Features of innovation policy in developed countries of the Baltic region

Mikhaylova Anna Alekseyevna – Ph.D. student, analyst of Marketing and Analytics Division, Office of Development and Strategic Planning, Immanuel Kant Baltic Federal University, Russia 

The study examines the characteristics of the formation and implementation of national and regional innovation policies in the developed countries of the Baltic region: Denmark, Finland, Germany, Norway, and Sweden. Building on in-depth case studies of the given countries, the author has conducted retrospective analyses of the processes of formation of the innovation policy, which is treated as a result of combining the individual instruments and mechanisms of the scientific and technological, educational, industrial and regional policies in a single set of influence on the innovation system. The article assesses the innovation development of Denmark, Finland, Germany, Norway, and Sweden; it presents the current scheme of their national innovation systems with a special emphasis on the most significant actors. The author highlighted the key trends and characteristics of the innovation policies of the given countries at the present stage with a focus on the tools used in five thematic areas: education, basic science, applied science and entrepreneurship, regional development, internationalization. Additionally the paper highlights the issue of regional participation in the process of strategy elaboration and subsequent implementation of the chosen course of innovative development.

 

Introduction

The interest in innovation as a source of economic development and welfare of the society began to form in the beginning of the twentieth century under the influence of scientific ideas developed by A. Marshall, JA Schumpeter, ND Kondratyev, P. Sorokin, S. Kuznets and other outstanding scientists of that time. Addressing the multi-faceted innovative economy, complex in its multidimensional image, researchers throughout the twentieth century set themselves the task not only to grasp the essence of the phenomenon of innovation and scientific category, but to identify a set of spacial-temporal, institutional, social, cognitive and other regularities of innovative processes and its impact on the development of territorial socio-economic systems of different level and scale. The fundamentals of the innovation theory evolved in close connection with the development of theories and concepts focus on the cyclical nature of the processes in the economy, specific placement of productive forces, international division of labour and competitiveness, internationalization, regionalization and territorial capital.

Since the end of the twentieth century there is a growing need for applied research that can create and enrich the knowledge base for political decision-making in the field of science and technology, and also innovations. There was a number of scientific concepts, that to some extent were reflected in the strategic and program documents, securing the long-term objectives and priorities for national and regional innovation development, that acted as a basis for the development of mechanisms and tools of the innovation policy. The most common were concept of clusters, national and regional innovation systems, triple spiral, networking, open innovations, regional knowledge, innovation environment, knowledge triangle, entrepreneurial university, global challenges, service innovations, social innovations and innovations in the public sector, live labs, technopolis, competence centers and others.

Empirical studies are also in demand, whose task is to study and analyze the experience of different countries and regions of the world in solving important and essential problems in the innovation. As a rule, such research is thematic and narrowly focused, with a strong territorial binding, but as a whole it allows to catch and to generalize current development trends of the global innovation system and is often the basis for new up-to-date concepts or the improvement and adaptation of existing ones, taking into account changes of contextual factors and conditions.

This article is the result of such study, when the author tries to reveal the features of the innovative policies of developed European countries, based on the comparative assessment of innovation systems of five Baltic countries: Sweden, Denmark, Norway, Finland and Germany. It should be specified, that under the innovation one means a comprehensive view of the state policy, which is a formation of scientific, technological and industrial policies implemented at national and regional levels.

Characteristics of innovation development of the Baltic region

The choice of the countries for the study is not accidental and is due to the innovative nature of sustainable development for a long period, what to some extent can be considered as an indication of the effectiveness of innovation policy, implemented at the state level. The results of a comparative evaluation of scientific and technical potential of the Baltic region [1, 3, 8] and the analysis of a series of periodic international rankings, dedicated to innovation and competitiveness, demonstrate consistently high positions of Sweden, Norway, Denmark, Finland and Germany not only compared to the Baltic countries, Poland and Russia, but also among the countries of the European Union and the world, which allows to assign them to a group of “global innovation leaders” (Table 1).

Table 1

Level of innovation development of the countries in the Baltic region, 2014

Country Index
globalinnovative globalcompetitivity Innovation panel of EU Economy of knowledge* knowledge*
value rank value rank value rank value rank value rank
world BR world BR ЕC28 BR world BR world BR
Sweden 62,29 3 1 5,41 10 3 0,75 1 1 9,43 1 1 9,38 1 1
Finland 60,67 4 2 5,50 4 1 0,68 4 4 9,33 2 2 9,22 2 2
Denmark 57,52 8 3 5,29 13 5 0,73 2 2 9,16 3 3 9,00 5 3
Germany 56,02 13 4 5,49 5 2 0,71 3 3 8,90 8 5 8,83 10 5
Norway 55,59 14 5 5,35 11 4 0,48 - 6 9,11 5 4 8,99 6 4
Estonia 51,54 24 6 4,71 29 6 0,50 13 5 8,40 19 6 8,26 21 6
Latvia 44,81 34 7 4,50 42 8 0,22 27 9 7,41 32 8 7,15 33 8
Lithuania 41,00 39 8 4,51 41 7 0,29 24 7 7,80 37 7 7,68 40 7
Poland 40,64 45 9 4,48 43 9 0,28 25 8 7,41 38 9 7,20 39 9
Russia 39,14 49 10 4,37 53 10 -  - - 5,78 55 10 6,96 43 10

Remark: * on data of 2012; BR – Baltic region

Source: [14, 15, 18, 19]

 

