piroska nagy and bojan markovic ebrd - basscom...kyrgyz republic latvia lithuania moldova mongolia...
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Piroska Nagy and Bojan Markovic
EBRD
EBRD Transition Report presentation
Sofia, 3 February 2015
Stuck in Transition?
A wake-up callReform fatigue is slowing the
process of convergence
TRANSITIONREPORT2013
3
Transition slow-down…
Econ
omic
tran
siti
on
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
CEB Central Asia EEC SEE Russia Bulgaria
…means convergence slow-down
Sources: IMF WEO, EBRD REP, weighted averages.
Innovation in Transition
FranklinGothicDemiCondITC 38pt
A wake up callReform fatigue is slowing down
the convergence process
Innovation by
companies as a
driver of growth…
…re-energises
transition
TRANSITIONTRANSITIONTRANSITIONTRANSITIONREPORTREPORTREPORTREPORT2014201420142014
Adopt, Adapt, Advance: Picking the low-hanging fruit
Innovation about improving productivity within firms
Innovation goes well beyond R&Din high-tech sectors
Products and production processes new to the firm
Firms Adopt, Adapt and Advancetowards technological frontier
BEEPS V:
Around 16,000 firms in
30 countries and similar
surveys in Jordan and Israel
Taking the pulse on firm innovation
8
Innovation: New products
AMG Technology: a company experienced in semiconductor manufacturing technologies since 2007
Connects micromechanical system with electronics and bridges the gap between nano-sized objects and macro-level tools
New product: triple scanning microscope, merging a dual beam microscope with high-speed atomic force microscope, used for novel analytical methods like tomography
Became the first Bulgarian SME to receive funding from Eurostars transnational programme
Innovation: New production processes
Bulgaria’s KCM, the largest lead and zinc smelter in the Balkans
EBRD and UniCredit provided EUR 95 mil. for upgrading lead production and zinc processing
New processes helped reduce lead dust emissions by 10% and improve energy efficiency by 35%
10
Firm innovation gets countries unstuck…
MoroccoMoroccoMoroccoMorocco
JordanJordanJordanJordan
MacedoniaMacedoniaMacedoniaMacedonia
UkraineUkraineUkraineUkraine
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80
Inn
ova
tio
n in
ten
sity
of
exp
ort
s In
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on
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in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s
GDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EU----15 average 15 average 15 average 15 average
1993/1994 1993/1994 1993/1994 1993/1994 → 2010/2011→ 2010/2011→ 2010/2011→ 2010/2011
MoroccoMoroccoMoroccoMorocco
JordanJordanJordanJordan
MacedoniaMacedoniaMacedoniaMacedonia
UkraineUkraineUkraineUkraine
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80
Inn
ova
tio
n in
ten
sity
of
exp
ort
s In
no
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in
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ort
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in
ten
sity
of
exp
ort
s In
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vati
on
in
ten
sity
of
exp
ort
s
GDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EU----15 average 15 average 15 average 15 average
1993/1994 → 2010/20111993/1994 → 2010/20111993/1994 → 2010/20111993/1994 → 2010/2011
MoroccoMoroccoMoroccoMorocco
AzerbaijanAzerbaijanAzerbaijanAzerbaijan
BelarusBelarusBelarusBelarus
JordanJordanJordanJordan
MacedoniaMacedoniaMacedoniaMacedoniaRussiaRussiaRussiaRussia
SloveniaSloveniaSloveniaSlovenia
UkraineUkraineUkraineUkraine
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80
Inn
ova
tio
n in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s
GDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EU----15 average 15 average 15 average 15 average
1993/19941993/19941993/19941993/1994 → 2010/2011→ 2010/2011→ 2010/2011→ 2010/2011
MoroccoMoroccoMoroccoMorocco
AzerbaijanAzerbaijanAzerbaijanAzerbaijan
BelarusBelarusBelarusBelarus
JordanJordanJordanJordan
MacedoniaMacedoniaMacedoniaMacedoniaRussiaRussiaRussiaRussia
SloveniaSloveniaSloveniaSlovenia
UkraineUkraineUkraineUkraine
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80
Inn
ova
tio
n in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s
GDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EU----15 average 15 average 15 average 15 average
1993/1994 → 2010/20111993/1994 → 2010/20111993/1994 → 2010/20111993/1994 → 2010/2011
MoroccoMoroccoMoroccoMorocco
AzerbaijanAzerbaijanAzerbaijanAzerbaijan
BelarusBelarusBelarusBelarus
Czech RepublicCzech RepublicCzech RepublicCzech Republic
EgyptEgyptEgyptEgypt
EstoniaEstoniaEstoniaEstonia
HungaryHungaryHungaryHungary
JordanJordanJordanJordan
LatviaLatviaLatviaLatvia
MacedoniaMacedoniaMacedoniaMacedoniaRomaniaRomaniaRomaniaRomania
RussiaRussiaRussiaRussia
SloveniaSloveniaSloveniaSlovenia
Slovak RepublicSlovak RepublicSlovak RepublicSlovak RepublicTunisiaTunisiaTunisiaTunisia UkraineUkraineUkraineUkraine
TurkeyTurkeyTurkeyTurkey
BulgariaBulgariaBulgariaBulgaria
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80
Inn
ova
tio
n in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s
GDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EU----15 average 15 average 15 average 15 average
1993/1994 1993/1994 1993/1994 1993/1994 → 2010/2011→ 2010/2011→ 2010/2011→ 2010/2011
MoroccoMoroccoMoroccoMorocco
AzerbaijanAzerbaijanAzerbaijanAzerbaijan
BelarusBelarusBelarusBelarus
Czech RepublicCzech RepublicCzech RepublicCzech Republic
EgyptEgyptEgyptEgypt
EstoniaEstoniaEstoniaEstonia
HungaryHungaryHungaryHungary
JordanJordanJordanJordan
LatviaLatviaLatviaLatvia
MacedoniaMacedoniaMacedoniaMacedoniaRomaniaRomaniaRomaniaRomania
RussiaRussiaRussiaRussia
SloveniaSloveniaSloveniaSlovenia
Slovak RepublicSlovak RepublicSlovak RepublicSlovak RepublicTunisiaTunisiaTunisiaTunisia UkraineUkraineUkraineUkraine
TurkeyTurkeyTurkeyTurkey
BulgariaBulgariaBulgariaBulgaria
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80
Inn
ova
tio
n in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s In
no
vati
on
in
ten
sity
of
exp
ort
s
GDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EUGDP per capita, in per cent of EU----15 average 15 average 15 average 15 average
1993/1994 → 2010/20111993/1994 → 2010/20111993/1994 → 2010/20111993/1994 → 2010/2011
Source: USPTO, UN Comtrade, Feenstra et al. (2005)
-20
0
20
40
60
80
100
120
140
160
180
LatinAmerica
EmergingAsia
SEMED Russia TransitionCountries
CEB SEE Bulgaria
Gro
wth
19
93
-20
10
, p
erc
en
t
TFP Human capital Labour Physical capital Growth
11
…by boosting aggregate productivity
Source: EBRD Transition Report 2013, Penn World Tables 8.0.
Gro
wth
19
93
-20
10
Gro
wth
19
93
-20
10
Exports have become more innovation intensive, in particular in
CEB
12Source: Source: Source: Source: USPTO, UN Comtrade, Feenstra et al. (2005)
0
10
20
30
40
50
60
70
80
90
100
CEB
SEMEDSEETUR
EEC
CA
RUS
BUL
Inn
ov
ati
on
in
ten
sity
of
exp
ort
s
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Transition regionTransition regionTransition regionTransition region
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Transition regionTransition regionTransition regionTransition region
IsraelIsraelIsraelIsrael
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Transition regionTransition regionTransition regionTransition region
IsraelIsraelIsraelIsrael????
13
In each country firms can take ‘innovative
actions’ to improve their productivity
14
Firm innovation can improve productivity everywhere
• Some firms are as productive as leaders in advanced markets…
• …but laggards must adopt and adapt – or die – to raise aggregate
productivity and get countries unstuck
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Central AsiaCentral AsiaCentral AsiaCentral Asia
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Central Europe and the Baltic statesCentral Europe and the Baltic statesCentral Europe and the Baltic statesCentral Europe and the Baltic states
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Central AsiaCentral AsiaCentral AsiaCentral Asia
IsraelIsraelIsraelIsrael
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Central Europe and the Baltic statesCentral Europe and the Baltic statesCentral Europe and the Baltic statesCentral Europe and the Baltic states
IsraelIsraelIsraelIsrael
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Central AsiaCentral AsiaCentral AsiaCentral Asia
IsraelIsraelIsraelIsrael
????
