ANNEX 2: NATIONAL INNOVATION SYSTEMS

National Innovation Systems: A Short Review

Country: Austria

Introduction – the Austrian innovation system

The country belongs to the group of EU member countries with the highest R&D expenditures as a percentage of GDP. Furthermore, according to the latest European Innovation Scoreboard, Austria is ranked first in the group of “innovation followers” with very good performance in input indicators – the main focus of the innovation support system. Furthermore, the mix of direct and indirect R&D funding covers a wide range of innovation activities and types of firms and business models, respectively.

However, central to the entire system is intelligent regulation, which provides innovators with incentive systems that promote innovation. Co-ordinated adjustments of incentive systems are the leverage to improvements in human capital, which is the focal point of innovation performance. The extensive support system provides policy makers with a wide range of tools to address specific problems, but cannot replace the impact of innovation fostering incentive structures. The main challenge, from a governance point of view, is the lack of a joint, content based vision at governmental level. This hampers improvements in effectiveness and efficiency of the innovation system in general, and of the support system in particular.

The support system has been improving steadily, but still exhibits several suboptimal characteristics. Programmes still need enhanced coordination, as the competencies and therefore the programs are often overlapping. Furthermore, the Austrian innovation support system has long been described as 'a jungle of programmes', which, as a consequence, can be used by system of insiders in their endeavours to maximise the financial support they receive.

As a consequence of the input orientation and lacking co-ordination, the innovation system in Austria shows weaknesses in output indicators (see EIS 2008). The overall picture that emerges indicates issues in efficiency: the vast inputs to innovation do not produce the aspired output. Whereas in 'leading countries' evaluations address efficiency issues, recommendations of evaluations are not compulsory for implementation in Austria, and there are no commonly defined guidelines of how to evaluate programmes (evaluations objectives are typically rather vague in Austria, and results hardly bear any consequences).

Innovation Stakeholders

The political responsibility for the development of the Austrian innovation system is shared between several Austrian ministries, which administer their activities largely through promotion agencies and the science fund.

a) Governmental bodies

At federal government level, the main governmental players in science and technology policy are the Ministry of Transport, Innovation and Technology (bmvit), the Ministry for Economy, Family and Youth (bmwfj) the former Ministry for Economics and Labour, (bmwa), the Ministry of Science and Research (bmwf), the Ministry for Education, Arts and Culture (bmukk), and the Ministry of Finance (bmf).

The Ministry of Science and Research is mainly responsible for basic research in Austria. It administers a substantial amount of the total research budget of the Austrian government. It owns the Austrian Science Fund (FWF), which is the most important instrument for supporting basic research.

The Ministry for Education, Arts and Culture is responsible for educational matters and especially for the universities in Austria. The Ministry of Finance is not directly involved in financing innovation

policy, but it plays an important role within the policy system, since it governs the allocation of financial resources, and at least implicitly sets standards for designing and monitoring innovation support programmes.

The Ministry for Transport, Innovation and Technology concentrates mainly on supporting applied research. It holds a 50% stake of the Austrian Research Promotion Agency (FFG), as well as 50% of Austria Wirtschaftsservice (AWS), and is responsible for the Austrian Institute of Technology (the former Austrian Research Center).

The Ministry for Economy, Family and Youth is a co-proprietor of the Austrian Research Promotion Agency (FFG) and owns 50% stake of AWS (Austria Wirtschaftsservice). It is also responsible for the Christian Doppler Research Association, which is a research association supporting application-oriented fundamental research and fosters the cooperation between member companies and universities and non-university research institutions. BMVIT and BMWFJ work on research and innovation in the enterprise sector and supporting institutions. In certain cases there is an overlap of competencies of the two ministries.

In addition to these stakeholders that are directly responsible for research, technology and innovation, there are other ministries that also manage research budgets. For instance, the Ministry of Agriculture, Forestry, Environment and Water Management organises broad research activities in the framework of the programme (programme for research and development). It hosts the Austrian climate and energy fund (Klima- und Energiefonds), which promotes sustainable technologies, local traffic, but also funds R&D. Regular discussions on strategic and operational issues of innovation policies take place in the newly founded Innovation Committee of the Parliament.

b) Main bodies managing implementation of policies

A reorganisation of the system of direct R&D support was carried out as a consequence of an evaluation of the entire promotion system in 2004. This step was necessary, since a multitude of R&D funding institutions have produced an interwoven and opaque promotion system. It is generally acknowledged that these structural reforms have successfully reduced the institutional fragmentation of the system of direct support for R&D in Austria. However, there is a general agreement amongst the innovation community that the proliferation of direct support promotion programmes has again been excessive.

Over recent years, ministries increasingly, if not fully, withdrew from in house programme execution. To a large extent, this task was outsourced to specialised agencies, the Austrian Science Fund (FWF; owned by the BMWF), the Austrian Research Promotion Agency (FFG; jointly steered by the BMWFJ and the BMVITt) as well as the Austrian Promotion Bank (Austria Wirtschaftsservice, AWS), also jointly steered by the BMWFJ and the BMVITt). These agencies implement on a non-exclusive basis the science, technology and innovation programmes for the ministries.

The main objective of the Austrian Science Fund is the support of basic academic research and guaranteeing high quality standards. The Austrian Research Promotion Agency, established in 2004, provides direct funding for innovative industrial projects, mainly through its “basic programmes”, structural programmes (like COIN — Cooperation and Innovation) and thematic programmes as well as the space programme. On behalf of the corresponding ministries the FFG delivers further programmes, such as 'COMET' that promote industry science collaborations on excellence level or the Research Studios etc. .

Austria Wirtschaftsservice, founded in 2002, is Austria´s national promotional bank. AWS offers a broad range of company-specific investment promotion programmes and services, such as financial assistance and consultancy for companies, from the pre-seed phase up to the expansion stage. We offer Austrian companies financial assistance in the form of loans, guarantees, grants and/or equity as well as consultancy services. The agency is inter alia responsible for the life sciences start-up programme 'LISA', the patenting programme program 'tecma'. A special focus has been laid on small and medium enterprises.

In an effort to create a body with the power to design long-term strategies for Austrian innovation policy, the Austrian Council for Research and Technological Development was established in 2000. However, unlike the research councils in other countries, the Council is an advisory board for the

government respectively for individual ministries. It has no formal decision-making powers and its recommendations are not binding for the government. The Austrian Council for Research and Technology succeeded in formulating a strategy 2010, and recently published its Research Strategy 2020, which is subject to the development of the government's RTI-strategy (www.forschungsstrategie.at). Overall, the role of the Council has been weakened, as funds for STI have been retransferred into regular budgets.

The respective ministries continue to 'compete' for dominance in specific policy areas. The fragmentation of competencies reduces the cost-efficiency of support measures, and leads to a high coordination costs between all players, such as the ministries, agencies, the council, or regional agents. As a consequence, the structure hampers the development of coherent policies. There is also a certain degree of competition amongst ministries to develop new measures that the agencies deliver, especially in thematic fields. The agencies are owned by the ministries. The ministries do not only provide strategies and thus design the shape of policies, but in many cases actively intervene into the operational implementation of new programmes. A division of tasks between the agencies and the ministries has often been suggested. Ministries should focus on strategy, whereas agencies should focus on implementation.

Innovation Instruments

The Austrian subsidy system is very generous, and consists of a large number of measures and programmes that address a wide range of market failures, actors and technology fields using an extensive set of both direct and indirect intervention instruments.

In 2008, the present value of the subsidies of the FFG amounted to approximately EUR 421 million. The technology programmes of the AWS provided funds amounting to EUR 43 million in 2007 (last available year), and a further EUR 395 million for programmes promoting firm growth (including special programmes). Hence, the Austrian federal government subsidised industrial innovation by a total of EUR 855 million (the FWF promoted scientific research with funds amounting to EUR 164 million in 2008).

Furthermore, there are fiscal incentives that consist of two types of tax allowances (one for the definition of R&D expenses according to the Frascati manual of the OECD, and another one for economically useful inventions), as well as a tax credit. The system of fiscal incentives for R&D could be considered quite generous compared to other EU-27 or OECD countries. For instance, it guaranteed a gross rate of tax subsidy for EUR 1 of R&D of 11-12. However, the reform of the corporate tax system and the decrease of the corporate tax rate in Austria in 2005 reduced the attractiveness of fiscal incentives to values below 9%, and therefore made it comparable to the level of the EU-15.

Both direct and indirect R&D subsidies amounted to 0.42% of the GDP in 2008. Indirect promotion only refers to tax grants, and thus excludes tax allowances in order to follow the OECD definition of direct innovation promotion. This poses a 16% share of the total R&D expenditures or approximately 25% of business and enterprise financed R&D. Notably, these figures only refer to the federal support level. There are further subsidies of innovation projects at the state level (Bundesländer). However, these are hard to portray, since the funds are typically part of consolidated budget data and thus not available separately. An official estimate of the extent of public R&D support is not publicly available.

Over recent years, the strong increase in the country’s R&D quota has been accompanied, and partly enabled, by a significant expansion of public support measures. In 2004, the value of the subsidies granted by the FFG amounted to EUR 127 million, which is approximately 30% of today’s funding. Despite comparability problems of available data over time, the AWS shows similar increases over time. Almost half of the funding granted is allocated to enterprises (mainly by the FFG), about one third to universities or researchers at universities (primarily by the FWF) and almost 20% to research institutions (including competence centres). The basic funds of the FFG do not have a thematic focus, and account for 38% of the agency’s budget. A further 34% address structural issues, such as industry-science collaborations. A 28% share of the budget is allocated to programmes with a thematic orientation.

A similar picture can be drawn for the AWS, the second major funding agency, where approximately 10% of the federal promotion programmes have a thematic focus, such as nano-sciences and nano-technologies (NANO11) or biotechnology (LISA or GEN-AU12). More emphasis is being put on the following themes: space, environment and climate change, ICT and energy. Service innovations are funded to a relatively small extent, their share in general funding (Basisförderung or basic programmes of FFG) is rather low, and the access to structural programmes of the FFG and to thematic programmes is better but still at a low level in absolute numbers.

There are certain important innovation policy measures which may not provide any direct funding (e.g. legislative measures), or only have marginal budgets, yet have an important leverage effect. The following provides a short list of such instruments which are either already implemented in Austria, or whose implementation is pending due to an already initiated discussion processes, and whose implementation is recommendable:

• Innovation vouchers (Innovationsscheck; implemented) An important step in turning non-innovators to innovators was the introduction of innovation vouchers. Following the Dutch example, the BMVIT and BMWFJ launched innovation vouchers that financially promote newcomers to R&D. A maximum amount of EUR 5,000 is being granted to eligible SMEs, supporting extramural research expenditures (e.g. at universities, applied).

• Exemption of highly innovative SMEs’ R&D-staff from social taxes (recommended) Another possible step is the exemption of highly innovative/R&D-intensive SMEs’ research staff (scientist, technicians, R&D-project managers) from social security taxes for a limited period of time (see Le Statut de la Jeune Enterprise Innovante – JEI in France.

• Regulatory reform of the PE/VC market (pending) A pending step is implementation of a revised VC and PE act in order to provide the underdeveloped market for risk capital with a required regulatory environment.

• Fund of Funds (pending) The launch of a fund of funds initiative could help attracting risk capital. In order to maintain efficiency, project management is done by a private majority stakeholder at conditions usual in the market. Although financially such a step may require substantial funding, the leverage may be extremely high.

New or modified support measures

Several modified innovation measures and programmes were introduced in the period 2007-2008. In order to be able to better and efficiently influence and stimulate the innovation activities of Austrian companies, several programmes were integrated into one programme respectively. Two new programmes have been launched; the JITU program (Junger innovativer technologieorientierter Unternehmer), which was started in 2008 and is administered by the AWS, and the Josef Ressel Centres. Other developments occurred with the programmes COMET and COIN (Cooperation & Innovation), which are modifications or mergers of existing initiatives (both are being administered by the Austrian Research Promotion Agency).

• JITU Program (Förderung von Gründung und Aufbau junger innovativer technologieorientierter Unternehmen) Delivered by AWS, this programme provides seed and pre-seed finance to start-ups. Hence, it targets SMEs from all technology sectors at a very early stage. They should be leading technology companies which conduct applied R&D with the eventual goal to start a company. The funding requirements encompass reasonable market expectations and high management skills. The founders are prepared to take a (small) part of the risk. The companies must be incorporated before the first part of funds is paid, but application may occur before incorporation. Furthermore, the company must not be older than six years at the time when the financial support is granted. Its R&D expenditures should account for at least 15% of total expenditures.

• COMET (Competence Centres for Excellent Technologies; AT 160)

COMET is the follow-up programme of K_ind, Kplus and K_net. It unites these previous measures, and was launched in 2006. The first tender was opened in 2008. The strategic objectives of COMET are to develop new expertise by initiating and supporting long-term research cooperation between science and industry in top-level research, and to establish and secure the technological leadership of companies. The programme is delivered by the FFG.

• COIN (Cooperation & Innovation) The main goal of the programme is to stimulate and to increase innovation activities of companies, and to promote their interaction and cooperation with universities and research institutes, but also with other innovative companies. Thereby, the efficient implementation of knowledge, innovation products and innovation services is emphasised. Special goals of the programme constitute the development and consolidation of competencies and activities related to research and innovation facilities, and to promote innovation ability through networking and co-operations, especially of Austrian SMEs. COIN is split into two operative lines. The first dimension is structural, and deals with the establishment and expansion of applied research, technology, development and innovation facilities. Secondly, the corporate orientation of the programme promotes cooperation in innovation and innovation networks. The programme is delivered by the FFG.

• Josef Ressel Centers Josef Research Centres were launched in 2008, and are designed as competence and cooperation centres between Universities of Applied Sciences (Fachhochschulen) and small and medium enterprises (SMEs). The aim of the program is to foster the research and innovation potential of the Universities of applied sciences on the one hand, and on the other hand, to enable SMEs to profit from the R&D expertise of these Universities.

