CC BY
52
George IVANIASHVILI-ORBELIANI
M. Phil., Founder and Chairman of the International Center for Social Research and Policy Analysis, Member of the Central Eurasian Studies Society
at Harvard University (Tbilisi, Georgia).
THE ROLE OF NATIONAL INNOVATION SYSTEM IN ECONOMIC COMPETITIVENESS OF GEORGIA
Abstract
The study analyzes the methodology of the National Innovation System (NIS), which has been successfully used in OECD countries and more recently is becoming the focus of increased attention from developing nations. It emphasizes the importance of NIS as having great potential as a powerful conceptual framework, which requires increasing financial support for R&D, improving cooperation between universities and the private sector as well as developing the economic and legal
framework to better facilitate the creation of new knowledge and technological development. The main goal is to capture among the existing methodologies and best practices the ideas that can enrich our discussion about the instrumental role of NIS in competitiveness-oriented policies in Georgia. The study applies to the category of benchmarking analysis and environmental scanning, and suggests practical recommendations for creating NIS in the country.
I n t r o d u c t i o n
The first written contribution that used the concept “national system of innovation” is an unpublished paper by Christopher Freeman from 1982 that he worked out for the OECD expert group on Science, Technology and Competitiveness.1 The paper, titled Technological Infrastructure and International Competitiveness, pointed out the importance of an active role for government in promoting a technological infrastructure.2
Freeman was the first who brought the modern version of the full concept “national innovation system” into the literature in his book on innovation in Japan, where the analysis was quite inclusive taking into account the intra- and inter-organizational characteristics of firms, corporate governance, the education system and the role of government.
1 C. Freeman, Technology Policy and Economic Performance: Lessons from Japan, Pinter, London, 1987.
2 The paper was published for the first time more than 20 years later in the journal Industrial and Corporate Change (Freeman, 2004).
According to OECD, NIS institutions, defined in the narrow context, can be divided into five main categories:
■ Governments (local, regional, national and international, with different weights by country) that play the key role in setting broad policy directions;
■ Bridging institutions, such as research councils and research associations, which act as intermediaries between governments and the performers of research;
■ Private enterprises and the research institutes they finance;
■ Universities and related institutions that provide key knowledge and skills;
■ Other ppublic and _private organizations that play a role in the national innovation system (public laboratories, technology transfer organizations, joint research institutes, patent offices, training organizations and so on).
The nation’s innovation infrastructure helps supply inputs to private enterprises. This infrastructure includes:
■ Scientific and research institutions that serve as a major source of knowledge and include universities and research institutes, laboratories, non-profit think-tanks, R&D consortia, technology transfer centers and technological centers of excellence.
■ Capital providers and markets that finance innovation and the acquisition of new products and services. Venture capital and government research programs play a particularly important role in supporting technology-based entrepreneurs, start-ups and small business firms. Equity/stock markets provide an important incentive for innovation, reward innovators and determine the value of enterprises.
■ Education institutions comprising secondary schools, colleges and universities, along with private sector training organizations, should provide the pool of leading-edge scientists, engineers, managers and the technical workforce. The skills, mobility and flexibility of the workforce are an important innovation input to both producers and customers of innovation.
■ Information infrastructure provides enterprises with the important tools and communication platforms necessary for innovation. Global collaboration and open innovation systems rely on advances in computing, software applications and information networks.
■ Regional innovation clusters are geographic concentrations of interconnected businersses, suppliers, and associated institutions in a particular field that share a common knowledge base, labor pools, markets or distribution channels.3
Institutional Setup
What possibilities do developing countries have to affect their learning processes in order to develop an adequate NIS? This question arises, as the connection between learning and innovation is obvious and advancing the learning processes and interactions between individuals and groups will lead to implementing innovation system. Therefore, developing countries have to specify their institutions, because these play a dominant role in innovative activities.
3 The term “industry cluster,” also known as a business cluster or competitive cluster, was introduced and the term cluster popularized by Michael Porter in The Competitive Advantage of Nations (1990).
THE CAUCASUS & GLOBALIZATION
Nelson argues that differences between innovation systems of a group of nations are at least partly the result of differences between the economic and political circumstances and priorities of these nations.4 To specify these national distinctions within the scope of an approach of NIS, those factors have to be identified that have an impact on the economic structure of a nation.