Sh
are
of
firm
sS
ha
re o
f fi
rms
Sh
are
of
firm
sS
ha
re o
f fi
rms
ProductivityProductivityProductivityProductivity
Central Europe and the Baltic statesCentral Europe and the Baltic statesCentral Europe and the Baltic statesCentral Europe and the Baltic states
IsraelIsraelIsraelIsrael
????
0
50
100
150
200
250
Higher-tech sectors Medium-low-tech sectors Low-tech sectors
Pe
rce
nta
ge
in
cre
ase
in
la
bo
ur
pro
du
ctiv
ity
Pe
rce
nta
ge
in
cre
ase
in
la
bo
ur
pro
du
ctiv
ity
Pe
rce
nta
ge
in
cre
ase
in
la
bo
ur
pro
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ctiv
ity
Pe
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ge
in
cre
ase
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la
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ur
pro
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ctiv
ity
Pe
rce
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ge
of firm
s tha
t inn
ova
teP
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tag
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f firms th
at in
no
vate
Pe
rce
nta
ge
of firm
s tha
t inn
ova
teP
erc
en
tag
e o
f firms th
at in
no
vate
Percentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovation Impact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivity
0
50
100
150
200
250
Higher-tech sectors Medium-low-tech sectors Low-tech sectors
0
5
10
15
20
25
30
Pe
rce
nta
ge
in
cre
ase
in
la
bo
ur
pro
du
ctiv
ity
Pe
rce
nta
ge
in
cre
ase
in
la
bo
ur
pro
du
ctiv
ity
Pe
rce
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ge
in
cre
ase
in
la
bo
ur
pro
du
ctiv
ity
Pe
rce
nta
ge
in
cre
ase
in
la
bo
ur
pro
du
ctiv
ity
Pe
rce
nta
ge
of firm
s tha
t inn
ova
teP
erc
en
tag
e o
f firms th
at in
no
vate
Pe
rce
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ge
of firm
s tha
t inn
ova
teP
erc
en
tag
e o
f firms th
at in
no
vate
Percentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovationPercentage of firms engaged in product innovation Impact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivityImpact of product innovation on productivity
Pay-off from innovation highest in low-tech industries…
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
f fi
rms
tha
t m
ak
e o
r m
ak
e
of
firm
s th
at
ma
ke
or
ma
ke
o
f fi
rms
tha
t m
ak
e o
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ak
e
of
firm
s th
at
ma
ke
or
ma
ke
an
d b
uy
an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
f fi
rms
tha
t m
ak
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ak
e
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firm
s th
at
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ke
or
ma
ke
o
f fi
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tha
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ak
e o
r m
ak
e
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firm
s th
at
ma
ke
or
ma
ke
an
d b
uy
an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
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tha
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ak
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e
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firm
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at
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tha
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ak
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e
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firm
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at
ma
ke
or
ma
ke
an
d b
uy
an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
AzerbaijanUzbekistan
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
f fi
rms
tha
t m
ak
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r m
ak
e
of
firm
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at
ma
ke
or
ma
ke
o
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tha
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ak
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firm
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at
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uy
an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
Low innovationLow innovationLow innovationLow innovation
AzerbaijanKazakhstan
Uzbekistan
Turkey
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
f fi
rms
tha
t m
ak
e o
r m
ak
e
of
firm
s th