• Research Studios Austria The programme entitled 'Research Studios Austria' promotes applied research. Studios are small research units connected to a research institution. Target group: universities, all kinds of research establishments and their spin offs. Objectives: to develop the results of basic research into applications for the economy.

• Laura Bassi Centres of Expertise This programme, the only one of its kind in Europe, is committed to equal opportunities for men and women and to establishing a new research culture. The initiative is implemented by the programme w-fFORTE – Economic Impulses of Women in Research and Innovation.

• Energy of the Future Based on the results of the strategy 'Energy 2050' a new energy research programme will be launched by the BMVIT and BMWFJ. The objectives of this programme: energy efficiency, renewable energy and intelligent energy systems. The programme comprises the support for R&D projects, basic activities to support the implementation of the strategy, lead projects as well as training and other accompanying measures.

• Climate and Energy Fund (Klima und Energiefonds - KLIEN) The fund contributes to the following goals of the Austrian Climate Strategy: sustainable supply of energy, reduction of greenhouse emissions and stimulation of RTD activities in these fields. The Fund comprises 3 programme lines: research and development in the field of energy technology and climate, projects in the field of transport and mobility and projects facilitating the dissemination and diffusion of climate related and sustainable energy technologies.

Assessment of Innovation Instruments

Effectiveness and efficiency of policy design The Austrian Innovation System contributed to a successful catching up process, and has reached the 'technological frontier' in many industries. Austria’s overall R&D expenditures have increased steadily. The Austrian federal government has endorsed the Barcelona 3% target and strengthened the innovation system. This was accompanied by several major reform initiatives, which improved the delivery of direct innovation promotion through the agencies. Continuing this policy, the Austrian government sets the ambitious goal to increase research expenditures to 4% and expenditures for

tertiary education to 2% of GDP by 2020. Furthermore, fiscal incentives supported the increase in R&D. However, industrial structures have not changed to the desired extent, which the previous chapter explained is due to the lack of strategic dedication of the political level.

Although the country performs extraordinarily well in input indicators, output falls short. On the one hand, the process of delivery could be regarded as effective, as it enables a broad range of firms, universities and research institutions to participate in diverse innovation programs. According to the European Innovation Scoreboard’s 2008 classification, Austria is the leader of the innovation followers group, and significantly behind countries of the cluster of innovation leaders.

The strong input orientation and the benevolent subsidy-quota raises questions about the system’s efficiency if opposed to structural developments. From this point of view, the system can be described as effective, but inefficient. Besides the lacking normative orientation of the system, there are several shortcomings of the current system, which are as a result of the lack of strategy.

The intervention logic is dominated by the setting of single intervention programmes, and not by holistic approaches, which also encompass the incentive system that is set by the regulatory framework, or allow for a comprehensive policy mix. Hence, long term and short term goals are often blurred, and although certain programmes (e.g. the introduction of innovation vouchers) follow good international practices, not all instruments seem adequate for solving the problem which they aim to address. This seems especially true in the venture capital market. There is an insider-outsider problem to the Austrian funding system which has led to the creation of communities that aim at lobbying for programmes in their respective research area. This comes at the risk of turning the system into a 'support supermarket'. Despite the development of an evaluation culture, there is no culture of ending programmes.

The system’s evaluation made a number of recommendations on how to improve the system. These can be sketched as follows:

• From an innovation policy in the narrow sense to a comprehensive innovation policy. The latter is interlinked with education policy and includes improvements of the framework conditions (e.g. competition, international openness, mobility); while the former only concentrates on the measures and institutions directly involved in science and technology.

• From an imitation strategy to a frontrunner strategy. In a frontrunner strategy firms and researchers strive for excellence and market dominance in niches and high quality segments, increasing market shares in sophisticated industries and technology fields, and in areas or missions of particular relevance to society.

• From fragmented public interventions to coordinated and consistent interventions derived from a vision which specifies economic objectives, external and internal challenges and the type of (market or system) failures which call for public intervention.

• From a multitude of narrowly defined financial programmes to a flexible, dynamic policy, defining broader tasks and priorities. Some broad technology and research fields important for society (missions) should be defined top down in the vision, but clusters and centres of excellence will grow bottom up, and should be funded sufficiently so as to attain international leadership.

• From a blurred division of responsibilities between and within ministries (and other players) to well defined responsibilities. Ministries devise sub-strategies for their area of responsibility from the top-level vision, are coordinated on the government level by a high level commission and monitored by a Council for Science, Research and Innovation.

• From managing public intervention by bureaucratic procedures to modern public management techniques. Goals are pursued either by internal competence centres in ministries or by delegation to outside agencies (agencification). Agencies are free to choose instruments and are controlled according to pre-defined output criteria, not by means of micro-interventions.

Impact of public support for innovation

The Austrian innovation system has, together with other favourable political and economic conditions, helped Austria’s income and productivity to catch up with the most advanced countries by

the 1970s. It was instrumental in the following decades as Austria forged ahead relative to the average of the European Union. As a consequence Austria is now one of the top five countries in the EU as measured by income per capita, and is ranked among the top ten industrialised nations worldwide. The Austrian industries on average invest more in R&D than across the OECD.

The Austrian business sector exhibits a positive structural change towards both education intensive and innovation intensive industries, even if the starting point is marked by rather low shares of such industries. The structural change towards education intensive industries is generally more pronounced, but not fast enough to catch up relative to the other EU countries. The consequence is a growing structural gap. Conversely, the less pronounced change in specialisation towards innovation intensive industries has been sufficient to narrow the structural gap relative to the EU, where the shares have declined.

Therefore, the innovation policy in Austria refers to the closure of the technological gap, and aims at supporting the structural transformation. At the same time it is mainly input-orientated, and the efficiency of the system is questionable, since a ‘technological leapfrogging’ to the group of innovation leaders seems unlikely. Not the public support, but framework conditions (e.g. human capital, private equity), as well as the creation of proper incentives are to be improved in order to shift the economy towards an innovation based growth paradigm.

Possible future actions and opportunities for innovation policy

Austria’s innovation performance has been improving significantly over recent decades. This is not only reflected by high growth in innovation inputs such as the R&D-quota, but also by composite innovation indicators such as the European Innovation scoreboard, in which the country positions ranks on top of the cluster of innovation followers. Enabling the process, the Austrian innovation system has, by and large, worked quite well in the past. However, the transformation of the economy towards a more knowledge and innovation-intensive industrial structure and growth paradigm is still ongoing, but occurs at a slower pace than the Austrian R&D-intensity suggests.

Austria’s current innovation system consists of a balanced set of strengths and weaknesses. While the system performs well in innovation input indicators, below average performance of output measures indicate systemic inefficiencies. In order to resolve structural deficits (e.g. in the formation of human capital), co-ordinated adjustments of incentive systems are required. The extensive support system provides policy makers with a wide range of tools to address specific problems, but cannot replace the setting of innovation fostering incentive structures.

Although Austria’s innovation community produced several strategy papers, which provide similar recommendations, a content-driven, politically orchestrated approach to innovation policy is not perceivable. The missing vision leads to a system which is largely self-governed. Although efficiency gains were realised by the actors concerned, the system lacks strategic steering. Ministries concerned have a certain degree of thematic overlap, which sometimes leads to competition between ministries over policy fields. Policies are dominated by the establishment of particular programmes, which are sometimes set in a non-transparent way. In practice, the agencies are not fully independent, which also contributes to the often perceived programme jungle, which however is used by many system insiders as a 'support supermarket'. Political will and action is required in order to unlock the strategic standstill, and to implement an as yet lacking strategy and increase co-ordination in the delivery of policies.

Based on the results of the evaluation of the Austrian RTD support system, the Research Dialogue (Forschungsdialog), the recommendations of the Austrian Council of Research and Technology Development Strategy 2020 and the assessment of the CREST Peer Review Report on the innovation policy of Austria the Austrian government has started a process to develop a comprehensive RTI strategy for the time period 2020.

Note: The present document consists in a summary of the INNO-Policy TrendChart Innovation Policy Progress Report Austria, 2009. This report was prepared by Klaus Friesenbichler (klaus.friesenbichler@wifo.ac.at) and Mariya Hake (mariya.hake@wifo.ac.at) of the Austrian Institute of Economic Research (WIFO). The contents and views expressed in this report do not necessarily reflect the opinions of inno.

National Innovation Systems: A Short Review

Country: France

Introduction

Many policy efforts have been deployed in France these last years to face innovation challenges. One of the major challenges in France deals with the need to increase synergies between public and private research with a view to increase the private sector expenditure on R&D. Indeed, with 2% of its GDP devoted to R&D expenditure in 2007, France continues to proportionally reduce its R&D expenses and to move away from the 3% Lisbon objective (2010), both in terms of the overall rate and in terms of the distribution between private and public expenditure. The other major challenges deal with the need to foster innovation in SMEs as well as supporting existing innovative SMEs in their growth. According to national statistics, there are 2.5 million SMEs in France that is to say 98% of all enterprises representing 6.9 million employees.

In order to tackle the French challenges, these innovation policy actors, mainly at the national level but also at the regional level, have recently developed or reinforce an array of support measures. New support measures have been created (the competitiveness clusters) and other have been reinforced (research tax credit). A strong emphasis was given to SMEs with an increased funding devoted to the OESO agency.

The policy efforts of the French actors have come along with several major changes in the course of the last years in terms of innovation policy governance.

The implementation aspects of the policies are increasingly falling into the agencies responsibilities. From 2005, and in order to separate the steering of research and innovation policy from its implementation and effective support, agencies were given a larger place in the French system. Two main agencies, the National Agency for Research (ANR) created in 2005 and OSEO, the SME agency are today dealing with research and innovation. This change in policy governance was a trial and error process since one of the newly created agency (AII) was soon merged with OSEO. Taking over the AII responsibilities, which has been created to support large-scale industrial project, OSEO now evolves towards larger and developing enterprises. Other actors, the Regional councils, tend to gain powers over the years. Some Regional councils, of which the large innovative regions (Provence-Alpes-Côte d’Azur and Rhone-Alpes) as well as smaller regions (Aquitaine, Bretagne for instance) have started to design comprehensive innovation support policies.

In terms of governance, France is also developing a more systematic evaluation of its policies. Several major pieces of the innovation policy has been evaluated (Support to projects by Young innovative enterprises, FR58), Research tax credit (CIR, FR109), the competitiveness clusters, the national competition for the creation of new-technology based firm (FR11) or the regional incubators structure (FR12).

France has, for the very first time in 2009, launched a work to define a national strategy for research and innovation that should ground future budgetary decisions. The strategy that must be ready by June 2009 shall be based on proposals of several thematic groups gathering private and public research and innovation actors as well as representatives from the civil society. The strategy shall also

take into account the result of a large internet public consultation. This type of exercise is completely new and may produce new policy orientations.

Source: INNO-Policy TrendChart – Innovation Policy Progress Report, France, 2009

Innovation Instruments

The three main recently put in place Innovation Support Instruments are:

• The Research Tax Credit

• The Competitiveness clusters policy 2.0

• The Strategic Investment Funds (FSI)

The Research Tax Credit

The Research Tax Credit (Crédit Impôt Recherche - CIR) is a measure aimed at supporting corporate R&D investments by means of tax incentives. The "New" Research Tax Credit replaces the old version in vigour from 1983 until 31 December 2003. On the basis of a simple declaration, companies can benefit from a tax reduction for a large range of research-related spending, including R&D personnel expenses, R&D subcontracting, patenting costs, etc. The eligible expenses for which firms apply to the Research Tax Credit are mainly associated with the human and technical resources allocated to research and subcontracting. The 2004 and 2006 finance bills have improved the measure, the aim was to make easier for companies the calculation of the amount of their Research Tax Credit.

The programme is managed by the Ministry Delegate of Higher Education and Research. Each year, the Ministry Delegate of Higher Education and Research publishes a review presenting the main results of the Research Tax Credit (overall budget, number of beneficiaries, breakdown between sectors, companies' sizes) for the year n-2. The 2007 overall budget is 1 billion Euros. By 2012, the budget will be around 2,7 billion Euros per year.

All types of companies are targeted.

The Competitiveness clusters policy 2.0

The competitiveness clusters policy 2.0 is the second phase of the competitiveness cluster policy that covers the period 2009-2011 and following the first competitiveness clusters policy launched in 2005. The measures consist in supporting the strategic governance of clusters, financing structuring projects such as innovation platforms, develop other aspects of the cluster ecosystems such as competence management, international development, IPR management, and an incentive to get more of private funding specifically to support the growth of SMEs.

The competitiveness clusters gather companies, training centres and public and private research organisations around innovative collaborative projects. Each cluster is specialised in scientific and technological fields. Some clusters cover the same field. The priorities and status of each cluster are defined in individual contracts between the different parties involved (State, local authorities, universities, research laboratories, training centres and enterprises). As the 71 competitiveness clusters are running and have been evaluated, the government decided to give a new dimension to the policy. In the framework of the competitiveness clusters policy 2.0, three axes have been defined:

• To strengthen cluster strategic piloting and management through; • To provide clusters with new financing tools (structuring projects);

• To develop the support to new dimensions of the innovation ecosystem (human resources competences, IPR…)

The general policy is monitored by the interministerial working group (GTI), headed jointly by: - the Interministerial Agency for Spatial Planning and Competitiveness (DIACT) and - the Ministry of Economy, Finance and Industry (Directorate General for Enterprise). The overall budget in EUR 1,500,000,000 for the period 2009-2011. It is composed of:

• Funding for governance structures of cluster : €50m • Funding for R&D projects : €495m • Structuring projects (Innovation platforms) : €105m • National agency for research (ANR) : €600m • OSEO and Caisse des Dépôts (CDC): €250m

The target groups are clusters and their members (companies, training centres and public and private research organizations).

