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 KAZAKHSTAN International Business Magazine №3, 2010
 Innovative economy. Expert recommendations
Innovative economy. Expert recommendations

One of the important events under the 3rd Astana economic forum was the Innovative Congress on the "Model of a Well-Organized and Effectively Functioning National Innovation System – the Foundation for Economic Growth in Post-Recession Development". It was attended by the managers of a number of international companies, involved in promotion of high technologies and representing such countries as Finland, Norway, Germany, South Korea, France and Israel. They shared the experience of developing national innovative economies and gave recommendations on running the innovative policy in Kazakhstan and the countries of Central Asia.

We present the readers of Kazakhstan magazine with the most interesting, from our point of view, opinions of experts – the congress speakers on the three following questions:

1.     Can you provide with examples of ideal model of national innovative system? Why do you think that this model is successful?

2.     What kind of support for innovative processes, to your mind, the state and government should provide with?

3.     What kind of recommendations you can give for Kazakhstan and other countries of Central Asian region for innovative processes?

Kamila Magzieva (Kazakhstan), National Coordinator of the European Union Seventh Framework Program on Research, Technology Development and Innovations in Kazakhstan (FP7-NCP-Kz), Director of Independent Expert Consulting Board to Promote Scientific Research Activity in Kazakhstan (InExCB-Kz)

1.It is hard to tell whether the ideal model of an innovative system exists in the world that could be applicable in other countries, considering the specifics of their economic development. Perhaps, the best examples are the development of innovative systems in Germany, Great Britain and Sweden. Nonetheless, in the ideal model the preference is given to the innovative system of united Europe.

During a very short period of time globalization has changed the world economic order. In this situation Europe could not remain competitive enough without a well-thought innovative policy, responding to the needs and requirements of the consumers. EU has a very extensive potential for innovations, thanks to its suitability to advanced technologies, based on the creativity of the population and its cultural diversity. Historically EU has had strong and the most important capital – human resources. Europe has created the biggest single market in the world, where the innovative products and services may be commercialized in an extremely wide range.

European Commission exerts great efforts in order to define, develop and launch special programs on reinforcement of European innovations, creating all conditions for their understanding, support and all-round development. Any innovation, prior to being launched in the market, must meet the needs of intensifying European competitiveness, economic sustainability and employment of the population.

2. First of all, the creation of programs that could facilitate the development of innovations with their consequent launch in the market. These programs must respond to such important tasks, as definition of the innovation essence; the economic outcome that could bring innovative supply; the cost of launching the innovation and its match to economic output and many others.

The establishment of special innovative institutions, apparently, is not the only answer. The governmental support to innovative processes, as EU experience proves, means the establishment of orderly, flexible, and at the same time clear state programs on innovative and scientific-technological development, financed from various sources – state, public and private. The major criterion of innovative supply support must be its market cost and competitiveness, as well as economic effect.

3. Using the EU example in the implementation of the biggest in the world Framework programs on scientific-technical development and innovations that were established thanks to efforts of all the EU states and another almost 15 countries of the world, contributing to the budget of the program for producing certain research results. The major goal of these framework programs is the strengthening of European competitiveness through the launching of the triangle: knowledge – education – innovations.

Using this example, it could be possible to create a Central Asian framework agreement, targeted at reinforcement of competitiveness and accelerated innovative-technological development of regional states, based on bilateral and multilateral agreements.

Peter Lindholm (France), General Director of Lindholm-Consult

1. In my view, such a model does not exist and will most probably never exist. Each country tries its best to increase competitiveness thanks to various measures supporting the innovation ecosystem. All in all (at least the European level) countries deploy more or less the same tools and mechanisms (legal, financial and infrastructural). What really makes a difference is when such measures are handled by groups of competent and visionary people. In other words same measures have different effects depending on the implementation mechanisms. In my experience this holds true in all dimensions related to the promotion of innovation and entrepreneurship.

Since I work in CIS country I have contemplated (and participated in) a large number of study tours, benchmarking exercise, etc. My conclusion – after many years of experiments – is that “copying good practices” has little effects. What is really needed is to make sure policy-makers do understand the essence of the so-called good practices and that they become capable of tailor-adapting those to local conditions (culture, finance, regulations, entrepreneur spirit, infrastructure, etc.).

This implies of course that those in charge of designing and implementing innovation policy carry a parallel exercise: looking at what is working around the world, and understand what should be done locally, in which sequence and on which given period of time (always think ten years ahead!).

2/3. It is clear that public authorities have to take the lead to promote innovation and technology in order to create the right innovation ecosystem. In the case of Kazakhstan, many “tools” have been already been created to favour such an environment. It might become the right time to mix such formal measures with a number of soft measures that could comprise the followings:

  • Stimulate entrepreneurship in a systematic manner. This implies that entrepreneurs-to-be can make mistakes, fail and try again. Such measures should be promoted across the entire economic system (for young and mature scientists, for “natural entrepreneurs and for people employed in organisations and who wish to start their own businesses).
  • Allow more pilot projects to test the right model of innovation system best adapted to the Kazakh culture and local economy.
  • Actively promote collaborations with foreign technology-based firms. This must be done with policies that ensure that such collaborations create a fair share of added-value in Kazakhstan. Such a policy could be looking at the promotion of co-incubation mechanisms that support the creation of technology-based start-ups in Kazakhstan as well as in the partner country.
  • Rebuilding centres of scientific excellence with a focus on technological sectors that can find applications within short periods of time (instead of focusing on frontier braking technologies that need decades to become exploitable). This implies a paradigm shift for many scientists: they need to deliver “knowledge-goods” to the society.

