technique.

Fig. 2. Intellectual property rights and patent activity.

57 foreign countries patent their objects of intellectual property in Belarus, but there is a negative tendency of lowering their share. The other tendency is a low rate of patents obtained abroad by Belarusian inventors - and of these as much as 90% are achieved in Russia due to close economic and political links between the countries. This is caused by high costs of patenting abroad and mainly affects state R&D organisations. The other reason is that the R&D and trade links with the other countries are very underdeveloped Belarus is still cut off from the European market.

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4. Mechanisms of stimulating science and innovations 4.1 Foundations 4.1.1 Belarusian State Foundation for Fundamental Research (BSFFR) BSFFR has existed for more than 10 years, it offers financial support not to organisations, but to small research groups or single scientists working on projects that passed the contest of the selection procedure. The grant system of research support at BSFFR assists Belarusian scientists in adapting their work in to market conditions by raising the activity rate of scientists. It also demanded that researchers have their psychology reconstructed, to master the techniques of preparing tenders. The creation of BSFFR allowed the transition from basic to a combination of basic and contest funding of fundamental research. Once launched, it helped to perfect the national system of expertise for scientific research projects, in which hundreds of Belarusian scientists participate. An analysis of the practical use of results of FR done on BSFFR grants has also been carried out. The average indices of practical use for results of fundamental research were about 12%; 5% of finished projects were introduced directly into production. The expenditure of BSFFR were the equivalent of 1 335 133 USD, 1.6% of them are allocated to funding international projects. BSFFR also co-operates with the National Academy of Sciences of Belarus, the Committee on Science and Technologies, Department of Education, HEEs. 4.1.2 Foundation for Informatisation of Belarus (FIB) In 2001 FIB was the state customer of the developments under following programs financed from the state's science budget: - Advanced information and telecommunication technologies, - Programmes for the development of a single scientific information computer network of Belarus (NICS), and - Project of the State program for informatisation of Belarus in 2001-2005, whose major actions are directed to the creation of automated information systems for bodies of governmental management. The volume of funds allocated to these actions was 1467 563 USD, but the real volume of the paid-out funds was only 66.7%. 4.1.3 Belarusian Innovation Foundation (BellF) To broaden the possibilities of funding innovation activities, the BellF was set up in 1998, rendering targeted support to innovation projects, which correspond to priorities of scientific and technical activity that do not repeat the projects funded from the state budget, last no longer than 2 years, and are aimed at the creation and introduction to manufacture of new technologies and/or kinds of products or organisational decisions which are exportable and competitive, or substituting import, or help to promote the technologies on the market. One of the most burning problems for the BellF activity is the search for customers. The enterprises and organisations which dispose of significant scientific and technical potential do not dare collaborate with BellF, finding it risky, insufficient, and preferring to be subjected to state control.


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4.1.4 Branch Innovation Foundations (BIF) In order to concentrate financial resources for the technical re-equipment of branches of industry and support the level of production technologies, state organisations can organise branch innovation foundations, for which the enterprises pay up to 0.25% of their disposable profit for costs of products (or works or services). BIFs have been created in 32 Departments and by other government bodies. The funds for BIFs have been collected from 3139 enterprises and organisations, 44% of which are in private and mixed ownership. Due to funds of BIFs' significant volumes, reconstruction and technological re-equipment of enterprises have been provided, but problems of the way funds are used are disturbing: for external aims, such as lodging construction, paying budgetary debts on foreign credits, financial assistance to collective farmers and so on. Also, investment in science was only about 5% (2001), whereas investment in capital assets were 93%, which is evidence of the critical financial state of enterprises and the high deterioration of capital assets, which need to be restored.

4.2 Taxation policy The current system of taxation does not favour the development of organisations carrying out scientific and technical activity it is the reason why many of them change the orientation of their activity to "scientific manufacturing" (legal form of scientific and production organisations) where R&D only amounts to 15-20%. Taxation policy in respect to science and innovations was not changed in 2001. The further reduction of the number of taxes and payments have been made due to uniting into one of taxes which are to be counted from the general base. Still, there are 20 taxes to be paid. The negative tendency should be noted that the tax burden in science and scientific services is 1.44-1.25 times higher in comparison with the industry and economy of Belarus as a whole (fig. 3). The reason for this is that the share of wages in the structure of prices of scientific and technical production is relatively high, which causes the high deductions for taxes and payments from wages (mostly they are payments to the 'Fund for social protection of the population' - social insurance - the share of which constituted 36.9% of the total sum of taxes in the sphere of science in comparison to 21% and 18.1% in the country and industry correspondingly. The other problem is that, whereas practically all kinds of innovative activity funded from the budget are exempt of major taxes, scientific organisations, which are financed mainly from innovation funds and enterprises' own funds, do not have any possibility to use these tax preferences.

0.12

Fig. 3. Tax burdens in the economy of Belarus: share of taxes and payments in sales, in %.

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5. Innovative entrepreneurship and its infrastructure In Belarus, 1.4% of small enterprises have registered their activity as R&D (these figures should be compared with care because the official statistical definitions of small enterprises and innovative activity differ). Innovative activity refers to technological and product innovations, not organisational innovation. The definition of small enterprises varies depending on the sector of economy (construction, or agriculture, or both.). In 1996-2002 an alarmingly negative tendency of decrease in the share and growth of innovation-oriented small enterprises and the number of employed experts has been observed (fig. 4). The average number of employees at an innovative scientific enterprise fell from 13 in 1995 to 8 persons in 2001.

Fig. 4. Small innovative entrepreneurship.

Although there is a number of measures to support small innovative entrepreneurship in Belarus (Programme of support for small entrepreneurship, Programme for the development of scientific and innovative activity, a number of presidential directives and decisions of the government concerning the development of small entrepreneurship and support of science-intensive industries), no significant improvements in innovative activity of small entrepreneurship are observed. The major barriers to the development of small innovative entrepreneurs referred to are: poor advertising capacities significant barriers for international market entry and protectionism of most developed countries; poor ability to pay of the population, enterprises and organisations, and low acceptability in society for new innovative products, lack of trust in domestic developments. The other important obstacle is uncertainty about commercialising the scientific and technological development, that the customer enterprises introducing the developed technological innovations and equipment will be able to sell their products and pay for the R&D activity. The problems are aggravated by the length of capital turnover, and, since in most cases the state organisations are actors in the innovation process (from research institutes to manufacturing enterprises), the delays in funding from the Treasury, scarce funding and the lack of alternative sources (external), plus the psychology of soft budgetary limitations by most state enterprises hinder innovations seriously. More than 30 small innovative entrepreneurial structures worked In the system of the National Academy of Sciences in 2001, launched with participation of NAS organisations. A significant volume of work was done in 2001 by small enterprises set up with participation of the Physical-Technical Institute of NAS (CVD vacuum coating application; electron and laser beam technologies of surface treatment, welding and brazing; design and manufacture of equipment for personal protection such as bulletproof jackets, and other things). In 2002 the scientific and technological association "Academic Technological Park" was set up by the National Academy of Sciences,

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the main activity of which consists in promoting and co-ordinating the innovative activities of organisations which will be its members (they are concentrating on the creation and market introduction of science-intensive competitive products, new and high technologies). A significant part of the innovative potential of Belarus is based on research carried out at institutions of higher education. At Belarusian State University (BSU), small enterprises are set up whose activities are based on the introduction of the latest technologies developed by researches of BSU. For example, more than 30 technologies are used to recover precious metals from waste. Taking into account the high scientific potential of Universities in Belarus, the Inter university Centre for Marketing of Scientific and Technical Developments was established in 1997, which created and maintains the system of collecting and processing information about directions of scientific activity, investment projects and developments of universities for promoting the R&D results of universities and their enterprises. In the course of 1999-2001 the joint programme of UNDP and the government of Belarus supported the activity of nine business incubators. Five regional Centres for scientific, technical and business information are launched which deal with technology transfer at the regional level. Presently there are two technological parks acting in Minsk (in the Belarusian State University), and in Mogilev; the third, in Gomel, is being organised. A branch-specific scientific programme of the state is targeted at 'the advancement of activity of technology transfer centres and regional marketing and innovation centres'. The National Centre for Technology Transfer (NCCT) established with the assistance of UNDP and UNIDO is a novel structure in Belarusian system of technology transfer. Conclusions: transformation of the scientific and technological sphere into a sustainable national system The development of the scientific and technological sphere in Belarus is striving for wider commercial use of research results, whereas the structure of interrelations within the system tends to stay vertical, with the developed state regulation system of the R&D sphere and underdeveloped horizontal coherence between the sectors involved in the innovation process. Major difficulties in developing the scientific and technological sphere in Belarus are of financial, political, and social character. Difficult general economic conditions cause the low capability to finance the expensive R&D activities on the 'supply' side, as does poor solvency of customers of research results on the 'demand' side. The questions of economic and social stability are very high on the political agenda leading to the high level of state participation in science, while the conditions and infrastructure for innovative entrepreneurship need further development. A culture of Innovation, social acknowledgement of scientific issues and orientation towards innovative activity are other factors determining whether the innovation system currently developed will be sustainable. The following can serve as the 'growth factors' to pay attention to for building an NIS: - large production-oriented industrial clusters for exportable competitive products, - a powerful research structure of the National Academy of Sciences and institutions of higher education, - leading scientific schools in technical sciences (new materials, nanotechnologies, etc) and life sciences (biology, chemistry), developed by institutes for applied research,

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- organising of the base of public research institutions for small innovative companies and bridging the gap between science and industry, and thus bringing the technological innovations closer to the market. Among the prior needs of the innovation system in Belarus are the its integration into the global structure of technological links, the provision of information on innovation processes, and the development of a framework to foster the active involvement of all stakeholders in innovation. / would like to express my sincere gratitude to Dr. Anton Slonimski and Ms. Elvira Meerouskaja for their support and valuable leadership in the preparation of this paper, especially for their patience and demandfullness. References Ivanov VF., Karelina VA., Kostiulovich N.N., Kriukov L.M., Meerovskaja E.D., Nedilko L.M., Pranovich V.B., Slonimski A.A., Hartonik LA. (2002) Development of Science in Belarus in 2001 Analytical report. Committee on science and technologies. Minsk: BellSA. Nesvetailov, G.A. (Ed.) (1991) Scientific Potential of the Republic. Minsk: Nauka i Tekhnika. Science of the Republic of Belarus 2001. Statistics collection. V.N. Tamashevich et al. (eds.). Minsk: Committee on Science and Technologies and Department of Statistics and Analyses. Sources on the Internet: http://www.gknt.org.by - State Committee on Science and Technology; http://nctt.org.by - National Centre for Technology Transfer; http://www.bas-net.by - System of Academy of Sciences; http://www.main.gov.by - Legislative base.


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Environmental Management A Real Area for Innovation in Belarus S. Zenchankaa, Ju. Lakovetsb, A. Zenchenkob and S. Malchenkoc a International Sakharov Environmental University, 23, Dolgobrodskaya Str., Minsk, 220009, Belarus. 'JSC "BelEcoMedService", 35, Kujbysheva Str., Minsk, 220029, Belarus c Moscow State University of Economy, Statistics and Informatics, 18a, Zheleznodorozhnaya Str., Minsk, 220000, Belarus Abstract. Environmental management is a growing area of professional activity all over the world. The importance of environmental management was confirmed in the decision of the world conference in Rio in 1992 and in the documents of the International Standards Organisation. Enterprises that want to gain advantages on the market must implement an environmental management system and support it. The development of environmental management demands the training and retraining of specialists both for maintaining this system at the enterprises as for verifying it. That is why we consider environmental management an area for innovation in education and practical management. Such an approach allows us to include higher education and specialist retraining in innovation processes. In Belarus the process of implementing the environmental management system was started at 1998 when the subsystem of environmental certification was founded as a subdivision of the state's system of certification.

Introduction The development of an independent state and its inclusion in the global community is impossible without incorporation of the different types of innovations. We start from the definition "Innovation is an act of changing or the change made in established laws, customs, rites, and practices by the introduction of something new" (New Webster's Dictionary). Consequently innovation can be made in any area of human activity. We consider state and regional development as sustainable development that is impossible without environmental management implementation of which was started at the level of enterprises at the end of the last century. And what is environmental management? Similar to financial or quality management where costs and quality of the products and processes are the objects of management we can assume that environmental management is managing company environment. This is not quite correct, though. One of the possible answers is that "the relatively new discipline of environmental management does not seek to manage the environment directly. Instead, it concentrates on the more indirect, but nonetheless effective, route of managing an organisation's activities that give rise to impacts upon the environment. The focus of the work becomes the interaction between the organisation and the environment, and the rather fluid interface between the two.