The Strategic Investment Funds (FSI)

The Strategic Investment Fund (FSI) was launched in 2008 in order to help promising French enterprises to obtain funding and to secure their capital. The FSI is a limited company (societe anonyme - SA) which takes minority shares in French companies carrying out industrial projects that create economic benefits and competitiveness. The FSI capital is held by the “Caisse des Dépots et Consignations” (CDC) at 51% and by the State at 49%. At the time of its creation, this new fund was allocated with €6b. It has now increased up to €20b.

The first investments in 2008 of this new fund have been allocated to the automotive sector (Valeo, Daher for instance). In a context of scarcity of new investments in equity capital within innovative companies, the FSI has decided (June 2009) to reinforce its actions in favour of biotech companies in order to support this strategic economic sector. Indeed, the FSI supports the creation of a new fund dedicated to biotechnologies, and will directly invest in some biotech enterprises. Moreover, the FSI is bringing additional € 75 m to funds dedicated to biotechnologies within the framework of the France Investment scheme. However the FSI is evaluating demand for funding from every sector.

The FSI is divided into two branches: FSI SME and FSI France Investment.

Source: INNO-Policy TrendChart

Assessment of Innovation Instruments

France (though efforts have been made over the last few years), does not systematically use evaluations yet. Nevertheless, evaluations or in the very least impact assessments of the most significant support measures for innovation have recently been carried out: the evaluation of Competitiveness clusters, and the impact assessment of the CIR.

Competitiveness cluster policy

Today, there are 71 Competitiveness clusters divided into three types: seven global Competitiveness clusters, 10 globally-oriented Competitiveness clusters, and 54 Competitiveness clusters. In the original version of the policy, only 15 Competitiveness clusters should have been selected. Despite the fear that public funding would be spread amongst the 71 clusters, data show that funding focuses on the top clusters. Firstly, 80 % of the EUR 36 million grant for the clusters functioning costs have been attributed to world-class clusters. Secondly, and as far as ANR funding is concerned, the 17 world-

class clusters managed to obtain 47 % (EUR 327 million) of the total funding during the period from 2006 to 2008. Clusters now cover various thematic areas like aeronautics, ICT, life sciences, but also more traditional sectors such as wood, construction and finance.

The competitiveness cluster policy was evaluated in 2008 at national level and at the level of each of the 71 clusters. According to the evaluation, 39 clusters fully reached the objectives of the policy, 19 clusters partially reached them but should devote more efforts in strategy definition and governance, and 13 clusters would benefit from an in-depth restructuring. Between 2005 and 2008, the number of new entries into Competitiveness clusters increased, and large firms and SME in particular. Actors from public research are less numerous but are usually projects leaders. In addition, partnerships between clusters and economic development operators increased as well.

This evaluation stressed that the competitiveness cluster policy triggered or accelerated a cooperation process on innovative projects in all industrial sectors. The Competitiveness clusters can be an important boost to improve the links between public and private research, and eventually strengthen the French strategic positions in the fields of research, development and innovation, and particularly abroad. On the basis of these results, the government decided to launch a second phase of the competitiveness cluster policy (Cluster 2.0) for an additional three-year period (2009 to 2011) with a total budget of EUR 1.5 billion intended to widen the scope of the Competitiveness clusters’ activities.

Research Tax Credit

An evaluation of the CIR was carried out in 2006. The evaluation report stated that there are three types of effects. First, the CIR would have a clear impact insofar as the level of tax credit is explicitly taken into account by the company that increases its overall R&D expenditures in accordance with the tax credit it will benefit from. Second, it would have an indirect impact: the tax credit is not explicitly calculated by the company when planning its R&D budget. However, the company is keen on financing more research than it would have done without the CIR. As it is the case with the JEI, the CIR also has a positive impact on the recruitment of researchers by private companies. Third, no real impact was noticed on the level of expenses. For the company, the tax credit does not impact its R&D budget in nominal terms and indeed, without the tax credit, this level would have been the same.

Overall, the evaluation concluded that even if the CIR has impacts on private R&D expenditures, the measure could be improved and be simplified especially. As a consequence, the budget act for 2008 radically simplified the mechanism by abolishing the fraction calculated over the spending increase and significantly raising the tax credit rate applied to the spending volume from 30 % of R&D expenditure up to EUR 100 million (50% for the first year and 40% for the second). Beyond that amount, businesses are eligible for a 5% credit without a cap. Since January 2009, companies can obtain an immediate refund of their CIR for 2005, 2006, 2007 and 2008 that has not yet been used or mobilised.

In September 2009, the Ministry for Higher Education and Research released the first quantitative results analysing the reform of the CIR and stressing that the measure seems to be a shock absorber during the crisis and a springboard for the post crisis. According to the Ministry, the overall level of business R&D investment in France remained stable in 2008 (about EUR 15 billion) thanks to the CIR. However, France’s impact by the crisis has been approximately a year delayed in coming, which serves to undermine this encouraging figure.

Source: INNO-Policy TrendChart – Innovation Policy Progress Report, France, 2009

National Innovation Systems: A Short Review

Country: GERMANY

Introduction1

The main comparative advantage of the German economy is its specialisation on high and medium-high technology combined with efficient production and innovative products and services. Germany has a large and diversified science and knowledge base, it belongs to the world nations with the biggest R&D capital stock, and the output of RD&I activities in terms of patents, new products and high productivity is remarkable. European Innovation Scoreboard (EIS) indicators and recent results from the German Community Innovation Survey (CIS) confirm this assessment:

• Germany ranks third with the EIS summary innovation index (SII) within EU-27 and shows the highest value among all larger Member States.

• Germany's innovation performance is particularly strong when it comes to generating innovative outputs and new technology. This is revealed by a high share of innovators (both technological and non-technological), a high share of patent applications per inhabitant, and the employment and export shares of medium and high-tech manufacturing.

• German enterprises invest heavily in R&D. R&D expenditure as a percentage of GDP is considerably higher than in most EU countries and grew further up to 2008.

• Technology transfer between research organisation and industry is well organised and rests on long-established networks. As a consequence, higher education institutions (HEIs) receive a high share of their research budget from the business sector.

In Germany, research and innovation policy form a single policy area, and research and development and innovation (RD&I) are always regarded as two aspects of one and the same process of creating and applying new knowledge and new technology. For this reason, one cannot reasonably separate innovation policy objectives from research policy objectives.

Objectives of innovation policy at the federal level is typically conceptualised in policy documents. Over the past few years, the most important policy document is the High-tech Strategy. This document was published in August 2006 by the federal government and defined objectives, priorities and key measures for RD&I policy at the federal level for the period 2006 to 2009. The High-tech Strategy had a total volume of EUR 14.6 billion for the period from 2006 to 2009.

While the High-tech Strategy is the federal government's first comprehensive, multi-agency innovation programme, it basically continues ongoing promotion activities and well-established programmes, though providing increased funding. Within the generic activities, some new actions have also been foreseen. The implementation of the High-tech Strategy started in autumn 2006. It has since then been reviewed and updated after its first years of implementation. The federal government published in 2010 its Hightech-Strategie 2020 für Deutschland (High-tech Strategy 2020 for Germany).

Innovation Instruments (in the framework of the High-tech Strategy)2

The following approaches / instruments form the backbone of the High-tech Strategy

1. Lead markets and initiatives

1 Source for this chapter: INNO-Policy TrendChart – Innovation Policy Progress Report Germany 2009, European Commission Enterprise Directorate-General 2 Source for this chapter:

• www.hightech-strategie.de (19 January 2011) • Ideen. Innovation. Wachstum Hightech-Strategie 2020 für Deutschland, Bundesministerium

für Bildung und Forschung (BMBF) Referat Innovationspolitische Querschnittsfragen, Rahmenbedingungen, Bonn, Berlin 2010

Emerging technologies are the basis for new products, processes and services which can contribute to mastering current social challenges. Without them, innovation would be unthinkable today. Demand for innovations will focus on the areas of health, climate and resource protection, energy, mobility and security. The Federal Government wants to further strengthen Germany's top position in the field of technology within the framework of its High-tech Strategy and wants to promote transfer of research results into business applications.

“Future projects” (Zukunftsprojekte) approach:

Those strategic projects aim at reaching major concrete scientific, technological and societal targets within a timeframe of ten to fifteen years. They formulate innovation strategies and roadmaps for the achievement of those targets.

Examples of „Zukunftsprojekte“ are:

One million electric vehicles in Germany in 2020 Renewable resources as an alternative to oil Effective protection for communication networks …

2. Key technologies

Funding key technologies and innovative services is intended to strengthen Germany's position as system solution provider. The Federal Government is funding key technologies with numerous initiatives and measures under its High-tech Strategy.

These include:

• Establishment of innovation alliances and strategic partnerships - such as: organic light-emitting diodes (OLED), organic photovoltaics, CarbonNanoTubes, digital product memory, applied virtual technologies over the product and production life cycle, transport services for the Internet of the future - 100 GET, secure intelligent mobility - test field Germany, standards for mobile communication of the fourth generation, the BioPharma competition and BioIndustry2021.

• The "ICT 2020 - Research for Innovations" programme focuses research funding on fields of application which are particularly strong in Germany and in which innovations are to a large extent driven by ICT.

• The "Innovations against Product Piracy" research initiative promotes the fight against plagiarization of investment industry products under the "Research for tomorrow's production" programme.

• "WING - Innovative Materials for Industry and Society" promotes materials research for better, more efficient and cheaper tailor-made materials.

• With the "Framework Programme Biotechnology - Using and Shaping its Opportunities", funding is geared at innovations in industrial and medical biotechnology and plant biotechnology.

• With the "Nano-Initiative Action Plan 2010", an interdepartmental framework for action was created for faster implementation of research results in products and for better framework conditions.

• By means of microsystems technology, ICT, medical technology and innovative services, the conditions are being developed for ambient assisted living (AAL) to enable elderly people to lead a healthy and independent life.

• "Innovations with Services" promotes innovation dynamics and in particular the systematic development of innovative services.

3. Science and business

The High-tech Strategy deploys targeted incentives to build a bridge between business and science and to strengthen the innovative small and medium-sized enterprises (SMEs). Skills are brought together and joined in collaborations, partnerships and innovation alliances. The creation of clusters and networks, with the essential involvement of the SME sector, receives clear focus in this strategy.

Increased transfer of technology and know-how from science to business is a decisive factor in the commercial success of innovations.

The following programmes have been implemented:

• ZIM Through its Central Innovation Programme for SMEs (Zentrales Innovationsprogramm Mittelstand, ZIM), the Federal Ministry of Economics and Technology (BMWi) is encouraging small and medium-sized firms toward greater efforts in research, development and innovation. ZIM is now a nationwide funding programme for SMEs, open to all technologies and sectors, which puts the emphasis on collaboration between individual firms and between companies and business-oriented research institutions as well as on the formation of networks.

• The KMU-innovativ scheme The Federal Ministry of Education and Research (BMBF) has introduced the KMU-innovativ scheme to significantly ease access to research funding for SMEs by, amongst other things, simplified credit risk assessment. Through KMU-innovativ, the BMBF is supporting cutting-edge research in important future areas.

• Innovation alliances Innovation alliances form a new instrument for research and innovation policy within the framework of the High-tech Strategy. The emphasis in these strategic alliances between science and business is in all cases toward specific application areas or future markets. Innovation alliances exercise a particular economic leverage effect. The target is: One Euro from the Federal Government (BMBF), five Euros from business.

• The Leading-Edge Cluster Competition The Leading-Edge Cluster competition is intended to take Germany to the top of the league of technologically advanced nations. The BMBF launched the competition in the summer of 2007 under the slogan "Germany's Leading Edge Clusters - more innovation, more growth, more employment". The high-performance clusters formed by business and science that enter into strategic partnerships are set to boost Germany's innovative strengths and economic success.

• Kompetenznetze Deutschland – networking for innovation The Initiative Networks of Competence Germany by the BMWi brings together the most innovative and capable national networks of competence with technological orientation. These networks characteristically stand out for their high level of activity and cooperation. They share commonly formulated goals, are regionally anchored, and excel both in minimizing distance to markets and industry, and in their dynamics and flexibility.

• EXIST The EXIST programme from the BMWi (Existenzgründungen aus der Wissenschaft / University-Based Business Startups) is an ideal partner for business startups in the scientific arena with a proven track record. Almost all universities, many universities of applied sciences and non-university research institutions have submitted applications for funding for people intending to start new businesses. EXIST improves the startup environment in universities and research institutions and helps to convert new ideas and research results into innovative new startup companies.

• SIGNO Ideas, knowledge, research results and innovations are often of great value. The concern of SIGNO is the protection of these against illegal exploitation and to assist in their implementation and exploitation. Since April 2008 this funding programme from the BMWi has been supporting universities, companies and inventors with the legal protection and commercial exploitation of their innovative ideas. It promotes technology transfer through the efficient use of intellectual property.

• High-tech Startup Fund The success of technology-based startups and young innovative companies should not be allowed to falter due to lack of capital. When venture capital companies and business angels fall short, help may be enlisted from the Federal Government's High-tech Startup Fund.

The High-tech Startup Fund has EUR 272 million of funding available. Since 2005 the fund has already pledged to take holdings in 177 young technology companies. The fund is a public-private partnership: in addition to the BMWi, investors include the KfW Group and industrial companies such as BASF, Deutsche Telekom, Siemens, Daimler, Robert Bosch and Karl Zeiss.

• Innovation Initiative for the New German Länder Innovation is the key to developing Eastern Germany. Through its Unternehmen Region innovation initiative, the BMBF supports regional cooperation alliances to develop and implement a strategy for achieving success through their own innovative, sustainable and technological approaches. The strengths and potential of each region should be used and bolstered in order to determinedly take their innovations forward to the market.

• Mobilising skilled workers The demand for qualified staff is rising continually, in particular in the production of cutting-edge technologies and in the service sector. At the same time, demographic change is making itself felt: in future, fewer and fewer young people will be living, learning and working in Germany. The aim of the Federal Government is to meet the requirement for skilled staff primarily through stepping up its training and continuing education efforts within the country, and through a significant increase in economic activity of women, older people and migrants already living in the country.