Suzanne Rosselet (Switzerland), Professor, Deputy Director of the IMD Business School, Co-author of the IMD World Competitiveness Yearbook

1. In my presentation “Innovative Capacity of Countries & Competitiveness” I focus on the drivers of innovation: human capital and education, a “science culture”, high level of R&D expenditure, development & application of technology, access to capital, strong legislative framework and intellectual property protection. Countries that emphasize these areas tend to have a strong innovative capacity that spurs competitiveness.

2. The state should provide a national environment that fosters innovation and competitiveness. It should focus on encouraging a knowledge-based economy, improving how businesses and countries accumulate, share and diffuse knowledge. This also implies long-term investment in higher education. For knowledge to have an impact there must be a free flow of new insights and a strong networking link between education and business. Governments also need to facilitate the availability of technology funding, build on the attractiveness of the economy to researchers & scientists, and encourage a science culture in society. Lastly, a sound legal framework that enforces legislation on intellectual property protection should provide the incentives and protection to innovate. Innovative ideas alone will not drive economic growth but need a framework of institutions and policies that encourage and reward innovation and entrepreneurship.

3. Kazakhstan ranks fairly low for the competitiveness category: Scientific Infrastructure (44th place out of 58 economies). The government should strive to improve this ranking to align its performance with countries such as the Czech Republic (29th), Turkey (39th) or those that have a high innovative capacity, like Taiwan (5th) or Germany (3rd). With its strong emphasis on scientific funds, research centers and technological parks, Kazakhstan has the potential to improve its scientific and technological framework. These initiatives should foster more favourable conditions for innovative activities and thus, increase the country’s capacity for innovative products, infrastructure and services.

Mathias Rauch (Germany), Deputy Director, Fraunhofer Center for Central and Eastern Europe

1.First of all, I would like to emphasize that in my opinion, the one ideal model of a national innovation system does not exist, i.e. there is no one-size-fits-all solution. The design of an adequate national innovation system is highly dependent on different variables such as the existing economic structure as well as the political and legal framework in a country. Nevertheless, there are some aspects, which should be part of any national innovation system. These are, for instance, a clear output-orientation of innovation expenditures (e.g. R&D expenditures) and efforts in transferring and commercializing R&D results and other new solutions as well as the systematic development of human capital throughout all age cohorts. Regarding innovation policy this implies that policy-makers should follow a mix of policy measures, in order to sufficiently cover a wide set of different aspects of the innovation system. Which concrete aspect should be in focus, once again, depends on respective national peculiarities.

2.Basically, the governmental and legal bodies of a country are responsible for the creation of an environment that is favorable to business development. That includes a legal framework, which gives the right incentives for innovation activities (e.g. IPR), active support of start-ups and SMEs in terms of consultancy services and, for instance, provides efficiently working public authorities when it comes to starting a business. Apart from creating favorable framework conditions, the state should (in some selected cases) also support the commercialization of innovative ideas more directly, e.g. by providing financial resources to certain enterprises or economic sectors, which are likely to create new value chains for the country’s economy (e.g. venture capital).

3.As mentioned before – and this applies to any other country as well, not only to CA – there is no “fixed model”. As for Kazakhstan, one main challenge is an adequate financing of the country’s existing R&D structure and workforce, to realize fallow potential. A Second challenge would be the improvement of the technology transfer between public and private sector and therefore the further development and commercialization of R&D. Some work has been done, e.g. in the field of IPR. But incentives – like tax exemptions – as well as transfer structures need to be developed further. The Implementation of Technology Transfer Centers, Business Incubators and the like through government funds aimed at collaboration of public and private organizations will also help to support and enhance the percentage of innovating SMEs. As there are only few private entrepreneurs, these programs could be supplemented by measures, focusing on the needs of start-ups and high growth technology firms, whose extension would be a third point on the agenda.

Peter Wolfmeyer (Germany), Director, ZENIT GmbH, Centre for Innovations and Technologies of North Rhine-Westphalia

1. I do not feel there is an "ideal model" of a national innovation system, since too many external factors play a role (e.g. human capital in the economy, education and research and their willingness to work together and innovate, availability of financial resources…). In general, a good NIS (National Innovation System) takes into account the given parameters of the country in question and is customised to its objectives, resources and problems, as well as involving all players. A good NIS is thus based on the so-called "Triple Helix", i.e. academia/industry/government, and focuses on those sectors with the greatest potential to generate employment, growth and prosperity. In addition to these general principles, there are specific examples of individual good practice approaches which work well in many countries, such as the establishment and support of economic clusters. This approach is successful because it involves all stakeholders, bundles competencies, focuses on areas with high innovation potential, attracts investors, researchers and qualified personnel, and often has an international dimension. Another tried and tested approach is the "Innovation Assistant Initiative" (knowledge transfer by heads) where the deployment of young graduates in SMEs is subsidised by public funds for the initiation and implementation of innovative projects.