The industrial development of a country defines the status and quality of technology and the key sectors of the economy. This factor is giving direction to the national economic structure. Depending on the profession and direction of the technological development, the knowledge base between countries differs and, therefore, different institutional set-ups and learning processes are required.
The factor endowment of a country involves all relevant natural, human and infrastructure resources. Depending on the quantity and quality of the nation’s factor endowment a different structure of production is needed. For example, without a sufficient amount of natural resources an economy is reliant on the import of these and has to develop an export-oriented manufacturing economy, if it wants to be internationally competitive. Because of differing economic emphases that result from differing factor endowments, each nation develops its specific system of innovation.
The historical endowment is the third factor influencing the economic structure. Depending on historical experiences, like wars, changing political situations or geostrategic location, each country develops its specific social norms and habits of governmental regime.
Because of the resulting geographical and political structures, different structures of production are developed. From this follows that the learning process and innovation system are built upon different bases and are individual forms of expression of the national history.
These factors lead to innovation success, which is the degree to which value is created for customers through enterprises that transform new knowledge and technologies into profitable products and services for national and global markets. A high rate of innovation in turn contributes to more market creation, economic growth, job creation, wealth and a higher standard of living. This definition updates our perspective on innovation by incorporating more than ideas, R&D, technology development and transfer. The nation must not only generate fresh ideas and intellectual property, but must also apply them and make them commercially successful.
Globalization of Technology and the Role of FDI
Multinational corporations (MNCs) predominantly control international trade in the global market. Moreover, a substantial proportion of international trade is either inter-industry or intra-industry trade, which means that a good part, if not all, of the science-based exports originating from the developing economies derives from the operation of multinational corporations operating in these economies.
Multinational corporations are considered as leaders in producing innovations of commercial significance, including new technologies, new products and new organizational forms. This makes them a potent vehicle of international technology diffusion. Aitken, Hanson, and Harrison5 show a negative relationship between FDI and total factor productivity of the domestic plants. However,
4 See: National Systems of Innovation: A Comparative Study, ed. by R.R. Nelson, Oxford University Press, Oxford,
1993.
5 See: B. Aitken, G.H. Hanson, A.E. Harrison, “Spillovers, Foreign Investment and Export Behavior,” Papers 95-06, Columbia-Graduate School of Business, 1994.
Xu6 found a positive relationship between productivity growth and FDI in an aggregative study covering 40 countries. The impact of foreign direct investment on productivity is stronger and more robust for advanced countries than it is for less developed ones. The dismantling of control systems by the developing countries through liberalization policies to attract FDI has not, however, helped much in promoting innovation efforts. The mere presence of FDI does not, of course, significantly change the situation of technological knowledge and the gains to be derived from it until developing countries step up efforts to absorb, adapt, master and improve technology. Indeed, in the absence of innovative capabilities in most of the developing economies, the gains arising from FDI initiatives have remained concentrated in the developed countries.
Governments have pursued science and technology policies to improve the innovative performances of agents of production.7 They have also created a network of institutions to promote interactions between agents of production and enhance their competitiveness in the international market.
Historically, the state has played a fundamental role in the evolution of the NISs and thus, in the pace and direction of technological progress. Even so, it is worth noting that the competitive edge of the U.S. industries has mainly resulted from the strategic support extended by the federal government. In the words of Ruttan: “Government has played an important role in technology development in almost every U.S. industry that has become competitive on a global scale. The government has supported agricultural technology through research, the automobile industry through design and construction of the highway infrastructure, the development of the computer through military procurement, and the growth of the biotechnology industries through support for basic biological research.”8
Significantly, business-funded R&D expenditure has emerged as the most important and widely accepted indicator of innovation in recent years. Countries vary in terms of experience with respect to private sector expenditure on R&D; but in most countries, business-funded R&D has received substantial government support through incentives and tax concessions.9 The nature of state intervention has, however, undergone a substantial transformation from direct participation to indirect participation via supporting commercially-oriented research through public-private participation and also through the provision of subsidies and tax incentives.
The prime minister of Finland was the first highly placed politician using the concept in referring to the need to strengthen the Finnish innovation system already in the very beginning of the nineties. Early followers were Canada and South Africa. Some ten years later the president of China in a speech to the Engineering Academy made a similar remark referring to the Chinese innovation system. These examples emphasize the importance of government’s vision and its leadership to carry out innovative reforms.