Table 2 contains statistic indicators of innovation system development in these countries at present. In general, it is characterized by significant accumulation of human resources, what is due to priority of national authorities to support the education system and focus on the flow-in of skilled workers. More than 30% of the population in Finland, Norway and Sweden have higher education, slightly less in Denmark – 27%, and 24.1% in Germany. For comparison, in Russia, according to the census 2010, the share of the population with higher education was 23.4% [6], which can be comparable with Germany, however, is significantly lower than in the Nordic countries. On average, about 39% of the total economically active population in Sweden, Denmark, Germany, Finland and Norway are engaged in the field of science and technology, accounting for nearly 27% of the total population. The leaders in terms of the concentration of human resources in science and technology sector are Denmark (40.5%) and Sweden (39.3%). Another characteristic of innovation systems in these countries is the level of employment in high-tech industry (3.9%), which is higher than the EU average both in production sector and service.

Table 2

Indicators of innovation development of developed countries of the Baltic region, 2013

Indicator Sweden Denmark Germany Finland Norway
Share of population with higher education, % 30,3 27,0 24,1 32,1 32,4
Engaged in science and technology to economically active population, % 39,3 40,5 36,4 38,4 38,7
Engaged in high-tech spheres of industry and service to economically active population, % 4,9 5,5 4,1 5,7 3,6
Volume of venture investments to GDP, % 0,4 0,6 0,2 0,3 0,2
Export of high-tech products as a share of all export, % 13,0 9,3 14,2 6,2 …
Share of innovative products in full turnover *, % 6,1 13,9 13,0 11,1 5,2
Expenses for research and development, %
To country’s GDP 3,3 3,1 2,9 3,3 1,7
From general expenses of state budget 1,6 1,8 2,0 1,7 1,8
Expenses structure on research and development on source of funding, %
Business 61,0 59,8 66,1* 60,8 43,1
State 28,2 29,3 29,2* 26,0 45,8
High education 1,0 0,0 0,0* 0,2 0,5
Non commercial companies 3,1 3,8 0,4* 1,4 1,0
Foreign sources 6,8 7,2 4,3* 11,5 9,5
Applications for patents in the European Patent Office *, pcs
For mln citizens 289,9 223,2 278,2 270,6 111,7
For bln EUR of internal expenses on research and development 197,9 164,3 287,8 213,9 86,6

Remark: * data of 2012

Source: compiled based on data of Eurostat [11]

 

One of the most important indicators of the dynamics of the innovation system includes the volume of financing research and development activities (R & D). In Sweden, Finland, Denmark and Germany the ratio of expenditure on research and development to gross domestic product (GDP) is well ahead of the average for the EU (2%) and Baltic region (1.95%). Sweden and Finland show solvent high levels of funding in the long run. Since 2000 the share of R & D expenditures in the GDP of these countries did not fall below 3.2%. However, one should note the tendency for decrease of the level of funding of scientific and technical sphere in Sweden, due to lower expenditures for the development of technologies for defense.

Denmark and Germany on the contrary show a significant increase in the share of research and development expenditures in the said period. If in the early 2000s the ratio of R & D spending to GDP was slightly more than 2%, in 2013 it amounted to 3% with a positive dynamics. It should be noted that these high rates are due to structure of R & D funding,prevailing in these countries, where the main role belongs to business sector (60%). The exception is Norway, where the contribution of the state and business in the research and development is nearly equivalent: 45.8 and 43.1% respectively in 2013. As shown in Table 2, lack of high interest from Norwegian business in investments in R & D, even with share of budgetary allocationscomparable with other countries in the Baltic region, has a negative impact on the total value of the financing of the innovation system of Norway. During 2000 – 2013 the share of expenditure on research and development in the country’s GDP fluctuated around 1.6%, without reaching the EU average.

An essential role in encouraging innovation is played by high-risk investments in companies that are engaged in development of new products and / or technologies, but not listed on the stock market. The need for its finance is formed in early stages of development (seed and start-up), and later (growth and expansion). The highest level of venture capital investment to GDP is in Denmark and Sweden: 0.6 and 0.4% respectively. This indicator is higher than in other EU countries and Baltic region, but the dynamics of such investments is unstable and still below the real needs (Pic. 1).

Pic. 1 –  Dynamics of volume of venture investments to GDP of Denmark, Sweden, Germany, Finland, Norway, %

Source: compiled based on data of Eurostat [11]

 

As the result of innovation Table 2 indicates the share of innovative products in total trade, exports of high technology products and patents. Germany shows the highest return on investment in research and development. Bearing in mind 2.9% expenses on R & D of GDP, Germany shows the highest performance in turnover and export of high-tech products, as well as higher patent activity in terms of unit costs, compared with other developed countries of the Baltic region.

Innovation policy in Sweden

The innovation system in Sweden evolved throughout the twentieth century with limited natural resources and domestic market, which was the main driving factor for the development of technology and export industry with high added value. The need to enter international markets and compete led to the formation of several large transnational companies that currently are the main investors in research and development. The participation of small and medium-sized companies (SMEs) in the innovation process is relatively small, so the state is forced to use various motivating mechanisms for their involvement in R & D. In order to overcome the negative effects of industrial policy of 1980 – 90 and stimulate economical growth Sweden developed a long-term strategy of innovative development «Innovative Sweden», which presented a nationwide vision of Sweden as a competitive, dynamic and knowledge-based economy, attractive for investments of large and small high-tech companies.

