Post-Transition Technology Absorption – What Can ECA Learn from Germany ?

1. Post-Transition Technology Absorption – What Can ECA Learn from Germany? Itzhak Goldberg, Europe and Central Asia Region, World Bank Knowledge Economy Forum, Berlin, May 5, 2010

2. What is an innovative SME – Inventing or Absorbing? • Absorption = incremental = new-to-country but not new-to-world • Absorption ►►► key to Japan, China and India • R&D = pre-requisite for Absorption, not only for innovation • Restructuring – post-transition technology absorption ►►► discontinued production line, upgrading lines (see below) Itzhak Goldberg, Europe and Central Asia Region, World Bank

3. Post-crisis Growth –Whence? • In ECA, capital is scarce and labor costly, relative to Asia; no cost-based competitiveness ►►►Need technology absorption to help export-oriented diversification. • Technology Absorption Channels in SMEs: (i) Participate in world R&D and support firms getting into global markets (ii) Encourage spin offs and R&D collaboration (portability, researchers’ IPRs) Itzhak Goldberg, Europe and Central Asia Region, World Bank

4. Enterprise Perceptions: Investment Climate in Germany, Poland and Czech R. Subset of Enterprise Survey 2005, including 1260 firms with less than 250 employees Firms claiming major obstacle in… [%] Source: WB Enterprise Surveys Itzhak Goldberg, Europe and Central Asia Region, World Bank

5. Technology Absorption – Enterprise Surveys Indicators – Germany, Poland and Czech R. Initiatives of company over the last 36 months [%] Source: WB Enterprise Surveys Itzhak Goldberg, Europe and Central Asia Region, World Bank

6. Do we know how to support absorption rather than innovation? • In principle, we know why/how to subsidize innovation. But… • Why subsidize technology absorption? • Matching grants: OK for licensing, export promotion, consultancy. But… • Most absorption is via new machinery and equipment – do we subsidize capital assets? • or the R&D / skills needed to properly adapt technology and workforce to new tech? Itzhak Goldberg, Europe and Central Asia Region, World Bank

7. Public Support for Innovation – and what can ECA learn from Germany? Matching Grants for R&D in enterprises and support for Venture Capital (VC) -- successful in the US (SBIR, ...), Finland (TEKES, …), Israel (OCS/Yozma) And today we will hear from High-Tech Gründerfonds in Germany whether this model is working • Grants • State support for VC • mixed results in Poland, • successful in Croatia • successful but miniscule in Russia (Bortnik) • problematic in Russia (RVK – no pipeline) • problematic in Croatia (VC no pipeline) • problematic in Poland (only large) Itzhak Goldberg, Europe and Central Asia Region, World Bank

8. What can ECA learn from Germany – Questions to Panelists • How did the investment climate in East Germany change post-unification? • How do you support new firm creation in E. Germany? • Do you manage to attract W. German firms to set up operations and/or R&D. And if not why not? • What is your innovation strategy e.g. did you improve cooperation between research and industry Innovation Assistant Program to promote in-house firm R&D? • What financial instruments do you use: loans or grants? Do you believe that loans encourage risk-taking in innovation? Itzhak Goldberg, Europe and Central Asia Region, World Bank