Table 1 below illustrates the extensive range of public policies impacting innovation and the diverse ways these policies can stimulate or inhibit innovation.
The public sector is linked to the innovation process in powerful and deep ways. R&D funding from the public sector accounts for a substantial portion of national R&D investment. The choices of government in supporting a field of science (e.g., life science, nanotechnology, advanced computing) are an influence on the direction of innovative activity. However, R&D is only one area of public policy that bears on innovation.
6 See: B. Xu, “Multinational Enterprises, Technology Diffusion and Host Country Productivity Growth,” Journal of Development Economics, Vol. 62, No. 2, 2000, pp. 477-493.
7 See: D. Mowery, N. Rosenberg, “The US National Innovation System,” in: National Systems of Innovation: A Comparative Study.
8 V.W. Ruttan, Technology, Growth, and Development: An Induced Innovation Perspective, Oxford University Press, New York, 2001.
9 Ibidem.
Table 1 Public Policy Impact on Innovation
Public Policy Examples of Innovation Impact
R&D Funding Impact scientific direction (e.g., life sciences, nanotechnology, advanced computing) and production of scientists and engineers. Supports innovation infrastructure of universities, research centers, federal labs, industry research. Specialized programs like ATP support pre-competitive collaboration. MEP support small manufacturers and SBIR technology-based start-ups. Public R&D goals and administrative procedures can conflict and misalign with private sector goals, expectations and management requirements.
Macro Fiscal and Monetary Policy Cost of capital for innovation, and rate of national economic growth influence investment decisions, available earnings, stock market valuation of innovative enterprises, etc. Currency policy, foreign and domestic, impacts international competitiveness.
Technology Transfer Policy Bayh-Dole Act and federal Tech Transfer Act impact the incentive for industry-university-lab collaboration and rate of knowledge flow to innovators.
Human Resources Policy Federal education and training programs, education, subsidies and research funds to support universities are a determinant of the supply of qualified workers needed for scientific research, development, and commercialization of innovation.
Tax Policy Provides R&D incentive. Rate of depreciation affects transfer of knowledge embedded in new capital. Provides level of incentives for consumers to adopt innovation.
Standards Facilitates platform technologies, such as Internet, computing systems, software. Standards can also function as a barrier to technical change and can restrict markets.
Procurement Government can stimulate market and standards development through large-scale aggregation. Design specifications can restrict introduction of new technologies.
Antitrust Can encourage industry innovation collaboration. Encourages new market entrants. Delays innovation introduction.
Intellectual Property Acts as incentive for innovators. Can restrict entry of competitors. IP protection can be weak globally, reducing return to innovation.
Market Access Choice and access to foreign markets, export conditions and foreign direct investment influence market potential, risk and growth. Export controls can inhibit competitiveness.
Table 1 (continued)
Public Policy Examples of Innovation Impact
Economic Regulation Impact innovation investment through pricing control, rates of return, market share restrictions and entry of competitive alternatives.
Social and Environment Regulation Can act as stimulus to innovation and also impact performance parameters of innovation. Type of regulation also impacts industry costs, relationship to suppliers and employment conditions.
Health Care Policy Major driver of business cost of operations. Demographics and growing demand for health care create opportunity for new products, services and productivity-enhancing technology.
Privacy Public concern creates additional demand for protecting information flows and assets.
Homeland Security Creates government market for innovation, and creates additional economic requirements for managing risks and vulnerabilities of most economic sectors, including information industry, financial industry, water, energy, transportation, manufacturing supply chains, etc.
Employment & Manufacturing Initiatives Current political pressures add to protectionist risks, constraints on global investment, “Buy America” provisions, employment transition costs, and higher skill standards.
S o u r c e: Measuring Innovation for National Prosperity, Innovation Framework Report, January 2004.
National Innovation System in Developing Countries
It is often argued that the most essential aspect of a successful catch-up process is the rate at which a follower is able to imitate foreign technology. By means of imitations a country learns to industrialize. Technological imitation involves more than just pursuing the same path of development as more industrialized countries. It rather involves a critical stage in the process of learning to industrialize and therefore should be seen in this context.10 They argue that acquiring foreign technology cheaply and effectively and then adapting it to local conditions is a key element for the technology strategy of developing countries. (Imports of foreign technologies are not substitutes for economic development, but complements.) The rate of imitation is influenced by technological capabilities, policies and institutional arrangements, by the nature of technological systems, market structure for technology and international trading rules.