In 2012 Sweden adopted a new long-term innovation strategy «The road to a world-class innovation climate 2020», which became a continuation of the ideas of pan-European growth strategy «Europe 2020». The strategy is aimed at improving the quality of life and sustainable development through the maintenance of competitiveness and job creation in the global knowledge-driven economy. The main principles of its implementation are the creation of favourable conditions for innovation; support of people, business and organizations that are systematically engaged in innovation; implementation of a holistic approach based on a common vision. The structure of the modern national innovation system of Sweden is shown in Picture 2.

Picture 2 – National innovation system of Sweden

Source: compiled based on [13, 16]

 

The Government of Sweden is responsible for the development of innovation policy at the national level. The main role in this process is assigned to the Ministry of Education and Science and the Ministry of entrepreneurship and innovation. In 2001 their department established two major agencies: Swedish Research Council and Swedish governmental agency for Innovation Systems (VINNOVA), whose tasks included the implementation of the main directions of the state innovation policy. The activity of Swedish Research Council focuses on the support and development of basic scientific research. VINNOVA is strengthening cooperation between all actors of the innovation system, co-financing of research initiatives with further monitoring and control of its implementation, as well as support of international collaboration. In addition, support functions and the financing of industrial R & D were split between several dozens of specialized state research councils and agencies that focus on meeting the needs in knowledge of the society in individual spheres. An alternative to government agencies and large industrial companies in funding R & D is various para-public and private research funds, which have their own budgets. For example, Swedish Foundation for Strategic Research (SSF), Knowledge Foundation (KKS), Foundation for Strategic Environmental Research (MISTRA), Swedish Foundation for International Cooperation in Research and Higher Education (STINT), Swedish Foundation for health care sciences and allergy research (Vårdal), Knut and Alice Wallenberg Foundation, Swedish Cancer Society, and others.

A characteristic feature of the innovation system of Sweden is a relatively small number of research institutes established in the second half of the twentieth century and united in holding «RISE group» in order to improve the efficiency of use of financial, material and human resources and enhance its expertise and complementarity. The consequence of a lack of research institutions engaged in applied research and development has become the laying of their functions to universities with the increase in financial support of the latter. According to the Parliament decision dd. 1979 [17] University in Sweden combines three missions: education, basic research, interaction with business, being transformed from a classic structure in the enterprise.

One of the most urgent problems of the Swedish innovation system is the lack of commercialization of university research. It reflects the emergence of the concept of «the Swedish paradox» [7, 13], when a large amount of expenses for research and development and education shows a disproportionately low return of innovation. In many respects it is a consequence of the negative impact of legislation («teacher’s correction», laws on the public domain and state acquisition and others [5, 9]) and insufficiency of venture capital on initial stages.

Overcoming the effect of «the Swedish paradox» is done through the implementation of the state policy of promoting the commercialization and innovation in the framework of realization of strategic ideas of national «knowledge triangle», what brings together education, research and innovation. The main efforts of the government in this area are aimed at increasing the efficiency of the implementation capacity of universities by strengthening and deepening cooperation with other actors of the innovation system. Swedish universities dispose a developed network of incubators and science parks, as of 2010 they have created Bureau of innovative interaction – contact interuniversity platforms to improve the efficiency of R & D and stimulate innovation.

It should be noted that such measures of stimulating innovative economy as tax incentives and credits for businesses carrying out R & D did not gain widespread in Sweden. The most widely used tools are venture capital financing; subsidized loans for small and medium-sized business; state guarantees; grant support on a competitive basis (at the individual, institutional level) in the framework of national programs; advisory services; assistance in the training of personnel; creation of special areas for cooperation of participants of actors «triple spiral», etc. In recent years, active work has been carried in order to liberalize the law on state acquisition in order to use it as a driver for innovation in social sectors: infrastructure, health and welfare, environment. Particular attention is paid to support of small and medium-sized businesses, including issues related to the expansion of the participation in research and development and implementation of international activities (program «Explore and grow» and «VINN NU»). A number of organizations of supporting infrastructure were created: investment companies («ALMI Invest», Industrial Development Fund and others), technology transfer centers (Swedish organization to support innovation and technology transfer (SNITTS) and others), agency for attracting investment («Business Sweden» and others), network organizations, bringing together participants of «triple spiral» (Swedish Entrepreneurial Forum and others).

Important areas of ​​modern innovation policy of Sweden are regional development and support of the creation of innovation clusters. As of 2001 has been launched a national flagship initiative «Vinnväxt – Regional growth through dynamic innovation systems», whose aim is to promote sustainable regional growth by developing internationally competitive innovations in priority areas. In 2007 the idea of ​​a differentiated approach to regional development and growth gained formal acknowledgement in the «National strategy for regional competitiveness, entrepreneurship and employment in 2007-2013»; expanded long-term strategy «National strategy for regional growth and attractiveness 2014-2020» , whose base was cross-sectoral approach, multi-level control mechanism for dialogue between participants and collective training, as well as clear focus on results, entered into force in 2014.

In recent years, the authority of the regions of Sweden to participate in the development of regional policy has greatly increased. Currently each region is obliged to form and implement its own development strategy, including vision, goals and long-term priorities, taking into account regional characteristics and competitive advantages. Regional development strategy should contribute to the coordination of initiatives in the field of regional development, held at different levels. It should be noted that we mean regions of level NUTS 3, i.e. län or regions in which the responsibility for the implementation of national policies is traditionally divided between the county administrative boards (länsstyrelsen) – representatives of the national government at the regional level and regional district councils (landsting). By 2015 each of the 21 regions of Sweden has already formed its own regional development strategy with a planning horizon until 2020, maximum until 2025 or 2030. A number of them have also developed a strategy of innovative development, for example, the regions of Skåne and Blekinge, focusing on strengthening of its competitive advantage through the development of cooperation and the formation of clusters and internationalization.