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There are the environmental aspects (as opposed to the financial or quality aspects) of an organisation's activities, products and services that are subject to management" (Sheldon and Yoxon, 2002). This definition shows the complexity of environmental management and its procedures and this complexity demands using innovations during environmental management implementation. We consider three types of innovations connected with environmental management preparing the enterprises for environmental certification, higher education and correspondence courses. But first of all we must address the legal and standard basis of innovation and environmental management. 1. Law and standards concerning innovation in the Republic of Belarus There are no laws governing innovations but there are several standards in the Republic of Belarus. Each ministry develops its own rules and implements innovations in accordance with these standards. The most important provisions are made in "The Programme for the Development of Scientific and Innovative Activity in the Republic of Belarus" (Government Regulation, 1996) that was approved by Ministry Cabinet in 1996 and the Management directive of the Ministry of Education and Science "Scientific and innovation activity. Main regulations" approved in 1995 (Letter, 1995). The Programme is based on the following principles (Government Regulation, 1996): • Declaration the model of the innovation development of the republic economy as a priority. • Maximum use of market mechanisms for stirring up innovation activity and business. • Effective use, first of all, of the country's own scientific and technical potential and conducting structural change in this sphere. • Intensification of the innovation potential of the scientific and technical sphere owing to its structural reform, partial privatisation, creation of effective innovation structures. • Optimal combination of the interests of authors, product manufacturers and investors; recognition of the objects of the intellectual priority as a source of revenue. • Alignment of the innovation activity to social and economical priorities; effective change of structures of production capabilities for the purpose of maximum satisfaction demands of the domestic market, replacement of imported goods and supply to the new areas of the world market. • Creation of equal stimuli for the innovation and industrial activity for all stakeholders in the economy independently from the form of priority. • Maximum attraction for the facilities of national enterprises, entrepreneurs. • Encouragement of foreign investment for innovation projects that gives spreading of the production of the competitive product, realization of the tinsel customs police. • Active role of the state in the creation of economic and legal conditions and market mechanisms to turn innovations into significant factors of the social and economical development of the state. The procedures of innovative activities of scientific organisations are defined in the Management Directives (Letter, 1995). In particular it is pointed that scientific organisations, enterprises and innovative funds can organise joint laboratories, centres, small enterprises and other structures that specialize in developing new products and technologies and specific innovative structures (business incubators, techno parks and techno city states and so on). Their activity must be directed to the development and production of competitive products. R&D and its implementation can be funded from

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the state budget, special funds, non-state funds and using the enterprises' own facilities. Enterprises can attract foreign investment, too.

2. Laws and standards concerning environmental management in the Republic of Belarus Key conditions for the realisation environmental certification of enterprises are: meeting environmental demands in accordance with which the certification is carried out, the metrologically certified laboratories, certification services and qualified certification specialists. Certification of the environmental management systems of the enterprises is conducted in the framework of the Subsystem of Environmental Certification of the National System of Certification (Tsigankov, 2002) which was founded in 1998. The goals of this subsystem are: • environmental protection for the state, the society and its citizens; • ensuring ecological safety; and • preserving biodiversity. Main stages of the environmental certification are: • preliminary analyses and estimates of the documentation; • testing and assessing the object of certification; • assessing the correspondence of the environmental management system to the demands of the documentation; • the inspection audit of the certified environmental management system. The activity of the Subsystem of Environmental Certification is based on the laws of the Republic of Belarus "About environmental protection", "About atmosphere air", "About ozone layer protection" and others, on the International Standards ISO 14000 series part of which is used as national standards and for the management directives of the Subsystem (Management directive, 2000). All functions connected with the realisation the goals of the Subsystem are entrusted to the centre of international ecological projects, certification and audit "Ecologiainvest" subordinate to the Ministry of Natural Resources and Environmental Protection.

3. Environmental management as an innovative process Environmental management needs the implementation of a management system that permits enterprises to work cleaner and hence to decrease their impact at the environment. This approach demands the development and implementation of new technologies of production, new management systems and changing the mentality of employers. The environmental management system of enterprises is implemented in accordance with a systematic approach. Firstly the enterprise is considered as a complex structure with inner components that interact with each other with different positive and negative feedbacks. Secondly an enterprise is considered as a structure that interacts with its environment, has an impact on it and get information from the environment about this impact. The ultimate aim of environmental management is decreasing the enterprise's impact on the environment.

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The environmental management system of enterprises is implemented in accordance with a structural approach, too. During the development of the environmental management system it is necessary to determine priorities for establishing an efficient management structure. This structure must have inner substructures that can and must interact at different levels of the enterprises. The environmental management system of enterprises is implemented in accordance with a market approach. The ISO 14000 series of standards (ISO, 1996) stipulates that the requirements of customers and people with respect to environmental protection be met. The 21st century is a century of sustainable development which requires more careful attitude towards the environment. The environmental management system at the enterprises is implemented in accordance with a process approach. During the preparation of the enterprise for environmental certification and the implementation of the environmental management system (EMS) all its inner and outer activity is taken as a whole business process: production, auxiliary and control processes. Each process consists of a continuous activities with positive and negative feedback. 4. Environmental management of the enterprises To help enterprises with the implementation of the environmental management system some companies get rights to consult the enterprises working in this field. This consultation includes two stages: • Preliminary environmental audit of the enterprise; • Creation of the environmental management system of the enterprise. During the preliminary environmental audit the consulting group estimates the impact of the enterprise on the environment, its environmental aspects and proposes possible ways overcoming environmental problems. During this stage we estimate the environmental performance indexes (Bennett and James, 1999; Zhukov et al., 2002) using statistical methods (Isikava, 1988) such as Isikava diagrams and Pareto diagrams usually used in quality management systems. This approach permits us to reveal the main environmental aspects and their impact on the environment. These methods permits us to track the index dynamics, too. For more detailed analyses of the dynamics of environmental indexes we use analyses of the time series of these indexes (Afanasjev, 2001). The second stage of consultation involves the development and implementation of the enterprise's environmental management system as part of the corporate management system. This system includes a guide and a set of different procedures that help managers, environmental managers and staff of the company to implement it. JSC "BelEcoMedService" is one of such companies. Starting in 2000, its auditors consulted several enterprises two of which received environmental certification in compliance with the national ISO 14001 standards. Some of these enterprises use their own money for this process and some attract different funds such as World Bank and others. 5. Higher education in the field of environmental management To satisfy industrial demands on environmental managers courses of study in this field were started at different universities of Belarus. For example, at Sakharov International Environmental University in Minsk.

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We started with the creation a new specialisation "Environmental monitoring and audit" for "Radioecology". Thus we extended the training area from traditional ecological science to environmental science. The next step was the creation of a new discipline "Environmental monitoring, management and audit" that includes four specializations "Environmental management and audit" "Environmental monitoring", "Standardisation and metrology in environmental sciences" and "Environmental information systems". We consider the latter three as instruments for the realisation of the first. Student's training in the discipline "Environmental management and audit" is based on in-depth knowledge in the fields of mathematics, physics, chemistry, biology, geography and economics. Starting with the third course students attend such courses as "Quality management", "Environmental management", "Air pollution", "Water management", "Waste management" and so on. During their studies students prepare their course work using materials they get from different enterprises. Their teachers develop some methodological material for processes of environmental audit and environmental certification. Both teachers and students take part in preliminary environmental audits of the enterprise and its preparation for certification. There is a close co-operation between Sakharov International Environmental University and JSC "BelEcoMedService". 6. Correspondence courses in the field of environmental management Currently, the system continuous training of specialists is widespread. This system presents a package plan for their training and retraining during their period of practical working. As world experience shows training and retraining can be done by correspondence courses. In accordance with world standards modern correspondence courses are based on the internet technology. We consider the possibilities of such system for training specialists in the field of environmental management. Using such courses in the field of environmental management is connected with the fact that top managers prefer to retrain specialists that have practical experience at their enterprises to hiring graduates from higher education institutions. And these top managers prefer correspondence courses because employees must do their job during the period of education. Correspondence courses in the field of environmental management are aimed at retraining specialists that have a basic higher education connected with the enterprise's profile. Let us now turn to the complex of teaching methods. Correspondence courses must consist of: Curriculum. Author's course of lectures (including its electronic version). Practical training. Electronic multimedia library. System of training and tests in the curriculum subjects. Examination. Along with the creation of teaching methods the programme and telecommunication means for correspondence courses are being developed development. Software tools are being developed on the base of the international standard WEBCT. The programme and telecommunication complex includes: • Telecommunication system. • Administrating system for the teaching process. • System for developing and accompanying teaching and methodological materials. • System for developing and accompanying of test's bank.

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• • • • • • • •

Testing system. Electronic library. Marketing system for the correspondence courses. electronic dean's office. educational internet websites. Wave-Top technology. System's data base. Teaching and methodological complex. The implementation of such courses will enhance the prospects of training in the field of environmental management and will help enterprises with their efforts in environmental management and certification. Conclusions The consideration of approaches to the development and implementation of environmental management systems and to training in this field lead us to a conclusion that this area of activity is one of innovation. One of the most important results is that these innovations are carried out using internal finance resources. Enterprises generally use their own budgets, higher education is funded from republic budget. It is necessary to point out that the implementation of environmental management systems is in some enterprises supported by different international finance organisations such as the World Bank and the European Bank of Reconstruction and Development. References Afanasjev V, Jusbashev M. (2001) Analyses of the Time Series and Forecasting. Moscow: Finance and Statistics, 226 pp. In Russian. Bennett M., James P. (1999). ISO 14031 and the future of environmental performance evaluation. In: M. Bennett, P. James (eds.), Sustainable Measures. Evaluation and Reporting of Environmental and Social Performance, pp. 76—97. Government Regulation, 26th February 1996, No. 143. About the Programme for the Development of the Scientific and Innovation Activity in the Republic of Belarus (in Russia). Code of President Edicts and Government Regulations of the Republic of Belarus No. 7, p. 181. In Russian. Isikava K. (1998) Japanese Methods of Quality Management. Moscow: Economics, 216 pp. In Russian. ISO 14001 (1996) Environmental Management System: Specification with Guidance for Use. Geneva: ISO. Letter of the Ministry of Education of the Republic of Belarus and National Academy of Science. "Scientific and Innovative Activity. Main regulations". 3rd January 1995. In Russian. New Webster's Dictionary of the English Language (1998) Kamla Nagar, Deli-110007, India: Surjeet Publications. 7-k, Kolhapur Road. Management directive 03810.5.xx (2000). Subsystem of the Environmental Certification. Minsk. In Russian. Sheldon C., Yoxon M. (2002). Installing Environmental Management Systems. A step-by-step guide. London and Sterling, VA: Earthscan Publication Ltd. Tsigankov N., Kurilov V (2002) Environmental Certification in the Republic of Belarus. Inf. Bull. No. 4. Minsk, 26 pp. In Russian. Zhukov N., Zenchenko A., Zenchanka S., Lakovets Ju. (2002) Environmental Certification: Indexes of environmental performance. News. Standardization and Certification, 5 pp. In Russian.


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INTAS and its Activities in Innovation: What a Research Funding Organization Can Do Manfred Spiesberger INTAS Secretariat, Officer for Innovation and Valorisation, 58/8 avenue des Arts, 1000 Brussels, Belgium Abstract. This chapter offers a brief overview of INTAS activities in innovation and the valorization of research results achieved within projects funded by INTAS.

1. What is INTAS? INTAS - the International Association for the promotion of co-operation with scientists from the New Independent States of the former Soviet Union (NIS) - was established in June 1993 as an independent international organization with the following aims: to preserve the best NIS scientific capabilities, to foster social and economic progress, and above all to support and enhance the scientific co-operation between INTAS member states and its NIS partner countries. The membership of INTAS extends now (August 2003) to 32 states] and the European Community. The Partner Countries of INTAS are the 12 New Independent States of the Former Soviet Union.2 INTAS has a budget of slightly more than 70 Million Euro for the period 2002-2006. The main contributor to the budget is the European Community, but additional funds are made available by member states and co-funding partners.3 INTAS' main instruments are calls for research project proposals: open calls covering all scientific fields, thematic calls focusing on specific topics (e.g. Aral Sea Basin Call), and collaborative calls with co-funding partners which are usually thematically oriented. Proposals are "peer reviewed" by independent experts from the INTAS member states and the NIS to select those of the highest scientific quality and novelty for funding. Another instrument is a Young Scientist Fellowship scheme, which enables scientists from the NIS under the age of 35 to carry out a research project both in the NIS and the INTAS member states. Two new instruments are currently being implemented: INTAS is developing information activities in the NIS on the EU Framework Programme for Research, Technological Development and Demonstration Activities and a call for innovation grants has been prepared and launched. Research funded by INTAS can be from all scientific fields and can be fundamental and applied research.

1 The EU member states, the 13 candidate countries for EU membership, Iceland, Israel, Norway, Switzerland. 2 Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan. 3 INTAS organizes collaborative calls for research proposals with partners such as CERN, CNES, Airbus, individual NIS countries (e.g. Belarus, Kazakhstan, Uzbekistan), whereby the partners co-fund the call.

