Servicio de Información Comunitario sobre Investigación y Desarrollo - CORDIS

Restructuring and reintegration of science and technology systems in economies in transition: Policy implications

The experience of CEE suggests a very weak synergy between transition policies in the narrow, macro-economic sense and the required shift towards an economy based on innovation and knowledge. There is a clear need to better integrate structural and transition policies to induce economic growth and initiate structural change. To achieve this, rather than lingering over systemic details, policy priorities in CEE should focus on the ‘big picture’ - on enhancing demand for technology within enterprises, and on restructuring R&D supply across the board. It must be recognised that a stabilisation of the R&D sector is impossible with radically reduced levels of expenditure unless the organisation, function, and structure of R&D is transformed. Policy needs to tackle supply, demand, and bridging functions in an integrative way.

After 10 years of pursuing the transition policy agenda, the CEECs are now searching for alternative policy solutions to also address the problem of their technological competitiveness. Given the current role of the state in these countries, the implementation of highly selective structural (industrial and technological) policies aimed at strengthening inter-firm and intersectoral technological linkages is unlikely. The CEECs are in the process of developing “market-friendly” public policies that correspond to the capacity of the individual states to implement them in co-operation with enterprises and with public and private organisations. This process is not a rational search but a highly politicised process in which ad hoc interventions dominate in most of the countries.

Policy options range from sector-specific or vertical policies (industrial policies) to horizontal policies (technology policy). However, the sectoral studies within the project show that the main problem is not in the type of policies per se but in the ability of governments to implement them in co-operation with industry. In other words, the empirical evidence produced within the scope of this project shows a variety of possible policy approaches, none of which should be dismissed as a priori more appropriate than others. Their (in) appropriateness is possible only within the specific industry and country context and includes an assessment of the role of the state and of business-government interactions.

The CEECs’ experience of the last seven years in R&D shows strong limitations of only supply type measures. On the other hand, structural difficulties on the demand side are such that key bottlenecks cannot be resolved through S&T policy only. A new transformation phase in the CEECs, in which basic economic reforms, economic stability, and privatisation are relatively stable, calls for much more innovative solutions in industrial and innovation policy, particularly in terms of low-cost policy measures.

The main areas of policy action should be:
I) Resolving the Problem of Industrial R&D Institutes Through Active Restructuring:
With the introduction of the market economy in CEE, it is primarily industry (and, more specifically, the structures and behaviour of enterprises) that is undergoing a major transformation. This has changed the role and position of industrial R&D institutes, but policy in most of the CEECs has been unable to come to grips with this problem. The response was most often a passive and gradual adjustment, whereby institutes had to restructure on their own without a clear policy framework within which they could identify their options. Also, it became clear that any artificial preservation of redundant and often centralised R&D capacities was condemned to fail, and that new tasks and opportunities would have to be sought out for them. In the Policy Report of this project, we propose elements of a pilot scheme for the active restructuring of R&D institutes in CEE.

II) Improving Domestic S&T Infrastructures:
The special importance of building up a technology infrastructure in CEE hardly needs emphasising. Thus, for example, the market value of the current excess supply of engineers and R&D specialists could be greatly enhanced by a technology infrastructure providing general technical support for entrepreneurs, in tandem, perhaps, with a venture capital facility to provide the financial support. But while the infrastructure is crucial for private enterprise and investment, it does not follow from this that the building-up of that infrastructure should be entirely the responsibility of government.

Technology infrastructure policy for a country in transition needs to be oriented much more closely to the customer, designed and financed in co-operation with the customer. In addition to direct government-led public initiatives, infrastructural functions can be created with the support of private provisions of public services (through information services, consultancy organisations, university-industry consortia, semi-public networks of innovation centres, etc). A ‘bottom-up’ approach should ensure demand for the services provided. Voluntary industry associations, too, can function as builders of the technology infrastructure, targeting specific branch needs and financing their operations through members’ fees and customer contributions.

III) Supporting Vocational Training:
Human capital leads to growth only to the extent that it can generate technical change and learning. The sectoral studies within this project pointed to this aspect of restructuring as an essential component for industrial upgrading. In CEE, the labour force has undergone a difficult process of adjustment and the wage structure reflects this through increasing wage differentials.

The education system does not seem to be a major factor constraining industrial upgrading - but it is certainly not a catalyst in that direction, either. Thus one looks in vain for strong pressures to upgrade the human capital stock from either the demand or the supply side. In addition, there are serious deficiencies in the process of the renewal of the skilled labour force (ie, training of unemployed workers), and there is a lack of support for vocational training. The fact that this aspect has been significantly undermined during the 1990s is a strong rationale for public policy actions in this area. Also, technical education is subject to radical change and in need of modernisation. Due to the need to ensure the relevance of vocational training, these schemes are not only a problem of funding: More important is their relevance and whether they ensure the skill profiles that foreign and domestic enterprises seek. This requires vocational training policies to be conducted in close co-operation with business through different stimulative co-funding schemes.