Innovation policy of Denmark

Denmark as well as Sweden shows high level of innovation development among the world, Europe and Baltic region. Historically, the Danish economy is based on traditional sectors: agriculture, fishery, manufacturing. At the beginning of the twentieth century the country was highly competitive in agricultural production, which allowed it to consolidate its status as one of the world’s leading exporters of meat and dairy products. The logical consequence of active development of the agricultural sector which even at present forms the demand for qualified personnel and new technologies, was the establishment of the educational and research system of the country. Its basis was established in 1769 with the formation of the Royal Danish Agricultural Society, under whose support later were established various schools, colleges and universities that are still operating. A strong manufacturing sector of Denmark is the result of industrial and technological policy in 1960 – 1970es. Currently, the country was able to implement the industrial potential in sectors such as engineering and metalworking, food processing, chemical industry and oil refining, pharmaceuticals and medical equipment, electronic and electrical industries.

Danish modern economy is export-oriented with a growing share of service export (about 39% in 2013 with a positive trend in the long run [4]). On one hand, it is based on the success achieved in the traditional industries, and on the other hand – it demonstrates the commitment to the development of new high-tech sectors (ICT, biotechnology, alternative energy, bioeconomy, medical technology and others). The employment of the majority of the working population is provided by SMEs. Large businesses cover a major share of Danish exports, as well as a considerable amount of investment in research and development. It should be noted that the Danish economic model developed in a relatively low domestic resource capacity and low capacity of the national market that unites it with the Swedish, is characterized by a strong dependence on the situation on the international markets. It most strongly appeared during the economic crisis of 2008-2009. Maintaining the effectiveness of such model requires government’s continuous work to improve the investment and business climate, improve the system of science and education, improve the overall competitiveness of the economy, creation of favourable innovation environment.

The answer to the current challenges of the world economy was the development in 2010 of the national strategy «Denmark 2020: knowledge – growth – prosperity – welfare», which was based on the principle of more effective use of internal resources due to the consolidation of public finances, increasing productivity, increasing commercialization of R & D results by universities and public research organizations, introduction of new technologies (especially with a positive environmental impact), development of health care, reduction of bureaucracy level, strengthening of the competitive environment, greater involvement of the country and its regions in the process of internationalization and international cooperation (incl. scientific sphere). Innovation policy in this context is one of the key tools in achieving the strategic objectives of a long-term development of the country.

In 2012 it adopted a long-term national innovation strategy «Denmark – country of decisions. Strengthening cooperation and improving the innovation systems on enterprises», considerable attention in it is paid to the formation of an effective mechanism for the transformation of budgetary allocations for science and education to economic development, employment growth and improvement of social welfare. Key issues to be addressed in 2020 are associated with slow economic growth, insufficient level of productivity, need to shift from European markets to the world ones, weak position of SMEs in niche markets, imbalance in support of thematic research and development towards the dominance of certain sectors (pharmaceuticals, biotechnology, energy). The strategy developed a set of 27 tools in three areas of the innovation policy:

1. «Innovations in solving social problems»: optimization of the national innovation system through restructuring a number of government research councils, agencies and foundations; increasing transparency and easier access to government programs of innovation support; Danish participation in the expansion of EU initiatives on the principles of co-financing; issue of the catalog «INNO +», that identified key strategic areas of investment in innovation (transport, environment, urban development, food and bioeconomy, health, ICT, energy, innovative production); launch of initiatives to create social innovation and pilot partnerships in regions with strong scientific and business positions;

2. «The transformation of knowledge into innovation»: support of clusters and networks; involvement of SMEs in innovative activity (the program «Industrial PhD», «Promotion of Innovation», «Startups graduates», system of innovation vouchers (small lines of credit to finance R & D expenses), development of Danish network of international innovation centers); optimization of the number of incubators by increasing critical mass of residents; facilitating the exchange of knowledge between research and business sector by increasing public funding of joint projects, expansion of the target audience of Danish science e-library, document flow, creation of additional jobs for researchers;

3. «Strengthening the innovation potential through education»: increase in the practice at all levels of education; support innovation in education, including new forms and methods of training; systematic support of young talents; development of innovative and entrepreneurial skills of students; strengthening cooperation between business and educational institutions.

Picture 3 shows present structure of the national innovation system in Denmark after the optimization carried out at the level of institutions, which formed and implemented innovation policy, and at the level of direct participants of the innovation process (for example, by consolidating universities).

Pic. 3 – National innovation system of Denmark

 

The document dd. 2008 «Research 2015», identifying priority areas for research and development, was replaced by a new one in 2012 – «Research 2020». The current index, which was a result of joint work of universities, research organizations, ministries and research councils, represented a common vision of Sweden as a healthy, high-tech, competitive, inclusive society, developing «green» economy with a powerful innovative potential, strengths and competencies and high quality of life. According to this document, by 2020 Denmark should be among the top five OECD countries among the share of innovative SMEs, the level of private investment in R & D relative to GDP and the share of employees with higher education in the commercial sector.

Among the most important instruments of national innovation policy, in addition to the above, one should note personal tax credits for foreign researchers and other high skilled employees in Danish companies and research institutions, in force as of 1992; tax credits for income tax for the companies involved in R & D spending; framework and project grants provided by national programs supporting research and innovation; loans and loan guarantees provided by the Danish SME Development Fund; investment in large-scale infrastructure in the framework of the Roadmap for the development of research infrastructures (2011) and others.

