Model of the Entrepreneurship Motivation and Innovation Culture programme

1. Model of the Entrepreneurship Motivation and Innovation Culture programme 22 March 2007 Valdis Avotiņš, Agnese Griņeviča, LIAA Rene Tõnnisson & Wolfgang Drechsler, Tartu

2. Operational Programme 2007-2013 Strand III support Competency Centres PPP Concept TTOs & LiOs Pre-Seed Foresight 2004-2006 Business incubators New products and technologies Riga NIP Inno-Culture Innovation-System Created Risk capital scheme Skills Centre Risk Capital Shared laboratories Qualified personnel Monitoring System Training, consultancies Business Angel networks Need analysis Techo-consultancies EU networks New product scheme TI – VCF scheme

3. Culture Usually culture is understood as a diversity of values, norms and traditions which are reflected as common value of tools and environment of creative process. Culture always has been supposed as a result of people’s activity. It is fulfilling the role of society’s social memory and provides connection of centuries and continuity of generations values. In the economic aspect the term of culture is used quite recently. First of all, as common understanding of industrial relationships inside of collective economic subject (company). It’s possible to describe the stable employees relationships with the culture of business administration in the company with the goal to elaborate and define the decisions about effective use of limited resources in the production.

4. Innovation Culture An entrepreneurship and innovation culture means an environment where people can explore and express their creative, innovative and business acumen. It is an environment whereby entrepreneurs and innovators are the norm in society rather than an exception. The management of Innovation culture is defined by the elaboration of the Innovation strategy in the company together with access to all the necessary analytical information.

5. Innovation culture in the company • Components which describes the innovation competence of managers and are related to their professional knowledge and experience during the innovation processes in the company; • Motivation for value, which describes the motivating power of innovatin culture – common sense of demand factors, values, motives and stereotypes, which encourages the manager to implement the particular model of behavoiur during the innovation in the company. This level reflects the manager’s personal motivation. • Behaviour, which includes all practical managerial activities in all innovation elaboration and implementation phases. It’s possible to divide the particular terms “entrepreneur” and “intrapreneur”. The entrepreneur is a person who establishes and run the new private business – company, while the intrepreneur is a person who starts new activities in the company owned by others.

6. 2. CULTURE FOR INNOVATION in the sense of an innovation conducive climate within a certain location (“innovation milieu”) Innovation & Culture 3. INNOVATION CULTURE in the sense of an innovation-conducive habit or system or best practise within a given company 1. INNOVATION AND EXISTING CULTURE (especially regional / local) as it exists

7. Market defficiences • Lack of a visible, open enterprise culture; • Lack of National and individual self-confidence; • Lack of coherent, cohesive national vision in relation to entrepreneurship, innovation, and enterprise culture; • Poor understanding of enterprise in civil and public sectors; • Low Risk taking; • Low levels of R & D; • Training for enterprise not developed; • Emigration of youth and educated workforce to other economies; • Low levels of partnership

8. Only external barriers

9. Assimmmetry of information (308 firms intervied) RIS Latvia, 2003

10. Share of innovative firms, %, 2002-2004 17,5% innovative firms gave 42,3% of total turnover in 2004 Only 4,7% product innovative Only 3,5% high-tech in manufacturing

11. Competitive companies R&D performance in business sector shows positive pace Intramural R&D in business sector by research type, EUR mill. Source: Central Statistics Bureau, 2006.

12. Two policies Promotion of new innovative SMEs policy Entrepreneurship policy Encouraging phase Birth phase Start phase After-start phase (upon 42 months) Growth management phase

13. Division of business education in Education system in Finland Business values and attitude Business related knowledge Business and management knowledge Pre-schools Vocational education Life-long learning High schools Universities

14. Lujo Brentano 1844-1931

15. “When I climbed out of the boat that had brought us back … to Naples, and gave to one of the boys lying on the pavement my briefcase to carry, he shook his head with the words: I have already eaten!” (Brentano)

16. Mistakes come from lack of experiences and experiences come from mistakes

17. Innovations are new products, processes, or distribution or financing mechanisms that are succesfully brought into the economic process (market) The ENTREPRENEUR in search of a SHORT-TERM MONOPOLY, which only an innovation - except if there are laws to the contrary - provides WHAT ARE INNOVATIONS AND HOW DO THEY WORK? • INNOVATIONS ARE NOT INVENTIONS • innovation is an economic term • innovation is lucrative AND WHAT PROPELS INNOVATION? • because at least for a time, the novelty that marks the innovation makes it impossible for competitors to get “into the action”

18. But this is just half of the story... There are innovations that are only good for the entrepreneur, and there are innovations that are also good for state, society, and economy. And while entrepreneurship is nice as such, the interest for the state side and regions lies in promoting it in precisely those areas that have a “snowball effect” to produce a general increase in production and wealth.

19. Therefore, the question or challenge implied in asking about regional innovation culture is not so much, or not only, about creating an innovation-friendly culture, but to create a set of innovation incentives which are in line with the existing culture!

20. Regional culture can ATTRACT innovation: During economic globalization, which is marked by a divorce of value-addition and physical product, life remains “real” and must be lived. Thus, to attract innovative business, as or more important than tax advantages etc. may be LIVING ENVIRONMENT and quality of life for the innovators and their families… … which are partially cultural, partially infrastructural, partially natural (landscape and climate), but they ARE promotable and should be a focus of any regional innovation strategy.