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2. Context of INTAS innovation activities 2.1 Innovation at EU level Innovation at EU level is ever more important as a tool in the EU policy towards becoming the most competitive and dynamic knowledge based economy in the world.4 A milestone accelerating this process was the European Council in Lisbon in 2000 which postulated to establish a European Area of Research and Innovation. Concrete actions were decided and further refined at the European Council in Barcelona 2002; an innovation Scoreboard has been established, the community patent introduced, spending on research shall reach 3% of GDP in the EU member states by 2010 etc. Also the Sixth Framework Programme for Research, Technological Development and Demonstration Activities (FP 6) is considered as an instrument contributing to the creation of the European Research Area and to innovation.5 INTAS as a dedicated instrument of FP 6 for the scientific co-operation with the NIS operates in this context and has to consider these developments and to take appropriate measures. 2.2 FP 6 and co-operation with the NIS Research co-operation is an important feature in the EU's neighbourhood strategy: "The EU should take forward the opening of the European Research Area (ERA) to integrate the scientific communities of the neighbouring countries, exploit scientific results, stimulate innovation and develop human resources and research capacities."6 In fact, the core of FP 6, the Seven Thematic Priority Areas, has been opened up to international participation, and research teams from the NIS are now allowed to participate in consortia and to receive funding for their research contribution. As in previous framework programmes there are still, however, also specific measures in support of international co-operation for the NIS; in the past this action line was known as INCO-Copernicus. In this framework a dedicated call on selected topics relevant for Russia and the other NIS will be launched in 2004 and additionally, so-called Specific Support Actions are available. As stated in the FP 6 work programme for international co-operation, activities with Russia and the other NIS will be carried out in particular through INTAS. For this purpose Euro 70 million have been reserved for INTAS out of the budget line for international co-operation and an important part of EU research co-operation with Russia and the other NIS is managed through INTAS. 2.3 NIS S&T situation Dealing with innovation issues regarding the NIS, one has certainly to take into account the specific situation of S&T in this region. The NIS have inherited from the Soviet 4

See Lisbon European Council, 23 and 24 March 2000, Presidency Conclusions. The decision on FP 6 has the following title: Decision No 1513/2002/EC of the European Parliament and of the Council of 27 June 2002 concerning the Sixth Framework Programme of the European Community for research, technological development and demonstration activities, contributing to the creation of the European Research Area and to innovation (2002-2006). 6 See "Wider Europe - Neighbourhood: A New Framework for Relations with our Eastern and Southern Neighbours", COM (2003) 104 final, Brussels, 11.3.2003. 5

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Union an important S&T sector with a large number of highly qualified specialists in the natural and technical sciences and a focus on research for military use. This sector is still in the process of being turned towards an appropriate size and use for the respective economies. Several standard instruments necessary for innovation activities are yet to be well established or even to be established at all in the NIS, such as a sound system of legal protection of intellectual property, a solid banking system, technology transfer offices. Some NIS are more advanced in this process than others, not least because of the general differences between individual NIS: compare for example Russia with a population of 145 million (2001), which is currently in an economic upswing helped by high prices for its main exports, and Tajikistan with a population of 6.2 million (2001), which is in a much more difficult situation having lived through a civil war for several years in the 1990s. These countries are in a completely different situation not only with respect to their general state, but of course also concerning the importance of their S&T sector.

3. INTAS' innovation activities Innovation is a widely used term which often means very different things. At INTAS innovation and valorisation are defined as all activities supporting the exploitation and application of research results achieved in INTAS projects. This includes not only application of results in the natural and technical sciences, but also from social and human research. The basis of INTAS innovation activities are projects which have been funded over the last ten years. Since 1993 INTAS has supported over 2,500 research projects and networks and over 500 Young Scientist Fellowship projects, which have produced around 18,000 international publications7 and 370 patents. These indicators show that there is certainly an excellent basis of high quality research results to build on. Several actions have already been taken in the past to enhance the dissemination and use of these results. INTAS supports the information dissemination by posting summaries of all research projects and networks on its website and making them available also within the European Community Research & Development information services' (CORDIS) database8. Promising project results are singled out by INTAS' Scientific Officers and promoted as success stories. Scientific conferences may receive co-funding if a certain number of INTAS projects are presented at the conference; this support contributes in turn to the dissemination of results and networking of the INTAS project participants. In the field of applied research, INTAS has developed the instrument of collaborative calls with industry and research institutions. Such calls are thematically focused and allow pursuing the common interest of NIS researchers and INTAS co-funding partners. The topics of the calls are decided jointly by INTAS and the co-funding partner; similarly half of the budget of such a collaborative call, which usually amounts to Euro 1 million, is to be contributed by the co-funding partner. Tackling specific problems put forward by the co-funding partners guarantees that the researchers are linked already during the research project with the users of their findings and that the implementation of the findings is really brought forward. Collaborative calls have been launched in the last

7 8

"International Publications" means publications in international journals, monographs, etc. See the projects database at CORDIS at www.cordis.lu

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years together with partners such as Airbus Industries, CERN, CNES (Centre Nationale d'Etudes Spatiales/F) and GSI (Gesellschaft fur Schwerionenforschung/D). The importance of dissemination and valorization of results has been enhanced also within the INTAS project modalities. More importance is now put on these aspects in the research proposals (a separate section has been introduced in the proposal structure), and the evaluation criteria have been modified in this respect. Furthermore, within the regular reporting to INTAS during the execution of the project more information now has to be given regarding the status of dissemination and valorization of results. INTAS has co-funded strategic conferences on innovation in relation to the NIS: In 1999 an ISCONIS workshop on "Research co-operation with the NIS: Dissemination and use of results" took place in Bonn/Germany. Another high-level strategic seminar on Innovation Policy and the Valorisation of Science and Technology in Russia took place in Helsinki in 2001. This seminar, with the title "Bridging the Innovation Gap in Russia", was co-organised with the OECD, the United States Civilian R&D Foundation, the Ministry of Trade and Industry of Finland and in co-operation with the Russian Ministry of Industry, Science and Technologies9. Cooperation with other organizations is not limited to the above mentioned ones. INTAS of course closely co-operates with the Directorate General for Research of the European Commission. INTAS project participants can use all innovation related services of the Commission that are available for the Framework Programme, such as CORDIS and the IPR-Helpdesk. In the preparation of its further activities in innovation, INTAS had also exploratory talks with relevant organizations such as the Civilian R&D Foundation (CRDF, USA), the Foundation for Assistance to Small Innovative Enterprises (FASIE, RF), the International S&T Center (ISTC, based in Moscow), the Russian Foundation for Basic Research (RFBR, RF), the Russian Innovation Agency, the Russian Ministry of Industry, Science and Technologies. INTAS is certainly open to further co-operation, where useful for its aims of enhancing scientific co-operation between its members and the NIS partner countries. In 1999 and 2001, two studies on innovation aspects within INTAS projects were carried out. A significant number of scientists from the NIS and INTAS members were questioned. The findings of these studies give guidance for INTAS' activities. The following points were ranked as most important for the exploitation of the research results: • Additional financial resources for the further development of the research results, for IPR protection, for consultancy. • Support for networking possibilities to bring the research results to users - e.g. workshops with users, brokerage events, etc. • Support with the dissemination of results.

3.1 Innovation Grant Learning from its innovation studies and from the co-organised innovation workshops, INTAS decided in 2002 to introduce a new action line, the so-called innovation grant. The rules and guidelines were elaborated during the second half of 2002 and a first call 9

The proceedings of this seminar (in English and Russian) are available via the OECD website at www.oecd.org; the Russian version can be accessed free of charge at http://www.oecd.org/dataoecd/44/63/ 1943293.pdf


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for applications for the innovation grant was launched together with other INTAS calls in March 2003. The innovation grant offers additional financial support of up to Euro 25,000 to researchers that have participated in an INTAS project. For the first call the target group was limited to around 1000 projects, which had finished in the years 2000 until the call deadline on 11 July 2003. All team leaders, around 4500 researchers, were informed via e-mail of this new opportunity to receive support for the implementation of their results. INTAS innovation grants are to promote the further development, utilization and marketing of INTAS research results. They are to encourage researchers to enable the exploitation of their innovations and to bring them to the market in the INTAS Members and the NIS. Therefore, the most promising results leading to innovative products, technologies, services and strategies of a significant economic and/or social value shall receive financial support in order to link the scientists with potential users. Applications may come from all scientific fields within INTAS, therefore innovations can be a new product, service, technology or strategy. To be considered for funding, innovations must be exploited; applications to this call should not be mere prolongations of research work. Costs, which can be funded with the innovation grant can cover travel, technical and market assessment, legal advice and IPR support, marketing and documentation, partner search, preparation of models, prototypes and samples (if necessary for the marketing of the innovation). Similar to the rules for research projects, in the innovation grant action too, a minimum of 75% of the financial support has to go to the NIS. The consortium conditions are slightly relaxed and only a minimum of two participants, one from the NIS and one coming from an INTAS member state, are necessary to form an eligible consortium. However, at least one main author of the innovation has to be included in the consortium, and also at least one contractor must have been involved already in an INTAS project, network or fellowship. Users from the NIS and INTAS members must be defined so as to prove that there is potential use of the innovation with positive effect in both geographical areas. With this approach INTAS aims to support collaborative exploitation of promising research results both in the NIS and the INTAS member states. The innovation grant shall help to overcome the barrier between the scientific sphere on the one hand and the commercial or societal spheres on the other hand, allowing researchers to approach the latter and to implement their (possibly legally protected) findings with the appropriate users. As was pointed out at the innovation seminar in Helsinki 2001: "Academic scientists generally have no resources, no stimuli to continue research beyond the point at which it is reasonable to expect publication in a scientific journal. However, this stage of the process is fraught with risks for industry since the knowledge available at this point is too remote from the market to be assessed in commercial terms ... bridging this gap is government's primary task."10 INTAS tries to offer a bridge at this point. NIS authorities have welcomed this approach and declared their support for this new action. On 11 July 2003 the call for innovation grants was closed. 39 applications were received; 34 applications involving 89 partners were checked as eligible and will undergo the evaluation procedure. Each proposal will be evaluated by three independent experts and the final selection will be done by a specialized panel composed of members of the 10 See OECD 2001: 14-16; statement by Baruch Raz, Science Counsellor, Embassy of Israel in the United Kingdom.

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INTAS Council of Scientists and external experts in innovation and technology transfer. A budget of Euro 500,000 is available for this first innovation grant call, allowing the funding of at least 20 projects. Successful projects will start up in the beginning of 2004. INTAS is looking forward to seeing beneficial results in the NIS and INTAS member states as a consequence of the innovations that will be implemented with its support. References Alfimov, M.V, Tsyganov, S.A. (2000) Ot naucnoj idei do prakticeskovo resul'tata. Moskva: RFFI (= RFBR Russian Foundation for Basic Research). Bell, E., Gokhberg L., Schuch, K. (2002) Dialogue on S&T between the European Union and the Russian Federation. Moscow, CSRS. Commission of the European Communities (2003), Wider Europe - Neighbourhood: A New Framework for Relations with our Eastern and Southern Neighbours. Brussels: COM(2003) 104 final. INTAS (2003) Activity Report 2001-2002. Brussels: INTAS. ISCONIS Workshop (1999), Research co-operation with the NIS: Dissemination and use of results, Brussels/Bonn. Organisation for Economic Co-operation and Development (2001), Bridging the Innovation Gap in Russia. Paris: OECD. Presidency Conclusions (23 and 24 March 2000), Lisbon European Council, available at www.europa.eu.int


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Innovation in Transition: Lessons from Poland1 Andrzej H. Jasinski School of Management, University of Warsaw, Szturmowa Street 3, 02-678 Warsaw, Poland Abstract. As a method of analysis, a model of the innovation scene has been used here (Jasinski, 1999). The model assumes that there are three main actors on the scene: (1) Science (the R&D sector), (2) Industry (companies) and (3) Government (the state). All of them will be analysed in this paper. A case study is Poland as a country in transition in the past decade.

1. An actor: Science The R&D/science sector in Poland has some key features as a legacy after the centrally planned economy: • Practically the whole R&D potential is localized outside companies; among 56,400 researchers, FTE (1999) only 6.9% of them work within enterprises (GUS, 2001); a similar contribution was in 1989. This means that an in-house R&D stays out of the way. • The so-called R&D sphere or base, which consists of three institutional sub-sectors, used to be very fragmented and separated from industry/market. The base contains: 1. higher education institutions (HEIs) which represent the biggest R&D potential in the country, 2. branch R&D units subordinate to various ministries, mainly to the Ministry of Economy, and 3. the Polish Academy of Sciences (PAS) research institutes, rather non-existent as a research sub-sector in most Western countries; the PAS represent the smallest R&D potential. • The science sector - in opposite to industry - practically is still state-owned, so is fully dependent on the condition of public finance. • At the end of the 1980s, the sector was fully financed from public sources; at the end of the 1990s, a main burden of the R&D financing (ca 60%) was carried by the state budget (GUS, 2000). The contribution of public expenditures is, de facto, a bit higher because many of the big companies, spending on R&D, still are state-owned, too. In the past decade, we had a kind of mixture of positive and negative tendencies in the Polish R&D sector. The positive phenomenon was a growth of the R&D potential (researchers FTE) in: • the higher education sector; higher education was a tugboat of development of the sector, and This is a revised, up-dated and shortened version of my paper presented in Harvard (Jasinski, 2002).

