Comments for Innovation and economic growth

My comment is about the proposal made by italian Prime Minister Enrico Letta to focus more political and economic efforts on innovation, especially concentrating on the “digital agenda”.
The EU Commission established all european countries will have to implement the so called digital agenda by 2020 in order to get the most out of digital technologies.
The digital agenda identifies several technologic areas that will have to be improved by all countries; the italian government will concentrate more on: 1-creating a stable broadband regulatory environment so to allow most of the people to have an easy and fast internet access. 2-Smart communities, urban spaces which will allow people and organisations to meet and share informations about common problems exploiting new technologies and to help public administrations collecting useful informations in a quick way. 3-open data is a new approach to the information and data sharing process held by public institutions. The aim is to allow a smoother acces to those informations through new technologies so to make it easier for everybody to get more involved in public life. 4-Cloud computing will allow all public institutions to share all their informations in order to speed up all administrative and public processes.
All these issues are by my point of view very important in order to underline how Italy wants to keep the pace of other developed occidental countries. Also it has to be shown how important it is to strenghten the will to be part of the european regulatory framework.
The innovations proposed by the government will allow the bureaucratic process to be quicker and less cumbersome so to allow the basis of every economic process to get started sooner, more easily and to be also more effective.
I am not expected these changes will boost Italy’s economic performance or cancel all bureaucratic traps all over the country, but I am sure this could be a good starting point.
Moreover I believe it is necessary, especially in these days of political instability, to show both internally within the nation, and externally to the european partners, the will to keep on working together for development and economic growth.
On the other hand I am aware that most of the government’s short term policies won’t be about innovation and the implementation of the digital agenda, unless the current political situation stabilizes.
My hope is that at least some of the innovative proposals will be carried on soon, so maybe we could experience a broad improvement in several processes within the country and consequently political stability will be more likely to come. At that point I am sure innovation will be at the top of the political agenda so to favor economic growth and development.

http://ec.europa.eu/digital-agenda/
http://www.governo.it/GovernoInforma/dialogo/aree/allegati/agenda_digitale/agenda_digitale.pdf
http://www.corrierecomunicazioni.it/pa-digitale/23458_letta-agenda-digitale-priorita-del-governo.htm

My comment is about a policy put in place in 2008 in the region “Rhône-Alpes” located in the South-East of France. The goal of this measure is to promote the green innovative companies. The initiative “INNOV’R” has been launched by a group of associations : RégionRhône-Alpes, l’Agence de l’environnement et de la maîtrise de l’énergie, l’Institut national de la propriété industrielle (INPI), l’Association française de normalisation (AFNOR), l’Agence régionale du développement en Rhône-Alpes, la Caisse des Dépôts, un groupement d’investissements publics and OSEO.

These organizations help the green innovative companies. They study their projects and those which are eligible are referred to an appropriate source of funding. This system is simple and direct for the small and medium companies which are often faced with the complexity and the requirement of the calls for proposals. The projects have to be compatible with the priorities of the region in terms of energy efficiency and renewable energy. Projects must be developed by small and medium companies and their duration mustn’t exceed three years. The projects can be very diverse.

According to me, this policy is absolutely smart and efficient. In fact, it gathers different subjects which are all interesting for the growth of the region : the small and medium companies, the innovation and the environment. What is more, this measure turns out to be a success what proves that it is necessary and useful for companies.

My comment is about a new measure took in Wallonia in 2013.
In recent years, the Walloon government feels involved in the efforts of diversification and innovation activities of enterprises. That is why, the Walloon government passed a new measure: a budget of 2 million 800 thousand euros is awarded to the ASE (agency of economic stimulation) to support the arrangements of a grant for preactivity and innovation.

“The innovations grant (€ 12,500 maximum) aims to encourage companies to integrate an” innovative approach “by investing in a project of differentiation through the development of new organizational practices, commercial, new products, a design approach, etc. The project must involve a creative approach in order to add value.”

Since 2009, 653 preactivity grants and 130 innovation grants were awarded. In one of his reports, the Walloon Minister of Economy provides some figures: over 70% of the activities created from a grant persist beyond 5 years which demonstrates a high quality of projects result in terms of sustainability. In addition, the innovation grant seems to play the role of initiator and / or accelerator of innovation in Walloon SMEs. There is great satisfaction of all sides.