at
ma
ke
or
ma
ke
o
f fi
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tha
t m
ak
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ak
e
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firm
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at
ma
ke
or
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ke
an
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uy
an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
BuyBuyBuyBuyLow innovationLow innovationLow innovationLow innovation
Azerbaijan
Bulgaria
Estonia
Kazakhstan
Uzbekistan
Turkey
Israel
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
f fi
rms
tha
t m
ak
e o
r m
ak
e
of
firm
s th
at
ma
ke
or
ma
ke
o
f fi
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tha
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ak
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ak
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firm
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at
ma
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an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
BuyBuyBuyBuy
Make and BuyMake and BuyMake and BuyMake and Buy
Low innovationLow innovationLow innovationLow innovation
Albania
Armenia
Azerbaijan
Belarus
Bosnia and Herzegovina
BulgariaBulgariaBulgariaBulgaria
Croatia
Czech Republic
Estonia
FYR Macedonia
GeorgiaHungaryJordan
Kazakhstan
Kosovo
Kyrgyz Republic
Latvia
LithuaniaMoldova
Mongolia
Montenegro
Poland
RomaniaSerbia
Ukraine
Uzbekistan
Slovak Republic
Tajikistan
TurkeyRussia
Slovenia
Israel
0
2
4
6
8
10
12
14
16
18
20
22
24
26
0 2 4 6 8 10 12 14 16 18
Pe
rce
nta
ge
P
erc
en
tag
e
Pe
rce
nta
ge
P
erc
en
tag
e o
f fi
rms
tha
t m
ak
e o
r m
ak
e
of
firm
s th
at
ma
ke
or
ma
ke
o
f fi
rms
tha
t m
ak
e o
r m
ak
e
of
firm
s th
at
ma
ke
or
ma
ke
an
d b
uy
an
d b
uy
an
d b
uy
an
d b
uy
Percentage Percentage Percentage Percentage of firms that only of firms that only of firms that only of firms that only buybuybuybuy
BuyBuyBuyBuy
Make and BuyMake and BuyMake and BuyMake and Buy
Low Low Low Low
innovationinnovationinnovationinnovation
16
Source: BEEPS V
…and is often best achieved by simply acquiring foreign
know-how
Innovative firms more sensitive to the business environment
17
In particular: corruption, skills and access to finance
Gre
ate
r co
nst
rain
t fo
r in
nov
ator
sG
rea
ter c
on
stra
int f
or i
nn
ovat
ors
Gre
ate
r co
nst
rain
t fo
r in
nov
ator
sG
rea
ter c
on
stra
int f
or i
nn
ovat
ors
Corruption
Skills Finance
Tax administration
Informal sector
Electricity
TransportTelecommunications
Customs/trade regulations
Access to land
Crime
Licences/permits
Labour regulationsCourts
CorruptionCorruptionCorruptionCorruption
SkillsSkillsSkillsSkills FinanceFinanceFinanceFinance
Tax administration
Informal sector
Electricity
TransportTelecommunications
Customs/trade regulations
Access to land
Crime
Licences/permits
Labour regulationsCourts
Corruption
Skills
Finance
Tax administration
Informal sector
Electricity
Transport
Telecommunications
Customs/trade regulations Crime
Licences/permits
Labour regulations
Courts
Central Europe and Central Europe and Central Europe and Central Europe and
the Baltic Statesthe Baltic Statesthe Baltic Statesthe Baltic States
Corruption
Skills
Finance
Tax administrationInformal sector
Electricity
TransportTelecommunications
Customs/trade regulations
Access to land
Crime
Licences/permits
Labour regulations
Courts SouthSouthSouthSouth----eastern Europeeastern Europeeastern Europeeastern Europe
Corruption
Skills
Finance
Tax administrationInformal sector
Electricity
Transport
Telecommunications
Customs/trade regulations
Access to landCrime
Licences/permits
Labour regulations
Eastern Europe and Eastern Europe and Eastern Europe and Eastern Europe and
Caucasus, Caucasus, Caucasus, Caucasus,
Central Asia and RussiaCentral Asia and RussiaCentral Asia and RussiaCentral Asia and Russia
Greater constraint for nonGreater constraint for nonGreater constraint for nonGreater constraint for non----innovatorsinnovatorsinnovatorsinnovators
Innovative firms more sensitive to the business environment
18
Electricity
Telecommunications
Transport
Customs and trade
Access to land
CourtsCrime, theft
and disorderTax administration
Business licensing and
permits
Political instability
Corruption
Access to financeLabour regulations