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- in-house R&D units of industrial companies. The negative phenomena were: - a permanent decline in the contribution of GERD in GDP: from 0.96% in 1990 to only 0.70% in 2000 (GUS, 2001) and - shares of the business and the government sectors in the R&D potential practically didn't change (ca 10% each) while the former should have increased and the latter should have decreased. Moreover, the following correlation was observed: a high contribution of the state budget —> a high proportion of basic research. Unfortunately, no major changes took place: both the former and the latter are still too big in comparison with Western countries. Generally speaking, the science sector as a source of technical change experienced: 1. insufficient structural changes, 2. inertia of the previous system that had prevailed 45 years, 3. an active attitude to defend status quo (employees, buildings, funds etc.) and 4. too slow and long-lasting process of transition. All of this proves how difficult is to reform this sector in a country in transition. 2. An actor: Industry As known, industry (in a broad meaning) is the actor who has the most important role to play on the innovation scene. Not science and not government but an entrepreneur/firm is, nowadays, the engine of the contemporary technological change. In turn, the firm doesn't work in vacuum but in a given economic environment. So let's check what changed in the Polish industry, namely in its general ownership structure during the 1990s. A major conclusion resulting from an analysis (Jasinski, 2001) is that a broad privatisation took place in the country's industry in the period of transition. Unfortunately, the above restructuring was not accompanied by relevant changes in the structure of industry from the viewpoint of level of technology. There is still a very small contribution of high-tech industries in Poland: in 1999, only 3.4% of industrial employment and 4.0% of aggregate industrial output (GUS, 2000). Moreover, two negative tendencies appeared: 1. a declining share of high-tech and mid/high-tech sectors and 2. an increasing share of mid/low-tech and low-tech sectors. A general picture of industrial firms' behavious towards innovation is unclear. It may be said that: i. from the view-point of production modernity, changes in industrial structure were ambiguous, ii. within the high-technology sector, directions of structural changes weren't clear; it applies to high-tech exports, too, iii. an unambiguous tendency didn't crystallize to improve the structure of industrial production towards modernity. My deeper analysis proves that slowly but gradually growing the firms' innovation effort did not result in a clear growth of innovative effects. Simplifying, innovation activity was higher than 'innovation performance' (see further). So, considering firms as a place where most innovations are implemented, one could observe: • too small the demands for R&D and innovation, • an underestimated role, among Polish managers, of technological change for longterm development,

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• a lack of capital for investment in R&D and innovation, • too small the market compulsion to innovate. All the observations prove that it's easier to privatize firms than to stimulate them to spend more on R&D and to innovate. Generally speaking, the Polish industry continues to be a weak actor on the innovation scene. Moreover, a scientific-technological co-operation between companies and research organizations, especially between private firms and public R&D units, is too weak. It looks like a tragedy that, while over 93% of the country's R&D potential lies outside enterprises, only 32% of firms mentioned the R&D sphere as a source of information for innovations introduced in 1994-96 (GUS, 1998). This is still a legacy after ancien regime where two separate worlds existed in the national economy Production and Science - with very weak linkages between them.

3. An actor: Government At least three arguments can be identified for a strong public science and technology policy, or innovation policy, in Poland in the period of transition: - firstly, since technological innovation is a phenomenon which, nowadays, gets (in various forms) public support in numerous advanced market economies, innovation should also receive such a support in Poland; - secondly, vast majority of Polish research institutions and of large companies continue to be state-owned; — thirdly, without the government's positive and active attitude towards science and technology, both the market transformation of the Polish economy and its integrating with the European Union would undergo slower. Market forces in the country are too weak and too slowly working. In this place it should be explained that there are slight differences between terms 'innovation policy' and 'science and technology (S&T) policy'. Speaking in the shortest way, the former is focused more on innovation/technology while the latter focuses more on science/R&D. Nevertheless, numerous authors use these concepts, in principle, as synonyms (see e.g. Rothwell and Zegveld, 1985; Stoneman, 1978; Gibbons et al., 1994). Further in this paper, both terms will be used interchangeably. As known, a government's financial effort is the main evidence of a scale of state intervention into the field of science and technology. Budget appropriations for R&D are, of course, a result of political decisions. Figure 1 shows data on R&D expenditures in Poland under the period of analysis. It can be seen from fig. 1 that all the three indicators showed permanent tendencies to decrease in the first half of the 1990s and, afterwards, stabilized at a very low level. It proves a very small financial effort of the Polish government in the field of S&T. In my opinion, there are four reasons of such alarming low public expenditures on R&D: 1. A belief in 'an invisible hand of the market'; the belief started universally to prevail in Poland at the beginning of the previous decade. However, the hopes assuming that market mechanisms will force companies to spend much more money on R&D and innovation, did not fulfil. 2. Current difficulties with public finances, especially in the second half of the 1990s, which caused cuttings in 'the science budget'. As a result, a percentage share of GFR&D in GDP is now even less than 0.5%. 3. A low level of public understanding of science (PUS) in the Polish society, including politicians. A political approach still predominates that it is easy to make economies

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Fig. 1. R&D expenditures ratios, 1989-2001. Source: GUS (1998-2001). OBS: GFR&D means government funded research and development or budget appropriations for R&D.

on science, instead of a desirable approach which should try to answer a question: How to capitalize on the national science in the long term? 4. A macro-economic adjustment process, fully understandable in a starting period of transformations. Is such a decreasing financial effort of the state good or bad? It's good, on the one hand, because the government's share in the R&D expenditures - in comparison with Western countries - is still too high. But it's bad, on the other hand, because in the period of transition, free market forces are still too weak to stimulate innovation in industrial companies. According to my calculations (Jasinski, 2001; data for 1999): • almost all resources (98.7%) from the science budget go to research institutions localized outside firms, • only 1.3% go to in-house R&D units, although their contribution in the country's R&D workforce is over five times higher (about 7%), and • R&D expenditures being spent by the units are financed only in 3.5% from public sources. So, the scale of government support for firms' research activities is extremely small. Next two features of S&T policy can then be identified: a defence, at all costs, of the R&D potential localized outside enterprises and a discrimination of companies in this field. To evaluate public policy measures for science and technology, all official documents, approved by the Council of Ministers, have been analyzed (Jasinski, 2001). The policy instrumentarium may be evaluated as follows: • The vast majority is financial instruments; other types of measure, e.g. organizational, seem underappreciated. • Supply-side tools clearly predominate over demand-side. • Most of them are addressed to firms/industry as a whole, not selectively. • There is a lack of policy tools specified for high-tech sectors. • Too big the stress is put on supporting the creation of new scientific achievements instead of their industrial implementations. • Instruments supporting innovations are oriented on innovation creation rather than

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Table 1. Phases of the economic cycle and periods of S&T policy! Cycle

Policy 1) Up to 1989

Numerous measures

2)1990-1994

Lack of policy

3) 1995-1999

Many instruments

4) 2000-

Shrinking policy accompanied by a constant, relative decrease in GFR&D through the whole period

1) Recession (1989-1991) 2) Recovery (1992-1994) 3) High growth (1995-1997) 4) Slowdown (1998-)

Source: Jasinski (2001)

on its diffusion; it's hard to find among them such ones which would be focused exclusively on technology transfer. These characteristics may mean that the government tried to support both a market-pull model of innovation as well as science-push processes. However, due to the fact that the science-push model predominated in ancien regime, by inertia it is still in force while the market-pull processes are more desirable. After analyzing the above government documents, one can distinguish four periods of the policy: Period up to 1989. There existed numerous financial incentives as policy regulations addressed mainly to companies, especially to small firms, to stimulate their research and innovation activities. Period 1990-1994. When fundamental, political and economic, reforms started in Poland at the beginning of the 1990s, almost all of the previous instruments were liquidated. Period 1995-1999. From 1995, some of the 'old' incentives for R&D and innovation were restored; a list of fiscal preferences was even quite long. Period 2000-. From the beginning of 2000, some of those tools were cancelled again and no new ones introduced. As can be seen, a kind of wavering of current innovation policy took place. This was a short-term oriented policy. Perhaps the reason was a lack of any long-term strategy for science and technology in Poland, especially for the period of transition. A comparison of the periodization of S&T policy with phases of the economic cycle is made below. Table 1 and fig. 2 show that, in relation to the growth of the national economy, innovation policy often was delayed (drifted with the cycle) and was pro-cyclical. However, it should be inversely: the policy should have been strengthened during the recession and in a period of the slow-down. Several major features of Poland's public S&T policy can be identified for the 1990s: • lack of a long-term strategy for science and technology, • wavering of the current policy, • bad co-ordination between government agencies, • relative decrease in budget R&D expenditures,

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Fig. 2. Macro-economic performance and S&T policy. Source: Jasinski (2001). Notes: 1994, 1995, 1996, 1997, 2000, dates of government documents put into effect; (l)-(5), the documents analyzed in Jasinski (2001).

• quite strong policy centralization, including especially finances for R&D, and lack of a regional approach, • too small the support for applied research within funding decisions, • too big an emphasis put on support for science instead of for innovation per se, and • lack of policy for technology transfer/innovation diffusion. This has still been a science policy rather than a technology policy. The present situation is a kind of mixture: on the one hand, the science-push model still prevails (with a relatively broad state intervention) but becomes weaker and weaker, and on the other hand, the market-pull model has emerged but is still weak. This is neither mission-oriented nor diffusion-oriented policy. Big efforts have been undertaken by the government to work out a genuine, modern innovation policy, which would be adjusted to conditions in the market economy. The policy still evolves. Summarizing, the government's approach as a potential catalyst of changes can be characterized as follows: a. Policy towards science: • stability, i.e. no significant about-turns in science policy, • a will to maintain and protect the R&D sphere, • limitations in budget R&D expenditures, b. Policy towards industry: • instability and wavering, • a lack of clarity as to the role of government in technical change processes, • a set of policy instruments having a one-sided character, mainly fiscal. 4. Innovation performance in transition A general state of processes of innovation and technology transfer (TT) in a country is a resultant of behaviours of all the three main actors. The overall picture of technological change processes in Poland is ambiguous: neither good nor bad; both negative and positive tendencies can be identified. On the one hand, we can speak about a certain slow-down in processes of innovation and technology transfer at the end of the decade. The symptoms are here declines in: 1. the share of R&D in innovation activities in industrial firms, 2. the number of enterprises taking part in the turnover of new technologies, both at home and with foreign countries, excluding FDIs, 3. the number of firms planning the introduction of innovations in forthcoming years, 4. and escalation of main barriers to innovate, such as (GUS, 1998): - lack of ownfinancialresources in firms, - too high interest rates on bank credits,

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Fig. 3. Macro-economic performance and innovation performance. Source: Dr. D. Mierzynska, University of Bialystok, Poland, specially for the project (Jasinski, 2001).

- high uncertainty levels of markets, - lack of in-house R&D bases. At the end of the 1990s, some negative phenomena even worsened. On the other hand, positive tendencies took place at the same time, namely the growth of: 1. the share of companies' R&D expenditures in GERD, 2. the number of in-house units and their research staff, 3. innovation intensity as the share of firms' expenditures on innovation activities in aggregate industrial output, 4. the contribution of new and modernized products, 5. the contribution of technologically advanced products. So, let us now try to analyze how innovation performance developed under the period of analysis, i.e. in 1989-2000. There is no single, universal indicator of a country's innovation performance. In order to describe it, four yardsticks were available to be taken into consideration: 1. the share of firms' expenditures on innovation activities in aggregate industrial output (innovation intensity), 2. the share of new and modernized products in aggregate industrial output, 3. the share of technologically advanced products in aggregate industrial output, 4. the share of high-tech products in total exports. A principle components analysis (PCA) was applied to choose such a combination of those measurements which describes, in the best way, a course of a given phenomenon, in this case - of innovation performance. The calculations were carried out using a partial least squares method (see, e.g., Morrison, 1976). A PCI curve is shown alongside a curve of GDP growth in fig. 3. So, an interesting regularity can be seen: innovation performance reacted in the same direction but with a one-year delay to macro-economic changes; only at the end of the whole decade there was a two-year delay. This is some proof that the innovation activity followed a cyclical development of the national economy. Innovation performance was demand-driven, i.e. pulled by the demand resulting from the economy's recovery and high growth. This conclusion confirms an observation that

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firms' innovation activities were not affected by S&T policy, which was often delayed. The observations made through this analysis prove that slow, gradual technological development was taking place in the Polish economy in 1989-2000. The progress was a result of activities of the three main actors and of the clash of positive and negative tendencies on the scene. It was and still is a difficult, long-lasting period of creative destruction. The transition from the centrally planned economy to the modern market economy turned out not to be an easy and short process in the field of science and technology either. However, not just the government can be blamed for the slow progress in processes of innovation and technology transfer. All the actors share some responsibility for it. There was also a lack of sufficient co-operation between them on the innovation scene. On the basis of this, it seems established that technological progress was taking place in Poland under the influence of (a) macro-economic regulations, (b) market forces and (c) the inflow of foreign technical thought, rather than being influenced by public S&T policy.

5. Policy recommendations The policy recommendations, which result from the above analysis concerning Poland, to be discussed below may also be useful for other countries in transition. The proposals apply mainly to public innovation policy. First of all, a good 'climate' for innovation is necessary and should be created by macro-economic policies oriented towards growth, employment, equilibrium and market competition. Such a climate ought to create general economic conditions favourable to technological change. A country's long-term strategy for science and technology is equally important. The government should impose realistic strategic goals and be responsible for their consistent execution. A current S&T policy ought to result from the strategy. Referring to the model of the innovation scene, the government should: • act for consumer protection/education together with fostering market positions and influencing the power of the consumer as the main user of innovations; • run such a policy which will stimulate, on the one hand, firms' demand for R&D, and on the other, a supply of new scientific-technological solutions offered by the R&D institutions; • importantly support the establishment and development of uttis which will strengthen science-industry linkages. However, the greatest challenge in this field, not only in Poland but in many other countries, seems to be answering the question of how to gain more money for R&D from outside the state budget? Given that the country's expenditures on research and development are drastically low, government appropriations for R&D ought to start rising quickly but under two conditions: 1. the private sector's spending on research and development should rise more quickly; and 2. any net increase of the budget expenditures should go towards R&D in companies. At the same time, some improvements ought to appear in the science sector in a double sense: 1. the share of the enterprise sector in the R&D expenditures should rise; and 2. the share of applied research and experimental development should increase, too.