10 See: C.J. Dahlman, R. Nelson, “Social Absorption Capacity, National Innovation Systems and Economic Development,” in: Social Capability and Long-Term Economic Growth, ed. by B.H. Koo, D.H. Perkins, MacMillan Press Ltd. 1995, Chapter 5, pp. 82-122.
THE CAUCASUS & GLOBALIZATION
The term “technological capabilities” covers knowledge and skills needed to acquire, assimilate, utilize, adapt, and create technology. The more a following country disposes of technological capabilities and the better it is able to accumulate these, the more successful the intended catch-up process will be.11 This view focuses on the cumulative aspect of technological change, because prior capabilities are important for future rates and directions. Private firms are the main location in accumulating technological capabilities. They are more suitable for the acquisition of foreign technology than public firms, as they are interested in providing training necessary to absorb the available technology in order to maintain their competitiveness. Thus, private firms are crucial for the competitive advantage of a nation. The accumulation of technological capability of a firm is influenced by its relationships with other actors, as they operate in a complex industrial network characterized by competition and cooperation. Consequently, innovation and technological change is not only a technological, but also a social process resulting from informal and formal communication networks.
A key aspect of technological development is the creation of institutions and institutional arrangements that facilitate this process. Innovative private firms are not enough in this context. On the one hand, the ability of firms to undertake innovative activities depends on the external market environment and the provided incentives. Therefore, government-industry relations are of great interest to advance the existing conditions for technological progress. Overall national policy toward technology must be implemented in order to facilitate technological change, e.g. by promotion of knowledge-diffusion or by providing support for firms with the creation of technological niches. This follows from the idea of “technological congruence” defined by Abramowitz. It can be argued that for successfully imitating advanced technology, the imitating country should not differ much from the imitated one in terms of economic, political and social factors. Therefore, if possible, the government has to provide appropriate surroundings in the range of political and economic incentive systems. On the other hand, careful attention has to be paid to the role of human resource development, as education is central to the process of technological development. The educational needs of countries differ according to their level of development. In industrialized countries normally the main focus lies on reforming the higher education in order to advance technical subjects. Poor countries are focusing on primary education as an important aspect of human development. The catch-up process depends on how countries balance between primary education for all and higher education with emphasis on key subjects. Educational policies have to be designed in such a way, that they are able to facilitate the implementation of merit-based principles and knowledge capitalization.
The elements contained in a NIS are those elements necessary for a successful process of catching up. The combination and effectiveness of different institutions, their interactivity and the emphasis of the relevance of knowledge and diffusion are elements constituting a NIS. At the same time, these are identified as important aspects of technological development. Furthermore, the term “social capability,” introduced in the context of the technology-gap approach, is anchored in the concept of NIS, as it defines factors that determine the ability of a country to engage in technological progress. It is argued that factors like culture, factor endowment, institutional arrangements etc. are important for the future rate and direction of economic development.
The question about the chance of success for catching up requires a closer examination of the NIS. In addition, it is important to ask, in which way and on what terms this approach can be used, and how national factors affect innovation processes and can influence future outcomes. Dahlman and Nelson12 analyze the relationships among social absorptive capability, NIS and economic performance in developing countries. The most critical element of any successful development strategy is the development of human resources.
11 See: C.J. Dahlman, R. Nelson, op. cit.
12 Ibidem.
In developing countries, micro-innovative strength remains isolated and encapsulated. In addition, many institutions that are important for innovative activities do not exist. It can be noted that, if the concept of NIS is be useable in developing countries, it has to be adapted to the specific characteristics of these countries.
To what extent is the argumentation for NIS transferable to the case of transition countries? The term “transition” can be defined as the institutional transformation toward a market economy, like it was and still is observable in Central and Eastern European countries. Institutional transformation toward a market economy that does not bring noticeable economic benefits to the population cannot be pursuited indefinitely within a democratic framework, because these missing economic benefits partly contributed to the collapse of the socialist system. The purpose, then, has to be an effective and rapid transition process. For this reason, the development of a NIS is mandatory, that is reasonably adapted to the specific characteristics and requirements of the country in order to provide a successful catching-up. It can be argued that transition countries are located in the middle of a process of catching up. But, different from developing countries, transition countries have already chosen and pursued their way of development. The question is, if this way to industrialize and catch up is compatible with the specific characteristics of the country. But in both cases the prospects for catching up will depend on their ability to generate industrial and technical and therefore institutional change. However, the different initial positions of these two viewpoints have to be kept in mind.