4. Framework conditions

Following improvements have been introduced:

• Corporate tax reform is creating financial leeway, the High-tech Startup Fund is providing innovative young companies with venture capital, and the "Help for Helpers" Law is strengthening incentives to channel private capital into foundations.

• Conditions for setting up a business: The amendment to legislation governing limited liability companies makes it easier to set up a business. Start-up programmes such as EXIST encourage people to venture into self-employment.

• Innovation through public procurement measures: The Federal Government's policy for awarding contracts pays close attention to the use of new products and technologies. This stimulates innovation.

• Protecting intellectual property: Institutions of higher education and people setting up in business are provided with advice on issues relating to patents under the "SIGNO - Protection of ideas for commercial use" initiative. At the same time, the Federal Government is also introducing measures to combat product piracy.

• Standardization as a driver for innovation: The "Innovation with Norms and Standards" project is helping small and medium-sized enterprises (SMEs) in particular to cope with often very complex standardization processes.

• Reduction of bureaucracy: regulations have been simplified, thus saving industry more than seven billion Euros per year.

• Germany has become more attractive as a science nation: The Federal Government has taken important steps towards modernizing the German science system with the Excellence Initiative, the Higher Education Pact 2020 and the Joint Initiative for Research and Innovation.

• Expanding the international approach: The Federal Government's Internationalization Strategy has helped to make better use of the opportunities of worldwide cooperation.

5. Funding advisory service

The Federal "Research and Innovation" Funding Advisory Service is the central point of contact for any questions concerning research and innovation funding. The centre informs potential applicants about the federal research structure, funding programmes and the persons to contact as well as about current funding priorities and initiatives.

6. Research alliance

The "Industry-Science Research Alliance" was initiated in 2006. It is a forum in which leading representatives from science and industry propose strategies for strengthening Germany as a high-tech location. The Research Alliance includes 19 members from the spheres of science and industry. They are responsible for accompanying the implementation of the High-tech Strategy.

Innovation governance system3

The system of innovation governance in Germany is, by and large, stable and oriented towards consistent continuation of well-established and efficient governance structures. As a consequence, there were no major changes among the group of main policy actors (i.e. government organisations and administrating agencies) and their key responsibilities. The system of policy design and delivery rests on a clear division of labour between ministries (which are responsible for strategy, developing new instruments, responding to new challenges and coordination with other policy actors) and administering agencies which manage programmes, communicate with (potential) beneficiaries, monitor programmes and provide feedback to ministries on programme success (including results from evaluations), potential needs for adjustment and changing challenges within the target groups of policies. This model is more or less valid both for the federal government and the majority of state governments.

1. Governmental bodies

The system of innovation governance in Germany is strongly affected by the institutional and legal setting. As a federal state, both the federal government and the 16 Länder (federal states) governments are important players and share a number of policy responsibilities for financing education, research and innovation policy programmes and initiatives. The federal government takes up a variety of activities in research and innovation policy and may be regarded as the main state actor in the German innovation system.

The main actors in innovation policy among the federal ministries are the BMBF and the BMWi. Several other federal ministries are also engaged in innovation policy to some extent, e.g. through technology programmes or the financing of military-oriented R&D. The responsibility for innovation policy is mainly divided between the BMBF and the BMWi. Each ministry follows a specific innovation policy approach:

• The BMBF is mainly engaged in (i) financing of top-level R&D projects in both enterprises and public science bodies within thematic programmes (i.e. programmes focused on certain fields of technology), including specific cluster-oriented measures in Eastern Germany; (ii) co-funding basic and applied research at public research organisations and the DFG; (iii) technology transfer and networking activities, including the promotion of innovation within regional networks and the provision of an innovation infrastructure; and (iv) tertiary education, including activities that concern the mobility of students and scientists.

• The BMWi's policies address innovation activities through the following main channels: (i) designing appropriate framework conditions for innovation including competition policy (e.g. telecommunications, energy, transportation), the legal setting (e.g. with respect to e-commerce) and a framework conducive to entrepreneurship; (ii) offering direct financial promotion to SMEs which is not specifically targeted at certain fields of technology through grants, loans and VC in order to stimulate innovation, to foster technology-based start-ups, to promote R&D cooperation and to increase innovation management capabilities; (iii) providing infrastructure support to the enterprise sector; and (iv) running application-oriented thematic and sectoral research programmes that provide grant funding to enterprises and public science bodies such as energy research, space and aviation research and ICT research.

3 Source for this chapter: INNO-Policy TrendChart – Innovation Policy Progress Report Germany 2009, European Commission Enterprise Directorate-General

2. Main bodies managing implementation of policies

A major peculiarity of the German innovation system compared to many other countries is the delivery mode of research and innovation programmes. Both at the federal and the state level, government agencies focus on defining policy objectives, strategic design and coherence of policy measures, while implementation and programme administration is conducted by a set of specialised public, semi-public or private institutions, so-called Projektträger (PT). They are authorised by governments to care for administrative issues in running policy measures. Their main task is to deliver innovation policy in Germany. As formally independent organisations, they administer and manage innovation policy programmes on a contractual basis. This includes activities such as public relations and publicity, checking and administering proposals and applications, preparing decisions on funding, financial affairs in the course of funded projects, programme monitoring, and project controlling. They are also quite strongly involved in the conceptual design of programmes and in stakeholder debates.

There are more than 20 such programme managing organisations, both serving federal and state Ministries. Many of them have developed out of public research bodies (especially from the large governmental research centres), and many of the managers at the programme managing organisations have an academic or even research background in the thematic area they are responsible for. As all direct public support for R&D and innovation activities in enterprises is project based and administered by programme managing organisations, policy makers and other staff.

The most important programme managing organisations are currently the following:

• PT Jülich (Biotechnology, energy, new materials/nanotechnology, environmental technologies and climate, maritime technologies, basic research in science, technology transfer and start-ups);

• DLR (ICT, space, health, services, workplace design, research in education, environment/ culture/ sustainability);

• PT Karlsruhe (manufacturing technologies, sustainability research);

VDI/VDE Innovation and Technology (microsystems, cooperative R&D programmes for SMEs).For some programmes, new legal entities have been set up to run a programme, e.g. for the High-tech Startup Fund which is run by a limited company (High-tech Gründerfonds Management GmbH) which invests in young technology firms. Ministries are rarely directly involved in the management of programmes but rather focus on conceptual and strategic issues.

Assessment of Innovation Instruments4

A detailed evaluation of most of the new instruments implemented within the High-tech Strategy is not yet available as those evaluations are still going on. However, some impacts and successes of German’s overall research and innovation policy since 2005 have been measured:

• Germany is again increasing its investments in research and development o From 2005 to 2007, Germany’s total expenditures (includes expenditures of the

Federal Government, the Länder and business enterprises) in R&D increased by 10.4 percent, from EUR 55.7 billion (2005) to EUR 61.5 billion (2007)5.

• The Federal Government has massively increased its state support for research and development

o Since 2005, the Federal Government has increased planned R&D investments by some EUR 3 billion, from EUR 9 billion to about EUR 12 billion in 2009. In addition,

4 Source for this chapter: Research and Innovation for Germany. Results and Outlook, Bundesministerium für Bildung und Forschung /Federal Ministry of Education and Research (BMBF) Section 111 – Innovation Policy Framework, Bonn, Berlin 2009 5 Preliminary figures of the Federal Statistical Office

the second economic stimulus package (Konjunkturpaket II) provides still more funding for R&D for the period 2009 to 2011.

• More R&D investments in the business enterprise sector o Over the past three years, the business enterprise sector’s R&D expenditures

(volume of R&D carried out within the companies themselves) have grown much more rapidly than they did in the first half of the decade: from 2000 to 2005, they grew by nearly EUR 3.1 billion (8.6 percent), while from 2005 to 2007, i.e. in only two years, they grew by EUR 4.4 billion (11.3 percent).

o For 2008, business enterprises reported plans to invest an additional EUR 2.7 billion in R&D, thereby bringing their total R&D investments to EUR 45.7 billion (+ 6.3 percent).

• Strong growth among SMEs o Already in the first year after the start of the High-tech Strategy, SMEs’ internal R&D

expenditures grew by more than 12 percent (from EUR 6.6 billion in 2006 to EUR 7.4 billion in 2007).

o From 2005 to 2007, the Federal Government increased its R&D support for SMEs by 20 percent.

o Furthermore, the second economic stimulus package (Konjunkturpaket II) provides additional funding in support of SMEs’ R&D during the economic crisis, for a range of efforts that include the Central Innovation Programme for SMEs (ZIM).

• Germany is an international leader o In terms of absolute figures, Germany is Europe’s leading investor in R&D.

Internationally, only the U.S., Japan and China have larger national R&D budgets. In 2007, Germany was also a leader with regard to R&D expenditures as a share of GDP, with a figure of 2.54 percent (for comparison: the OECD average in 2006 was 2.26 percent).

• Positive impact on employment o Employment has been growing via research, knowledge acquisition and innovation

From 2005 to 2007, manufacturing sector employment increased by 43,000 employees subject to social insurance requirements, and all of this growth occurred in research-intensive and knowledge-intensive areas. In spite of decreases in the financial services sector, the area of knowledge-intensive services also rose by 43,000 employees.

The positive employment market trends of recent years have especially benefited highly qualified persons. The percentage of employees with higher education qualifications in the German business enterprise sector grew from 6.9 percent in 1998 to 8.6 percent in 2007. The long-term trend indicates that German employment growth occurs especially in the category of jobs involving research, development and innovation, and requiring high levels of qualifications.

o Additional R&D workforce added In 2007, an unprecedented number of men and women at Germany’s

public sector research institutions and higher education institutions were involved in research and development. The R&D workforce in that area amounted to some 179,000 full-time positions. The positive budget trends seen in 2008 and 2009 give reason to expect a further increase of 20,000 to 30,000 employees.

Pursuant to the Stifterverband innovation agency, as of 2008, the business enterprise sector was planning on employing some 322,000 highly qualified and specialised staff in R&D. This figure represents a 6 percent increase over the corresponding figure in 2005.

As of June 2008, the number of persons employed in the economy’s research and development sector, which primarily includes public and private research companies (i.e. does not include higher education institutions), had increased to some 162,000, or by about 15 percent over the corresponding figure in 2005.

National Innovation Systems: A Short Review

Country: United Kingdom

Introduction

The UK’s Innovation infrastructure targets all aspects of innovation and operates through a number of organisations. It supports innovation through networks, Public Sector Research Establishments, Universities and other elements of the Innovation Ecosystem which combine:

• The research base

• The BIS sponsored Technology Strategy Board

• Knowledge Transfer Networks (KTN’s)

• Knowledge Transfer Partnerships (KTPs)

• Knowledge exchange

• Skills for Innovation

• Innovation in Government Departments/public sector

Whilst the included table outlines the current key National instruments for Innovation support, other smaller mechanisms are available, these include, Private Venture Capital and Seed funds, Sector specific financial support such as the UK Film Council Innovation fund, the Sport England Innovation fund, Low carbon innovation fund and Private sector innovation research funding such as the Wellcome Trust and the Wolfson Foundation.

It must be noted that a significant amount of innovation funding and support interventions were procured and financed either through single pot funding or matched ERDF funds and delivered by Regional Development Agencies their partners and organisations such as BusinessLink.

However due to the Government decision to disassemble Regional Development Agencies and reduce Businesslink services coupled with the lack of clarity as to the replacement structure currently many Innovation funding streams and initiatives have been suspended or cancelled for the foreseeable future.

Only two significant National funding instruments have been introduced to replace the withdrawn or suspended funding which supported areas of innovation. The first is the all encompassing Regional Growth fund which is a £1.4bn 3 year fund that will operate across England to stimulate private sector led sustainable economic growth and employment and foster innovation.

The second is the UK Innovation Investment Fund which supports the UK Government’s strategy for Building Britain’s Future. The Department for Business Innovation and Skills, the Department of Health and the Department of Energy and Climate Change are investing £325m million to support innovation in key growth areas of life sciences, low carbon, digital technology and advanced manufacturing.

The UK Innovation Investment Fund will fundamentally adopt a venture capital structure which means it will not invest directly in companies, but rather invest in a small number of private sector technology funds that have the knowledge to invest directly in technology businesses.

In addition the Government funds or co-funds other initiatives to support specialist research into innovation these include:

• The UK-Innovation Research Centre which is a collaborative initiative undertaking cutting-edge research and knowledge exchange activities on how innovation can make businesses more competitive.

• The Public Sector Innovation Unit which collates, manages and diffuses knowledge about innovation in the public sector offering guidance and resources to explore innovative approaches within public sector organisations.

• Innovation Infrastructure Partnership – this project engages six Innovation Infrastructure bodies, (British Standards Institution, Design Council, Intellectual Property Office, National Endowment for Science, Technology and the Arts, National Measurement Office (embracing NPL, LGC & TUV-NEL) and UK Accreditation Service) and associated bodies such as Technology Strategy Board, SEEDA and UKTI to explore ways to improve the design and delivery of policy through engagement of the innovation infrastructure.

Innovation Instruments

This infrastructure is supported by the following key organisations and strategies:

The research base:

The research base incorporates organisations such as research councils, universities and public bodies known collectively as Public Sector Research Establishments (PSREs). The research base is funded by National Government mainly through the Research Councils www.rcuk.ac.uk/Pages/Home.aspx and Education Funding Councils such as HEFCE in England http://www.hefce.ac.uk/.

The BIS sponsored Technology Strategy Board:

The TSB www.innovateuk.org works in partnership with the Research Councils, Regional Development Agencies (RDAs), Devolved Administrations and Government departments promoting innovation through investing in programmes and projects in UK priority sectors

Knowledge Transfer Networks (KTN’s) https://ktn.innovateuk.org:

Knowledge Transfer Networks (KTNs) are over-arching national networks which aim to improve the UK’s innovation performance by increasing the breadth and depth of the knowledge transfer of technology into UK-based businesses

Knowledge Transfer Partnerships (KTPs) http://www.ktponline.org.uk/:

KTP scheme places high calibre, recently-qualified individuals into a business to work on innovation projects

Knowledge exchange:

Collaborations between universities and research institutions and industry/business users work to commercialise research through creating spin out companies and trading patents and licenses.

