Dr Jadranka Švarc Institute for Social Sciences “Ivo Pilar”, Zagreb e-mail: jadranka.svarc@pilar.hr

1. International ConferenceWHY INVESTING IN SCENCE IN SOUTH EASTERN EUROPE?Ljubljana, Slovenia, September 27-29, 2006CROATIAN INNOVATION POLICY MEETS REALITY Dr Jadranka ŠvarcInstitute for Social Sciences “Ivo Pilar”, Zagrebe-mail: jadranka.svarc@pilar.hr Dr Emira BečićMinistry of Science, Education and Sportsemira.becic@mses.hr

2. Starting points of the presentation Innovation system in Croatia is rather complex but not coherent set of institutions mutually interrelated to pursue the same mission of “using knowledge for development” It is laging behind NISs of other European countries (benchmark analysis) Innovation policy in Croatia is not an integrated policy but a narrowly-shaped program for fostering science-industry cooperation Therefore, the Croatian innovation policy should “meet the reality” and to be adjusted to the specific development needs of Croatia determined by of the country for using innovation (knowledge) as a main driving force of economic growth. • technology advancements • economic progress and • social maturity

3. Content of the presentation Presentation consists of the three parts: 1. Current state of a. Croatian NIS - institutional and organizational set-up, main stakeholders… b. Croatian innovation policy – policy framework (documents), main programs and instruments… 2. Results of the pilot benchmark analysis of the Croatian NIS and NISs of EU countries to stress the critical points of the Croatian NIS 3. Brief discussion of the socio-cultural inertia and the lack of policy learning that are perceived as the main obstacles to faster development of Croatia

4. Beginnings… Since 2000 Croatia made significant effort in establishing national innovation system and introducing innovation policy These endeavors were additionally supported by the Accession negotiations with the European Union (EU) opened on the 4th October 2005 ….brought Lisbon and Barcelona targets into strategic policy agendas of Croatia The screening processes for both the sectors ...have been successfully finalized with overall conclusions that: • From the legal and institutional point of Croatian systems are harmonized with the acquis • Further development is needed….. R&D and HE (Chapter 25) Innovation policy (Chapter 20. 2)

5. Institutional set-up for R&D and innovation inCroatia (1/2)

6. Institutional framework for innovation policy management and implementation (2/2)

7. Documents relevant for innovation policy

8. The first innovation policy program -Program HITRA Croatian Program for Innovative Technological Development First government innovation policy program (adopted in 2001) Purpose: building up efficient national innovation system Long term goals: • Fostering science-industry cooperation • Revitalization of industrial R&D • Encouraging commercialization of the research results Current tasks: • Specialy designed to foster science –industry cooperation • Provides a framework for direct cooperation between entrepreneurs and scientific institutes/universities

10. HITRA – Main policy instruments

11. HITRA Programs RAZUM – Knowledge based companies TEST – technology projects 1/3 (37) projects proposals were selected for financing 22 projects relates to start-up companies 16 projects are intended for companies expansion plans 482 projects applications - received 252 projects selected for financial support 102 projects in progress 150 projects accomplished

12. Other programs related to innovation policy Programs of the National Foundation for Science (NFS) 1. “Partnership in basic research“ (launched in 2005) • Aimed atattracting investments from industry and entrepreneurship to basic research in Croatia 2. Program “Brain Gain - Visitor" (launched in 2004) - Aimed at encouragingresearchers resident outside Croatia to carry out research project in Croatia incl. industry

13. Institutional infrastructure of the Croatian innovation system – initiated by the MSES • Business and Innovation Centre of Croatia (BICRO) • The Croatian Institute for Technology (HIT) • Centre for Technology Transfer (CTT), Zagreb Technology and Innovation Centre, Osijek Centre for Innovative Technology Rijeka (TIC) 1. Four technology and innovation Centres Centre for Technology Transfer (CTT), Zagreb Technology Centre Split (TCS) Centre for Innovative Technology Rijeka (TIC) Technology and Innovation Centre, Osijek 3. One Research and Development Center Research and Development Centre for Mariculture, Dubrovnik 4. Business and Innovation Centre of Croatia (BICRO) 5. The Croatian Institute for Technology (HIT) Technology Centre Split (TCS) Research and Development Centre for Mariculture, Dubrovnik

14. Institutional infrastructure of the Croatian innovation system – initiated by the Ministry of Economy and local authorities • 9 business incubators • 20 entrepreneurial centres • 10 development agencies • 14 free zones • 2 technology parks • “Technology park Zagreb“ • “Technology park Varaždin

15. Institutional infrastructure of the Croatian innovation system - technical infrastructure 2. Institutions of the technical infrastructure During 2004 the basis for technical infrastructure has been achieved and harmonized with the European standards and acquis State office for norms and measurement was transformed into the three new institutions: • Croatian Accreditation Agency (http://www.akreditacija.hr/) • Croatian Standards Institute (http://www.dznm.hr/hzn/) • State Office for Metrology (http://www.dzm.hr/). • State Office for Intellectual Property Rights (http://www.dziv.hr/) • State Bureau for Statistics (CBS) (http://www.dzs.hr/) These institutions make the core of the technical infrastructure necessary for overall technological and innovation development