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Nevertheless, the key method of counteracting the decline in the R&D expenditures seems to be an activation of firms' research and innovation activities. An innovationoriented entrepreneur/firm should now be the main object of S&T policy, and not a scientific institution. The science sector ought to be treated - in this context - as the key element of the firm's environment. So, the re-thinking is needed among policy-makers. The scale of state intervention in the S&T system ought to shrink together with: - a strengthening of market forces/mechanisms in the process of transition; - a growing role of the private sector in R&D spending; and - an increasing share of the banking system in financing R&D and innovations. Science and technology policy should have a more regional character, i.e. it should become decentralized and regionally diversified. This will serve (a) to limit territorial disproportions in the R&D potential and (b) to create regional systems of innovation. 6. A message for countries in transition On the basis of this, six suggestions can be formulated towards science and technology policies in countries in transition: a. Policy for transition is very young and difficult. Before the 1990s, the world did not watch a passage from the centrally planned economy to the free market economy. b. All social forces (the actors) must be engaged in the process of transforming a country's S&T sector. c. There is here a key, irreplaceable role of a national government. d. The government has to overcome many relics as a legacy after the previous political system. e. To support innovation, S&T policy is equally important as macro-economic policies. f. As far as S&T policy is concerned, the government must not run a different policy towards science and different towards industry. This should be a single, integrated policy for innovation and technology transfer. References Gibbons M. et al. (1994) The New Production of Knowledge. London: SAGE. GUS (1998), Innovation Activities of Polish Industrial Enterprises in 1994-1996. Warszawa. GUS (1999), Science and Technology in Poland 1997. Warszawa. GUS (2000), Report on Science and Technology in Poland 1999. Warszawa. GUS (2001), Science and Technology in Poland in 1999. Warszawa. Jasinski A.H. (1999) Main Actors and their Roles on the Innovation Scene, paper for Summer Academy on Technology Studies, Deutschlandsberg, Austria, 11-16 July. Jasinski A.H. (2000) Technology Transfer in Poland: A Poor State of Affairs and a Wavering Policy. Science and Public Policy No. 4. Jasinski A.H. (2001) Public Policy and Technological Change in Poland, 1989-1999. Warsaw, report within the EU research project on "Integration of Macro-economic and S&T Policies for Growth, Employment and Technology" headed by Professor Nick von Tunzelmann, University of Sussex, Brighton, UK. Jasinski A.H. (2002) Innovation Performance and Public Policy in Transition: The Polish Perspective, paper for "International Conference on Science, Technology and Innovation: Emerging International Policy Issues", Harvard University, September 23-24. Morrison D.F. (1976) Multiuariate Statistical Methods. New York: McGraw-Hill. Rothwell R. and Zegveld W. (1985), Reindustrialization and Technology. London: Longman. Stoneman P. (1987), The Economic Analysis of Technology Policy. Oxford: Clarendon Press.


Supporting the Development ofR&D and the Innovation Potential of Post-Socialist Countries W. Leal Filho (Ed.) IOS Press, 2004

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Some International Perspectives on Innovation Walter Leal Filho TuTech, Harburger Schlofistrasse 6—12, D-21079 Hamburg, Germany Abstract. This chapter gathers some of the latest thinking in innovation, presents the key document "Green Paper on Innovation", the PAXIS programme and identifies some areas of future growth.

1. Introduction There are some current developments in the field of innovation, which ought to be considered in order to allow a forecast of future trends and assist countries in transition in their attempts to further innovation. Some authors and organisations have spent a lot of time and efforts in assessing current patterns and in setting in a motion for more systematic developments, a selection of which is presented in this chapter. Jeff De Cagna has for example stated, in "Executive Update" (2002), the following facts: "For the association world, innovation is an idea whose time certainly has come. No matter what some in our community might think, we are in desperate need of innovation in the offers we make to our members and customers that are now failing to capture their imaginations. We need innovation in ways of working that frequently prevent us from capitalizing on emerging opportunities. And we need innovation in the very strategic approaches in which we have placed our trust for so many years but which limit us in today's swiftly changing marketplace. There is hardly a single facet of association work that cannot benefit from our genuine embrace of innovation."

He goes on to state that "As the economy gradually improves and our attention turns toward what we intend to do in the future, the triage mentality must give way to something more. Association leaders instead must adopt a growth perspective that recognizes a single, brutal truth: our association may not survive regardless of what actions we take today, but we are absolutely certain to disappear in the long run if we continue to play it safe. Innovation is central to what comes next for associations. It is absolutely the key to our survival and success in the years ahead. So if we're going to become something more than nominal innovators, we need to explore what it takes to lead innovation inside our associations. I suggest that we "begin at the beginning," as some people like to put it, with a hard look at the role of courage in innovation. To be clear, business courage is not the same thing as battlefield courage. When it comes to the work of associations, no one is being asked to lay his or her life on the line. Nevertheless, we still must have leaders who believe enough in the value of innovation that they are willing to repeatedly make the case for it even in the face of opposition from boards, staffs, and members. These leaders must relentlessly pursue innovation in their own work and create the conditions in which it can flourish across the organization.

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As Dr. Robert Jarvik, the inventor of the Jarvik-7 artificial heart contends, "Leaders are visionaries with a poorly developed sense of fear and no concept of the odds against them." Genuine innovation leadership, then, is grounded in a deep conviction to the proposition that innovating is not merely a consultant's prescription but is a business imperative for our associations."

2. Where Innovation Begins In respect to where innovation begins, De Cagna believes that being a courageous organizational leader is only the price of admission. He thinks that the work of making innovation happen begins with a strategy and not strategic planning. De Cagna states "We're fond of goals in associations, and so here is a goal that I believe every association must aggressively pursue in its work going forward: Create the right kinds of superior value by applying the right capabilities on behalf of the right customer groups. This is the only goal that really matters for associations; everything else is just conversation." De Cagna also reminds that "even as strategy guides innovation, innovation serves strategy by identifying new markets, creating new opportunities, and releasing new energy across the organization. Innovation and strategy have a powerful symbiotic relationship, and your association must take advantage of it". In his view, if we plan to make innovation real, we need to admit that the recognition that the process of creating new knowledge is a highly fragile one and requires an organizational environment in which trust, empathy, the ability to ask for help, and lenience of judgment prevail. He believes that "innovation can occur when your staff, volunteers, and members freely share with one another their tacit knowledge in the form of new ideas and use those ideas to create new concepts for products, services, or experiences that can be prototyped and delivered to the right customer groups". This brings about the issue of what allows or inhibits innovation. There is what one may call the "enabling context" for knowledge creation, via or through which innovation may or may not occur. By encouraging the joint exploration of new opportunities instead of simple transactional exchanges innovation can be accelerated, and lead to positive and enduring impacts. Furthermore, as De Cagne states "another key intangible in the work of innovation that is receiving greater attention is the important role that informal networks and communities play in organizations. While these two forms of social connectedness share certain characteristics, such as common interests and some bonds of trust among their members, networks are more diffuse and less focused (in terms of attributes such as physical location or knowledge domain) than communities. And whereas all community members frequently know one another, networks tend to be more open, i.e., there are some people with whom network members have direct relationships, but they are not necessarily acquainted with most others in the larger network". Innovation leaders need therefore, in De Cagna's opinion, "to capitalize on the existence of these organic structures by engaging them in the association's innovation work. The open-source software movement that created the Linux operating system is an excellent illustration of the power of "connected innovation." The reach of any association's web of social and business relationships extends beyond its known boundaries to include nonmembers, competitor and noncompetitor organizations, and other possible innovation partners. By recognizing the position associations occupy in what might best be described as an innovation ecosystem, executives may be able to create opportunities that would simply be unimaginable if they worked on their own".


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De Cagna also states that there are several important innovation capabilities that all associations should develop going forward. For example, as the operating environment for associations becomes more dynamic and uncertain, associations can no longer afford to combine the two distinct logics of "making strategy" and "developing plans" into a single strategic planning process. Instead, they must create separate spaces for the divergent thinking that is critical to strategy making and the convergent thinking that is so essential to planning. One way to accomplish this, in De Cagna's opinion, "is to marry the design of more flexible strategies with a deep organizational capability in what I call rapid business planning. As new strategic opportunities are surfaced, ad hoc teams must be ready to come together on a moment's notice to develop business plans that will map out the market, identify organizational talent that should be involved, and guide the allocation of resources. These rapid business plans should be completed quickly to keep work moving forward but must be constantly re-examined in light of new developments to ensure strategic continuity". Other key innovation capabilities for associations include: a. partnering, b. prototyping, and c. strategic execution. A final capability on which innovation leaders must place their emphasis is, according to De Cagna, strategic execution. He thinks that a strategy that is 80 percent correct and is 100 percent executed is far better than a strategy that is 100 percent correct and only 80 percent executed. When implemented well, innovation leaders can use strategy to better understand new and existing customers, develop new offers, and surface emerging opportunities for innovation. In other words, by building a deep organizational capability in disciplined strategic execution, your association also can develop an increased capacity for strategic learning. It is seen that a lot should be done to fully capitalise on the potentials for innovation. Fritz Dressier brings the matter of support to innovation to the point, in an article published in "Innovative Leader" (1998) where he states that: "Most managers believe that innovation can be directed and managed from the outside in just shove here, pull there - and creativity and its soul mate, collaboration, flow on demand. Not true. What is true is that collaboration is the foundation of all creativity. And that both team collaboration and individual creativity arise naturally from within. Neither can be reached by drilling in from the outside. Not directly, anyway".

Dressier provides in his paper evidences of the value of concerted innovation, by relating to examples from Cisco and 3M, two leading companies noted for their innovative ways. Both consciously and consistently work to create the same combination of strong individuals and team actions. All of 3M's scientists, engineers, and technicians belong to the Technical Forum, an in-company means to provide both formal and informal communications for the free and active interchange of information and the cross-fertilization of ideas. Among many other such means, Cisco uses its annual Networkers Conference to accomplish the same end, including participation by the customers (Dressier 1998). This line of thinking is followed by Schonfeld, in his article on "Outsourcing Innovation". He defends the view that a cutting-edge management technique needs to take root at companies that want to tap into pools of expertise outside their walls. Schonfeld describes these pools as networks of intellectual capital. And he states "One network could consist of inventors, another could be made up of entrepreneurs, a third of scientists, a fourth of retired executives. Imagine trying to manage this nexus of networks

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and get them to help dream up your company's next killer product. At Procter & Gamble (P&G), where the goal is to have at least half its new products originate from ideas generated outside the ranks of its employees, this concept is being taken seriously. And the man charged with overseeing P&G's so-called Connect and Develop program is Larry Huston, whose title is "R&D manager, innovation and knowledge leadership". "Companies need more new ideas than ever before", Huston says, "but the traditional source of those ideas - research and development - is broken. A lot of R&D in America is not sustainable", he argues. "The rate of increase of R&D spending is going up faster than the rate of increase in sales." If Huston succeeds, though, P&G's spending could actually drop, even as it harvests an expanding crop of new marketable ideas. Huston is trying to tap into networks of the smartest scientists and business folks around, putting out challenges for ideas and solutions, and paying for exclusive rights to use the best offerings. 2.1 The Green Paper on Innovation One of the main instruments for supporting innovation in the EU is the "Green Paper on Innovation" (CEC 1995).The objective of the green paper is to identify the factors positive or negative - on which innovation in Europe depends, and to formulate proposals for measures which will allow the innovation capacity of the Union to be increased. Due to its significance and implications, it will be explored at length in this chapter. In the Green Paper, innovation is taken as being "a synonym for the successful production, assimilation and exploitation of novelty in the economic and social spheres. It offers new solutions to problems and thus makes it possible to meet the needs of both the individual and society. There is a wealth of examples, including the development of vaccines arid medicines, improved safety in transport, (ABS, airbags), easier communications (mobile phones, videoconferencing), more open access to know-how (CD-ROM, multimedia), new marketing methods (home banking), better working conditions, more environment-friendly techniques, more efficient public services, etc." (CEC 1995). According to the Green Paper, innovation has a variety of roles. As a driving force, it points firms towards ambitious long-term objectives. It also leads to the renewal of industrial structures and is behind the emergence of new sectors of economic activity. In brief, innovation according to the Green Paper is: • the renewal and enlargement of the range of products and services and the associated markets; • the establishment of new methods of production, supply and distribution; • the introduction of changes in management, work organisation, and the working conditions and skills of the workforce. The innovative firm thus has a number of characteristic features which can be grouped into two major categories of skills: - strategic skills: long-term view; ability to identify and even anticipate market trends; willingness and ability to collect, process and assimilate technological and economic information; - organisational skills: taste for and mastery of risk; internal cooperation between the various operational departments, and external cooperation with public research, consultancies, customers and suppliers; involvement of the whole of the firm in the process of change, and investment in human resources. It is this global approach which lies behind, for example, the success of Swatch watches. In practice, this amounts to four simultaneous innovations in: - conception (reduction in the number of parts);


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- production (assembly of the housing in a single part); - design (new concept for the presentation of the watches); — distribution (non-specialised sales outlets). Research, development and the use of new technologies - in a word, the technological factor - are key elements in innovation, but they are not the only ones. Incorporating them means that the firm must make an organisational effort by adapting its methods of production, management and distribution. Human resources are acknowledged by the innovation paper as being the essential factor. It states that, in this respect, initial and ongoing training play a fundamental role in providing the basic skills required and in constantly adapting them. Many studies and analyses show that a better-educated, better-trained and better-informed workforce helps to strengthen innovation. The ability to involve the workforce to an increased extent, and from the outset, in the technological changes and their implications for the organisation of production and work must be considered a deciding factor. The Green Paper on Innovation states that there is no hermetic seal between the innovative firm and its environment, by which it is influenced and which it helps to transform. It is the sum total of firms in an industry, the fabric of economic and social activities in a region, or even in society as a whole, which makes up the "innovation systems", whose dynamics are a complex matter. The quality of the educational system, the regulatory, legislative and fiscal framework, the competitive environment and the firm's partners, the legislation on patents and intellectual property, and the public infrastructure for research and innovation support services, are all examples of factors impeding or promoting innovation.