The National Innovation System approach focuses on the outputs of the system and the benefits that accrue to citizens and the society, which means harmonious and aligned interaction of all elements and linkages in the system to ensure effective and sustainable outcomes and impacts.
This has important implications for countries:
■ Every nation has “de facto” system of innovation, which may be more or less effective;
■ The actions taken by each nation to strengthen its system of innovation should be given the resources available and the current condition of NIS;
■ Every country will therefore have different and distinctive policy framework that serves its interest.
Measuring Innovation
This Global Innovation Scoreboard (GIS) Report compares the innovation performance of the EU25 to that of the other major R&D performing countries in the world: Argentina, Australia, Brazil, Canada, China, Hong Kong, India, Israel, Japan, New Zealand, Republic of Korea, Mexico, Russian Federation, Singapore, South Africa and the US.
Table 2
Global R&D Spending 2002. R&D Expenditures (thousand 2000 US $)
United States 26,655,154 36.69% Ukraine 41,536 0.06%
EU25 16,595,544 22.85% Luxembourg 33,527 0.05%
Japan 14,829,645 20.41% Thailand 32,167 0.04%
Table 2 (continued)
Germany 4,777,706 6.58% Slovenia 31,001 0.04%
France 3,056,595 4.21% Iceland 26,618 0.04%
United Kingdom 2,802,347 3.86% Croatia 22,647 0.03%
China 1,540,417 2.12% Egypt, Arab Rep. 19,216 0.03%
Korea, Rep. 1,439,710 1.98% Pakistan 17,138 0.02%
Canada 1,433,170 1.97% Rumania 15,456 0.02%
Italy 1,218,205 1.68% Tunisia 13,056 0.02%
Sweden 1,032,620 1.42% Slovak Republic 12,654 0.02%
Netherlands 707,220 0.97% Colombia 8,638 0.01%
Switzerland 632,105 0.87% Lithuania 8,628 0.01%
Brazil 625,919 0.86% Belarus 7,793 0.01%
Spain 609,127 0.84% Kuwait 7,123 0.01%
Australia 599,692 0.83% Bulgaria 6,741 0.01%
Israel 580,228 0.80% Costa Rica 6,176 0.01%
Belgium 517,285 0.71% Peru 5,741 0.01%
Finland 428,217 0.59% Uganda 5.67 0.01%
Austria 426,419 0.59% Uruguay 4,776 0.01%
Denmark 409,286 0.56% Estonia 4,646 0.01%
India 386,570 0.53% Panama 4,464 0.01%
Russian Federation 356,553 0.49% Nepal 3,830 0.01%
Norway 290,499 0.40% Latvia 3,770 0.01%
Mexico 228,914 0.32% Cyprus 2,967 0.00%
Singapore 198,692 0.27% Bolivia 2,414 0.00%
Turkey 132,131 0.18% Madagascar 2,322 0.00%
Ireland 114,103 0.16% Azerbaijan 1,932 0.00%
Hong Kong, China 102,365 0.14% Georgia 969 0.00%
Portugal 100,925 0.14% Macedonia, FYR 895 0.00%
Table 2 (continued)
Poland 100,102 0.14% Trinidad and Tobago 851 0.00%
Argentina 94,134 0.13% Paraguay 746 0.00%
South Africa 90,872 0.13% Armenia 599 0.00%
Greece 75,783 0.10% Honduras 316 0.00%
Czech Republic 71,020 0.10% Kyrgyz Republic 286 0.00%
Malaysia 65,253 0.09% Mongolia 282 0.00%
New Zealand 62,661 0.09% Seychelles 65 0.00%
Venezuela, RB 54,457 0.07% St. Vincent and the Grenadines 52 0.00%
Hungary 51,392 0.07% Cape Verde 26 0.00%
Chile 42,090 0.06% Serbia and Montenegro 11 0.00%
S o u r c e: 2006 Global Innovation Scoreboard (GIS) Report.
