Innovation for Sustainable Forest Management

What is it & why is it important?

Ewald Rametsteiner

ERASMUS IP Iisalmi, 16 May 2005

... and changing times we have: - new resources & suppliers

(e.g. Eastern Europe) - new technologies - new markets

(e.g. carbon, energy) - changing consumer needs &

demographics ....

“If you stand still in times of changes you

are in fact drifting backwards”

...so: how is the forestry sector doing? Is it taking advantage?

Asia-

a large extent inaccessible

-

Innovation

Successful introduction of novelties

Discontinous intentional change in the inputs,

outputs and processes of an enterprise

Differs from invention – creation of something that

has not existed before

„Innovation diffusion“ or „innovation adoption“ is

used if looked at a sector or economy as a whole

Innovation

New to the firm – new to the market

Radical – incremental

Innovations

Product Process

Goods Services Technological Organisational

Linear Innovation

Innovation research: From linear to systemic understanding

ProductIdea

Development

ProductTest

Marketing

Non-linear / complex process systemic research - structures, processes,

interactions - functions of system as a whole

Framework Conditions

Financial environment; taxation andincentives; propensity to innovation

and entrepreneurship ; mobility ...

Research System

Professional education and training

Higher education

Public sectorresearch

Production System

Large companies

SMEs

Forests Resources / Supply

Intermediaries

Research

institutes

Brokers

Consumers (final demand)

Producers (intermediate demand)

Markets / Demand for Forest Products

Banking, IPR and Innovation and Standards and

Infrastructure

Political

System

Government

Governance

RTD policies

business supportinformationventure capital norms

Suppliers (intermediate products)Resource raw material producers

Education System

Prior Conditions Knowledge Persuasion Decision Implementation Confirmation

Innovation phases the firm perspective

Innovation Diffusion

Innovation Diffusion & Adopter Categories

Innovation & Entrepreneurship – Why is it important?

Innovation are engines for

• economic growth,

• competitiveness,

• income creation & firm profit,

• employment creation, esp. in rural areas,

• changes towards environmental improvement and

sustainable development,

• meeting changing consumer needs & demographics

EG

C&P

EC

SD

CN&D

Innovation General Policy

European Union Lisbon Strategy on competitiveness & innovation EU Research Framework Programmes 6 & 7 EU Research Project Lines and infrastructures

National Policies and Strategies Ministries or Agencies on Innovation Funding programmes and initiatives

Focus on growth promising high-tech sectors

0% 5% 10% 15%

Productquality

Productivity

Jobs

Growth

2010 2030

EU: Expected gains from reaching 3% R&D by 2010 compared to status quo

Innovation Forest Sector Policy

European Union Forest-based Sector Technology Platform “Innovation &

Sustainable Development” initiative New institutions, initiatives & programmes in new areas

(e.g. bioenergy, carbon)

MCPFE Vienna Resolution 2 on economic viability & work

programme

UNECE/FAO European Forest Sector Outlook Study: competitiveness

as major issue

National policies & strategies Rather new topic, few coherent policies & programmes

(exception: Finland) Focus on specific topics, partly covered by policy

makers outside forest sector (e.g. biomass)

Innovation and economic growth

Neo-classical growth accounting

• based on capital and labour input - result: up to 80% due to

technological change (=technological innovation)

• if R&D, quality of labour etc. is accounted - result: about 30% of

growth

Endogeneous calculations

• Growth effect of spillovers and externalities (not all benefits can

be accrued by the inventor)

• monopoly rent diminishes over time due to imitators

EG

C&P

EC

SD

CN&D

Yes, but…why is economic growth important? 

Economic growth is measured by gross domestic product (GDP).  Economic growth is defined as positive rate of change in real GDP.  A satisfactory rate of economic growth is when the economy grows faster than the population, thereby increasing standards of living for individuals in an economy. (i.e. one where positive per capita rates of growth in real GDP takes place.)  

economic growth improves the overall standards of living of individuals in an economy. 

economic growth is one way to reduce unemployment & poverty in an economy. 

The OECD defines competitiveness as "The degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term".

Overall competitiveness, is a result of many factors: macroeconomic environment, ICT, innovation, public institutions – these all have a strong influence on increased productivity.

International competitiveness is seen as an important component of economic growth

Innovation and competitiveness

EG

C&P

EC

SD

CN&D

Productivity, competitiveness and employment

Long-term international statistical trends show that there is a strong correlation between national productivity and the level of unemployment. (higher productivity = lower unemployment)

The more productive an enterprise, the more income it can save for new investments and therefore create new jobs.

Short-term negative effects of productivity on unemployment are outweighted by long-term benefits.

R&D investments account for about 50% of total factor productivity growth, 1% of R&D capacity increase = approx 0,05-0,1 output growth

Innovation andfirm profitability

…is difficult to prove as profits are influenced by a wide range of factors

Existing studies find: a positive but modest influence a positive correlation to market share and profit

margins

Innovation & employment creation

A process innovation is labour saving, if the same amount of output can be produced with less labour.

the direct effect on employment is negative if output remains the same.

an indirect effect of higher employment is possible if Firms gain more from the increased productivity of

labour than from more capital input Market demand increases considerably 

EG

C&P

EC

SD

CN&D

For product innovations a positive (direct) effect of successful product innovation on employment is more likely if new products address new needs. If new products act as substitutes for existing ones, there will be positive employment effects only, if product quality is higher than before and labour intensive.

A net employment impact of product innovation is more likely to be positive if new products are complements to existing ones.

 

Innovation & employment

Employment creation: Bioenergy

Number of direct and indirect jobs created for 1000 toe consumed:

- forestry: 4.2 – 6.3- wood waste: 2.3 – 3.7- oil: 1.4- gas: 1.2

Source: Eurobserver 2004

…and this mainly in rural areas!

Environment & sustainable development

New markets: carbon sinks

New markets: bioenergy

New trends: wood construction

New business/marketing models and tools: forest certification

EG

C&P

EC

SD

CN&D

Consumer needs & socio-demographics

EG

C&P

EC

SD

CN&D

Changing attitudes: nature

Changing lifestyles: urban life

Changing socio-demographics: urbanisation, family, age structure,

mobility,..

Changing consumption: experience of nature, outdoor, excitement, silence?

Einschätzung der Wichtigkeit von Märkten

1

2

3

4

langfristig - Wichtigkeit in 20 Jahren 3,6 3,8 2,2 3,4 3,1 3,5 3,4 mittelfristig - Wichtigkeit in 5 Jahren 3,2 3,5 1,8 3,3 2,8 3,2 3,3

Bioenergie Trinkwasser Gentechnisch

veränderte Pflanzen

Erholung/Tou rismus

Vertragsnatur schutz Klimaschutz Holz

4= hohe Wichtigkeit 3= mittlere Wichtigkeit 2= geringe Wichtigkeit 1= keine Wichtigkeit

Market Expectations of forest owners/managers and forest policy actors in Austria 2002

Forest policyexpectations medium term

Concluding remarks

Innovation is seen as driver of economies

Innovation effects are difficult to quantify

The current focus on process innovation is not enough

Drucker: „as every businessman knows, efficiency

alone does not bring business success“

Innovation is risky and prone to fail

..but not to innovate is risky too (or too risky)