I think the fact that it is focused on SMEs is very important. Indeed, large companies seem to already advantaged particularly in industries that are characterized by high capital intensity, large investments in advertising … Small and medium-sized Belgian companies suffer heavily from the current economic climate; more than 10,000 jobs have been lost in our SMEs. The SME management becomes increasingly complex. National and international competition grows; including competitors from countries where labor costs are low. The global economy has also created new incentives and open new opportunities to access to various markets and multiple sources of knowledge. This is why an SME must accelerate changes in its ways of working, become more efficient, stand out from others, and therefore innovate. Its leader has a greater need to have experts in areas increasingly diverse but practical SMEs rarely have the financial resources to hire these experts.

Although SMEs represent only a very small share of total R & D activities, it appears that SMEs contribute substantially to fuel the innovation system by introducing new products to the market and adapting existing products to the needs customer. Small businesses are responsible for a proportion of innovations as new products far superior to what could be expected of them given the small amount of their expenditures in R&D.

I think it’s important that the government plays an important role in encouraging SMEs to innovate and implement financing strategies. However this is not enough, the vast majority of SMEs (which act as followers in technology) would require government non- financial actions to innovation especially in the form of consultancy, recruitment university graduates and skilled personnel, awareness of new ideas and technologies, implementation of technology centers and local technical educational institutions.

Sources:
http://www.oecd.org/industry/smes/2010238.pdf
http://gouvernement.wallonie.be/un-soutien-fort-la-cr-ation-d-activit-s-et-l-innovation-des-entreprises-en-wallonie
http://books.google.be/books?id=QwFzYuP20woC&pg=PA222&lpg=PA222&dq=les+PME+souffre+en+belgique&source=bl&ots=riaIg9RNYL&sig=OjdIiJQV71O-w2VpD7lsFCqoE_M&hl=fr&sa=X&ei=3RBMUpCDDYmn0wWDmIHoBw&ved=0CHYQ6AEwCQ#v=onepage&q=les%20PME%20souffre%20en%20belgique&f=false
http://indicators.plan.be/pdf/Rapport_2011.pdf

My cоmment is аbоut Sоfiа Теch Pаrk ЕАD – а cоmpаny with 100 % stаte pаrticipаtiоn.

The mаin tаsk оf the cоmpаny is tо suppоrt innоvаtiоn аnd entrepreneurship.
Currently, the cоmpаny аpplied аs prime cоntrаctоr fоr the first science аnd technоlоgy pаrk in Bulgаriа. The ideа is the technоlоgicаl pаrk tо turn intо а prestigiоus lоcаtiоn fоr the glоbаl, regiоnаl аnd nаtiоnаl reseаrchers аnd innоvаtive cоmpаnies, being аn exаmple оf ecоnоmy оf knоwledge in Bulgаriа аnd the regiоn оf the Bаlkаns. Аttrаctiоn аnd stimulаtiоn оf innоvаtive ideаs аnd prоjects, stimulаting the develоpment оf the ecоnоmy tо sectоrs with higher аdded vаlue will be аmоng the priоrities in the wоrk оf the future technоlоgicаl pаrk. The fоcus will be оn infоrmаtiоn аnd cоmmunicаtiоn technоlоgies, nаturаl sciences аnd “green” technоlоgies (“green” energy/ energy effectiveness/ netwоrks оf buildings). The purpоse is strengthening оf the cоmpetitiveness оf science аnd entrepreneurship in Bulgаriа thrоugh imprоvement оf the vоlume оf knоwledge between the аcаdemic circles аnd the business cоmmunity, suppоrting the stаrting cоmpаnies аnd the innоvаtiоn ideаs.
Sоfiа Tech Pаrk will be in pаrtnership with leаding universities, the Bulgаriаn Аcаdemy оf Sciences (BАS), business clusters, the stаrt ups аnd the innоvаtive ideаs, lаrge internаtiоnаl cоmpаnies, Sоfiа Municipаlity, MES, МLSP, nоn-gоvernmentаl оrgаnizаtiоns аnd оthers in the reаlizаtiоn оf the prоject.

Аs а result оf the implementаtiоn оf the prоject, within the next three yeаrs, а scientific structure fоr оver BGN 20 milliоn hаs tо stаrt up wоrking in suppоrt оf the Bulgаriаn innоvаtive business, аnd аbоut 20 000 m2 new аnd renоvаted building spаces within the next three yeаrs hаve tо be creаted, tо hоuse аpplied-reseаrch lаbоrаtоries, cоmmоn incubаtоr, innоvаtive lecture/ educаtiоn fоrums, spаce fоr demоnstrаtiоn оf new technоlоgies, оffice аreаs аnd etc. The cоnstructiоn оf the first technоlоgicаl pаrk in my cоuntry will be implemented under Оperаtiоnаl Prоgrаmme Develоpment оf the Cоmpetitiveness оf the Bulgаriаn Ecоnоmy 2007-2013. The prоject аmоunts tо EUR 50 milliоn аnd the plаnned аctivities hаve tо be cоmpleted by 30 September 2015.