21. Tartu Software Micro Cluster • There are about 50 software companies who are employing about 1000 software engineers in Tartu • Skype thought that it is a good place to recruit new people • But people did not want to move so it was forced to set up an software developement office in Tartu, which became catalyst for most succesful Cluster Initiative in Estonia

22. Therefore it is actually one of the best strategies for a region that wants to attract innovative enterprises and entrepreneurs to create an environment in which those people feel happy and actually want to live.

23. The basic description • 7 years programme 2007 - 2013 • The budget needed is 7 MEUR; • National programme • Part contracted out (50-70%) • Potential applicants – universities, local governments, NGOs, TTOs involving private intermediates

24. The main objectives • To increase local interest and involvement in Education and Research as a source for innovation; • To promote conductive climate for innovation in Latvia; • To increase investment in R&D and Innovation at both regional and national levels; • To use available resources to support and attract young highly skilled professionals to strengthen Latvia’s innovative capacity; • To create a new and dynamic culture to existing companies.

25. Short term goals • To promote an enterprise culture though educational programmes and competitions at each of the three levels of education; • To develop a greater understanding of the importance of enterprise creation among public and civil servants; • To assist the formation and sustained development of high potential start up businesses; • To put infrastructure in place to support enterprise creation.

27. Outputs of the programme Number of • enterprise courses delivered, persons engaged in training and skills development programmes(i.e. Investment readiness, Masterclass, Self-assessment tools & other short studies) • promotional activities undertaken such as articles in newspapers, magazines, Interviews in TV, radio, presentations in relevant seminars, conferences, workshops • enterprise competitions organised (Competition on Innovation prize) • innovation awards organised, marketing plans of future entrepreneurs designed, business plans created, enterprises supported/created (Competition of Youth innovative business ideas) • student firms created (Innovation and Marketing training for students) • enterprise awareness programmes for public and civil servants organised (Best practices) • Lean technology approach promoted (value concepts, productivity, efficiency, sales, new products introduced etc.) MIDDLE term target: 200; FINAL target: 500 events MIDDLE term target: 1000; FINAL target: 3000 enterprises approached

28. Beneficiaries Private sector: manufacturing companies and the ones providing services Public sector: governmental institutions, local authorities, NGOs “Support infrastructure”: business incubators, technology incubators, technology transfer contact points, universities etc. Society: potential entrepreneurs

29. Benefits from the programme • More innovative and high growth start-up businesses in knowledge and technological based industries • More innovation and creativity in existing industries • More “intrapreneurs” • More focus on Global market opportunities • More productive and competitive enterprises • More high value job opportunities for graduates • More spin-out enterprises from research projects • Closer linkages between industry and Universities.

30. Selection criteria • Need for financial support; • Value for money; • Ability toreach programme and measure objectives; • Spillovers generated jump of high effectiveness; • Cost effectiveness; • Potential to reposition of attitudes • Impact on Regional Development • Skills and experience

31. Pre-seed FacilityProgramme Model

32. Early Stage Finance Availability in Latvia The early stage equity market for knowledge based start ups in Latvia suffers from: • lack of investor ready projects • the dimension of the market, not big enough to allow proper risk pooling • the perception of the risk/profit ratio by the operators, due to the lack of specialization (and consequent asymmetry of information) and to the dimension of the market • the difficulties of way out • Existing equity gap (“valley of death”)between idea and investor ready business plan

33. Role of State in Early Stage Basic R&D Applied R&D Pre-seed Seed Start-up Expansion Private sector funding Public sector funding Pre-commercial financing Commercial financing • Existing equity gap between idea and investor ready business plan • Private investors not interested • State needs to interfere

34. Role of Pre-seed Facility Business and Technology Incubators Real estate Incubator Premises Industrial networks Basic daily services Professional services Innovation Culture and Entrepreneurship Motivation Business plan Forming new start-up Funding Equity registration Operational company Incubator company Idea stimulation / business idea formulation Dev. plans Market plan Organisation plan Financial plan Prospect Idea with comm. value Market analysis Applied and basic R&D Asset management Early stage Seed capital Risk capital Competent management Entrepreneurship education, training Business culture Social attitudes Understanding of failures Greenhouses Business labs Pre-analysis Product Protection Development Value Competition cooperation Licensing License to existing company Education Outflow of Master, PhD IPR Commercial protection Marketing Royalty agreement Fiscal incentiveenvironment Technology Transfer System Seed fund Pre Seed fund IPS fund

35. Pre-seed Facility Model Promotion and awareness building of the programme • Fellowship and mentoring: • For researchers and research groups • For engineers in companies • Voucher to participate: • For participation in training courses and seminars • Expert consultation: • Consultations with selected specialists/experts 4 month x 300 EUR è 1200 EUR On average 1500 EUR On average 3000 EUR • Operated by private service management company • 6 year programme • Initially 3 year pilot phase

36. Innovation Culture is thus not about having more technological innovations

37. ... but it is about the right attitude and understanding how to make best out of innovations in your specific situation

38. Thank You for attention! Pērses iela 2, Riga, LV 1442, Latvia Phone: +371 7039410Fax: +371 7039401 E-mail: valdis.avotins@liaa.gov.lv http://www.liaa.gov.lv