16. Relevant international projects 1.“Science and Technology Project“ of MSES supported by the World Bank, aimed at improving NIS, started in 2003 2. CARDS project “Intellectual Property Infrastructure for the Research and Development Sector”aimed at introducing IPR system in academic sphere, started in 2005 3.The TEMPUS project “Stimulating Croatia’s Entrepreneurial Activities and Technology transfer in Education – CREATE” has been approved by the European Commission in August 2005 . Aim: create national university system for supporting entrepreneurial activities and technology transfer. 4. EURO-INFO Centre - The European information and communication centre Zagreb was established at the Croatian Chamber of Economy, started in 2005

17. Towards Lisbon • All these activities provide a platform for certain satisfaction with the innovation policy • Although Croatia has no concrete “National 3% Action Plan” or “National Lisbon plan” there is mix of policies and actions that should move Croatia’s orientation towards Lisbon goal- knowledge society. Does Croatian NIS follow the path towards knowledge economy?

18. Benchmark ecxercise – Croatia Simple model of NIS Input Output Source: STRATA-ETAN Expert group for benchmarking national research policies (EC DG Research, June 2002

19. Components of NIS - definitions RESERCH INTENSITY is a national pool of knowledge that makes a basis for the creation and adoption of new technologies and innovations HUMAN CAPITAL represents the knowledge and skills embodied in individuals that make them capable of taking advantage of knowledge and new technologies ABSORPTION CAPACITY is the ability of a company to recognize, accept and exploit new technologies. It is highly interdependent with innovation performance. It is capacity is closely connected to the infrastructure and channels that enable diffusion of innovation such as ICT, quality management, etc. TECHNOLOGICAL AND INNOVATION PERFORMANCE rather complex area that should indicate the degree of capitalization of science or transformation of research and human capacities into inovativnnes, competitiveness and production.

20. Components of NIS as composite indicators RESEARCH CAPACITY • Gross domestic expenditures in R&D (GERD) • Total number of researchers (FTE) per 1000 labour force, • Number of scientific publications per million population INTELECTUAL CAPITAL • Total public expenditure on tertiary education as a percentage of GDP • Percentage of population aged 25-64 with upper secondary education • New PhDs in S&E fields per 1000 population aged 25-34 ABSORPTION CAPACITY • Number of ISO certifications 9000 per million inhabitants • Number of Internet Hosts per 10 000 inhabitants • Researchers (FTE) in business sector as a percentage of total researchers (FTE ) TECHNOLOGICAL AND INNOVATION PERFORMANCE • Patent applications (PCT) per million population (technological output) • High-tech exports as a percentage of manufactured exports (competitivenness) • R&D financed by industry (BERD) as percentage of GDP a measure of intrinsic interest and demand of industry for R&D)

21. CALCULATION Our main task was to determine the relative position of Croatian NIS measured by composite indicators in relation to the two basic sets of countries: EU 25 – all the European member states EU 10 – the New member states … to see deviations ordivergence of each country and Croatia from the average of the basic set of countries

22. Calculation of composite indicators In order to compare and to correlate the composite indicators, it is necessary to transform various sub- indicators that are measured in different unites into the sameunit. . • This method calculates z-scores or standardized units of the number of standard deviations from the mean, using the following formula (above). • The method for calculation composite indicators is taken over from Towards a European research Area: Key Figures 2002. Euros Percentages Per capita units, etc Should be convert into the single measurement unit

23. Results – Research intensity vs. Human capital To see the relative position of Croatia we put into the relationship each of the composite indicator against each other. We receive 6 graphs, as follows:

24. Results – Graph 2 .Research intensity vs. Absorption capacity

25. Results: Graph 3. Research intensity vs. Performance

26. Results: Graph 4. Human capital vs Absorption

27. Results: Graph 5 Human capital vs Performance

28. Results: Graph 6.Absorption vs performance

29. Results – Croatia and EU 25 EU 25 : It is possible to identify at least three groups of countries: • Countries that are significantly above EU average in all the components of NIS: Sweden, Finland, Denmark, Germany, Untied Kingdom, and (Netherlands with the exception of HC). These countries are the most efficient in the transition towards knowledge economy and in utilization of knowledge factors and innovation for economic growth • Countries that are about EU average such as Belgium, France, Austria, Ireland and Luxembourg (with the exception of HC). Those countries are catching up with the first group in knowledge based economy • Countries which are in almost all composite indicators (with some oscillations) below EU average. This group comprises all the new member states, but also southeastern countries like Greece, Spain, Italy, Portugal and Cyprus and ….Croatia