There wаs а lоt оf prоmise when the prоject begаn thаt it wоuld turn Bulgаriа tо а regiоnаl R&D leаder in the IT аnd telecоmmunicаtiоns sectоrs with the help оf lоcаl universities аnd IT cоmpаnies оperаting WW. This, in cоmbinаtiоn with the cheаp lаbоr fоrce аnd the fаct thаt Bulgаriа is аlreаdy аn estаblished IT center in Sоuth Eаstern Eurоpe is expected tо significаntly increаse the cоmpetitiveness оf the ecоnоmy, tо bооst the entrepreneurship аnd tо аct аs аn incubаtоr оr lоcаl IT stаrt-ups аnd оf cоurse tо be а mаgnet fоr fоreign investments. The tech pаrk cоnceptiоn hаs prоven rоbust results visible frоm mаny exаmples WW.

Hоwever, I believe thаt this prоcess is very cоmplex аnd fаr frоm аutоmаtic. While we mаy sаy science pаrks аre cоmmоnly believed аs sоurces оf entrepreneurship, tаlent, аnd ecоnоmic cоmpetitiveness tо generаte, I believe mоre quаntitаtive evidence suppоrting this clаim аre needed fоr this pаrticulаr prоject.
Nоt а vаst pоrtiоn оf the business plаn hаs been subject tо public оpiniоn аnd discussiоn. Cоnsidering the sensitive budget stаte аt which Bulgаriа is in nоw fiscаlly аnd ecоnоmicаlly the gоvernment hаs tо hаve а cleаr strаtegy аt the time оf estаblishing the pаrk аnd tо fоcus оn certаin types оf firms cаrrying оut similаr аctivities thаt fit the reseаrch prоfile оf the university/universities linked tо the pаrk. The fаct is thаt mоre thаn аn yeаr аfter the initiаlizаtiоn оf the prоject оnly 3 firms hаve cоnfirmed pаrticipаtiоn in the pаrk is nоt sо prоmising.

Tо cоnclude – such аn initiаtive cаn оbviоusly bооst Bulgаriа’s cоmpetitiveness аnd cоntribute tо its knоwledge ecоnоmy develоpment but оnly if the prоper prоject plаnning, mаnаgement systems, cооperаtiоn with the lоcаl аnd regiоnаl IT, telcо business аnd universities аre аt plаce. I hоpe we wоn’t cоme tо the situаtiоn where the Sоfiа Tech Pаrk prоject’s mаin аsset is thаt it gives Strоng Bооst tо the EU Funds Аbsоrptiоn.

References :

1) http://eufunds.bg/bg/oicnews/3455/1

2) http://paper.standartnews.com/en/article.php?d=2013-01-11&article=41100

3) http://sofiatech.bg/%D0%B7%D0%B0-%D0%BD%D0%B0%D1%81/%D0%B5%D0%BA%D0%B8%D0%BF-%D0%B8-%D1%83%D0%BF%D1%80%D0%B0%D0%B2%D0%BB%D0%B5%D0%BD%D0%B8%D0%B5/

In order to promote innovation in the EU, the Council and the Parliament have adopted a regulation (1) to introduce the unitary patent and the Unified Patent Court (UPC). This regulation is expected to entry into force in 2014. The unitary patent will then be applicable in 25 EU countries, excluding Spain and Italy that have not signed the regulation yet, and will be overseen by the UPC in the case of litigation.
 
Until now, an innovator has to register his invention and validate the patent in each of the 27 EU members. The applicant is also obliged to pay annual fees from each of the national offices to maintain the protection of his rights. The procedure is thus quite complicated while, in the USA, one step is enough for anyone to protect his innovation. As a consequence of the EU patent system being under national rules, the patent litigation is also subjected to the state’s law, which makes it difficult and costly to introduce litigation in court (2). Those high costs involved can sometimes impede the motivation of applicants to innovate and apply for a patent.

«The European Commission, the EU’s executive body, estimates that the cost of having a patent recognised in every EU country can be €36,000 ($46,900), €23,000 of it accounted for by translation. American patents cost a mere €1,850. This tariff on inventors may partly explain why national patent offices still do not receive many applications from other EU countries (see chart). Between 2008 and 2011 filings for European patents fell by about 2.5%—though that probably had more to do with the sickly economy than the sticky system. In the same period, says the World Intellectual Property Organisation, filings in America rose by about 10%. In China, which handled more than any other country last year, knocking America off the top spot, they went up by two-thirds» (3).

