text 1 transition report 2014 tr.ebrd.com innovation in transition produced by the office of the...
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TEXTTEXT
TRANSITIONREPORT2014
tr.ebrd.com
Innovationin TransitionProduced by the Office of the Chief Economist,
EBRD.© European Bank for Reconstruction and Development
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Productivity catch-up in transition region largely complete – how to achieve further productivity gains?
Source: EBRD Transition Report 2013, Penn World Tables 8.0.
Gro
wth
199
3-2
01
0G
row
th 1
99
3-2
01
0
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INNOVATION: Adopt, Adapt, Advance
Innovation = improving productivity within firms
Innovation goes well beyond R&D in high-tech sectors
Products and production processes new to the firm
Firms need to Adopt, Adapt and Advance towards technological frontier
4 4
BEEPS V: Around 16,000 firms in 30 countries and similar
surveys in Jordan and Israel
Taking the pulse on firm innovation
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• FIRST BEEPS ROUND TO INCLUDE A DETAILED MODULE ON INNOVATION AND MANAGEMENT/ORGANISATION PRACTICES
• RESPONDENTS ASKED IF THEIR FIRM INTRODUCED NEW OR SIGNIFICANTLY IMPROVED PRODUCTS, PROCESSES, ORGANISATIONAL ARRANGEMENTS OR MARKETING METHODS IN THE PAST THREE YEARS
• EXTENSIVE “CLEANING” NEEDED TO DISTINGUISH GENUINE INNOVATION FROM NON-INNOVATION, AND TO APPLY THE RIGHT CLASSIFICATION
BEEPS V: Special Focus on innovation
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Descriptions of innovations analysed to achieve consistency
Product innovation, reclassified as:
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Zooming in on a firm in transition
1. THE MANY FACES OF INNOVATION: FOCUS ON TECHNOLOGY ADOPTION
2. INNOVATION AS A DRIVER OF IMPROVEMENTS IN FIRM PRODUCTIVITY
3. WHAT DRIVES INNOVATION?
4. FUNDING INNOVATION
5. POLICIES FOR INNOVATION
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Innovation in Croatia: New products
Atlantic Multipower part of Atlantic GroupState-of-the-art production facility in Nova Gradiska
Multipower is one of the leading European producers of sports food and supplements
New services: protein and protein and carbohydrate bars
Selling through own sales and marketing representatives in Germany, UK, Italy and Spain and own distribution in SEE region
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Innovation in Croatia: New production processes
ABS Sisak - part of Danieli Group steel-making division ABS Italy
New production processes: Innovative technology aimed at improving the environmental footprint of the steel works and minimising the production of scrap (Green Steel)Transfer of knowledge from ABS R&D centre in Metz to ABS Sisak responsible for engineering and launching of new productsSelling through Danieli Group and directly to the clients in Central Europe
Sisak steel mill restructuring and modernisation programme
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Innovation in Croatia: New services
Data Centre in Jastrebarsko, CroatiaGreenfield investment in data storage company
Highest industry standards: first Tier 3 carrier-neutral data centre in Croatia
New services: data centre, business continuity and disaster recovery
Clients – energy and postal services corporates, banks and other financial institutions.
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Firms in the transition region focus on technology adoption, rather than bringing new products to the international market
Source: BEEPS V
Gro
wth
199
3-2
01
0%
of f
irms
with
a n
ew p
rodu
ct
0
2
4
6
8
10
12
14
New to international market New to country, local market, or firm
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Zooming in on a firm in transition
1. THE MANY FACES OF INNOVATION: FOCUS ON TECHNOLOGY ADOPTION
2. INNOVATION AS A DRIVER OF IMPROVEMENTS IN FIRM PRODUCTIVITY
3. WHAT DRIVES INNOVATION?
4. FUNDING INNOVATION
5. POLICIES FOR INNOVATION
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Transition region
Productivity
Share
of
firm
s
Transition region
Productivity
Share
of
firm
s
Israel
Transition region
Productivity
Share
of
firm
s
Israel?
In each country firms can innovate to improve their productivity
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Croatia
Productivity
Share
of
firm
s
Israel?
Productivity in Croatia relatively high, but further improvements needed
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High pay-off to all types of innovation in all sectors…
Source: : BEEPS V, MENA ES
Gro
wth
199
3-2
01
0Im
pact
on
labo
ur p
rodu
ctivi
ty
0
20
40
60
80
100
120
High- and medium-high-tech
manufacturing
Medium-low-techmanufacturing
Low-techmanufacturing
Less knowledge-intensive services
Product innovation Process innovation Marketing/organisational innovation
Higher-tech sectors Medium-low-tech sectors Low-tech sectors0
5
10
15
20
25
30
0
50
100
150
200
250
Percentage of firms engaged in product innovationImpact of product innovation on productivity
Perce
nta
ge o
f firm
s that in
novate
Perc
enta
ge incr
ease
in labour
pro
duct
iv-
ity
16
Higher-tech sectors Medium-low-tech sectors Low-tech sectors0
5
10
15
20
25
30
0
50
100
150
200
250
Percentage of firms engaged in product innovationImpact of product innovation on productivity
Perce
nta
ge o
f firm
s that in
novate
Perc
enta
ge incr
ease
in labour
pro
duct
iv-
ity
…and highest in low-tech industries…
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In less advanced countries the quality of management is key
Source: BEEPS V, MENA ES
Gro
wth
199
3-2
01
0In
crea
se in
pro
ducti
vity
, %
Management needs to be improved before new processes can yield substantial productivity gains