Skills for Innovation:

The Government Innovation strategy to ensure that funds are provided for scientific education and training in market areas and sectors which will be critical to future jobs and growth

Innovation in Government Departments:

(BIS) brings together the strengths and expertise of the former Department of Innovation, Universities and Skills (DIUS) and, the former Department of Business, Enterprise and Regulatory Reform (BERR) to build Britain’s future economic strengths,

BIS works with a variety of partners and awards funding to programmes which focus on supporting businesses and individuals and the development of the UK Knowledge Economy.

The Role of Regional Development Agencies

Additional innovation initiatives have historically been financed by Regional Development Agencies. However due to the disassembly of these organisations and the introduction of Local Economic Partnerships the future of Regional intervention support instruments currently remains uncertain.

KEY INNOVATION INSTRUMENTS IN THE UK Instrument Funding Source Target Group Availability Current/Future Innovation Vouchers Government via

RDA’s SME’s *Until end 2010 Current

Innovation Vouchers are designed to help businesses owners, entrepreneurs and social enterprises to purchase a knowledge provider's expertise to develop innovation and enhance business typical value £3,000 and £7,000 The Small Business Initiative

Technology Strategy Board

SME’s Ongoing Current

The SBRI programme aims to use government procurement to drive innovation. It provides business opportunities for innovative companies whilst solving the needs of government departments. Competitions for new technologies and ideas are run in specific areas and aim to engage a broad range of companies in short-term development contracts. Variable value. Grant for Research and Development

Government via RDA’s

SME’s *Until end 2010 Current

This grant provides finance to individuals and small and medium-sized businesses in England to research and develop technologically innovative products and processes. Collaborative research and development

Technology Strategy Board

LE/SME/University collaborative projects

Ongoing – Open Calls

Current

The Technology Strategy Board drives innovation through the organisation and sponsorship of various competition thematic programmes. Variable value £25,00 - £2million. Entrepreneurs Fast Track

The Carbon Trust SME’s Open Calls Current

The Carbon Trust Entrepreneurs Fast Track provides a customised package of expert advice, research and development funding and networking opportunities to the leading UK’s low carbon technology start-ups £20k to £500k National Endowment for Science, Technology and the Arts (NESTA)

National Lottery

LE/SME/University/Volunteer collaborative projects

Open Calls/tenders Current

NESTA is an independent body with a mission to make the UK more innovative - commissions Innovation projects and Innovation policy analysis via competitive tender The Knowledge Transfer Partnerships (KTPs)

Technology Strategy Board

LE/SME/University collaborative projects

Ongoing Current

Knowledge Transfer Partnerships (KTP) is Europe's leading programme helping businesses to improve their competitiveness and productivity through the better use of knowledge, technology and skills that reside within the UK knowledge base. Knowledge Transfer Networks (KTNs)

Technology Strategy Board

LE/SME/University collaborative projects

Ongoing Current

The objective of a Knowledge Transfer Network is to improve the UK's innovation performance by increasing the breadth and depth or the knowledge transfer of technology into UK-based businesses and by accelerating the rate at which this process occurs R&D tax credits Government SME’s/LE’s Ongoing Current Research and Development (R&D) Relief is a Corporation Tax relief that may reduce a company or organisation's tax bill by more than their actual expenditure on allowable R&D costs. UK Innovation Investment Fund

Government High Growth small businesses, start ups and spin outs in digital and life sciences, clean technology and advanced

Ongoing Current

manufacturing. UK Innovation Investment Fund will operate on a Fund of Funds structure which means it will not invest directly in companies, but rather invest in a small number of specialist, private sector technology funds that have the expertise and track record to invest directly in technology businesses Big Lottery Fund for Social Innovation

National Lottery Community/Charity/public sector

Ongoing/open calls Current

Funds projects supporting health, education, environment, innovation and charitable purposes. Most funding is awarded to voluntary and community sector organisations. Higher Education Innovation Fund

HEFCE Industry/HEI’s Closed Current

The Higher Education Innovation Fund (HEIF) is designed to support and develop a broad range of knowledge exchange activities which result in economic and social benefit to the UK. Health Innovation Challenge Fund

Wellcome Trust and the Department of Health

LE/SME/University collaborative projects (UK Lead Partner)

Open Call Feb 2011 Current

The Health Innovation Challenge Fund (HICF) is a £100 million, five-year parallel funding partnership between the Wellcome Trust and the Department of Health. The funders are collaborating to stimulate the creation of innovative healthcare products, technologies and interventions Regional Growth Fund Government LE/SME/University/Volunteer

collaborative projects Open Calls/ongoing Current

Regional Growth Fund (RGF) is a new £1.4bn 3 year Fund that will operate across England to stimulate private sector led sustainable economic growth and employment through innovative programmes.

*Regional Development Agencies (RDAs) are making no new financial commitments for activities that run beyond March 2011. The RDAs' current responsibilities will be transferred to other national or local organisations such as Local Enterprise Partnerships and details will be confirmed by the end of 2010.

Innovation Stakeholders

The UK remains within the top 5 EU member states on the EU Innovation Scoreboard for overall innovation performance. A recent Government survey Supporting Industrial Innovation Activity in the UK undertaken by AIRTO identified that UK Innovation Instruments can be broadly broken down into the following support actions:

• Collaborative R&D

• Single Company Support Schemes

• Sector Oriented

• Procurement Driven

• Knowledge Driven

• Venture Capital/Private Sector Funding

Presentation of Innovation Stakeholders and associated actors will be outlined under these headings.

Collaborative R&D

Investment in R&D remains a key driver for innovation growth, most recent figure show 45% of R&D funding in the UK comes from UK businesses1 with R&D tax credits forming the single largest source of government funding for business R&D.

The UK academic sector leads the way in collaborative R&D projects especially those funded by EU Framework 7 and associated programmes. UK Universities accounted for 60.8% of all UK participations. UK businesses comprised 23.3% of all UK participation in FP7 and SME participation accounts for 14.9% of all UK participation.

The Technology Strategy Board through its calls for competition will have generated a £2bn programme of investment in UK innovation by 2011 with the majority of recipients being SME’s and LE’s.

Further Investments totaling £330 million have been made in UK Research and Development (R&D) as a result of the UKTI R&D Programmes again with the majority of recipients being SME’s and LE’s

Single Company Support Schemes

The Technology Strategy Board – TSB business initiatives have provided support to 1500 unique businesses, of which approximately 60% are SMEs.

However key deliverers of these support schemes’ have traditionally been Regional Development Agencies their partners, BusinessLink and UKTI with the beneficiaries ranging from spin out and micro businesses through to large enterprises. Instruments include:

• Innovation Vouchers - To date, over 1,300 Innovation Vouchers have been issued by RDAs to SMEs to enable them to work with the Knowledge Base.

• Grant for Research and Development – Between April 2003 – March 2008 Grants for R&D have helped almost 1,700 SMEs to research and develop innovative new products and processes accessing over £130M of grant funding.

• Regional Innovation Support Initiatives - Funded at Regional level to support the delivery of their Regional Economic Strategies.

NB. Regional Development Agencies (RDAs) are making no new financial commitments for activities that run beyond March 2011. The RDAs' current responsibilities will be transferred to other national or local organisations such as Local Enterprise Partnerships and details will be confirmed by the end of 2010.

In addition UKTI and Businesslink’s company support activities are due to be significantly reduced.

Sector Oriented/Knowledge Driven

Knowledge Transfer Networks – facilitating collaborative working and communication between key actors from business and academia. KTN’s foster sector specific innovation through intelligence gathering dissemination and networking events. Fifteen Networks are established with over 37,000 SME’s and industry members.

Knowledge Transfer Partnerships (KTP) - is the leading knowledge transfer mechanism, which provides academics with the unique opportunity to apply research to real world business projects

Procurement Driven

Public sector procurement for goods and services is seen as a key driver to stimulate innovation. £185 million has been devolved to Regional Improvement and Efficiency Partnerships to harness the expertise of local authorities to accelerate the drive for innovation through greater improvement and efficiency in R&D procurement.

Venture Capital/Private Sector Funding

The UK Innovation Investment Fund will provide venture capital funding via specialist agencies to support key growth sectors. In addition it aims to secure further investment from private investors

both in the UK and overseas with the aim to create the largest technology Fund in Europe which could be worth up to £1 billion over its 12-15 year life.

Figures courtesy of Dept. of Business Innovation and Skills – Annual Innovation report

Assessment of Innovation Instruments

Each year the Department for Business Innovation and Skills reviews and collates information on the innovation performance of UK business and industry. The key metric for evaluating performance is investment in R&D.

The following are the Key facts for 2010

• The 1,000 UK companies that invested the most in R&D spent £25.3bn in 2009, down 0.6% year on year.

• 80% of R&D carried out by the 1,000 top-performing companies is conducted by the 100 most active companies.

• Globally, the 1,000 companies most active in R&D spent a combined £344bn, a decrease of 1.9% year on year. The 50 UK companies in this group also decreased their R&D investment, albeit by only 1% overall.

• 78% of global R&D occurs in five countries: the US; Japan; Germany; France; and the UK.

• Global R&D intensity (R&D expenditure as a proportion of sales) stood at 3.6%. Among the UK’s 1,000 leading companies R&D intensity stood at only 1.7%.

The UK’s top R&D companies

In 2009 the UK1000 decreased their investment by 0.6% compared with the previous year, to £25.3bn. This overall decline, which could be attributed to the global economic downturn, was largely owing to decreased spending by firms in the fixed-line telecommunications, banking and aerospace and defence sectors.

However, upon closer inspection a more nuanced picture emerges, as R&D spending developed differently across the whole of the economy. Several of the top sectors by overall investment, including automobiles and parts, software and computer services, and technology hardware and equipment, increased their overall R&D spend, although some at a slower rate than in previous years.

The UK’s 50 biggest investors–which also form part of the G1000 (the largest R&D spenders worldwide)–conducted 60% of the UK1000’s R&D. They decreased their R&D by 1% year on year, while their global peers averaged a 2% year-on-year decrease.

Courtesy of Department for Business Innovation and Skills http://www.innovation.gov.uk/rd_scoreboard/?p=3

TSB

2008-09:

• 11 ICT projects £7m

• Six low impact buildings projects £5.6m

• Smart care systems for assisted living £5m

• Optical internet access £1m

• 16 low carbon vehicles projects £23m

• Nine cell therapy projects £4.2m

• 16 projects in materials for energy £10.3m

• 27 high value manufacturing projects c. £20m

• New innovation platform in Infectious diseases £55m

(Figures include contributions from public funding partners)

Technology Strategy Board Annual Review 2008-09

KTP’s

Annual investment into the programme is in excess of £100 million (including all business and sponsor investments).

• Public sector investment into the programme was c.£30 million in 2008/09. The majority of this (£29m) was from TSB.

• The annual cost per active partnership has been estimated at £57,000. The majority of this (69%) is incurred in direct delivery (i.e. associate salary payments and academic time).

• Just under a third of project costs are accounted for by administration and support. This includes costs incurred by KTP offices, although this varies significantly between institutions.

• Overall number of active KTPs has increased since the early 1990s: there are currently 963 active partnerships.

• There has been an absolute decline in the scope of individual partnerships. Average partnership duration and the amount of associate time incurred on projects have both decreased since the 1990s.

• The broadening out of the KTP programme has been most notable in business management and ICT technology areas although STEM related partnerships still account for the largest proportion of the active portfolio.

• The number of KBIs involved with the programme has grown annually although the amount of activity within institutions varies significantly. The majority of activity is focused on a small number of KBIs; 20 institutions account for almost half of currently active KTPs.

• There are a large number of dormant institutions that have had a KTP in the past but are not currently active.

• There is a significant skew towards larger businesses in the base of KTP activity since 2004/05.

• The majority of partnerships are carried out with a business and KBI located in the same region, although there are numerous instances of inter regional working.

• Female associates and UK students are significantly underrepresented.