There seems to be a link between the quality of filled patent due to high costs and the number of patents granted in a patent system. As we can see in the USA, due to very low fees to obtain a patent, the US Patent and Trademark Office (USPTO) receives a large number of requests (4). This implies a little scrutiny of applications which leads to a low average quality of patents. On the contrary, the European Patent Office (EPO) has the «reputation» to deliver high quality patents.

We may wonder if the same kind of issues as those we can observe in the USPTO will appear with the unitary patent. The aim of the unitary patent is to increase the innovation and strengthen the competitiveness of European businesses in order to ultimately increase economic growth in Europe. Moreover, this measure could facilitate the access to patentability to small businesses. 
We believe that this goal will be achieved if the patent system in Europe preserve the high quality of the patents. In order to do this, applications have to be treated as carefully as before, despite the surge we can expect in patent applications due to the simplification of the procedure and the lower costs of the procedure.

References :

(1) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:361:0001:0008:en:PDF

(2) http://www.cstc.be/homepage/download.cfm?dtype=patent&doc=brevetcommunautaire.pdf

(3) http://www.economist.com/news/business/21568436-after-40-years-trying-europe-has-unified-patent-system-sort-yes-ja-oui-no-no

(4) de Saint-Georges, M. & van Pottelsberghe de la Potterie, B., A quality index for patent systems, Elsevier, 2013.

My comment aims at disentangling the relationship between education policy and growth, thereby offering a critique of the argument that post-secondary education should be widened in order to increase economic growth.
As I remember it from my undergraduate classes, the single most important insight from Solow’s theory of growth remains the fact that, in the long run, technological progress (i.e. process innovation) is the sole source of economic growth. Assuming that this is indeed the case, or that at least most of GPD growth can be attributed to technological progress (which is most likely to be the case in the developed “North” but not so in the “South”), (Northern) governments should put in place policies that promote technological progress (all the more since they could thereby potentially outgrow their debts in the long run).
There is a number of policies that have the potential to do just that: promoting research clusters (e.g. the Sophia Antipolis cluster in France), establishing and strengthening public-private sector research partnerships and joint ventures, setting up possibilities and incentives for the highly educated (with specialist knowledge in particular branches of the economy, etc.) to immigrate, prizes and grants for successful inventions or for R&D projects, patents and copyrights, etc.
Subsequent to Solow, economists have endogenised technological progress, making it dependent on human capital (skills and education that is). A number of policies mentioned in the above are based on this consideration. Yet however, a number of governments and some think tanks in the western world (amongst them former PM Tony Blair, the European Commission, and the OECD [see footnote]) have misapprehended the potentials of education for economic growth. Noticing the steady growth of the tertiary sector and the intricate, and yet somehow plausible, relationship between education and innovation, some conclude that if we want to remain competitive in future and if we want our economies to grow further, then we need a greater share of the population with post-secondary education.
In my opinion, this is non-sense. You might want to postulate for such policies on other grounds (e.g. as a means to personal fulfillment and to strengthen our civic contributions) but such policy won’t significantly raise growth in the long run. This is due to the diminishing returns which I would like to argue, are prevalent both in the case of physical capital (machinery), and in the case of skills. This is, as skills improve this translates in ever lower returns in production. At some point the effort to increase skills simply isn’t worth the trouble anymore, all the more in the case that learning those skills requires years spent in education which are lost in terms of contribution to GDP. Thus, in terms of direct gains in productivity, education does not significantly contribute to long term growth.
Education does however affect long term growth indirectly. Since it determines whether individuals are up to date with regards to the latest technologies and scientific knowledge, more education coupled with the right individual in the right position increases the chances for ideas that could lead to technological change. So, what is needed for growth is not an emphasis on the breadth of education in the population, which won’t affect the quality of R&D and innovation, but rather on the quality of education (investment in the facilities, staff, libraries, etc.). Thereby, one would both shape a higher number of future inventors and promote an increase in basic research which might eventually feed in technological progress.

Footnote: On Tony Blair, see Ha-Joon Chang, “23 Things They Didn’t Tell You About Capitalism” (2011, 179). With regards to the European Commission, see Europe 2020 (the EU’s current growth strategy), where amongst the first targets appears the wish to ensure that “at least 40% of 30-34-year-olds [complete] third level education” (http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/targets/index_en.htm). On the OECD, see, amongst others, its recurring advice to Germany to promote tertiary education attainment (Education at a Glance: OECD Indicators 2012, Germany, p.2-3).