Small countries face big challenges

Small countries have to think very carefully about their position in the global innovation system. “You have to choose your best dancing partner, so that you are not left with the ugly one in the room,” said Anderson, speaking at a workshop on National and Regional Innovation Strategies. “We have chosen the very attractive Australia, which sits right next to us,” she said.

Small countries have to select the instruments they use to promote innovation with care. Unlike larger and richer nations, they cannot afford to put huge amounts of money into lots of different schemes in the hope that some will pay off.

However, Anderson said that New Zealand does have clear advantages in its environmental attributes and position as a major food exporter. “We are a food producing country. People do not need to buy a new car or refrigerator every year, but they do need to eat.”

Speakers at the workshop described the different approaches their countries are taking to promote innovation.

Israel may not be as geographically remote as New Zealand, but it is constrained by a lack of water and other natural resources. The only “raw material” to hand is human capital, and for Israel, innovation, “is a matter of survival,” said Rina Pridor, a consultant at Business Incubation, Technology Transfer and Innovation.

To encourage innovation, Israel set up an Incubators Programme in 1990 with Pridor as its head. The incubators have access to government funds to back promising technology projects and develop them to the stage where they can attract private finance. Projects receive an average of US$500,000 to $750,000, depending on the sector, with the private sector expected to contribute up to 20 per cent of total costs.

Now Israel has 24 incubators throughout the country. Fifteen of these are in what Pridor described as “peripheral areas.” Typically, incubators expect to hold the hands of start-ups for two to three years until they can attract first-round investment. Support is not limited to financial backing. Once a project is accepted for the incubator scheme, you get “everything you need,” said Pridor, “and things you don’t think you need,” she added, highlighting the fact that one particular element of support involves supplying the managerial skills that start ups so frequently lack.

Eleanor Taylor, manager of the Proof of Concept Programme funded by Scotland’s inward investment body, Scottish Enterprise, said that as in the case of Israel, “The whole rationale of the scheme is to grow the Scottish company base.” This is done, “either through licensing or cooperation with Scottish companies, or through the creation of new companies in Scotland.”

Both Pridor and Taylor make much of the private funding that follows on from public sector investments. In Scotland’s case, public investment of £30 million has attracted a further £240 million of public-private investment. Since it began, the Proof of Concept Programme has generated 42 new companies and 45 licensing deals.

By the end of 2006, projects emerging from Israel’s incubators had attracted $2.5 billion in funding on the back of government investment of $500 million. Over its lifetime, the programme has nurtured more than 1,000 projects, and around 40 per cent of the companies that have graduated from the incubators are still in business.

Romania, another country ‘on the edge’ of Europe in geographical terms, faced very different challenges as it emerged from the Communist past. Its contributions to the portfolio of innovation policies include what Professor Anton Anton, Vice Rector at the Technical University of Civil Engineering, Bucharest, and previously Minister for Science, called an Innovation Caravan.

“We took off with all the scientists and everybody,” Anton told the meeting. “Put them in cars, and moved them physically around the country where they met local entrepreneurs, local industrialists.”

Romania went down this road because it needed to convey the innovation message to those businesses that could benefit from R&D support. Anton said that at first the country had backed “great university professors” who teamed up with “poor manufacturers” who said “’I am going to innovate his production.’ That was a complete a failure,”

A further important development, said Anton, was to split responsibility for the innovation budget. The Agenţiei Manageriale de Cercetare Ştiinţifică, Inovare şi Transfer Tehnologic (AMCSIT) no longer has sole control over government funding.

Romania now also has a National Innovation Council. Whereas academics used to rule the roost, the Council includes bankers, people from industry “and at the far end a few professors”

Has it worked? When Romania benchmarked progress, it found a doubling of the country’s “ISI cited” publications between 2006 and 2008, a steeper increase than all other countries in eastern Europe apart from Poland. There was less progress in new patent filing.

However, Anton believes that there had been a complete change in the innovation landscape in Romania, even before the country had access to EU money. The success is down to the fact that it was up to companies to apply for funds, “Not the universities, not the research institutes. Companies are putting their money on the table and the state is co-financing them.” If they want to risk their money, then the state will risk its money too, Anton concluded.