The choice of which countries to include was made based on their global R&D expenditure share in 2002. A non-EIS country’s share had to be at least 0.1% in order to be included. The following countries are included in the 2006 Global Innovation Scoreboard (GIS), with their share of global R&D in parentheses: China (2.12%), Republic of Korea (1.98%), Canada (1.97%), Brazil (0.86%), Australia (0.83%), Israel (0.80%), India (0.53%), Russian Federation (0.49%), Mexico (0.32%), Singapore (0.27%), Hong Kong (0.14%), Argentina (0.13%), South Africa (0.13%) and New Zealand (0.09%).
Most innovation policy attention is focused on the capacity to innovate and on input factors such as R&D investment, scientific institutions, human resources and capital. Such inputs frequently serve as proxies for innovativeness and are correlated with intermediate outputs such as patent counts and outcomes such as GDP per capita.
Innovation is a non-linear process and the EIS indicators are distributed among five categories that cover different key dimensions of innovation performance:
■ Innovation drivers measure the structural conditions required for innovation potential;
■ Knowledge creation measures the investments in R&D activities;
■ Innovation & entrepreneurship measure the efforts toward innovation at the firm level;
■ Application measures the performance expressed in terms of labor and business activities and their value added in innovative sectors, and
■ Intellectual property measures the achieved results in terms of successful know-how.
Innovation inputs include three dimensions:
■ Innovation drivers (5 indicators), which measure the structural conditions required for innovation potential;
■ Knowledge creation (4 indicators), which measure the investments in R&D activities, considered as key elements for a successful knowledge-based economy;
■ Innovation & entrepreneurship (6 indicators), which measure the efforts toward innovation at firm level.
Innovation outputs include two dimensions:
■ Applications (5 indicators), which measure the performance, expressed in terms of labor and business activities, and their value added in innovative sectors;
■ Intellectual property (5 indicators), which measure the achieved results in terms of successful know-how.
Table 3
European Innovation Scoreboard Indicators
1. INPUT— Innovation drivers
1.1 S&E graduates per 1,000 population aged 20-29 Eurostat13
1.2 Population with tertiary education per 100 population aged 25-64 Eurostat, OECD
1.3 NEW Broadband penetration rate (number of broadband lines per 100 population) Eurostat
1.4 Participation in life-long learning per 100 population aged 25-64 Eurostat
1.5 NEW Youth education attainment level (% of population aged 20-24 having completed at least upper secondary education) Eurostat
2. INPUT— Knowledge creation
2.1 Public R&D expenditures (% GDP) Eurostat, OECD
2.2 Business R&D expenditures (% GDP) Eurostat, OECD
2.3 NEW Share of medium-high-tech and high-tech R&D (% of manufacturing R&D expenditures) Eurostat, OECD
2.4 NEW Share of enterprises receiving public funding for Innovation Eurostat (CIS)
2.5 NEW Share of university R&D expenditures financed by business sector Eurostat, OECD
13 The Statistical Office of the European Communities (Eurostat) is the statistical arm of the European Commission, producing data for the European Union and promoting harmonization of statistical methods across the member states of the European Union.
Table 3 (continued)
3. INPUT— Innovation & entrepreneurship
SMEs Innovating in-house (% of all SMEs)
Innovative SMEs cooperating with others (% of all SMEs)
Innovation expenditures (% of total turnover)
Early-stage venture capital (% of GDP)
ICT expenditures (% of GDP)
SMEs using non-technological change (% of all SMEs)
4. OUTPUT— Application
Eurostat
(CIS)
Eurostat
(CIS)
Eurostat
(CIS)
Eurostat
Eurostat
Eurostat
(CIS)
Employment in high-tech services (% of total workforce)
Export of high technology products as a share of total exports
Sales of new-to-market products (% of total turnover)
Sales of new-to-firm not Sales of new-to-market products (% of total turnover)
Employment in medium-high and high-tech manufacturing (% of total workforce)
5. OUTPUT—
Intellectual property
Eurostat
Eurostat
Eurostat
(CIS)
Eurostat
(CIS)
Eurostat
5.1 EPO patents per million population Eurostat
5.2 USPTO patents per million population Eurostat
5.3 NEW Triadic patent families per million population Eurostat, OECD
5.4 NEW New community trademarks per million population OHIM
5.5 NEW New community designs per million population OHIM
S o u r c e: European Innovation Scoreboard 2007.