3. The link between and public action The Commission has clearly identified - first in the White Paper on Growth, Competitiveness and Employment, and then in its 1994 communication on An Industrial Competitiveness Policy for the European Union - that firms' capacity for innovation, and support for it from the authorities, were essential for maintaining and strengthening this competitiveness and employment. The Green Paper on Innovation makes use of, adds to and extends that work with a view to arriving at a genuine European strategy for the promotion of innovation. While respecting the principle of subsidiarity, it will propose the measures to be taken at both national and Community levels. "In exercising their responsibilities, the authorities must promote the development of future-oriented markets and anticipate changes rather than react to them (...)• The European Union must place its science and technology base at the service of industrial competitiveness and the needs of the market more effectively. Greater attention must be paid to dissemination, transfer and industrial application of research results and to bringing up to date the traditional distinction between basic research, precompetitive research and applied research which, in the past, has not always allowed European industry to benefit from all the research efforts made." The Commission has paid attention to this aspect of updating in the new arrangements on research aid adopted in December 1995. This responsibility of the authorities is particularly important as regards technological innovation and the creation of businesses - fields in which the situation in Europe remains worrying compared with its competitors. Strengthening the capacity for innovation, states the Green Paper, involves various policies: industrial policy, RTD policy, education and training, tax policy, competition policy, regional policy and policy on support for SMEs, environment policy, etc. Ways

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Innovation: a multi-faceted phenomenon. The term "innovation" is somewhat ambiguous: in common parlance it denotes both a process and its result. According to the definition proposed by the OECD in its "Frascati Manual", it involves the transformation of an idea into a marketable product or service, a new or improved manufacturing or distribution process, or a new method of social service. The term thus refers to the process. On the other hand, when the word "innovation" is used to refer to the new or improved product, equipment or service which is successful on the market, the emphasis is on the result of the process. This ambiguity can lead to confusion: when referring to the dissemination of innovation, does one mean the dissemination of the process, i.e. the methods and practices which make the innovation possible, or to the dissemination of the results, i.e. the new products? The distinction is important. In the first sense of the term (innovation process), the emphasis is on the manner in which the innovation is designed and produced at the different stages leading up to it (creativity, marketing, research and development, design, production and distribution) and on their breakdown. This is not a linear process, with clearly-delimited sequences and automatic follow-on, but rather a system of interactions, of comings and goings between different functions and different players whose experience, knowledge and know-how are mutually reinforcing and cumulative. This why more and more importance is attached in practice to mechanisms for interaction within the firm (collaboration between the different units and participation of employees in organisational innovation), as well as to the networks linking the firm to its environment (other firms, support services, centres of expertise, research laboratories, etc.). Relations with the users, taking account of demand expressed, and anticipating the needs of the market and society are just as important - if not more so - than a mastery of the technology. In the second sense (result of the innovation), the emphasis is on the new product, process or service. A distinction is made between radical innovation or breakthrough (for instance the launch of a new vaccine, the compact disk) and progressive innovation, which modifies the products, processes or services through successive improvements (e.g. the introduction of 32-bit chips to replace the 16-bit ones in electronic equipment, or the introduction of airbags in cars). New products, processes or services can appear in all sectors of activity, whether traditional or high-tech, public or market, industrial, agricultural or tertiary. Innovation may also concern services of general interest, such as public health, administrative procedures, the organisation of postal services or public education. It is largely forced along by changes in social behaviour and lifestyles, which it helps to modify in return (e.g. the large number of new products or services flowing from the development of sports and recreation activities: Club Mediterranee, skiboarding, mountain bikes, etc. and, conversely, the extension or modification of sporting practices or performances flowing from the development of equipment in cycling, mountaineering and sailing, in particular). Nor is innovation necessarily synonymous with (high) technology, although this is increasingly involved in equipment, materials, software (incorporated technology) and methods. Many innovations stem from new combinations of familiar elements (e.g. video recorders, the sailboard) or new uses (the walkman), or creativity in the design of the products. Bang & Olufsen (DK) got itself out of the red thanks to innovation. Nevertheless, the technological component is normally present, if not the determining factor, in the creation, manufacture and distribution of the products and services. A mastery of the scientific and technical skills is essential from two points of view: to generate the technical advances (in this respect, the creation and development of new high-tech firms is a major factor in perfecting and disseminating them); and, just as important, to understand and use the new technologies, whatever their origin. Excerpt from the Green Paper on Innovation (CEC 1995)


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must therefore be found of identifying, preparing and implementing - in a coordinated fashion - the necessary measures covered by these various policies. Thus as regard SMEs, the Commission has outlined a new policy strategy in its report, "Small and Medium-sized Enterprises, a Dynamic Source of Employment, Growth and Competitiveness in the European union", which has been presented to the Madrid European Council in December 1995. These priority policies and measures to be undertaken, both by the European Union and the Member States, has formed the basis of various Multiannual Programme s in favour of SMEs and the craft sector since. First and foremost, the authorities must establish a common strategy. This is a matter of ongoing monitoring and consciousness-raising. The Green Paper has contributed to these two objectives through the wide-ranging debate which it aims to encourage amongst the economic and social, public and private players. It touches upon the following: • the challenges of innovation for Europe, its citizens, its workers and its firms, against a background of globalisation and rapid technological changes; • a review of the situation of innovation policies and the many obstacles to innovation; • proposals or lines of action, while respecting the principle of subsidiarity, for government, regions and the European Union, aimed at removing these obstacles and contributing to the campaign for a more dynamic European society which is a source of employment and progress for its citizens. The context of innovation has changed profoundly over the past twenty years, and the increasingly rapid dissemination of new technologies, the constant changes which require ongoing adaptation, are a challenge for society as a whole. Innovation is an essential precondition for growth, maintaining employment and competitiveness. However, the situation of the European Union in terms of innovation appears to be unsatisfactory, despite some first-rate scientific achievements. The Union also needs to maintain rules on competition and legal protection, which are effective and adapted to the needs of innovation. Moreover, support to R&D ought to be seen in various contexts: the new innovation context and the European paradox. 1. The new innovation context. The generalisation of markets and the increasing importance of strategic alliances, the emergence of new competing countries in the technological field, the growing internationalisation of companies and of research and innovation activities, the interpenetration of sciences and technologies, the increase in the cost of research, the rise in unemployment and the increasing importance of social factors such as the environment - all these are phenomena which have radically changed both the conditions under which innovations are produced and disseminated and the underlying reasons for intervention by the authorities in this field. In this new context, the capacity of institutions and firms to invest in research and development, in education and training, in information, in cooperation, and more generally in the intangible, is now a determining factor. It is necessary to work simultaneously in the medium and long term and to react very rapidly to the constraints and opportunities of the present. 2. The "European paradox". This mobilisation is all the more necessary as Europe suffers from a paradox. Compared with the scientific performance of its principal competitors, that of the EU is excellent, but over the last fifteen years its technological and commercial performance in high-technology sectors such as electronics and information technologies has deteriorated. The presence of sectors in which the scientific and technological results are comparable, if not superior, to those of our principal partners, but where the industrial and commercial performance is lower

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Fig. 1. Propensity of the EU, US, Japan and the DAE to produce results. Source: Green Paper on Innovation, CEC 1995.

or declining, indicates the strategic importance of transforming the scientific and technological potential into viable innovations. One of Europe's major weaknesses lies in its inferiority in terms of transforming the results of technological research and skills into innovations and competitive advantages. This inferiority is all the more damaging that is applies to a global research effort smaller than our competitors'. The gap between our efforts - measured by the percentage of total research and development expenditure as a share of European GDP (2% in 1993) - and those of our main partners, i.e. the United States (2.7%) and Japan (2.8%) has not narrowed over the last few years, as seen in fig. 1. Expressed in absolute terms, the size of this continuing gap appears critical for a cumulative and long-term activity such as research. European firms and governments must therefore redeploy their efforts, improve their capability to translate into commercial successes and better fund intangible investments which are a deciding factor for the future of competitiveness, growth and employment.

4. The PAXIS Initiative Managed by the Commission's Enterprise Directorate-General under the 6th Framework Programme, 'Research & Innovation Programme', PAXIS is a programme established to promote the setting-up and development of innovative companies across Europe - a driving force for employment and economic growth. The PAXIS programme has two major objectives:


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To boost the transfer of local and regional excellence in innovation, and • To have an instrument for the co-operation and the exchange of tacit knowledge and learning among local innovation stakeholders, profiting from each other's experience. PAXIS was launched in 1999 with three working areas: Thematic Networks, Projects and Accompanying Measures. The European Commission developed PAXIS so as to take example from the experience of the Regions of Excellence and learn from the sophisticated policies that support their networking activities. This facilitates better documentation of policy decisions and the elaboration of solid measures, which enable regions to be more innovative and competitive, simultaneously transferring their expertise to other regions. Creation of new innovative enterprises, support of spin-off companies and development of start-ups are some of the main policy objectives in both the EU and worldwide. The rich European scientific base needs to be further explored and promoted so as to include European citizens' welfare, developing new ideas for implementation. PAXIS aspires to gather all these ideas and recommendations and through advanced networking and collaboration, make them prolific and accessible. The Thematic Networks consist of 22 European cities and regions which have an outstanding track record in supporting the creation and growth of innovative start-ups. The 'Award of Excellence for Innovative Regions' was awarded for the first time in 2002 to 15 European regions and cities. In 2002, seven new regions joined the club and 22 regions were awarded in Stockholm. The 'excellent' regions are evaluated by the European Commission following a strict set of economic and innovation indicators that classify them among the most successfully performing regions in Europe. The Projects aim to develop, validate and disseminate concepts to encourage innovative start-up creation. In the period 2000-2002 several smaller projects have been co-financed by the European Commission. These projects cover many different aspects: • the organization of successful incubators •financingschemes • entrepreneurship training, etc. Currently six large projects have been selected, with the following objectives : • the transfer of existing successful know-how and start-up creation to associated candidate countries • the development of new concepts. Accompanying measures are designed to analyse and disseminate PAXIS results and good practices to all interested parties across Europe. The first two Accompanying Measures will facilitate the dissemination of activities, asses the results of PAXIS and shape policy lessons, by using experts with hands-on knowledge on start-up creation. The new third AM will create two European networks consisting of start-up representatives and service providers.

4.1 The history of PAXIS The idea for the pilot action grew out of the First European Forum for Innovative Companies held in Vienna in 1998 which drew up some proposals to encourage innovation and to support the creation of start-up companies. They fall within the Fifth Framework Programme's horizontal programme for the promotion of innovation and encouragement of the participation of SMEs. The pilot action is designed to look at mechanisms to facilitate the setting up and development of innovative companies. It has two main objectives: to identify and network economic areas which have created ideal

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environments for start-up and spin-off companies and to support projects which validate and promote novel strategies for the encouragement of the creation of innovative firms. Fifteen regions were then selected to take part, grouped into four networks according to their thematic priorities and previous links. Initially they would work to describe their methodologies and then look at ways of sharing their experience with others. A second action under the Fifth Framework Programme was launched in April 2001 and the results from the selection will be highlighted at the Third Forum For Innovative Enterprises organised by the European Commission in Stockholm on 8 and 9 April 2002. In 2001, 22 economic areas were nominated, 15 of which were already introduced at Lyon. The seven new regions are: Berlin, Copenhagen, Dublin, Edinburgh, Hamburg, Veneto Region and Vienna Region. Beyond the pilot action, this regional benchmarking initiative has developed the basis for benchmarking the innovation performance of European regions. As mentioned by Commissioner Liikanen during the press conference to announce the results of the 2001 European Innovation Scoreboard (1 October 2001), the PAXIS pilot action has became the basis for extending the Scoreboard to the regions.