30. EU 25 (+ Croatia) Composite indicators – divergence from average, 2001

31. Divergence of Croatia from EU 25 average in composite indicators, 2001

32. EU 10 (+ Croatia) Composite indicators – divergence from average, 2001 • The position of Croatia in relation to the new member states (EU 10) is not much different from its position among all (25) EU countries. • It is also possible to make the distinction between three groups of countries among new member states

33. Results - Croatia and EU 10 ….. • Countries that are in all four or at least three components of NIS above average such as: Czech Republic, Estonia,Hungary and Slovenia. Czech Republic and Slovenia are definitely the leading countries in innovation capabilities 2. Countries that are above (or about) average in 2 components Cyprus, Lithuania, and Slovakia and 3. Countries with three or four components below EU 10averge – Latvia (four components), Poland (three components) and Croatia (three components)

34. Croatia- divergence from EU 10 in selected indicators,2001 • In comparison with EU 10 Croatia is better in only one composite indicators research capacity and one sub-indicator – high-tech exports

35. GERD is in constant upswing line

36. GERD – Croatia is topping the list of the New member states

37. A pool of researchers in Croatia is bigger than in majority of the New member states

38. However… in human capital we are on the bottom of the list of the New member states…

39. In absorption capacity …. … we are before Lithuania which is on the bottom …

40. In innovation performance capacity… …we are below EU 10 average

41. Collapse of illusions ….that we are maybe better than the previous transition countres in human capital or innovation capacities. In both groups of countries Croatia is lagging the most in absorption capacity and human capital

42. Croatian NIS – critical components … IT MEANS THAT THE MOST CRITICAL COMPONENTS OF THE CROATIAN NIS ARE: ABSORPTION • Quality management • Number of researchersin industry and • Computerization of Croatia EDUCATION • Investment in tertiary education • Number of new scientists in engineering • Educated labor force

43. R&D sector: structural imbalances in number of researchers and R&D investments The analysis of R&D sector in the narrow sense, in terms of investment in R&D and number of researchers in public vs. private sector reveals that R&D sectors is suffering the serious structural imbalance since public sector significantly domintes over private sector while in developed countries industry and business sectors in both research manpower and investments largely predominate the public sector • While in developed countries about 50- 80 percent of researchers are employed in business sphere in Croatia, the situation is just the opposite. Pubic sector, (HE and government employs 85%) of researches, while business sector employs modest 15 %

44. R&D sector: structural imbalances in R&D investments between public and private sector • Business sector in Croatia invests 0,45 % of GDP. Business sector invests in EU 15 countries more than 1 % of GDP from 0,27 in Portugal to 3,32 in Sweden . • Therefore, the development of R&D sector should, presumably, involve further development of public sector R&D to catch up with European standards but concerted actions of both government and private business for strengthening industrial research capacities are seriously needed.

45. CONCLUSIONS • National innovation system of Croatia is underdeveloped in comparison with both – all the member states of EU – 25 and new member states – EU 10 countries that belonged to transition countries as well as Croatia • Croatia is lagging behind in knowledge based factors of growth that commonly shape the new techno-economic paradigm – knowledge economy such as: qualification structureof the labor force, technology capabilities of companies, research capacity in industry, computerization, etc. • Croatia is competitive to EU countries only in research intensity that reflects the present orientation of innovation policy primarily towards supply side in terms of number of researchers and investments in R&D in public sector • It support the thesis that Science policy in Croatia is standard policy based on a linear model of innovation in which science is a prime mover of technology development.

46. CONCLUSIONS (cont.) • Policymakers in Croatia assume that capitalization of science(innovation) begins and ends with research • Therefore, science and innovation policy is primarily focused on public science separate from production and entrepreneurship (Innovation policy is a part of science policy that is centralized and dominated by MSOS as the main financer and consumer of R&D • Ministry of economy runs its own programs for business development mainly unware of the innovation policy

47. The main reasons for underdeveloped innovation policy ….are perceived in the socio-cultural inertia and lack of policy learning The policymakers should understand: • the complexity of the innovation process – innovation is essentially the result of the interactive process between many actors and sectors (science, companies, financial sector, legal conditions, ect.) • that there is a need to create conditions for their interactions and combinations of different kinds of knowledge: scientific, engineering, production etc. • that Lisbon agenda requests a shift from the conventional science policy towards integrated and pro-active innovation policy that means integration of science, industry and technology policy.

48. Is integrated innovation policy possible in Croatia? However, integrated innovation policy should significantly influence both: • Science policy (science organization, evaluation and institutional set-ups), pushing it towards the norms and values of a concepts close to “new knowledge production” and “triple helix” that are not welcome in our scientific community and • Industrial policy that is today reduced to privatization of state-owned companies and financial rehabilitation of weak industries but corresponds to neo-liberalism that is a dominant economic doctrine in Croatia CONFRONTATION WITH THE SOCIO-CULTURAL NORMS AND VALUES

49. IS CROATIAN DEVELOPMENT POLICY ON THE CROSS-ROAD? INOVATION POLICY SCIENCE POLICY Fostering knowledge based factors of growth Privatization and rehabilitation Technology policy Standard industrial policy