Regional level of innovation policy is implemented through regional forums of economic growth, in force since 2006 in five regions of Denmark (Capital Region, North and Central Jutland, South Denmark, Zealand) and, separately, on the island of Bornholm. It is advisory bodies to the regional councils that do not have their own fund and are re-elected every 4 years. Among their main functions one can note development of regional business strategy, monitoring of trends in regional and local economies, development of recommendations for co-financing of regional measures to support entrepreneurship and innovation. All regional forums for economic growth closely cooperate with the Danish Board of economic growth in order to coordinate national and regional innovation policy. From 2007 to 2012 regional forums of economic growth were responsible for the preparation of medium-term or long-term development strategies for each region, taking into account its specific character, strengths and weaknesses, as well as national priorities. Despite the significant differentiation in the level of economic and innovative development of the regions, common to all strategies were emphasis on public education, training and attracting skilled labour, support for entrepreneurship, new technologies and innovations. Among the main measures of regional innovation policy one should mention public-private partnerships, cluster policy, open innovations, government acquisitions and innovation in the public sector, support of start-ups and innovative SMEs, promoting the exchange of knowledge, development of intellectual demand and innovation in the service sector. An important mechanism to support Danish regions is the EU framework program, funding of which is used also on creation of cross-border clusters (the most successful – «Medicon Valley») [2].

Innovation policy in Germany

In accordance with the principle of the federal government, enshrined in the German constitution, the responsibility for the formation of innovation policy is divided between the federal authorities and the authorities of 16 states with the release of exclusive questions and sharing knowledge. At the federal level, a significant role is played by two ministries: Education, Economy and Energy. Other ministries are involved in the development of research programs and support research within its field of competence, including the establishment of research institutes. All government institutions under the jurisdiction of the federal ministries are united in the association «Working Group of department research institutions». State authorities and management in Germany have a number of advisory bodies that assess the overall dynamics of the innovation system of the country and develop recommendations to strengthen it. The most significant and oldest is the German Council of Applied Sciences and Arts, established in 1957 by an administrative agreement between the Federal Government and the states. In addition to consulting services on higher education and scientific research, the Council carries out accreditation of non-state universities and severally liable with the German Research Foundation for funding the advanced university research within the framework of a comprehensive program «Excellence initiative».

The basis of innovation policy at the federal level is stated in a number of strategic and program documents, the most important of which is a comprehensive strategy in research and innovation «Strategy of high technology». It was launched in 2006 and combined a wide range of government initiatives and programs. In 2010 the country adopted an updated version of the document till 2020, where it fixed the key areas of development of promising markets and technologies (biotechnology, nanotechnology, micro-optical systems, new materials and production technology, aeronautical engineering and ICT); increased cooperation between science and business; coordination of political initiatives on both federal and regional levels. Also appeared separate national strategies on building research infrastructure, including international importance («National roadmap for research infrastructures», 2013); development of bioeconomy as an alternative to non-renewable energy sources («National research strategy bioeconomy 2030», 2013); internationalization of research activities («Strengthening of the role of Germany in the global scientific society», 2008); support for higher education and growing need for highly qualified professionals («Higher education pact 2020», 2007) and a number of others which form the basis for regional initiatives.

Federal states possess broad authority to develop and implement research and educational policies. Each land forms its own legal framework in this area and the budget to finance public higher education institutions and non-university research organizations and institutions. Some of the most innovative active regions developed comprehensive development strategy (North Rhine-Westphalia, Berlin, Brandenburg, and others) and issued series of program documents (Bavaria, Hesse, and others). The centerpiece of the current regional innovation policy in Germany is concluded in the idea of ​​smart specialization, based on the existing regional differences in the innovative development of land; support for SMEs, whose activities are focused on innovation; formation of strong regional clusters. A joint scientific conference, whose members are the Ministers of relevant ministries, was established in 2007 to coordinate the activity of the Federal Government and state governments in research policy. The range of issues within the conference is quite broad and incorporates financial, strategic and international areas of focus.

Funding of research and innovation in Germany is implemented through a wide range of government (federal, regional and joint), semi-public and private non-profit foundations, which include scientific and academic, party, church, industrial and other types. Basic tools of stock support are focused on three areas: research projects, promising young personnel, innovative SMEs. The Association of German research funds is designed to assist in overcoming disunity between funds in the implementation of its programs.

Research and development sector of the country is represented by a wide variety of participants, some of which trace their history from the beginning of the twentieth century and earlier: public and private universities, academia, public research organizations and institutions of basic and applied research, scientific research centers, companies with R & D divisions, etc. The major research associations in Germany are four non-university public research organizations: Fraunhofer Society, Helmholtz Association of Research Centres, Leibniz Association, Max Planck Society, who has its own research funds. It should be noted that, traditionally, German research organizations and industry are characterized by close cooperation ties and, as a consequence, persistently high level of funding of science and research business, which is largely a result of strong government technology policy of the second half of the twentieth century. Modern innovation system of the country is represented in Picture 4.