4.2 PAXIS Projects As part of Enterprise Directorate's pilot action on the creation of start-ups, the European Commission was supporting 24 Projects, which demonstrated best practice in setting up and developing innovative companies. Universities, research organisations and public sector bodies were invited to propose projects for funding and 72 proposals were received. The projects were funded on a shared-costs basis with the Commission providing 50% of the total cost. The average contribution per project was 400 000 euros. The topics covered within these Projects included: - mechanisms to stimulate the transfer of knowledge and the creation of innovative firms by higher education and research institutes; - new services for start-up companies; - new funding mechanisms such as regional funds and business angels networks. The following are titles of PAXIS Projects: - Knowledge Needs of Investment and Finance for Enterprise (KNIFE) - On line Innovation: Virtual European Network of Technology Parks for Innovative services (ONLI) - 3StartUp to Europe. Successful model for innovative start-up companies transferring a unique model from the Netherlands to Portugal and Spain (Smart Tulip) - Validation of Mechanism for stimulating the establishment of Innovative firms at Regional Level (INNO-TENDER) - Best practice mechanisms for co-operation between universities, research bodies and industry (BESTCOIN) - Most appropriate set of tools to allow technological advisers to better support TBF project holder in their seeking of private financial backing (PRO-BACK) - New methodology to stimulate Academic Researchers to create SPIN-OFFS and to contribute to INNOVATION by technology transfer (SPINNOVA) - Creation of a cross-border university system to accompany business creators (Euroentrepreneurship) - Innovative start-up support in trilateral region Slovakia-Austria-Hungary (ISTER) - Migrating Innovation and Research Through Alliances (MIRTA)

W. Leal Filho/Some International Perspectiues on Innovation

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- Development of Methods and tools to support the creation of technology based innovation firms (TECTRA) - Validation of the "QUASI ENTERPRISE" initiative: a new southern European Model for setting up innovative firms through a new approach to technology transfer (QUASIE) - Israeli Financing Innovation Schemes for Europe (IFISE) - Stimulation of SME start-ups in life science technology (STARTMED) - Innovation Growth Groups (InnoGrowthGroup) - Start-up Support for Entrepreneurs (SUSE) - The role of regional development agents as fertilizers promoting innovation and the co-operation of small and medium enterprises (FERTILIZER) - Development of EMBRIO firms for the transfer of technology from the Universities (EMBRYO) - University Start up of International Entrepreneurs (USINE) - "Politica Regional Integrada de Apoyo a la Creadon de Empresas Spin-off" ("Integrated Regional Policy to Support the Creation of Spin-off Companies", PRIACES) - Expertise in the setting-up of innovative firms (EXSIF) - Karlsruhe, Rhone-Alpes, Emilia Romagna, and Oxfordshire Finance and Management Development Project (KREO-FMD) - Telematic Market of services related to digital objects (TEMA)

5. Innovation, growth and employment The new theories of growth (known as "endogenous") stress that development of knowhow and technological change - rather than the mere accumulation of capital - are the driving force behind lasting growth. According to these theories, the authorities can influence the foundations of economic growth by playing a part in the development of know-how, one of the principal mainsprings of innovation. The authorities can also influence the "distribution" of knowhow and skills throughout the whole of the economy and society, for instance by facilitating the mobility of persons and interactions between firms and between firms and outside sources of skills, in particular universities, but also by ensuring that competition is given free rein and by resisting corporatist ideas. The relationship between innovation and employment is complex. In principle, technological progress generates new wealth. Product innovations lead to an increase in effective demand which encourages an increase in investment and employment. Process innovations, for their part, contribute to an increase in productivity of the factors of production by increasing production and/or lowering costs. In the course of time, the result is another increase in purchasing power, which promotes increased demand and, here again, employment. However, it is true that the rapid incorporation of these innovations into the productive system may result, in the short term, in job losses for certain types of qualifications which become obsolete. The reason may be slow or ineffective adaptation of the system of education and training to take account of technical and industrial changes, or the rigidities of the labour market in general. It is possible that job losses in some sectors may be offset by the creation of jobs in other fields, such as services. Innovation can also help curb the decline of traditional industries by boosting productivity and introducing more efficient methods of work.

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The White Paper on Growth, Competitiveness and Employment consequently referred to a structural "technological unemployment". It offers several strategies for adaptation. These include cutting tax rates and employment contributions (thereby saving and also creating jobs), together with increases in taxes on the improper use of natural resources with the dual aim of encouraging more efficient production processes and protecting the environment. Economic history shows that changes take place sooner or later and that employment and collective well-being are usually improved as a consequence, provided that businesses continue pursuing their efforts to adapt and innovate. The rapidly expanding field of environmental protection provides an example of how innovation and enhanced efficiency can generate new jobs. This industry, involved in producing equipment and technology to reduce pollution and improve the energy efficiency of manufacturing processes, already generates annual production figures of 200 billion ecus in the OECD countries, with an annual growth rate of 5-8%. It is estimated that the industry employs one and a half million people and that jobs in the sector are growing twice as fast as in the rest of the economy (Report on employment in the European Union, 1995).

6. Innovation and enterprise The Green Paper on Innovation states that "innovation is at the heart of the spirit of enterprise: practically all new firms are born from a development which is innovative, at least in comparison to its existing competitors on the market. If it is subsequently to survive and develop, however, firms must constantly innovate - even if only gradually. In this respect, technical advances are not themselves sufficient to ensure success. Innovation also means anticipating the needs of the market, offering additional quality or services, organising efficiently, mastering details and keeping costs under control". However, it continues, one of the weaknesses of European innovation systems is the inadequate level of organisational innovation. This serious shortcoming makes it impossible to renovate models which are now inefficient and which are unfortunately still being applied in a large number of businesses. The same applies to effective innovationoriented formulae for businesses management. Some of the areas the Green Paper mentions are:

6.1 Towards innovation management Innovation and technology management techniques such as the quality approach, participative management, value analysis, design, economic intelligence, just-in-time production, re-engineering, performance ratings etc. - give the firms concerned an undeniable competitive advantage. There are endless examples of this. These methods, which need to be adapted to the specific circumstances and different cultural backgrounds of European firms, are not yet adequately used in the European Union. Moreover, specialist training in these disciplines and their dissemination, particularly in educational programmes, could be expanded. The efforts required remain considerable, although there are very great differences between the countries, or even between different regions within the one country. Some sectors, although they are innovative and create jobs, go unrecognised.


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6.2 Innovative but unrecognised sectors Innovation is not confined to the manufacturing sector, however. The service sector is playing an ever-increasing role in innovation and dissemination. Firstly it accounts for the majority of salaried employees and a growing proportion of the gross national product of the countries in the European Union and is itself growing steadily, and secondly because it is the main macro-economic user of new technologies. Moreover, one very market-oriented part of this sector (distribution, logistics, transport, finance) introduces innovation to the manufacturing sector (such as zero stock requirements, fast delivery, easy transport, the ubiquitous bar code, etc.). Another factor is that products now incorporate more and more (information) services, and it is often hard to dissociate the two (e.g. in all areas involving information and communication technologies). Lastly, a growing proportion of this very heterogeneous sector is providing the intangible services which now dominate investment and innovation (training, research, marketing, counselling, financial engineering, etc.). However, the priority given to it in analyses and innovation policies is far from commensurate with its influence. Innovation does not simply create jobs. It also provides increasing opportunities for self-employed activities (or semi-self-employed, such as teleworking). The "tertiarisation" of jobs is also changing relations between staff and employers (with greater responsibility, autonomy, etc.). This fairly recent phenomenon is also stimulating the creative abilities of employees themselves. Lastly, it can be seen that a product or process innovation can achieve a higher profile thus providing access to new markets - if it acquires a "green" label or if enterprises carry out "environmental auditing".

7. The role of qualifications The Green Paper on Innovation rightly points out the role of human resources in furthering innovation. Education and training are essential if innovation is to succeed. Yet, there are some problems which are preventing progress in this field, which are also considered in the Green Paper. These are: a. Poorly adapted education and training systems. Considerable efforts are being made by teachers in schools and universities and by training personnel to adapt education to the needs of a changing world. Education and training establishments are having increasing difficulty in coping with an ever-growing number and variety of target groups. One of the reasons for this is a severe lack of flexibility in the structures of such establishments and their approach to change. This rigidity prevents them from adjusting and reformulating their programmes. Even if establishments and curricula experiment with renewal, they are still too isolated from each other. Education systems still tend to place excessive stress on academic knowledge, even in science, or to provide highly-specialised technical training. Courses which are still too compartmentalised do not help to convey the idea of innovation in education and training. Lastly, the concept of lifelong education and training has still to be developed. The level and dissemination of technical education is still inadequate in Europe. There are several reasons for this: - Science and technology are inadequately covered in basic teaching.

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- Technical disciplines are rarely given the recognition they deserve, since they are not regarded as "academic". As a result, they are usually relegated to fallback status. - There is too little technology content in the teaching of scientific disciplines; teacher training fails to keep up with advances in the sciences; there are too few women involved in science and technology courses. - Teaching approaches which leave too little space for personal research, experimentation and discovery, the acquisition of key lateral skills (project work, teamwork, communication) and training in the new production environment in industry (understanding markets and demand, preparations for becoming an entrepreneur, quality research). - Difficulty in rapidly supplementing training courses with hybrid subjects relevant to new vocations. b. Last but not least, the relational and communication skills essential to teamwork and exchanges with partners in different fields are still too often ignored. 8. Moving ahead In order to reverse the outlined problems and trends, the Green Paper on Innovation suggests a set of routes of action. These are l : 8.1 Route of Actions 1: Develop technology monitoring and foresight An initial requirement is the development of "technology watch" which provides reliable access to the best reports on technological information in the world. It was for this purpose that the Institute for Prospective Technological Studies (IPTS) was founded in Seville. Its activities are permanently linked to the technology watch actions being carried out as part of the specific research programmes under the Fourth Framework Programme. The job of this institute is not to produce new studies. Its purpose is to carry out the prompt collection of the relevant available information and to process it into a codified format for subsequent use. The idea is that the data is then channelled and exploited to illustrate the situation in the Member States and their major industrial rivals. An approach of this kind will encourage the organisation of exchanges of experience between countries, comparison of work, identification of areas of consensus and disagreement, and lastly the formulation of digests at Community level. These digests will make it possible for the European authorities, and industrial and scientific circles, to arrive at better decisions and policies. At the same time, regular statistical surveys of technological innovation should be organised in the Member States. The surveys should make it possible to measure also the costs and the benefits stemming from innovative activities and to arrive at a better understanding of the factors which determine innovation. Actions involving consultation and socioeconomic forecasting could also be launched as part of the ETAN network (European Technology Assessment Network), following a review of recent national initiatives (e.g. Technology Foresight in the United Kingdom, Delphi actions in France and Germany and the Foresight Committee in the Netherlands).

Modified from Green Paper on Innovation, CEC 1995.


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They should make it possible to expand and update the knowledge base which decisionmakers rely on for launching research programmes and actions. Actions designed to measure and arrive at a better understanding of the relations between new technologies, their incentives for their introduction and the economic context could also be amplified and put to better use. Such needs are well illustrated by the energy-environment-economy inter-relationship. 8.2 Route of Actions 2: Better direct research efforts towards innovation The debate should focus on actions undertaken at national level in order: • to establish ambitious objectives to increase the proportion of gross domestic product devoted to research, development and innovation; • to encourage national research by enterprises (especially the one financed by enterprises, or the one financed by governments, within the limits allowed by Article 92 of the Treaty); • to the extent allowed by cuts in public deficits and statutory deductions, to boost the proportion of government spending on intangible investment (research and development, training) and innovation, especially among enterprises, favouring indirect tools; • to refine the tools for technological forecasting and the instruments for coordination to facilitate the exploitation of research results; • to strengthen the mechanisms linking basic research and innovation; focusing on markets with high growth potential, such as prime sectors and "green" markets; • to introduce systems for monitoring the requirements of SMEs, with the dual mission reinforcing their capability to carry out their own research efforts and their capacity to absorb technologies regardless of origin. 8.3 Route of Action 3: Develop initial and further training The opportunity has to be taken to emphasise the importance of innovation becoming a permanent feature of initial and further training. The debate should concentrate mainly on the following objectives and on the best way to meet them: at national level: • a greater effort to instill young people in the education system with the spirit of creativity and enterprise. This could imply the introduction of education syllabuses which include: outline of the operation of an enterprise, knowledge of a market, familiarisation with materials, techniques, products, costs, tuition in the techniques of creativity and experimental methods, etc.; • surveying more efficiently the new professions (e.g. financial analysts for innovation projects) in line with the needs of the economy with regard to innovation; identifying the new qualifications required by present and likely future technological changes; designing training courses which could be adopted by national education and training systems; • promoting a general breakdown of barriers between disciplines: introduction of training modules on innovation management and communication into scientific and technical training syllabuses and technology management courses in business training programmes, etc.; • stimulating further training, in particular in SMEs; developing and generalising training to new technologies and innovation and technology transfer among enterprises (support bodies for the social partners);

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• exploiting the possibilities offered by distance learning and information technologies to stimulate and satisfy the demand for training; • developing, through cooperation among establishments and companies, the training of engineers and technicians in the tertiary sector which is adapted to activities in the sector and to consumer needs (e.g. maintenance, servicing, repairs, etc.); training provided partly by enterprises could link science subjects with legal and economic studies, communications techniques and psychology; at Community level, the debate will allow to specify the conditions and modalities of: • the creation of a European network of new teaching media based on cooperation between industry and educational and training establishments; • establishing a system of certification for basic technical and vocational skills, based on a cooperative effort between higher education institutions, enterprises, professional bodies and chambers of commerce. • the possible creation of a European observatory for innovative practices in vocational training in order to disseminate new ideas and best practice for modernisation based on negotiation; • the mutual recognition of training modules, favouring agreements between teaching and training institutions, as well as between professional branches; • supporting the creation of sandwich courses in higher education with a view to a better integration of general and vocational training, research and industry along the lines of "campus companies", with training geared primarily to the promotion of innovation and management of technology transfer. 8.4 Route of Action 4: Further the mobility of students and researchers The Member States need to pursue, develop or implement actions to encourage various types of mobility: social mobility, mobility between professions, mobility between research institutes and enterprises, etc.. For its part, the Community has to make every effort to eliminate or reduce the regulatory barriers to mobility and intensify and expand its programmes in this area. The following actions should be debated: • adoption of rules (directives) designed among other things to create a mortgage payment market and to facilitate the transfer from one fiscal or social security system to another; • the development of new ways for skills recognition beyond the diploma and formal education, in the first instance at national and local levels. At European level, a project for a personal skills smart card will be implemented. • actions designed to encourage the mobility of students, engineers and research workers in connection with the LEONARDO and HUMAN CAPITAL AND MOBILITY programmes. 8.5 Route of Actions 5: Promote recognition of the benefits of innovation The action undertaken by the Community and the Member States should strive to persuade the general public of the benefits of innovation. The debate should specify the necessary actions. Among them could figure: • The launching of a project of Community interest covering an initial phase of five years and involving the Member States could be part of this. The project, administered by the Community, would be launched after selection by tender. Its object would be to exploit, at Community level, successfull experiences from the Member States and to


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produce information programmes using various media (videos, specialist press, CDROM, etc.) on the positive repercussions of European innovations and also from other sources. The project would be launched simultaneously in the various Member States. • The recognition of creative individuals by providing European prizes or distinctions to reward original society in the fields of science, technology, society, design, training, etc.