Workforce skills
Gre
ate
r co
nst
rain
t fo
r in
nov
ator
sG
rea
ter c
on
stra
int f
or i
nn
ovat
ors
Gre
ate
r co
nst
rain
t fo
r in
nov
ator
sG
rea
ter c
on
stra
int f
or i
nn
ovat
ors
Greater constraint for nonGreater constraint for nonGreater constraint for nonGreater constraint for non----innovatorsinnovatorsinnovatorsinnovators
BulgariaBulgariaBulgariaBulgaria
In particular: corruption and skills
Local banking markets affects firms’ access to credit…
Source: BEPS II
…and their ability to innovate
0%
5%
10%
15%
20%
Product innovation Process innovation
Pe
rce
nta
ge
of
firm
s th
at
inn
ova
teP
erc
en
tag
e o
f fi
rms
tha
t in
no
vate
Pe
rce
nta
ge
of
firm
s th
at
inn
ova
teP
erc
en
tag
e o
f fi
rms
tha
t in
no
vate
No credit demandNo credit demandNo credit demandNo credit demand Unfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demand Fulfilled credit demandFulfilled credit demandFulfilled credit demandFulfilled credit demand
0%
5%
10%
15%
20%
Product innovation Process innovation
Pe
rce
nta
ge
of
firm
s th
at
inn
ova
teP
erc
en
tag
e o
f fi
rms
tha
t in
no
vate
Pe
rce
nta
ge
of
firm
s th
at
inn
ova
teP
erc
en
tag
e o
f fi
rms
tha
t in
no
vate
No credit demandNo credit demandNo credit demandNo credit demand Unfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demandUnfulfilled credit demand Fulfilled credit demandFulfilled credit demandFulfilled credit demandFulfilled credit demand
21
Foreign firms more likely to innovate
Source: : BEEPS V, MENA ES
Gro
wth
19
93
-20
10
% o
f fi
rms
tha
t in
no
va
te
22
Exporters innovate more
Source: : BEEPS V, MENA ES
Gro
wth
19
93
-20
10
% o
f fi
rms
tha
t in
no
va
te
23
… and so do firms participating in global value chains
Source: : BEEPS V, MENA ES
Gro
wth
19
93
-20
10
Hig
he
r li
ke
lih
oo
d o
f in
no
va
tio
n
(GV
C v
s. n
on
-GV
C f
irm
s)
What can policy-makers do?
Countries’ innovation policies are too similar
• Too focused on high-tech, R&D, university-industry technology transfer
• Not just adopt policies from advanced economies - also adapt them
Tailor policies to distance to technology frontier and local institutions
Help firms export and enter global value chains through:
Quality certificationsStreamlined export
proceduresVAT refunds
Embrace economic openness
25
Embrace economic openness
26
Embrace economic openness
Estonia:
focus on international cooperation,
foreign R&D investment grew by 15 per
cent a year
Embrace economic openness
Slovak Republic:
Special incentives for foreign firms,
including SMEs, to come to less-
developed regions
Embrace economic openness
Armenia:
Cisco, Microsoft partnerships, special
events. ICT companies now receive 44%
of revenues from exports
Low barriers to entry of firms
WTO-related liberalisation of services in Ukraine led to improved firm
productivity, largely through entry and exit
Hig
her p
rod
ucti
vity
Right mix of horizontal vs. vertical policies
Focus on horizontal
policies where governance is
weak
Use vertical policies to
crowd in the private sector
Right mix of horizontal vs. vertical policies
Right mix of horizontal vs. vertical policies
Finland – centres of excellence programme:
Gradually phases out government funding to
prevent dependence
Right mix of horizontal vs. vertical policies
Bulgaria – Sofia Tech Park:
The first science and tech park to boost R&D,
encourage partnership between public and
private sectors and accelerate the
competitiveness of science and entrepreneurship
Right mix of horizontal vs. vertical policies
Israel - Yozma VC programme:
Government intervention most effective when
taking minority stakes
Getting ‘unstuck’: a double act
36
Need firms willing to innovate and governments facilitating innovation
Innovation must be nurtured and supported with a tailored approach:
Adopting/adapting phase:Adopting/adapting phase:Adopting/adapting phase:Adopting/adapting phase:
•Tackle general barriers like corruption, labour skills and access to finance
•Help firms access international technology and value chains
•Promote smart specialisation
More advanced economies:More advanced economies:More advanced economies:More advanced economies:
•Nurture creativity
•Encourage highly specialised human capital
•Improve competition policies
•Facilitate access to VCs and private equity for young start-up firms
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