Pic. 4 – National innovation system of Germany

 

One of the main tools of the innovation policy in Germany is the development and financing of programs to support research and development projects: a) private or thematic, which are based on long-term frameworks in specific areas of technology (biotechnology, nanotechnology, ICT, medicine and health, environmental protection, space etc); b) open, which support more versatile research and are not intended to thematic restrictions. By the beginning of 2013 the total number of programs was 242, of which 92 were federal (including 20 – open) and 150 – regional (incl. 115 – open) [10]. In order to improve the efficiency of research activities, most of the thematic programs are focused on the use of public-private partnership. Table 3 shows the major government initiatives to support research and innovation in Germany.

Table 3

Main initiatives on support of science research and innovations in Germany

Program Main lines and tools
Initiatives to support innovative SMEs and start-ups
«Innovative SMEs», «Central innovation program for SMEs», «Program Venture Capital», «EXIST Program», «Industrial collective research», «SIGNO», «Go-Inno» and others. facilitating the access to finance research activities of SMEs; increasing transparency and reducing costs for SMEs, including the purchase of R & D and specialized services, management of innovation networks, staff; financing of start-ups (direct equity investments in the seed stage, co-financing of private investment in the early stages, repeated investment and the provision of state. guarantees in the later stages, preferential loans with below-market rate%); improving the framework conditions for the development of entrepreneurship in universities (grant support start-ups and spin-offs created by academics); facilitating access to the results of research and development for SMEs; grant support for the formation of self-organizing research associations; co-financing the costs of patenting; consulting services
Initiatives to improve the system of higher education
«Initiative: Qualification for Germany», «Promotion through education: open universities» and others. improving the quality of higher education in order to create a pool of qualified professionals; funding on a competitive basis, and initiatives to improve the integration of university curriculum
Initiatives in the field of regional development and the creation of innovation clusters
«innovative concept», «innovative regional growth centers»,  «potential growth centers», «Center of Innovation Competence», «Innovation Forum», «InnoProfile», «ForMaT», «Twenty 20 – Partnership for Innovation», «Competition of advanced clusters»  «Innovative alliances» (subsequently merged into «Entrepreneurial regions») and others. strengthening of smart specialization through the creation of innovation clusters; stimulating creative thinking and the development of competencies; support for cooperation of large industrial conglomerates and government organizations of R & D to develop innovations that require long-term studies; funding of innovation in the priority areas; systematic support of the regions in East Germany; reimbursement of labour costs, establishment and development of infrastructure, equipment and staff training, purchase of consulting and research services; grants, tax breaks (including by reducing social security contributions)
Initiatives to support young talents
«Initiative of excellence», «Germany sholarship», «Joint Initiative for Research and Innovation», «Qualification initiative», «Increasing scholarship» joint programs with various foundations and others. postgraduate funding of young scientists; long-term contracts with young researchers in universities; grants, student loans, scholarships to young talents; support of non-traditional research approaches; increased scholarships for students; supporting women researchers; funding for joint research projects and the participation of German researchers in international conferences

 

In addition to the above initiatives, Germany used a number of additional tools and mechanisms, such as fiscal incentives for the creation of a more favorable environment for financing start-ups and innovative SMEs at the early stages (new laws on venture capital and equity participation, 2008); the mechanism of state acquisition of innovative products (a joint initiative of six federal ministries «Decision to step up innovation-oriented state acquisition», 2007; Act, encourage competition, 2009); liberalization of immigration laws in order to increase the flow-in of highly skilled experts and scientists (German Immigration Act, 2005; «Labour migration helps to ensure a sufficient number of skilled workers in Germany», 2008; «The recognition of foreign skills», 2012); creating a legal framework to ensure the continued co-funding of universities by the Federal Government and the states (federal law to provide assistance in training, German Basic Law (Art. 91b) in ed. 2014) and others.

Innovation policy in Norway

A switch to innovation policy in Norway is due to the desire of national authorities to restructure the economy in order to reduce dependence on traditional industries, which became very crucial in the second half of the twentieth century as a result of an open and active development of oil and gas. At present, products of oil and gas sector is the basis of the country’s export, and major oil companies («Statoil», «Norsk-Hydro» and others) are the main investors in research and development. One of the mechanisms linking actors of industrial and research sphere is an instrument of «goodwill agreement», involving the provision of benefits to companies for the acquisition of exploration rights in return for the purchase of specialized R & D and services produced in the country. It should be noted that despite the high profitability, such model of economy is quite vulnerable to fluctuations in world oil prices, and its vital resource is limited by proven hydrocarbon reserves. The maintaining of the existing system of connections increases the risk of a sharp collapse of investment in research and development as a result of negative trends in the commodity sector.

The desire to achieve greater stability and balanced development of the country prompted the national authorities for increased support of alternative sectors of the economy, such as biotechnology and bioeconomy, ICT, new materials, aquaculture and others and transfer their experience in innovation, known in traditional sectors: mining, agriculture, navigation and fishing. Because of the limited number of large national companies focused on R & D, priority is given to the development of small and medium-sized businesses, capable of forming strong competitive clusters in the regions (especially agricultural and peripherals). The main tool to stimulate innovation in Norway is a tax credit system to support «Skattefunn», introduced in 2002 for SMEs, and since 2003 spread to all enterprises subject to taxation within the country. Ten years’ experience of this system proved its high efficiency, including comparison with other innovation policy instruments (grants, subsidies, etc), which has pushed the government to significantly increase the size of tax deductions in 2014.

In the field of science and education in connection with the new national development priorities one can outline a number of trends: firstly, decentralization and focus on support for innovation, resulting from the research activities of the regional universities and colleges; secondly, creation and implementation of social and environmental innovation. The result of the reorganization of the leading organizations and institutions of the institutional infrastructure, done in the 2000s, was the formation of the modern structure of the innovation system in Norway, shown on Picture 5.