8.6 Route of Actions 6: Set-up fiscal regime beneficial to innovation The Community must encourage the Member States to adopt tax measures conducive to innovation, especially for venture capital and intangible investment, while bearing in mind the need to control public spending with a view to Economic and Monetary Union. Given the extremely sensitive nature of fiscal policies, any action will have to be taken with care. It is naturally the responsibility of the Member States with regard to tax and social security deductions to devise consistent strategies which reconcile the development of innovation and that of employment. An exchange of information on the benefits of the various systems should be the first stage. However, fiscal incentives have their advantages and drawbacks. A thorough study is needed in order to determine a suitable breakdown in the use of the various types of measure. They could cover: • more equal fiscal treatment of intangible and tangible investment (e.g. possibility of creating depreciation allowances along the lines of those for tangible investments - a study is in progress); • broadening of tax relief to encourage individual investors towards investment in innovation (e.g. the "research development limited partnership" arrangement which exists in two Member States, or tax rebates); • promotion of fiscal transparency with regard to venture capital companies (to avoid double taxation), as indicated in the Communication of 25 May 1994; • deductions linked to deposits of industrial and intellectual property titles along the lines of the measures in the United States ("small entity fees"); • encouragement of further training (for individuals but also for SMEs) through the introduction of tax allowances for training; • reduction of regulations concerning the transfer of enterprises within the European Union in cases not covered by the "merger directive"; the Commission Recommendation of 7 December 1994 on the transfer of SMEs could serve as a starting point for this study; • approximation fiscal definitions relating to research and technological development and innovation in use in the Member States.

8.7 Route of Actions 7: Promoting intellectual and industrial property The desirable actions that the debate should allow to better specify and further, include: at national level: • encouragement of the use of utility models by SMEs and raising of awareness among enterprises; • assistance to businessmen in defining a strategy for the protection of intellectual and industrial property, as well as for the acquisition and granting of licences; • the means of a greater assistance to businessmen and research institutes in combating piracy and copyright infringement;

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• reinforcing teaching on intellectual and industrial property as part of training for future research workers, engineers and business executives; at Community and international level: • the continuation of the efforts to harmonise arrangements on intellectual property, especially in the field of life sciences and technical fields related to software, telecommunications (information society) and utility models; • reinforcement of the instruments to combat counterfeiting and copyright infringements; • promotion of patent information services as a method of technology watch based, in particular, on the information system set up by the European Patent Office. 8.8 Route of Actions 8: Simplify administrative procedures The Commission is trying to streamline the procedures and formalities it requires, especially for access to its programmes, the authorisations it gives or the checks it carries out. With regard to research aid, for instance, following the increase in the number of Member States and associate countries, general concern has emerged about the delays affecting implementation and payment and about the variety and complexity of Commission procedures. 8.9 Route of Actions 9: A favourable legal and regulatory framework The debate should concentrate, in particular, on the need and means to company law • very rapidly adopt the regulation on a European company statute with the aim of removing the obstacles to innovation caused by fifteen different legal systems; • launch a study for a simplified EEIG and European company statute for innovative new enterprises; standards • generalise the system of performance standards emphasising innovation in compliance with the constraints of safety and environmental protection; • support the establishment of voluntary agreements between enterprises and the authorities with the aim of achieving, at National or Union level, through technological innovation, high performance levels in economic, environmental and energy terms, while speeding up the introduction of ways of monitoring their application; public contracts • analyse and discuss means of stimulating demand for innovative products by existing means in the directives on public contracts; competition rules • continue the efforts to liberalise markets, in particular in the service sector • continue taking into account the globalisation of markets and of the features of technological and innovation activities in assessing cooperation agreements and concentrative operations. 8.10 Route of Actions 10: Develop "economic intelligence" actions It appears desirable to specify ways and means for:


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at national and regional level • intensifying the efforts to make enterprises, especially SMEs, more aware of the need for and methods of "economic intelligence". These efforts could also aim at government departments, so that they are aware of their powers and responsibilities in this area; • creating an environment favourable to the emergence of private-sector services offered to enterprises in this field; • including in higher training for future managers, engineers, researchers and senior marketing staff familiarisation with economic intelligence to encourage ongoing motivation for this subject among enterprises; • establishing up consultation bodies along the lines of what has been done in Sweden, France and the United Kingdom; • encouraging a reflexion at regional level on this area (if necessary, and if applicable, with the help of the Structural Funds, by using the lessons gained from experience with Regional Innovation strategies in Article 10 of the ERDF and the Innovation Programme); • highlighting the successful experience of enterprises or groups of SMEs; at Community level • facilitating the possible interlinking of national bodies for consultation and guidance in this field and exchanges of good practice between regions and countries; • reinforcing the scientific expertise of some of the Commission's delegations in third countries, in order to accomplish a mission of technology watch and to provide to the Union analyses on the evaluation of research conducted abroad; • launching pilot actions of assistance for SMEs using existing programmes (e.g. the SME initiative in the Structural Funds or the Innovation Programme); this pilot action could include encouragement of joint action in this field or specific support for new enterprises offering innovation in the field of information on world markets; some of these actions introduced as part of the SME Initiative could, for example, be enhanced by organising exchanges of experience and cooperation schemes between regional or local bodies in different countries which provide help to SMEs on innovation; • Increasing its efforts so that internal information sources and resources are put to better use and made more widely available.To that effect an invitation to tender could be organised in order to launch a project to compile an inventory of what exists, to define the specifications of a multilingual expert guidance system for large stores of information through the use of multimedia techniques, to assess feasibility and costs; this project would be based on a prior study of national practice in the Community and elsewhere, with an emphasis on concrete methods and procedures for collection, management, processing and pooling of information.

8.11 Route of Actions 11: Encourage innovation in enterprises, especially SMEs, and strengthen the regional dimension of innovation The local or regional level is in fact the best level for contacting enterprises and providing them with the necessary support for the external skills they need (resources in terms of manpower, technology, management and finance). It is also the basic level at which there is natural solidarity and where relations are easily forged. It is therefore the level at which small enterprises can be encouraged and helped to pool their strengths in partnerships in order to compete with bigger enterprises with greater resources or to

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make the most of the opportunities which these enterprises can offer. These issues are of special importance in the less favoured regions. The Green Paper would therefore offer a good opportunity to debate the suitability and the necessary conditions in order to: at local, regional or national level: • foster cooperation among enterprises (large and small) and strengthen groupings based on technology or sector in order to realise the potential of local know-how (in traditional activities as well as for top-of-the-range products); • encourage an internationally-minded approach among enterprises (in liaison with research centres and support services), facilitating acceptance of foreign investment with high value added and introducing procedures to absorb technology from other countries; • improve or add to business support structures by introducing: - tools for analysing the stated or unstated needs of enterprises; - "one-stop shops" for access to information and services; - mechanisms to facilitate dialogue between the various local partners involved in innovation and the follow-up and monitoring of aid measures; - networks to link and rationalise support services (like the Nearnet and Supernet networks in the United Kingdom or the technology dissemination networks in France); - reinforcing University Industry cooperation in order to facilitate transfers of technology, knowledge and skills. at Community level: • launch a pilot action designed to encourage the formation of new technology-based firms (NTBFs), especially by researchers and engineers from research institutes and universities; • facilitate the dissemination of good practice, especially by: - strengthening inter-regional cooperation networks for the promotion of innovation (including the services sector) and for help for researchers or engineers setting up innovative businesses; - supporting innovation projects based on cooperation between enterprises at a European level, laboratories, intermediaries, financiers, etc., illustrating new approaches to innovation (in terms of technology, society, organisation, etc.), especially in order to take a much advantage as possible of the potential offered by the information society; - developing support for regional innovation strategies and inter-regional technology transfer (joint actions involving regional policies - Article 10 of the ERDF and the INNOVATION Programme); - strengthening the role of the Business and Innovation centres (BICs) in identifying assistance requirements with regard to modernisation, help in carrying out modernisation plans for SMEs and their guidance towards specialist bodies which are best placed to help in their innovation efforts; - introducing training for those responsible in national, regional and local government for innovation policy, investment planning, etc., if need be with the support of the Structural Funds for the eligible regions (see also Route of Action 12). 8.12 Route of Actions 12: Update public action for innovation In most fields the role of the authorities is changing: they have to teach, persuade,


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involve, stimulate and evaluate rather than order. Public action also needs to be modernised and become simpler. According to the Ciampi Report, the State should become a moderate but effective regulator. This is also true in the case of innovation. If it is to be fully effective, public action also needs to be stable (involving regulations, but also financial support, especially for research and training where efforts need to be long-term) and it needs to be geared to satisfying collective needs. The authorities must also contribute, through forecasting and consultation, to indicating the path forward for those involved and to facilitating the emergence of common if not consensus views. The promotion of innovation also requires the coordination and alignment of the efforts of many people, and especially the consultation of the social partners. The authorities and government need to develop new thinking with greater emphasis on consultation and partnership with the private sector. Also, the pressure on public spending means that new solutions have to be devised, especially the move from direct to indirect support in the use of public intervention. Better results have to be achieved with fewer resources. In the Member States, as at Community level, innovation policies are usually the responsibility of several ministries, official bodies or services, which can result in some problems. It is often hard to find the right forum for discussion and even harder to find one which can provide the necessary overall view and ongoing coordination. In addition, public support for innovation still suffers in some cases of problems such as difficulties in taking into account needs and demand; difficulty to differentiate measures in function of the targeted beneficiaries and, accordingly, their lack of transparency; still inadequate information regarding "good practices"; the difficulty in carrying out evaluations because of the lack of suitable indicators; a dilatory adaptation of structures and procedures to changes in the economy, technology and society. (Modified from Green Paper on Innovation, CEC 1996) 9. Conclusions The quest for innovation is not easy, nor should it be, because the work of innovation itself is not easy. Innovation does involve risks, but the failure to innovate is often a more costly and damaging exercise. Innovation leaders need to understand this reality and accept it as part of a form of leadership that will always ask for more than it gives in return. Innovation is here to stay and those countries who will succeed in the 21st century, are those which have paid due attention to innovation, as it is the case now. In this context, transition countries and post-socialist countries can draw on the vast body of experience and expertise available in the EU so as to avoid the risks of costly mistakes and maximise the use of their limited resources. References Commission of the European Communities (1995) Green Paper on Innovation - COM (95) 688. Brussels: CEC. Commission of the European Communities (1995) Report on Employment. Brussels: CEC. De Cagna, J. (2002) Guiding Innovation. Executive Update, August 2002. Dressier, F. (1998) Innovation - From the Inside Out. Innovative Leader 7(3, March). Schonfeld, E. (2003) Outsourcing Innovation. Available on-line: https://www.business2.corn/subscribers/ articles/web/0,165 3,49855,00.html


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Subject Index Armenia Belarus Biotechnology Bulgaria Central and Eastern Europe Demand and supply Germany Greece Innovation policy INTAS International cooperation IRCs Knowledge Legal aspects Licensing London Development Agency Patent Exploitation Agency Patents Russia SME and innovation Sustainable innovation Technology transfer Transition TuTech Ukraine United Kingdom VINNOVA

49, 83 117,129 83 93 1,71 71 1, 11, 59 29 1, 19, 49, 93 135 v, 29, 59, 135 59 19 11 11 1 11 11 109 93 1 1, 11, 29, 59 141 1, 11 37 19 1


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Author Index Afrikian, E.G. Arzumanyan, T. Atoyan, V Gabrielyan, B. Gramatikov, PS. Jasinski, A.H. Kazakova, N. Kuzmenko, A. Lakovets, Ju. Leal Filho, W. Malchenko, S. Martin, L. Pobol, A.I. Radosevic, S. Rehberg, L. Skanavis, C. Slepoukhin, A. Spiesberger, M. Tchebotarevsky, Yu. Wolfmeyer, P. Zenchanka, S. Zenchenko, A.

83 49 109 49 93 141 109 37 129 1, 151 129 19 117 71 11 29 109 135 109 59 129 129

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