February 2010 Regeneris Consulting Ltd, Knowledge Transfer Partnerships Strategic Review

KTN

• KTNs enable interactions that would not normally take place

• More than 2.5 million new connections were made in 2009 as a direct result of KTN events

• KTNs save time for the enterprises they work with by providing them with information, contacts and insight

• Estimated at more than 15 million hours of industry time in 2009 alone

• KTNs perform a unique and neutral role in the UK

• 70% of KTN’s survey respondents agreed KTNs offer valuable support that is distinct from other bodies

• KTNs help create new enterprises

• More than 37 spinouts and 64 new products have been created through KTNs since 2007

Technology Strategy Board 2010 T10/075 Driving Innovation

National Innovation Systems: A Short Review

Country: GREECE

Introduction

The key objective of the development strategy of Greece concerning research, technology

and innovation during the 2007-13 period is to restructure the Greek economy, gearing it

towards high value added products and services so as to achieve its transition to the

knowledge economy and society.6 In this effort, the role of innovation, research and

technology (RTDI) is crucial. However, Greece’s performance in all these areas – and

especially innovation – is poor and it is considered one of the weakest in the EU as well as

the OECD area (among the catching-up countries), showing scores lower than that of the EU

average.7

An analysis of indicators from three international sources: the European Innovation

Scoreboard, the World Competitiveness Yearbook of Institute for Management

Development (IMD) and the Global Competitiveness Report of the World Economic Forum

show that Greece’s lag in innovation is systematic. In the majority of the indicators, the

rankings of Greece are below the average ranking of the EU like in the cases of the country’s

ranking in R&D expenditures, in firms’ capacity to innovate, in trademarks and patents, in

the quality of the educational system, in the university-industry relationships, in business

start-up requirements and in technology infrastructure the performance is very low.8

Nowadays, the situation does not look promising either as the economic crisis and the

financial recession prevent any increase in private but mainly public investments in RTDI

expenditures.9

Innovation Instruments

The Greek Research and innovation policy framework is currently planned for a period of

seven years, following the cycle of the Structural Funds programming period and is

promoted through the Strategic Development Plan for Research, Technology and Innovation,

which is an integral part of the National Strategic Reference Framework (NSRF).10 The key

objective of the current programming period is the promotion of innovation in all economic 6 General Secretariat for research and Technology (GSRT), Strategic Development Plan for Research, Technology and Innovation Under the 2007-13 NSRF, Athens, October 2007 7 European Commission Directorate-General for Enterprise and Industry, European Innovation Scoreboard 2007. Comparative Analysis of Innovation Performance, Office for Official Publications of the European Communities, Luxemburg, February 2008. 8 Athens University of Economics and Business, Innovation in Greece: Comparative Evaluation with International Indicators, Policies, Strategy Recommendations, Publishized Manuscript, Athens, 2009. 9 ERAWATCH Network, ‘ERAWATCH Research Inventory Report For GREECE 2009’ , viewed on 02 March 2011, <http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=4&countryCode=GR> 10 Directorate-General for Enterprise and Industry, Inno Policy Trendchart - Innovation Policy Progress Report for Greece 2009, European Commission, 2010

sectors as a key driver for restructuring the Greek economy and for assisting its transition

towards a knowledge economy. This transition is a prerequisite for the substantial

improvement of competitiveness, development, employment and the welfare of all its

citizens. Priority will be given to promoting innovative actions that contribute to the

attainment of this objective and are environment-friendly (eco-innovation).11

Overall, the Strategic Development Plan for Research is estimated to receive 5,3% of the

budget of the NSRF 2007-2013, of which 75% would be contributed by the EU Structural

Funds and the remaining 15% would be financed by Greek Governments’ public investment

budget. Approximately, one-third of the funding (32%) is expected to be allocated to the

development of human resources in the research sector, another 20% will go to research

related investments for SMEs and support for infrastructures in public research centres will

amount to 11% of the total budget.12

During the current period the main and most important programmes used in Greece for the

promotion of innovation are: the Operational Programme (OP) “Competitiveness and

Entrepreneurship”, with a total budget for research and innovation measures of €271 m, the

OP “Education and Lifelong Learning”, with a budget of approximately €380 m and the OP

“Digital Convergence” with a budget of approximately €200m for respective activities.13

Furthermore, almost all Regional Operational Programmes will be funding innovation

activities as well.14 The main innovation promotion instruments of each OP are presented

below:

• The OP “Competitiveness and Entrepreneurship”15 is the main instrument for supporting

innovation and among the most important for supporting R&D in the current

programming period. It aims to improve the competitiveness and extroversion of

enterprises and industry emphasizing on innovation by supporting: i) the acceleration of

the transition to the knowledge-based economy; ii) the development of healthy,

sustainable and extrovert entrepreneurship; iii) the goal of making Greece a more

attractive place for developing business activities, with respect for the environment. The

main instruments of this pogramme are cost-shared grants, the innovation vouchers and

public-private partnerships (PPPs).

• The OP “Education and Lifelong Learning”16 aims at upgrading the initial vocational

training and vocational educational systems and linking education with the job market,

11 General Secretariat for research and Technology (GSRT), Strategic Development Plan for Research, Technology and Innovation Under the 2007-13 NSRF, Athens, October 2007 12 ERAWATCH Network, ‘Impact of Structural Funds on Research Funding’, viewed on 02 march 2011, <http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=625&parentID=21&countryCode=GR>, 13 ERAWATCH Network, ‘ERAWATCH Research Inventory Report For GREECE 2009’ , viewed on 02 March 2011, <http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=4&countryCode=GR> 14 General Secretariat for research and Technology (GSRT), The Greek Innovation System, Review of Greece’s Innovation Policy by the OECD - Background report, Athens, August 2007 15Hellenic Republic, Ministry of Regional Development and Competitiveness, ‘OPERATIONAL PROGRAMME 'COMPETITIVENESS AND ENTREPRENEURSHIP', viewed on 25 February 2011, <http://epan2.antagonistikotita.gr/english/> 16 http://www.espa.gr/en/Pages/staticOPEducationandLifelongLearning.aspx

at reforming in the educational system so that lifelong learning will become a reality for

all and strengthening human capital in order to promote research and innovation. The

main instruments used by the OP are cost-shared grants and grants mainly for higher

education institutes and public research institutes.

• Finally, the OP “Digital Convergence”17 supports the dissemination of ICT in the business

sector and the civil service, the development of digital services for the citizens and

innovation mainly through technology transfer, i.e. through acquisition of equipment

and training. The main instruments in this OP are again cost-shared grants, grants and

PPPs.

The Strategic Development Plan for Research, Technology and Innovation is funded – now –

via the OP “Education and Lifelong Learning”. Furthermore, during the current programming

period (2007-2013), more funding for innovation and research is expected from the Regional

Operational Programmes (ROPs) (C. Macedonia - Thrace, Crete, N. Aegean, St. Ellada, and

other). However, until March 2010 very little progress had been made in the design of

regional measures.18

A new instrument that has been recently established and is expected to be utilised from now

on in Greece is the ETEAN, the Special Fund for Business Support, which substitutes the old

TEMPE (the Guarantee Fund for Small and Very Small Enterprises19). ΕΤΕΑΝ will be a special

funding instrument for enterprises, with a particular focus on SMEs as well as innovative

businesses. It is expected to improve and complement the current financial system through

leveraging revolving loans, bonds and equity co-investments, with a total amount of funds of

over € 2.5 billion over the next two years. The ETEAN is considered to be one of the key tools

of the new development model Greece needs, promoting new financial engineering tools

and facilitating companies' access to them. Finally, it should be noted that ETEAN will act as

co-investment fund rather than a bank and thus it will not be in direct contact with any

companies.

Innovation Stakeholders

The main direct organizations involved in the innovation policy design and implementation

are the General Secretariat for Research and Technology (GSRT), operating under the

17 http://www.espa.gr/en/Pages/staticOPDigitalConvergence.aspx 18 ERAWATCH Network, ‘Regional research policies - Overview and Governance’, Updated on 06 May 2010, Viewed on 02/03/2011, <http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=613&parentID=27&countryCode=GR> 19 www.tempme.gr

Ministry of Education, Lifelong Learning and Religious Affairs, and the General Secretariat for

Investments and Development which operates under the Ministry of Economy,

Competitiveness and Shipping. An indirect partner of the Greek STI policy is the EU through

its role in the design of the Greek Operational Programmes (since they are funded by the

Structural Funds) and in the formulation and implementation of the Framework

Programmes, which contribute substantially to the RTD funding of Greece.20

GSRT is supporting most of the public research centres, RTD activities in universities and

firms as well as S&T based innovation.

The National Council for Research and Technology (NCRT) is the main advisory body for

research. It is attached to the GSRT and it contributes to the priority setting for research

funding and the selection of management for the public research centres supervised by

GSRT. The current NCRT is composed solely of academics with no representation from the

industry sector, although its participation is encouraged by law.

The main player in implementing RTD activities in Greece is the public sector, in particular

the Higher Educational institutions and the public research centres, despite the efforts of the

Greek governments to increase the role of the businesses sector, which is one of the

weakest links in the Greek innovation system.

The country’s 22 universities are the main research performers and account for

approximately 48% of the Gross Domestic Expenditure on R&D (GERD), while the

Technological Educational Institutes (TEI), which recently became a part of the higher

education system, make a limited contribution to research.21 The Public Research Centers

perform some 20% of the research in Greece. GSRT supervises 12 of these research centers

and has announced the establishment of three more (in Western Greece, Epirus and

Thrace). They belong to two generations, those established before 1980 that support the

public interest in nuclear energy, atmospheric and marine environment, social policies and

agricultural modernisation, and those established after 1980, which aim at organising public

research in parallel to universities, at the same time adopting effective management support

and world quality standards.22 Together, universities and public research centres are

responsible for 69% of GERD, while private R&D performers have the lowest share

(approximately 30% of GERD) among the EU Member States, after Cyprus and Lithuania.23

20 General Secretariat for research and Technology (GSRT), The Greek Innovation System, Review of Greece’s Innovation Policy by the OECD - Background report, Athens, August 2007 21 ERAWATCH Network, ‘Research performers - Higher Education Institutions’, Updated on 06 May 2010, Viewed on 02 March 2011, <http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=66&parentID=65&countryCode=GR> 22 ERAWATCH Network, ‘Research performers - Public research organisations’ Updated on 06 May 201, Viewed on 02 March 2011, http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=67&parentID=65&countryCode=GR 23 ERAWATCH Network, ‘ERAWATCH Research Inventory Report For GREECE 2009’ , viewed on 02 March 2011, <http://cordis.europa.eu/erawatch/index.cfm?fuseaction=ri.content&topicID=4&countryCode=GR>

The contribution of the Non-Profit Organizations is almost negligible, as it is the case in the

majority of other EU countries.24

According to respective studies and reports, the Greek Innovation System is characterized by

a low mobilization of enterprises, mainly due to the fact that the Greek industrial sector is

mostly composed of small and very small traditional firms simultaneously with very few

larger enterprises with strong R&D performance. Thus, the industrial base of Greece lacks

strong R&D performers of a substantial size. This contributes to the slow adaptation of

process innovation and to an even slower development of a proper technological base in the

country,25 which is further worsened by the absence of coordination of innovation support

by Greece’s successive governments.26

Assessment of Innovation Instruments

Up to date, no official assessment of any of the OPs or NSRFs (of any of the previous programming periods) has been carried out up to date and, consequently, there is a lack of data concerning the measurement of their impact on the Greek economy and business environment. It is pointed out that, inter alia, OECD has been assigned with the peer-review of the national research and innovation system. All relevant information from the specific reports has been integrated in the present document. From empirical experience, since ATLANTIS is one of the major consulting firms in Greece, it can be stated that the funding instruments available under the different OPs are appropriate for the companies and with quite sufficient funding levels, despite the fact that the whole process is quite bureaucratic (i.e. too much time needs to be spent on reporting, audits, etc.).

With respect to the exploitation of the EU’s available instruments for the funding of innovation, again a lack of respective evaluations prohibits such an activity. What has been recorded though in relevant studies is the high level of success of Greek organisations, as expressed by the number of participations in the approved projects, especially so in sectors such as information and communication technologies, sustainable development, global change and ecosystems, as well as nanotechnology-nanosciences, multifunctional materials and new production processes-devices. Despite the high participation and on the basis of the data available at the national and European level, it seems that the utilisation of Community funds does not involve a particularly high added value for the Greek RTDI performance.27

According to the Strategic Plan for Research, the bureaucratic and the time-consuming management system, focused on ex-ante evaluation rather than on monitoring and on

24 General Secretariat for research and Technology (GSRT), The Greek Innovation System, Review of Greece’s Innovation Policy by the OECD - Background report, Athens, August 2007 25 ibid. 26 N. Komninos and A. Tsamis, ‘The system of innovation in Greece: structural asymmetries and policy failure’, Int. J. Innovation Regional Development, Vol. 1, No. 1, 2008 27 27 General Secretariat for research and Technology (GSRT), The Greek Innovation System, Review of Greece’s Innovation Policy by the OECD - Background report, Athens, August 2007

detailed supervision of projects together with the absence of a mechanism for systematic assessment/study of the impacts of policies/actions/funding28 are the two main issues obstructing the effectiveness and efficiency of the Greek RTDI innovation instruments.

As stated in the 2009 Trendchart report, thorough evaluation of the effectiveness of the measures delivered till now and serious upgrading of the quality of the designing and managing of the measures should be performed in order to tackle the existing efficiency and effectiveness problems and improve thus the quality, innovativeness and impact of the forthcoming measures in the years up until the end of the programming period.29

28 General Secretariat for research and Technology (GSRT), Strategic Development Plan for Research, Technology and Innovation Under the 2007-13 NSRF, Athens, October 2007 29 Directorate-General for Enterprise and Industry, Inno Policy Trendchart - Innovation Policy Progress Report for Greece 2009, European Commission, 2010

National Innovation Systems:

Country: Portugal

0. Executive Summary

The Innovation System in Portugal is largely based on European Structural Funds, for which the country is a major beneficiary in Europe (in an amount of 21,5 thousand million euros for the 2007 -2013) period. Out of these funds, Portugal will spend over €5 billion of Structural Funds (24% of its total Community allocation) on promoting Research & Development (R&D) and innovation. Considerable investments (€452 million) are also planned to reinforce advanced training in sciences and technologies, and research and innovation, in an effort to close the scientific and technological gap, a move which is considered a condition for economic and social progress.

Support for entrepreneurship, especially small and medium-sized enterprises (SMEs), will represent €1.5 billion of Structural Funds. It is planned to allocate €100 million to the establishment of a JEREMIE fund (Joint European Resources for Micro to Medium Enterprises) to be managed by the European Investment Fund (EIF). This facility is aimed at improving access to finance for small and medium-sized enterprises (SMEs) and support business creation. Another €200 million have been put aside for making available new and innovative financing instruments to small and medium-sized enterprises, including the funding of private Venture Capital and Business Angels Investment Funds, in a measure called SAFPRI (for Support System to the Funding and Risk Sharing of Innovation) which is arguably the most innovative measure of the Portuguese Innovation System, and that after a slow start is starting to take up in 2011 with the concession of the first investments in start ups and new technology based firms. Through this scheme, public –private (in a rate of 65-35%) Venture Capital can be used by start-ups (up to 3 years of existence) for all kind of investments related to innovation and commercialization of new products, processes and services.