Pic. 5 – National innovation system of Norway

 

The Parliament and the Government of Norway are responsible for the course of the innovation policy of the country. A key role in this process is assigned to the Ministry of Education and Science, which is responsible for coordinating the overall efforts of other ministries and is the main source of financing educational and research spheres. Other ministries are involved in supporting R & D within the framework of its specialization. Some of the largest budgets for research are granted by the Ministry of Health and Social Welfare and the Ministry of Commerce, Industry and Fisheries. The fundamental document for the development of science, education and innovation are the white book «Innovative and Sustainable Norway» (2009), «The long-term plan for research and higher education in 2015 – 2024» (2014), «The strategy of cooperation in research field with Europe» (2014). To support the priority technology areas and industries Norway also developed a number of thematic research and innovation strategies, including bioprospecting (2009), environment, biotechnology (2011), nanotechnology (2012), ICT (2013).

In 1993, as a result of the merger of five research councils in the innovation sector of the country appeared a large state player – The Research Council of Norway (RCN), which received the right to participate in the development of science and technology policy, to fund research and act as a communication platform for «triple spiral». RCN accumulates funds of all ministries. The level of funding from each ministry is different and depends on the tasks facing it. Currently RCN uses four groups of instruments for financing research activities [12]: a) «research programs» (support on a grant basis of collective, strategic and targeted research initiatives, promote the commercialization of innovations in a certain subject area); b) «independent projects» (funding of individual projects in the field of basic science, which are not linked to specific research programs); c) «infrastructure and institutional arrangements» (creation of the innovation infrastructure, various research institutions, purchase of scientific equipment, databases / collections); d) «network partnership event» (strategic initiative to create partnerships between actors within the country and international cooperation).

In 2003 it created a government agency – «Innovation Norway», whose tasks included the simplification of the formation and development of innovation and supporting infrastructure; strengthening of relations between regional development, innovation and internationalization; representation of national interests in the sphere of trade abroad. At the moment, «Innovation Norway» is acting as the center of the support for Norwegian business and innovation at all levels of management with a wide range of tools: high- and low-risk loans, grants, venture capital, consulting and advertising services, development of business networks and clusters. Also, the Agency is implementing main directions of the state regional policy: a) regional innovation clusters (strengthening and revitalization of the cluster cooperation, increase of innovation and competitiveness of regional businesses); b) business network (support of SMEs in the value chain, forming strategic partnership); c) development of competencies (improving the availability of new knowledge for regional business community through collaboration with universities and university colleges); d) program of regional development (expertise of regional programs for restructuring, management and control of its implementation).

Another important actor in the innovation system of Norway is the state company «Industrial Development Corporation of Norway» (SIVA). Being established in 1968 in the department of the Ministry of Commerce, Industry and Fisheries, by 1990 – 2000 it has expanded its role in stimulating innovation development at national level through the creation and support of innovation infrastructure (business incubators, business – «gardens», science parks in the community colleges, regional venture capital and seed funds), investment in commercial real estate and consulting services. In the 2000s, RCN, SIVA and «Innovation Norway» formed the Triple Alliance, which aim is to provide a complete package of services and public funding for science and innovation. Significant joint initiative of the Union was to launch three cluster programs that involve long-term financial, technical and consulting support on a competitive basis: «Arena» in 2003, «Norwegian competence centers» (NCE) in 2006 and «Global competence centers» (GCE) in 2014. Currently, they are combined into a single integrated multi-level program «Innovation clusters of Norway».

There is a relatively little number of funding sources for R & D sector, that are independent from the triple alliance. Among them are some large industrial companies and organizations in the service sector, private foundations, funding specialized studies (Norwegian Cancer Society (NCS), National Public Health Association (NAPH) and others) and individuals. The EU Framework programmes are an important source of foreign funding.

Describing the participation of regional authorities, represented by the districts (fylkeskommuner) and the municipalities of the third level, in the formation of innovation policy, one should note the tendency to expand the area of ​​its responsibility for the selection of priority areas of development, management, coordination and co-financing activities in the area of ​​innovation. The main mechanisms to involve regions in the government initiatives to support the competitive regional innovation systems is the «regional program of research, development and innovation» (2007), including complex financial instruments, notably the creation of regional research funds.

Research and development works in Norway are carried out by universities, specialized and regional university colleges, research institutes of two types («research» and «with research») and R & D divisions of large Norwegian companies. In 2000 as a result of merging of Norwegian Council of Universities and Norwegian Council of University Colleges was formed the Norwegian Association of higher educational institutions (UHR), which serves as a coordinating body between universities and university colleges and represent it on key issues in education and science questions in cooperation with public authorities. Since the beginning of the 2000s higher education has become actively involved in the creation of technology transfer centers, science parks and incubators. The cooperation on a contractual basis between universities and research institutes was enhanced, what established a separate joint research organizations to conduct case studies.

