Increasing innovation capacities of companies

Taking the Challenge – promotion of innovation in IT sector SMEs

Riga, April 20, 2007

Valdis Avotins, Knowlege and Innovation System Department

Rapidly changing environment (2)Real GDP (PPP): Projections 2004-2015 (Using 1991-2003 Average Growth Rates)

0

2

4

6

8

10

12

14

16

2003 2005 2007 2009 2011 2013 2015

Trillions of 1995 international $

India China Brazil

Canada France Germany

Italy Japan Mexico

Russian Federation United Kingdom United States

India

China

United States

JapanGermany

United Kingdom

France

Italy

Canada

Mexico

Russian Federation

Brazil

Source: WBI

Knowledge, transfer, absorbtion, innovation

Policy:

What ?

Why ?

How ?

Who ?

Needanalysis

Supplyanalysis

Awarenesscampaign

SWOT andSynthesis

Gaps and market failures

identified

RIS Latvia – a step by step approach

stage 1

meetings of RIS and NIP SCs and National Economy Council

stage 0 stage 2

Detailedelaborationof theworkprogram

Definitionofmeasuresandpriorpilotactions

Validation

Presentation& discussionof analysesresults;Gaps identified

consensusbuilding

01/2002 12/2003 03/2003

12/2004

Share of innovative firms, %, 2002-2004

14,1

27,2

53,6

0

10

20

30

40

50

60

10-49 50-249 >250

17,5% innovative firms gave 42,3% of total turnover in 2004

Only 4,7% product innovative

Only 3,5% high-tech in manufacturingSource: CSB

Weaknesses and challenges

• Research and industries develop isolated

• Research policies doesn’t include industry’s needs

• Economical growth has not increased R&D demand

• Small public R&D budget doesn’t reflect Government priorities

• Lack of entrepreneurial spirit and innovation culture

• Still dependence on low-tech, low productive and low cost industries

Assimmmetry of information (308 firms intervied)

0 20 40 60 80 100 120 140

University of Latvia

Riga Technical University

Latvia University ofAgriculture

Riga Stradina University

Service is knownService usedI will use again

RIS Latvia, 2003

Lack of technological competitiveness

0% 25% 50% 75% 100%

To attract external experts

Diversification of existing products

Purchase of products / licences / technologies

Collaboration with other enterprises

Increase of market share in other markets

To increase ability to react on market changes

Increase of market share and/or detection of new markets in EC

Increase of technological competence

To increase competence inside the enterprise

Increase of internal production capacity

Development of new products

Optimisation of operations to decrease costs

Increase national market share and/or detection of new marketsnationally Latvia

Sweden

0

9

18

27

36

Latgale

Rīga

A. Passive

B. Reactive

C. Strategic

D. Creative

High-Tech

Innovative

Don’t know that they don’t know

Know that they don’t know but don’t know what they don’t know

Know but not always what and how

High knowledge and absorption capacity

Source: RIS Latvia, WB methodology, 2004

Level o

f know

ledg

e o

f need

ed

chan

ges: w

hat a

nd

how

Enterprises by their technological capability

The NIS consists of several components aiming to foster the economic success of the firms and thus to increase the quality of life

The continuation of the RIS Latvia

The project of Regional Innovation Strategy (RIS Latvia) has became the milestone for developing the NIS, NDP and Regional Innovation Strategies

Monitoring and efficiency

• Social and Human Capital

- Universities

- S&T training and education

•Absorptive Capacity

- ”Follower” firms; Intermediate and end consumers and professional users

- Market for goods and services

•Research Capacity

- Universities; government,

laboratories

- Basic scientific research

•Knowledge Users

•Knowledge Creators

• Public Sector

• Private Sector

• Technology and Innovation Performance

- “Creative” firms

- Applied R&D and product/

process development

NIS concept contribution

National Development Plan 2007-2013

Financing for R&D&I, ERDF in%

18,31

6,11

0

2

4

6

8

10

12

14

16

18

20

2004-2006 2007-2013

Period

% 2004-2006

2007-2013

New products and technologies

Risk capital scheme

Shared laboratories

Training, consultancies

2004-2006

Strand III support

Business incubators

Pre-Seed

TTOs & LiOs

Competency Centres

Risk Capital

Qualified personnel

New product scheme

Innovation-System Created

Monitoring System

PPP Concept

Foresight

Operational Programme 2007-2013

Inno-Culture

Skills Centre

Techo-consultancies

TI – VCF scheme

Need analysis

Riga NIP

Business Angel networks

EU networks

Systemic innovation; the value chain

Source: Inno Group, 2007

Competitive companies

4,0

6,85,6

10,29,8

5,0

13,3

19,1

2002 2003 2004 2005

Applied research Experimental development

R&D performance in business sector shows positive pace

Intramural R&D in business sector by research type, EUR mill.

Source: Central Statistics Bureau, 2006.

Generation ofnew concepts

Productdevelopment

Redefinition ofprod. processes

Redefinition ofsales processes

Management (Knowledge and technology)

Mar

ket

dem

and

Market

Universities, R&D institutes, Private consultants, etc

Innovation management in companies

Planned aid budget – 8,4 MEUR

Received applications – 88, required grants 10,8 MEUR

Rejected projects – 43, total grants ~5,1 MEUR

Signed contracts – 45, total grants 5,7 MEUR

Changes in contracts (in paid out grants) – 31%

Support for Development of New Products and Technologies

(2004 – 2006)

Conclusions:• SMEs weak in formulation their technological needs• SMEs first look to grant, not to business goals and market demand• SMEs lack of innovation culture• SMEs need focused training and specialised consultancies• Consultants lack deep specialisation• Aid programs need better focus to market failures

Developing an Innovation and Enterprise CulturePromotion of entrepreneurship

– The specific strategy and mechanism for creating awareness about enterprise, and creating an environment whereby entrepreneurial activity is nurtured, supported and developed

– Creation of conducive environment– Awareness building campaign– Entrepreneurship education– Promotion of new innovative companies

Promoption of intrapreneurship – creating innovation culture in firms– Provide training in Creativity; – Promote a training culture in companies;– Empower employees to take an active role in the development of

enterprises;– Provide an environment for creating and developing new ideas;– Prepare managers to support the ideas developed by employees; – Define creativity as part of work;– Involve employees in decision making process; – Establish relevant system of innovation motivation and „bonuses”; – Allow risk as part of daily work; – Increased investment in R&D; – Evaluation of the effectiveness of work results

Thank you for attention!