Management of the Innovation System is fragmented through a series of different entities, with FCT (Foundation for Science and Technology) managing the support to scientific institutions (including framework contracts and projects), IAPMEI (Institute for Support of Small and Medium-sized Enterprises) managing individual grants to companies and Agência de Inovação (Innovation Agency, a private status entity jointly owned by the Ministry of Research and the Ministry of Economy) managing the grants to cooperative projects, involving companies and RTD institutions and the tax incentive system. Instruments are mainly based in shared-cost grants, but the absence of advance payments as a general rule (with, funding being granted only as reimbursement of certified expenses) causes several execution problems to companies, especially in crisis periods and contributes to a low global execution of support programmes to date. Promotion of qualified employment is a priority and several instruments (shared cost grants, tax incentives, funded probation periods) fund directly the creation of employments for innovation related activities. From 2011 onwards, promotion of exports is also a key priority, with all innovation support measures being directed in priority to companies with a presence in export markets.

In a nutshell:

— Largely ESF funded system, with €5 billion of ESF funded for research and innovation for the 2007-2013 period;

— Fragmented support scheme, with different managing authorities for different types of support, no “one-stop-shop” for innovators;

— Support instruments mainly based in shared-cost grants, but also tax incentives and direct support to creation of qualified employment for innovation related activities;

— The Innovation Operational Programme, targeted at SMEs, covers extensively non-technological innovation, such as design and organization, and commercialization and internationalization activities, such as presence in fairs, creation of branches abroad, etc.

— Introduction of a Venture Capital scheme from 2010 onwards, with €200 millions of public funding used to leverage private VC funds.

— From 2011 onwards, support measures have been prioritized towards exporting companies with at least 15% of sales abroad;

1. Introduction

An overview of the innovation policy documents suggests a consistent policy approach, whose basic headlines were drawn in the Technological Plan. This Plan is the cornerstone for Growth and Competitiveness of the National Action Programme for Growth and Employment, which translates the application in Portugal of the priorities of the Lisbon Strategy. It has three main axes, which to a large extent correspond to the main action lines: knowledge (qualify the Portuguese for the knowledge society), technology (overcoming the Scientific and Technological backwardness) and innovation (boost innovation).

Strategic Axis Target

1 - Knowledge Citizens

2 - Technology Enterprises

3 - Innovation Public Administration Research and Education

A further examination of the full set of measures included in the technological Plan has led to the identification of seven fields of action: (1) Networked society, (2) Upgrading of human resources, (3) Science & Technology infrastructure, (4) Entrepreneurship, (5) Financing system, (6) Framework conditions for economic activity, and (7) Company capabilities.

Innovation Instruments

FINICIA Program: The aim of this program is to facilitate the access to finance for start-ups and smaller companies, which have difficulties in connecting to the financial market. Through a network of hundreds of two entities, the program develops: activities to raise awareness of entrepreneurship and dissemination of the conditions for the processing of business ideas into business ventures, and business start-ups; support the implementation of business plans for business ideas with innovation character; IAPMEI provide resources for the implementation of Business Plans. To submit an application for a Business Plan, you may do so by BIM - Exchange of Ideas and Means online or through an affiliate program that incorporates one of the platforms FINICIA.; Access to venture capital; access to credit guarantee; monitoring of approved projects with innovative and, in specific situations, support for coaching; and support off the incubation of new businesses. The beneficiaries are SME’s in initial phase. The activities sectors covered are Industry, trade, tourism, services, construction, and energy.

[http://www.iapmei.pt/iapmei-mstplindex.php?msid=12]

PME CONSOLIDA Program It aims is to strengthen the capital structure of enterprises, especially SMEs in order to support mergers, acquisitions and corporate restructuring. That purpose created two tools to support the capitalization of companies, FACCE and FIEA and strengthened the tools of venture capital already. Has a budget estimated at 400 million Euros in consolidating three instruments in support of increased funding for national companies:

FACCE – Independent fund to support the merger and consolidation companies – FACC supports the funding of restructuring, merger and consolidation of companies and projects of demonstrated economic value of corporate restructuring, associations in participation or other forms of industrial partnerships and commercial stable.

FIEAE - Special real estate fund business support - The FIEA is designed for the acquisition of properties included in the assets of enterprises as a form of appropriation of the undertakings of the immediate financial resources, usually accompanied by the reservation use and right or obligation to repurchase these same properties by notifying companies.

[http://www.iapmei.pt/iapmei-art-02.php?id=245&temaid=9]

Investment and Employment (IIE): The IIE program aims the promoting economic growth and employment, contributing to enhancing the modernization and competitiveness of the country, the Portuguese qualifications; independence and energy efficiency and environmental sustainability and promoting social cohesion.

The IIE Program is composed of the following measures:

- 'Modernization of the schools; - "Promotion of renewable energy, energy efficiency and networks

transport of energy "; - 'Modernization of the technological infrastructure - Broadband Networks for new

generation"; - "Special support to economic activity, exports and small and medium

enterprises (SMEs); - 'Support for employment and strengthening social protection.

Capital de Risco

Venture Instruments

The instruments of Venture Capital from the Ministry of Economy and Innovation purpose to support the modernization and expansion of domestic companies, especially SMEs, by strengthening their capital. In this area, the Ministry of Economy and Innovation has supported national companies through the following four instruments:

Inov Capital: Society Venture Capital framed in IAPMEI which is active in supporting the Entrepreneurship and SME support in the areas of Innovation and Internationalization, contributing to the development of the Technological Plan and the sustained growth of national economy.

Aicep Capital Global: Society Venture Capital framed in ICEP, which aims to provide capital for private equity investors, minority and temporary, in small and medium-sized Portuguese companies involved in internationalization strategies of business

SIRME: System of incentives for Revitalization and Modernization of Enterprise - Financial instrument framed in IAPMEI, which aims to improve the critical mass of domestic enterprises, the restoration of competitive conditions in the businesses that have suffered sharp deterioration in its financial position and the creation a market for mergers and acquisitions to change business practices not dynamic.

Turismo Capital SCR, Society Venture Capital framed in the Turismo de Portugal IP, aims to hold shares of companies in the tourism industry, with prospects for recovery in the medium term.

[http://www.iapmei.pt/iapmei-art-03.php?id=533]

Thematic Operational Factors of Competitiveness (FEDER (QREN))

The central goal is the contribution to the promotion of economic growth levels to ensure the sustained recovery of the path of real convergence of the Portuguese economy with the European Union, based on the competitiveness of the country and its regions, businesses and territories. Concurrently, they established the following objectives: qualification of the productive sector, by means of upgrading the profile of expertise and business models; increased guidance for the international markets of the whole Portuguese economy, through increased of international production; qualification of Public Administration and efficiency of state action, through modernization of public administration and promoting a culture of public service centered on the citizen and business; promotion of a knowledge-based economy and innovation, by encouraging the development of science and technology and fostering entrepreneurship.

There are 6 priorities:

- Priority I - Knowledge and Technological Development – for large Companies and medium-sized entities, Higher Education and Scientific and Technological System, State Laboratories and Associate Laboratories; Entities interface and support of technology entrepreneurship.

- Priority II - Innovation and Renewal of the Business Model and the pattern of specialization – for Large and Medium enterprises; interface Entities and technical business.

- Priority III - Financing and Risk Sharing Innovation – for Public Institutions participating in the Support Fund financing innovation.

- Priority IV - A performing public administration and Quality - Is addressed this hub entities Central Public Administration.

- Priority V - Networks and collective actions of Business Development - Public Entities and local business; Private Entities Non-Profit (Business Associations and Entities of the Scientific and Technological Development), including those relating to female entrepreneurship.

- Priority VI-Technical Assistance - The recipients of the intervention line technical assistance are the governing bodies of the Program.

The total amount of ERDF Operational Program Competitiveness factors amounts to 3,103,789,011 Euros, which corresponds, in terms of schedule drawn up, the amount of public expenditure in EUR 685,552,410 and a total investment of 5,510,641,421 Euros.

[http://www.qren.pt/item3.php?lang=0&id_channel=34&id_page=286]

Operational Program Human Potential (FSE (QREN))

Assume 4 objectives: tackling the structural deficit qualifications in Portugal (12 years of schooling as minima) centered on youth and adults, advancing scientific knowledge, innovation and modernization

of the productive and Public Administration; stimulate the creation and job quality, emphasizing the promotion of entrepreneurship, and promoting equality of opportunity. Intended audience: individuals, companies, especially SMEs, legal persons.

[http://www.qren.pt/item3.php?lang=0&id_channel=34&id_page=287]

Operational Program for North (QREN)

Regional Program is structured in five Strategic Priorities, in terms of programming, are of the following six Priorities: - Priority Axis 1 - Competitiveness, innovation and knowledge; - Priority 2-Recovery of specific resources; - Priority 3 - Developing and qualifying environmental and territorial - Priority 4 - Urban system development; - Priority 5 - Regional Capacity building; - Priority 6 - Technical Assistance.

The budget is 2.711.646 Euros and the beneficiaries are Local Government, associations, Juntas Metropolitanas, Development Agencies Regional, collective people public and private, among other similar entities.

[http://www.qren.pt/item3.php?lang=0&id_channel=34&id_page=290]

Operational Program Regional Center (QREN)

This program set out priorities to develop the region within the context of the various thematic programs of the NSRF and public policy. Presents the priorities for action and makes a diagnosis of the current situation in the Central. This program is basing on 6 priorities:

1 - Competitiveness, innovation and knowledge:

- Creation of micro and small businesses; - Planned R & D, in particular cooperation projects and micro enterprises and entities of the Science and Technology; - Investment projects for production innovation in micro and small enterprises; - Classification of micro and small enterprises; - Pilot projects for renewable energy; - Development of Knowledge Society; - Planned infrastructure, equipment and networks to support business; - Collective action of business development.

2- Development of cities and urban systems

3 - Strengthening and enhancing local areas

4 - Protection and Environmental

5- Governance and Capacity Building

6 – Technical Assistance

The total amount of the Regional ERDF amounts to EUR 1.701.633,124 corresponds, in terms of schedule drawn up at a total investment of 2,881,114,918 Euros.

[http://www.qren.pt/item3.php?lang=0&id_channel=34&id_page=291]

Operational Agenda for Territorial Development

Aiming at the country and its regions and sub regions of a better attractiveness for investment in production and living conditions for people, includes interventions in nature and infrastructural endowment equipment essential to the qualification of the territories and the strengthening of economic, social and territorial cohesion. This Agenda as key areas for action on improving international connectivity, Accessibility and Mobility, Protection and Exploitation of the Environment, Cities Policy and also the networks of infrastructure and equipment for territorial and social cohesion.

[http://www.qren.pt/item3.php?lang=0&id_channel=34&id_page=289]

FIEP

Fund for the Internationalization of Portuguese Companies, the FIEP plays an active role in increasing equity international projects and take the risks associated with their participation, and between the state and the Financial System, and between those entities and the business world. Goals are - Facilitate the conditions for the internationalization of Portuguese companies; - Participate in setting up strategic partnerships - between the companies, banks and the state - and leverage funding for their projects internationalization

Projects under Portuguese investment abroad, and required minimal involvement in the capital (amount and percentage) and an appropriate management and strategic reasons, including:

- Installation of production facilities abroad (particularly in re-investment companies associated with the excess of actual and potential deadlocks arising from changes in competitive factors of the Portuguese economy);

- Investments commercial; - Another type of transactions are considered analogous (including those of contract).

[http://www.iapmei.pt/iapmei-art-03.php?id=574]

INOFIN

Program for Financial Innovation for the SME market in Portugal.

The INOFIN is configured to support public policies in 3 action plans: 1 - Environment of businesses; 2 - economic priorities (entrepreneurship and innovation, competitiveness and internationalization); 3 - dynamic entrepreneurs.

[http://www.iapmei.pt/iapmei-art-02.php?id=231&temaid=9]

FINCRESCE The program aims to optimize financing conditions for companies pursuing growth strategies and strengthen their competitive base.

Aimed at the SME segment that is in a stage of stable development and to provide good performance and risk profiles, the program aims to encourage business strategies aligned with the priorities of economic policy, promoting dynamic growth and affirmation in the markets, as well as strengthening the corporate structure through the consolidation of sectoral leaders.

The program aims to bolster the efficiency of bank intermediation and broadening the capital market in mid-cap companies and, therefore, these companies prepare for the new management model of funding resulting from the entry into force of the Basel II.

Integrated in INOFIN - Program Framework for Financial Innovation in the SME Market IAPMEI the FINCRESCE based on the formation of public-private partnerships with a range of actors and non-financial, to act in support to target the corporate segment.

[http://www.iapmei.pt/iapmei-mstplindex.php?msid=6]

Mutual Guarantee

It is a private system of nature and mutual support for small, medium and micro enterprises (SMEs), which results primarily in providing financial guarantees to facilitate the obtaining of credit in terms of price and time appropriate to their investment and business cycles.

In order to spur investment, development, modernization and internationalization of SMEs, the Mutual Guarantee Societies (SGM) also provide all other guarantees for the development of its business sectors: industry, commerce, services, construction, tourism and transport.

It provides the necessary guarantees in trade relations firm's current facilitates the choice of the best solutions for financing and obtaining credit in less time.

Reduces the risk that the bank naturally attaches to these operations, thereby reducing their cost to obtain the most appropriate deadlines and release additional credit ceilings.

Eliminates or reduces the need for collateral or personal partner, with the cost reduction that this implies, for example, in deeds and mortgage records.

Supports companies analyze their financial situation and building operations with the use of more sophisticated products, such as the issuance of bonds.

Aims to companies or individual entrepreneurs who: are SMEs, under the law, namely, have fewer than 250 employees have turnover less than € 50 million or assets less than € 43 million, meet the criterion of autonomy, keep records in accordance with the Official Accounting, exercise an activity covered in the industrial, energy, construction, tourism, trade, services and transport, show no debts to the Tax and Social Security, no incidents were not justified, claims or litigation in arrears to the financial system or other entities and have more than 2 years of activity.

[http://www.iapmei.pt/iapmei-art-03.php?id=820]

System of Tax Incentives for R & D Enterprise (SIFIDE)

Objectives: Tax incentives for R & D enterprise as a way to support companies that want to increase their investments in research and development. Recipients: Taxable IRC beneficiaries of this scheme must meet all the following conditions: - taxable income is not determined by indirect methods; - There are indebted to the State and Social Security of any taxes or contributions or have your payment forthcoming.