Innovation policy in Finland

Finland is one of the first countries that adopted the concept of national innovation system as a fundamental idea of ​​the strategic development of the state and the basis for the formation of innovation policy. Its innovation system has evolved over a long period and can be considered as the oldest in the Baltic region. A critical factor for changing the Finnish industrial and technological policy of the second half of the twentieth century and its subsequent transition to a comprehensive innovation policy, was the need to maintain national competitiveness through gradual restructuring: from a traditional resource-based model of industrial growth in the economy, and subsequently innovation. The process of formation of the Finnish national innovation system includes four significant periods: a) «institutionalized» (1960 – 1970es), which can be characterized by the creation of the institutional framework of the system (key institutions and links between them), development of a conceptual framework, principles and mechanisms for scientific and technical policy, implementation of measures to promote education and support industrial R & D; b) «target orientation» (1980es), associated with the beginning of the implementation of national technology programs and a set of measures for the commercialization of research results (also through the creation of science parks, competence centers, etc.); c) «systemic innovation» (1990es), uniting four basic ideas of new economy, «knowledge», «education», «innovation environment» and «internationalization» as the strategic guidelines for national development, maintained by the appropriate level of public financing; d) «optimization» (2000es), characterized by enlargement of main institutions of the innovation system of the country and the consolidation of their resources, structural reforms aimed at strengthening the interdisciplinary and social significance of the research activities, deepening of international cooperation, development of innovative services, improving the effectiveness of existing mechanisms for attracting foreign direct investment.

Current structure of Finnish innovation system has some similarities with the innovation systems in Sweden and Norway (see Pic. 6). Among its important characteristics one should note system integrity; high institutionality and significant role of state support; focus on applied research and commercialization of R & D; strong educational component; accumulated social capital and, as a consequence, development of network connections based on trust; high degree of integration of business and science in the international context. Key themes of the innovative development are bioeconomy, alternative energy, information and communications technology and health care. Also, considerable attention of Finnish government is paid to the area of ​​innovative services and creative industries.

Pic. 6 – National innovation system of Finland

 

Implementation of the basic principles of national innovation policies is carried out through a set of tools, including tax incentives (tax credits for tax on personal income for invited foreign experts and researchers and on income tax for companies in terms of labour expenses for personnel engaged in R & D; the postponement of the payment of capital gains tax for business angels, who provide venture capital to SMEs, tax credit for SMEs engaged in research activities, accelerated depreciation, etc.); the mechanism of state acquisition of innovation, aimed at promoting advanced energy and environmental solutions (such as «green» technologies), increase of the participation of SMEs in innovative activity, increase in the number of new small innovative companies; venture capital financing; long-term investment loans, grants, provided on a competitive basis through various support programs, including public and semi-public funds; targeted subsidies, etc.

Regional innovation policy in Finland is formed mainly at the national and pan-European (through structural programs EU) levels. Its main purpose is to increase the competitiveness, sustainable development and the creation of a balanced regional structure. The main instrument of innovation development of Finnish regions for nearly 20 years has been the program «Centres of excellence», transformed as of 2014 into the program «Innovative City». Events of old and new programs are focused on strengthening strategic competencies of regions and creation of competitive innovation centers (clusters). The participation of regional and municipal authorities (councils) in the formation of regional innovation policy is limited. The regional councils are responsible for the overall development of regions, forming the regional plan and a strategic program based on targets of regional development, developed at other levels, including the sphere of innovation (Pic. 7). Municipal councils are involved in supporting the system of universities of applied sciences (polytechnics otherwise) and participate in the creation of campuses.

Pic. 7 – Formation and implementation of regional development policy in Finland

 

Conclusion

According to the analysis the innovation policy in the developed countries of the Baltic region is being held since the late 1990s, but its basis was laid much earlier – in the middle of the twentieth century in the framework of industrial, scientific, educational and technological policies that were formed in parallel and in conjunction with the formation of key institutions, that subsequently formed the core of national innovation systems. Features of modern innovation policy of Sweden, Denmark, Norway, Finland and Germany are largely a consequence of the tasks facing their governments throughout the twentieth century to restructure national economies in order to increase competitiveness in the international arena. Context conditions that accompanied the transition to the development of high-tech activities in these countries, as a rule, advocated a small domestic market capacity, resource constraints (human resources, investment, natural resource, etc.), high dependence on the international situation, increasing negative impact on the ecology. Common to the developed countries of the Baltic region at the current stage is the pursuit of sustainable and dynamic development by improving productivity, ensuring high standards of living, overcoming imbalances in territorial development and deepening integration into the global community. Innovation policy in this context is the main instrument for achieving the strategic guidelines.

The common features of national innovation policies are systematicity, integrity, continuity, result-orientedness, goal orientation and a high degree of institutionalization. Note that the process of formation and implementation of innovation policy in Sweden, Denmark, Norway, Finland and Germany simultaneously affects several hierarchical levels: pan-European, national, regional and local, but in different degree. Because of the involvement of regional authorities in the development of innovative policy we have identified three country groups: those with a strong position of the regions (Germany), moderate (Denmark, Sweden, Norway) and weak (Finland). Developed countries of the Baltic region, as well as others, that implement an innovative model of the economy, still see relevance of issues related to lack of venture capital, need to attract highly qualified specialists, weak involvement of SMEs in research activities, mismatch of volume of commercialized R & D results to state investments in the research sector, strong differentiation of regions in terms of innovation, lack of patent activity, etc. Each of the countries, taking into account the general line of the European Union, is developing its range of innovation policy tools aimed at addressing these problems, but in general, there are five clusters of influence: education, basic science, applied science and entrepreneurship, regional development, internationalization. Among the most striking trends in innovation policy of the countries in question until 2020 we marked interdisciplinarity and intersector approach, focus on consolidation of internal resources and improve of the efficiency of its use, development of ideas for smart specialization of regions, increased attention to the social and environmental importance of innovations, more active support of the internationalization of SMEs, implementation of the concept of open innovation, strong educational component, associated with the support of talented youth.

 

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