Incr
ease
in p
rodu
ctivi
ty, %
18
Zooming in on a firm in transition
1. THE MANY FACES OF INNOVATION: FOCUS ON TECHNOLOGY ADOPTION
2. INNOVATION AS A DRIVER OF IMPROVEMENTS IN FIRM PRODUCTIVITY
3. WHAT DRIVES INNOVATION?
4. FUNDING INNOVATION
5. POLICIES FOR INNOVATION
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What determines innovation?
INTERNAL FACTORS
FIRM CHARACTERISTICS (AGE, SIZE, OWNERSHIP)
FIRM CHOICES (TO EXPORT, TO HIRE SKILLED PERSONNEL)
EXTERNAL FACTORS
BUSINESS ENVIRONMENT
FIRM CHOICES ARE SHAPED BY EXTERNAL FACTORS
HOW DIFFICULT IS IT TO EXPORT, TO FIND SKILLED WORKERS?
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Innovative firms are more sensitive to the business environment
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In particular: corruption, skills and access to finance
Gre
ate
r con
str
ain
t fo
r in
novato
rs
0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.00.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1.600396
1.40026 1.387476
1.249513
1.19863
1.191489
0.98896820.9762211
0.86676020.811749
0.81241910.7884232
0.78327970.6812459
TransitionRegion
Greater constraint for non-innovators
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Gre
ate
r con
str
ain
t fo
r in
novato
rs
0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.00.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
0.95
1.02
1.07
1.36
1.14
1.10
0.86
1.01
0.690.57
0.52
1.09
0.70
Central Europe and
the Baltic States
Greater constraint for non-innovators
In Central Europe/Baltics, main obstacles for innovators are tax administration, finance and electricity…
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…while in Croatia it is the informal sector that creates biggest problems for innovators
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Gre
ate
r con
str
ain
t fo
r in
novato
rs
Greater constraint for non-innovators0 0.5 1 1.5 2 2.5 3
0
0.5
1
1.5
2
2.5
3
0.7858224
0.343701
0.731751
0.8966564
2.507527
0.3263611
1.359764
0.9857591
1.949191
Licenses/permits
1.5448631.588306
Labour regulations
1.254419
Croatia
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Zooming in on a firm in transition
1. THE MANY FACES OF INNOVATION: FOCUS ON TECHNOLOGY ADOPTION
2. INNOVATION AS A DRIVER OF IMPROVEMENTS IN FIRM PRODUCTIVITY
3. WHAT DRIVES INNOVATION?
4. FUNDING INNOVATION
5. POLICIES FOR INNOVATION
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Can banks help firms to innovate?
NO
• Intangible and firm-specific assets cannot be used as collateral
• Firms are hesitant to disclose sensitive information on innovative activity
• Banks are technologically conservative
YES
• Banks specialise in building lending relationships with clients
• Innovation is more than just R&D
• In some countries, bank credit may be the only source of external finance
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Yes, if they relieve credit constraints
Local banking market
• There is regional variation in inter-bank competition and the presence of foreign banks…
Local credit
constraints
• …which determines whether firms have access to credit or not.
Firm innovatio
n
• Firms with access to credit introduce new products and processes to their markets.
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Banks positively affect firms’ ability to innovate
Product innovation Process innovation0%
5%
10%
15%
20%
No credit demand Unfulfilled credit demandFulfilled credit demand
Perc
enta
ge o
f fi
rms
that
innovate
Product innovation Process innovation0%
5%
10%
15%
20%
No credit demand Unfulfilled credit demandFulfilled credit demand
Perc
enta
ge o
f fi
rms
that
innovate
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Zooming in on a firm in transition
1. THE MANY FACES OF INNOVATION: FOCUS ON TECHNOLOGY ADOPTION
2. INNOVATION AS A DRIVER OF IMPROVEMENTS IN FIRM PRODUCTIVITY
3. WHAT DRIVES INNOVATION?
4. FUNDING INNOVATION
5. POLICIES FOR INNOVATION
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Embrace economic openness
Help firms export, enter global value chains through quality certifications, streamlined export procedures and VAT refunds
• Armenia - Cisco, Microsoft partnerships, special events. ICT companies now get 44% of revenues from exports
• Slovak Republic - special incentives for foreign firms, including SMEs, to come to less developed regions
• Estonia – focus on international cooperation, foreign R&D investment grew by 15 per cent a year
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Lower barriers to entry of firms
WTO-related liberalisation of services in Ukraine led to improved firm productivity, largely through entry and exit
Hig
her
pro
du
ctiv
ity
Source: : Calculations based on Derzhkomstat data.
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Focus on horizontal policies where governance weak
Innovation policies tend to focus on a few high-tech sectors…
Sources: EBRD Innovation Policy Questionnaire
% of countries viewing sector as priority…
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