2. State and government must encourage a spirit of entrepreneurship and create a climate in which innovation can flourish. That means, for example, (financial) support for high-tech start-ups and spin-offs, freedom e.g. self-governance of universities, as has taken place in our region, as well as opportunities for greater co-operation between higher education and business and thus transformation of R&D into concrete products and services. The networking of all players involved in the innovation process (politicians, banks, multipliers, higher education, research institutions, enterprises) is essential.

3. Innovation processes can only thrive if the overall economy is stable. Our recommendations would include establishing a solid base of small and medium-sized enterprises, training and education for the population in future-oriented and sustainable disciplines, focussing on high technologies, and securing a value chain from which all players profit. There is no need to reinvent the wheel - there is already considerable experience in Germany, the EU and beyond which can be "imported" to Kasakhstan. The newest EU Member States, for example, are still undergoing an extensive and dynamic process of establishment and expansion of the innovation process, with partly quite considerable growth and improvement. Kasakhstan could utilise the know-how and ideas already available, e.g. though mentoring or training programmes. A concrete step could be for Kasakhstan to join the Enterprise Europe Network and make greater use of the opportunities offered by the EU's Framework Programme for Research.

Peter Heydebreck (Germany), Professor Founder and Managing Director of Inno AG

1. There is no ideal model, i.e. no approach that can be successfully copied regardless of differing framework conditions. Instead, the model has to take into account e.g. the size of the country (e.g. in order to prioritise development of domestic competence towards joining international networks), the structure and competiveness of its industry, potential financial public resources ... Although being far from ideal, the German system is a good practice example.

2.Very much depending on the current situation. Overall, the following support is meaningful: Substantial financing of research and education. Financial support and motivating incentive mechanisms for applied research and validate different fields of application of a new technology and valorisation structures and activities. Support of Public Private Partnerships. Financial support of collaboration between industry and public research. Secure and transparent legal framework in terms of e.g. IPR. Encouragement and support of international networking at all levels. Public procurement honouring innovation (difficult to find good examples). Provide the physical environment for start ups (incubators) in dedicated centres of excellence. The reputation and atmosphere of the environment and the support services provided are as important as the hard infrastructure (labs, offices ...). Support to clusters, e.g. by channelling RDI funding through them to ensure overall excellence.

3. Further increase financing of research and education. Increase support for validation and valorisation structures and activities. Intensify attraction of foreign expertise. Strengthen exit opportunities for venture capitalists. Engage in Public Private Partnerships. Invite leading private partners from abroad and make intensive use of top experienced bodies like UNIDO. Financial support of collaboration between industry and public research. Further increase transparency of IP. Foster the development of IP professionals. Develop a strong EurAsEC. Exploit experiences from e.g. EU with approaches like the European Institute of Technology, Framework Programmes, co-ordination of national and supranational strategies. Foster cluster development and inter-cluster interweavement/collaboration. Provide infrastructure for start ups.

Klara Oren (Israel), Founder and General Director of Center of Innovation Technologies for High Technology Enterprises Development

1. Quite extensive work experience of the technology incubators system in Israel proves that this system ideally matches the goals – the establishment of innovative developments. The topic of the projects is formed in the incubators by the initiative of the new technology developers ("bottom"), but not under research plans (as a rule, quite long term) of universities or scientific research institutions that in many cases are "to much organized" and inhibit the personal initiatives of personnel. Unlike in that case, any initiator may address the technology incubator any time and, if the proposed project produces research and commercial interest, this project will surely get financing, organized by the incubator, as well as all necessary support in performance of development, creation of existing model, patenting and commercial implementation of the project. Legal assistance is also included here. The proposals, related to private initiatives, when the initiator must perform the work plan, enforced by the employer, usually have innovative ideas. The authors, willing to work very intensively and within tight schedules, reach great success in conditions of extensive support. Most of the projects, developed in the technology incubators, solve serious problems in various fields, reach commercial success and facilitate the innovative development of the country.

2. According to Israeli experience, the state and the government must adopt a law on the Incubator system of innovative developments. The law must include funds in the budgets of appropriate ministries (industry, agriculture, energy and other) for organization and financing of technology incubators that will develop special initiative innovative technologies. Further on, the experience proves that increasing the contribution to financing of these developments is made by private entrepreneurs. Today, some incubators in Israel are fully privatized, but the government continues to play an active role in the financing of projects together with the owners of incubators and other investors.

3. Becoming the country, supplying raw materials for developed countries, is absolutely not allowed. It is necessary in every possible way to develop private initiatives in performance of innovative developments, establish centers for their support, provide governmental assistance in commercial implementation, encourage private entrepreneurs to finance innovative projects (for instance, lowering taxes or tax exemption for amounts, invested in innovative projects etc).


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We will build a new world  Editorial review 
Germany and Kazakhstan: On reciprocal tracks  Rainer Eugen Schlageter, Nurlan Onzhanov 
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