[http://www.iapmei.pt/iapmei-art-03.php?id=551]

QREN

SI I&DT - Incentive Scheme for Research and Technological Development in Enterprises (QREN)

The aim of this Project is to Intensify the I &DT national business effort, create new knowledge in order to increase the competitiveness of enterprises, to promote integration of firms in international networks of knowledge, stimulating creation and assimilation of new knowledge inducing new economic opportunities, to promote Cooperation and Development Projects and R & D between companies and entities of the SCT and encourage the demonstration, technological experimentation, dissemination and technology transfer to industry.

The beneficiaries are enterprises, SCT entities and Business Associations.

Activity sectors:

1. Industry, trade, services, tourism, energy, transport and logistics 2. Other activity sectors 3. Under Collective Efficiency Strategies can also be given to other sectors.

The projects under the R & D Enterprises are:

- Individual Project - Project undertaken by a company. - Projects Co-Promotion - Projects carried out in partnership between companies or between

these entities and the SCT, which, due to the complementarily of skills or interests common use of results of R & D, combine to enhance synergies and share risks and costs, this partnership is formalized through a contract with the consortium and coordinated by a company;

- Supported Projects - Projects that mobilize skills and scientific and technological with high technological content and innovation with significant impact at sectoral, regional, cluster, cluster competitiveness and technology or consolidation of the value chains of certain sectors and the introduction of new skills in strategic areas of knowledge, aiming at effective transfer of knowledge and appreciation of the R & D among firms, conducted in co-promotion between enterprises and between the SCT;

- Vale I & DT - Money given to SMEs to purchase services from R & D entities in the SCT qualified to do so by assignment of a claim against these organisms.

- Collective I&DT Projects promoted by business associations that result from the identification of problems and needs of R & D shared by a significant number of companies, including the level of a sector, cluster, cluster competitiveness and technology or region, and the results were widely disseminated by companies in the aggregate concerned.

Establishment and strengthening of internal competences in R & D

Centers of R & D - Projects promoted by SME companies in order to develop the business skills of a sustained internal R & D and innovation management, through the creation of structured units with characteristics of permanence and dedicated exclusively to R &DT; Corporate R & D - Promoted by companies already active in a continuous and structured R & TD aimed at increasing the R & D beyond the lines of investigation of normal daily business.

[http://www.incentivos.qren.pt/innerpage.aspx?idCat=16&idMasterCat=10&idLang=1]

SI Innovation - System Innovation Incentive (QREN)

Support for investment projects of productive innovation promoted by companies, individually or in cooperation.

The aim is to promote innovation in the business, through the production of new goods, services and processes that support their progression in the value chain; to improve the targeting of companies to international markets; and encourage entrepreneurship qualification and structural investment in new areas with growth potential.

The beneficiaries are enterprises.

Activity sectors:

1. Industry, Trade, Services, Tourism, Energy, Transport and Logistics

2. Other activity sectors

3. Under Collective Efficiency Strategies can also be given to other sectors.

4. Support for projects in sectors subject to specific restrictions in EU state aid rules must comply with the relevant EU guidelines.

[http://www.incentivos.qren.pt/innerpage.aspx?idCat=17&idMasterCat=10&idLang=1]

SI SME Qualification - Incentive Scheme for the Qualification and Internationalization of SMEs

Support investment projects promoted by companies, individually or collectively, as well as public entities, associations or entities of the Scientific and Technological Development (SCT) targeted for intervention in SMEs, with a view to innovation, modernization and internationalization through the use of dynamic factors of competitiveness.

The aim is the promotion of business competitiveness through increased productivity, flexibility and responsiveness and active presence of SMEs in the global market.

The beneficiaries are enterprises and public entities with expertise in specific public policies for SMEs, associations with those entities that have established partnerships in pursuit of public policies, business associations and entities of the SCT, in the case of joint projects.

Activity sectors:

1. Industry, Trade, Services, Tourism, Energy, Transport and Logistics

2. Other activity sectors

3. Under Collective Efficiency Strategies can also be given to other sectors.

Types of Investment: Industrial Property, Design, Fashion & Design, Development and Engineering Products, Services and Processes, Organization and Management and Information and Communication Technology (ICT), Quality, Environment, Innovation, Diversification and Efficiency, Digital Economy, Trade and Marketing, Internationalization, Social Responsibility and Health and Safety at Work, Equal Opportunities.

Type of Projects:

Individual Project - Project presented individually by an SME;

Group project - project submitted by a public entity, a business association or entity that the SCT, with the support of contractors, develops a structured intervention in a number of SMEs,

Cooperation Project - Project submitted by an SME or a consortium led by SMEs, which proposes to develop a project of cooperation between firms;

Simplified Innovation Project - Draft submitted by an SME for acquisition advisory services and innovation support to entities of the SCT, qualified for this purpose, based on the assignment of a claim against those entities.

[http://www.incentivos.qren.pt/innerpage.aspx?idCat=18&idMasterCat=10&idLang=1]

2. Innovation Stakeholders

There are a number of bodies in charge of innovation policy implementation. The set of bodies has remained stable during the period under analysis. Below is a brief description of the main responsibilities and focus of the various bodies is provided. To help the reader, the presentation will start with the bodies specific to each main Ministry to conclude with information on the management of the NSRF 2007-13.

As mentioned above, three important agencies are under the purview of MEID: IAPMEI, AICEP and INOVCAPITAL.

IAPMEI, the Institute for Support to Small and Medium-Sized Enterprises and for Investment, is the principal instrument for economic policies directed toward micro, small and medium-sized enterprises. It also plays a role as funding agency, managing the support systems addressed to companies under the NSRF 2007-13, namely the IIS, the SME Skills Support System (SIQPME), and most of the measures under the Research and Technological Development Support System (RTDSS). In this regard, IAPMEI gained, under the NSRF 2007-13, new responsibilities, being in charge of all the measures specifically geared to promote in-house skills and innovation by SMEs. Previously, some of these, such as the R&D nuclei in the company sector and the Programme supporting the creation of research and technology teams in companies (NITEC, PT 36, now PT 75), were assigned to Adi.

To support entrepreneurialism and the creation of enterprises, in addition to the activities undertaken to promote the entrepreneurial spirit within the academic population, IAPMEI puts out information and support programmes to assist new businesspersons, from the stage of “collecting the idea” to a full-blown business project. It dedicates special attention to innovative entrepreneurialism.

To support innovative SMEs, IAPMEI encourages the use of innovative practices regarding sustainable development and the promotion of dynamic factors of competitiveness in order to increase businesses’ competitive dimension. Through a wide-ranging involvement in structures dealing with technical and technological support to companies and partnerships with the National Scientific and Technical System (NSTS) entities, it supports technology transfer and R&D inside and amongst companies, with special emphasis given to partnerships for innovation. IAPMEI participates in sector research centres, centres for research and technology transfer, business incubators and technology parks, among other entities. It is a boosting partner of the Technological Plan Shops at universities, promoting the business set-up and transfer of projects with strong technological content or innovation. IAPMEI’s operations extend over a wide field, namely with respect to the training of service providers who deal with companies once gaps or faults have been detected within the market that can affect the development of a company’s competitive features.

The IAPMEI is responsible for what was named SME Ambition XXI - a set of temporary and targeted measures aimed to support enterprises of the various national economic sectors and in particular SMEs, that were combined into a global initiative. This initiative includes a set of five instruments that operate in support of SMEs critical areas - finance, globalization and competitiveness, including:

1. FINICIA Program - Financial Solutions for Small Business - FINICIA Program facilitates the access to finance for start-ups and smaller companies, which traditionally have greater difficulty in their connection to the financial market.

2. Incentive System for Companies (QREN - Compete) - The System of Incentives to Companies Investment created under the Operational Agenda of Competitiveness Factors of QREN (Compete Program) provides direct financial support to productive and intangible investments, in order to promote competitiveness, innovation and internationalization.

3. PME Investe Programme – It aims to facilitate SMEs' access to bank credit, particularly through the subsidy of interest rates and reducing the risk of banking operations through the use of assurance mechanisms of the National Guarantee Mutual that support up to 50% of the debt capital.

4. PME Consolida Programme – This programme, budgeted at 400 million euros, aims to strengthen the capital structure of enterprises, especially Small and Medium Enterprises in order to support mergers, acquisitions and corporate restructuring. There were created two new tools to support the capitalization of companies, FACCE (Autonomous Fund to Support Concentration and Consolidation of Companies) and e FIEA (Special Real Estate Fund for Business Support) and strengthened the existing tools of venture capital.

5. PME Segura Programme – It aims to strengthen mechanisms of credit insurance by supporting guarantees offered by the national system of Mutual Guarantee, or directly by the state, allowing companies to access with more favourable terms to the instruments of credit insurance provided by national insurance companies. The AICEP – Business Development Agency is an agency with a liaison role regarding the promotion of investment in Portugal, also assuming the role of sole intermediary for the promotion of large-scale national or foreign investment, offering personalized service in all phases of the investment process as well. It also deals with developing and executing policies that aid in the internationalizing of the Portuguese economy, the promotion and diffusion of economic activities, namely those in the area of goods and services, the promotion of the image of Portugal, and of Portuguese brands outside the country. Regarding external promotion, AICEP deals with large, small and medium-sized businesses.

InovCapital is the Portuguese Ministry of the Economy, Innovation and Development venture capital firm, geared towards supporting SMEs and entrepreneurs. Its mission is to contribute to the Technological Plan, and therefore, supported growth of the Portuguese Economy through the promotion of entrepreneurship and a proactive participation in the development of Portuguese companies.

The main focus of AICEP is internationalisation. This includes two main strands. The first is the development of international businesses by Portuguese firms, following different market entry modes, from exports to direct investments abroad. This may have some influence on innovation performance for two reasons: (1) being more exposed to international competition will require further investment in the development of distinctive competitive assets, and (2) the possibility to use internationalisation from a competence-creating logic, developing home-base augmenting R&D activities (Kuemmerle, 1999) and learning from abroad. AICEP and public policy in general have not been much concerned with this matter. The second is the attraction of FDI. This is a central concern for AICEP, which earns profit from a network of offices abroad (as well as from Portuguese embassies), to approach potential investors in the country. AICEP is responsible for the management of special investment projects, involving a minimum investment of EUR 15 million, under the RTDSS.

The Fundação para a Ciência e a Tecnologia (FCT) is the main agency under the MCTES. It aims to promote the advancement of scientific and technological knowledge in Portugal, exploring opportunities that become available in any scientific or technological domain to attain the highest international standards in the creation of knowledge, and to stimulate their diffusion and contribution to improve education, health, environment, and the quality of life and well being of the general public. This mission is mainly accomplished through the funding, subsequent to the evaluation of the merit, of proposals presented by institutions, research teams or individuals in public open calls, and also through cooperation agreements and other forms of support in partnership with universities and other public or private institutions, in Portugal and abroad.

The Knowledge Society Agency (UMIC) also operates within the Ministry of Science, Technology and Higher Education and is the Portuguese public agency with the mission of coordinating the policies for the Information Society and mobilizing it through dissemination, qualification and research activities.

The Innovation Agency (Adi) is a state-owned agency funded by the Ministry of Science, Technology and Higher Education (50% FCT) and the Ministry of the Economy and Innovation (17% IAPMEI and 33% PME – Investimentos). Adi has as strategic objectives the promotion and economic valorisation of R&D activities, support and promotion of technology based innovation, promotion and support of recruitment of highly qualified human resources by enterprises and support of technology transfer activities. Working within a network of administrative departments, technological centres, business associations and other S&T entities located in Portugal, Adi also pursues a policy of promoting international co-operation. As such, it acts as a link between the European Union, Asia, Latin America and various international R&D organisations. As mentioned above, Adi has lost responsibilities to IAPMEI. It is now mainly focused on measures involving S&T organisations (including the promotion of national (co-promotion R&D projects) and internationals (Eureka Eurostars projects) university-industry research consortia), management of tax incentives for R&D through SIFIDE (System of Tax Incentives for Enterprises R&D) and employment of post-graduates in companies and S&T organisations.

A final reference is due regarding the Managing Offices of the various OPs under the NSRF 2007-13. The Regional Programmes Managing Offices have gained much more room for manoeuvre in the NSRF, and have important responsibilities, for instance in support of scientific and technological infrastructures (S&T parks and incubators), for the promotion of technology-based entrepreneurship.

From an innovation policy perspective, the most relevant Managing Office is the one responsible for CFOP-Compete, which designs, launches and oversees the key incentive systems dealing with innovation: SII, SIQPME, SIIDT, SIESCTN, Collective Actions Support System (SIAC) and Collective Efficiency Strategies (including the support to CTPs and other clusters).

3. Assessment of Innovation Instruments

Considering a preliminary analysis from the interviews performed at national level to Portuguese companies, where it was requested the comparison between EU and National frameworks in terms of the efficiency, some draft conclusions can be highlighted.

- In general most of the Portuguese respondents considered that “stimulating demand” in terms of regulatory measures, public procurement & promotion of technology adoption is much better implemented at European level rather than at national level;

- In terms of “networking & setting up infrastructures” such as human capital, clustering, partnering etc, most of the respondents considered the efficiency at EU and National level similar or slightly better at European level. Some companies find more important to have such supports at national level due to their core business and scope of activity, while other companies focused on internationalization objectives find more valuable the EU supports on this matter;

- Concerning “financial innovation”, from the supports on technological, non-technological innovation and market implementation, the majority of respondents expressed that EU efficiency is better than at national level;

- Regarding to support services such as IPR management, technology transfer, internationalization the respondents found the efficiency at national level quite alright, and at EU level they feel that more can be done at EC level to intensify the support on more market oriented initiatives, supporting commercialization and exploitation of project´s results;

- In terms of “scope” Portuguese innovators find EU framework much broader than National, with less administrative burden. Additionally, the funding is considered closer to the market (but not enough), the level of funding is higher, and the time horizon of projects have a tendency to be longer projects but with no significant difference from the national level.