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SALVATORE ZECCHINI Chairman OECD Working Party on SME and Entrepreneurship

KEY POLICY CHALLENGES IN FOSTERING INNOVATION International Conference “ Industry and Innovation 2014” Sofia, 30-31 October 2014. SALVATORE ZECCHINI Chairman OECD Working Party on SME and Entrepreneurship.

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SALVATORE ZECCHINI Chairman OECD Working Party on SME and Entrepreneurship

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  1. KEY POLICY CHALLENGES IN FOSTERING INNOVATIONInternational Conference “Industry and Innovation 2014”Sofia, 30-31 October 2014 SALVATORE ZECCHINI Chairman OECD Working Party on SME and Entrepreneurship

  2. Can a boosttoR&D and Innovation (RDI) prop up currentlystagnatingeconomies ? • MultifactorProductivity (MFP) differences can explain part ofdifferences in per-capitaincome • RDI is a major componentofMultifactorProductivity • MFP hasprovided a sizeablecontributiontoeconomicgrowth

  3. Frominnovationpoliciestogrowth: A model link

  4. MFP drivesper-capita GDP differences(Source: OECD, Johansson et al. 2012)

  5. MFP as a maincontributortoeconomicgrowth(Source: OECD, Johansson et al. 2012)

  6. Gvtexpenditure in RDI rose evenduring the last major economiccrisis(Source: EU Lessons…2013)

  7. But in countriesmostaffectedbycrisis RDI funding first hadananti-cyclicaleffect, thendeclined

  8. Bulgaria’s fundingto RDI followed the same pattern(Source: EU InnovationScoreboard 2014)

  9. Bulgaria’s performance in innovationisnot so unfavourable (Source: EU InnovationScoreboard 2014)

  10. Focus: Mainchallengesforgovernmentsupportpolicies in RDI • Is there a need to support RDI, particularly at a time of fiscal stringency? • Who should be the target for support? • How should support be structured? • What are the most appropriate means to support? • How to ensure efficient and effective implementation?

  11. Innovationis a processinvolvingmanyactors, forms and institutions in a non-linearsense. • Productofcontinuousinteractionofmanyactors • Itisaffectedbyeconomic, social and regulatoryenvironment • Prone tosystemicfailures • Needto intervene on the manycomponentsofnationalinnovation system • The twomainweaklinks are SMEs and finance

  12. Bulgaria’sinnovationindicators(Source: EU InnovationUnionScoreboard 2014)

  13. Barrierstoinnovation • SMEs difficult access to outside finance, • lack of competition in the market place, • unfavorable investment climate, • the social culture, • some regulatory constraints, • the weak linkages between large and small companies, • the dearth of cooperation between universities and entrepreneurs, particularly the start-ups.

  14. Whereto intervene? On the mainshortcomingsof the nationalinnovation system(Data source: EU Innobarometer 2014)

  15. Factorshamperinginnovation(% innovating firms with 10 to 49 employees, 2010 – Source: OECD)

  16. Factorshamperinginnovation(% innovating firms with 50 to 249 employees, 2010 – Source: OECD)

  17. Factorshamperinginnovation(% innovating firms with more than 250 employees, 2010 – Source: OECD)

  18. Still, 2/3 ofsurveyedfirmsinnovated in the last 3 years(Data source: EU Innobarometer 2014)

  19. SMEs invest in R&D and innovate less than large firms

  20. SMEsintroducingproduct and processinnovation in 2008 and 2010

  21. Surprising: few innovative firmsreceivedanyfundingsupport (Data source: EU Innobarometer 2014)

  22. SMEsgenerallyreceivedmuchlessgovernmentaidthanlargefirms

  23. Taxincentives benefit more multinationalcorporationsthanstart-ups and SMEs

  24. Equallysurprising: the majorityofsupportedfirmsdidnotconsider public supportimportant!

  25. What policy approach, toovercome system failures, governmentfailures, SMEshardship, financial market failures, incomplete marketsforfunding RDI?

  26. Policy approaches are ratherhomogeneousacrosscountries, withlimiteddifferences in their focus in spiteof wide disparities in innovation performance • Conclusion: thereis no policy modelvalidforall the countries. • The choicehastobebased on the country’s characteristics and itsvaliditytested on the ground in termsofinnovation performance • Barrierstoinnovation: SME financingproblem, low competition, poorinvestmentclimate, social culture, low technology transfer, weaklinkagesbetweenfirms and universities, few collaborative projects

  27. Governmentneedstodevelop a long term vision and a strategywithcleargoals Issues: • Policy governance • Top-downapproach vs. bottom-up • The latteris more successful • Create aninnovationconstituencywithin private business sector • Choiceof policy instrument mix • Poorimplementation and bureaucracy

  28. Essentialsupport • Develop high skills, training, mentoringoffirms, incubators, accelerators • Improvefirms’ absorptioncapacity and business environment • Promote Production and Diffusionofinnovation • New standard settings and regulations • Debt and equityfundingofstart-ups, innovative firms • Policy coherence and effective policy implementation • Public procurement • Fine tuningoftaxincentives (incrementalinvestment)

  29. Invest in aninnovation culture within the society at large, not just the entrepreneurs Main policy messageresultingfrom more than a decade ofexperience: Create anenablingenvironmentconducivetoresearch, development & innovation and Generate a culture thatpromotesinnovation. Firmsthemselvesshouldhaveanimportantrole in shapinggovernment policy and monitoringitsimplementation.

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