IV) Developing a Regional Innovation Policy:
As a result of systematic neglect under the old regime, the development of the CEECs’ regions - both in an administrative sense and as an innovative centre - is generally very weak. Nevertheless, economic differences between regions are already evident, and likely to increase even further, which only reinforces the case for a pro-active regional policy, including a regional innovation policy. Although this project did not explicitly focus on regional aspects, this aspect clearly stemmed from problems related to the inclusion of small and medium-sized enterprises (SMEs) into national and international supply networks.

The main elements of regional innovation policy should be:
- Strengthening input-output linkages through physical investments, and opening new markets and trade links, by establishing regional business centres and development agencies that would promote the region. This activity is already spreading throughout CEE.

- There is a need to address those skills and training needs that are very industry-specific and relevant for the region. In designing such programmes, users must be actively involved in their development.

- Assistance for institution building and institutional transfers. From the perspective of regional innovation, an important form of this kind of transfer are innovation centres, incubators, and technology parks. Evidence suggests that their effects and results in a central and eastern European context have not been very encouraging. Most often they are initiated by foreign-assisted programmes and operate successfully - as long as foreign assistance is in place. Misunderstanding with these forms of institutional transfer is that they do not represent response of local community on their own problems but are seen as mere transfer of institutions which do not resolve the main constraint - lack of collective action which is implied in institutions like innovation centres. This points to the need to correct an excessive supply side orientation of such initiatives that do not take into account local demand.

V) Strengthening and Differentiating International Co-Operation in S&T Between the EU and CEE:

The comparative analysis of the progress in the institutional transformation of S&T systems in CEE led to a differentiation between three large groups of countries. In the coming years these countries are therefore also faced with differing problems and tasks in the formation of their S&T systems, although they do also share many similar problems. Given the current state of development, however, a differentiation in the main emphasis placed on the individual transformation countries would be prudent:

In the (Group III) countries, which are still beginning to reorganise their S&T systems, the main focus should be on consultation and an exchange of experiences in the area of S&T policy and organisation. This aim can be broadly supported by involving these countries in international bodies (such as EUROSTAT, for example), and by establishing contacts (by sending experts at all levels of science, politics, administration, and organisation to bilateral conferences or to appropriate fora to exchange experiences.

The Group II countries, in which fundamental changes in the S&T systems have either already been introduced or prepared, should be included in international bodies like Eurostat, and an expert exchange at all levels of S&T policy should be supported on a continuous basis. In particular, it would be sensible within the EU framework to gain an overview and to take stock of all the activities that individual EU members states and EU bodies have undertaken in S&T policy and co-operation.

The leading transformation countries in Group I have already consolidated their S&T systems, and co-operation with them should be intensified. Indeed, this is now taking place, with these countries being involved in the work of the EU at various levels. Of primary importance here is adaptation of corresponding regulations, modes of operation, etc, to conform to EU standards and requirements. In some cases, however, interim arrangements are likely to be necessary to take into account the specific conditions in these countries even after their accession to the EU, especially as regards the support of industrial R&D in the former branch institutes.

Finally, the policy of international co-operation, in particular with CIS countries, should be more diversified, and efforts should be made to actively develop civilian as opposed to military/defence sciences. International S&T co-operation should diversify into areas of civilian science, especially those concerned with solving the more immediate environmental, health, and industrial problems.

Based on the results of this project, the following measures, aimed to enhance the production, utilisation, and diffusion of knowledge in CEEC is also recommended. These are further explained in the project’s Policy Report.
- Continuing to strengthen the autonomy of public R&D systems through improving peer review and other evaluation procedures, but increasing its relevance to economic needs through different co-funding mechanisms.

- Diversifying the portfolio of funding instruments in R&D and innovation activities by introducing programme, project, co-funding, and individual grant funding.

- Developing technology foresight activities.

- Stimulating foreign investors to invest in R&D and avoid ad hoc interventionism in relation to FDI.

- Fostering collaboration in public technology procurement.

- Supporting the transfer of those R&D units most directly linked to industrial activity to industrial enterprises.

- Improving the articulation of demand for technology services by supporting demonstration projects in innovation and technology management.

- Supporting the process of formation of spin-off enterprises from, or attached to, R&D institutes and enhancing bottom-up restructuring processes.

- Encouraging governments to invest in vocational training through different co-funding schemes.

- Supporting technology transfer functions not only through the formation of stand-alone organisations (ie, S&T parks, innovation centres) but also by enhancing the technology transfer functions of enterprises and R&D organisations.

- Supporting networking at the regional level by supporting regional technology plans and organisations that may act as network organisers in the region.

- Advocating a broad strategy to encourage linkages and subcontracting arrangements with foreign firms.

Reported by

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