THE CAUCASUS & GLOBALIZATION
EU-Georgia Neighborhood Policy Action Plan
It was March 2003, when the first thoughts about European Neighborhood Policy (ENP) were outlined by the European Commission in the document called Communication on Wider Europe. It demonstrated the high priority that the Union accorded to shaping its future relations with its neighbors.
ENP is an outcome of the Lisbon Strategy, which includes a variety of policy measures to enhance research, innovation and business development. These factors are important not only for those countries that have moved very close to the technology frontier, but also for those that are implementing the principles of free market economy. As a country of economic transition, Georgia must create the necessary framework to promote education and research activities and encourage innovation in products and processes. This requires sufficient investment in research and development, high quality scientific research institutions, collaboration in research between universities and industry, protection of intellectual property and innovation stimulation through government procurement.
On the basis of Lisbon Strategy analysis we can conclude that that up to 40% of labor productivity growth in Europe is generated by research and development spending and that there are powerful spillover effects into other areas of the economy, depending on the way in which the money is spent. Future economic development of Georgia will critically depend on its ability to create and grow high value, innovative and research-based sectors.
The new Strategy Paper published in 2006 elaborated on these thoughts and laid foundation for the new policy. It set out in concrete terms how the Union could work more closely with its neighbors and extend to them some of the benefits of enlargement. Today, the Commission provides an assessment of bilateral relations between the EU and Georgia, reflecting progress under the existing Partnership and Cooperation Agreement and describing the current situation in different areas, including economic and social reforms that will create new opportunities for development and competitiveness.
The European Neighborhood and Partnership Instrument (ENPI), the funding instrument of the European Union’s European Neighborhood Policy, which was launched on 14 November, 2006, plays a crucial role in the development of a new innovation policy in Georgia. ENPI priorities reflect the role of innovation systems in a country’s development. Among other priorities, for instance, ENPI aims at facilitating the development of sound research and innovation policies in Georgia, which would help the country achieve and maintain sustainable economic growth. Besides, some other ENPI priorities are indirectly relevant to the development of a national innovation system and strategy. Namely, they aim to improve business environment, systematically review the reform strategy, reform the management system of education and science, and improve the quality of statistical data.
Apart from these priorities, the chapter on regional cooperation includes a subchapter on the development of Georgia’s potential in the sphere of technological research and innovation to assist the country’s economic and social development. It includes the following themes:
■ measures to bolster human, material and institutional resources in order to improve technological research and innovation;
■ integration of scientific and educational institutions, promotion of result-oriented research and innovation projects;
■ Georgia’s preparation for the integration with European research framework and EU research and innovation programs, taking into consideration scientific achievements in specific fields.14
One of the important objectives of the European Neighborhood Policy in Georgia is to facilitate the country’s participation in multi-dimensional cooperation and integration processes in the Baltic, Black Sea, and Caspian regions and work out an exclusive, region-specific strategy in this field.
The road from the past to the future should lead Georgia through the development and implementation of a strategy to improve the country’s competitiveness. Georgia needs a strong strategic goal—a strategy of change and innovation—to be able to rise to the challenges of global competitiveness. A comprehensive multi-component plan of Georgia’s strategic development should ultimately aim to bring the country’s economic, political and social standards into line with Euro-Atlantic and EU norms. The following steps are vital to solve the problem and accomplish this vision of Georgia’s strategic development:
■ to develop, integrate and implement knowledge economy and innovation systems aiming to tackle all urgent problems of the country;
■ to work out long-term cluster strategy and achieve territorial, economic and social integrity in order to ensure the country’s competitiveness in specific fields.
The EU has created the model of how to cultivate innovation through quality education connected with research. If Georgia is to develop its capacity for innovation and competitiveness in information-based economy, the country must be prepared to renew its national commitment to innovations and to reinforce the values of life-long learning. Special importance should be paid to ensuring economic growth, competitiveness, establishing stable social protection system, reforming the higher education system and encouraging research and innovation. Georgian universities need to acquire increasing importance as an instrument of economic, social, and cultural development and also as a means of bringing about change in the community in which relationship between education, science and business is receiving increased attention.15
The development of a national system of innovations is the key to successful implementation of each of the above-specified tasks, which are closely linked to the problem of financial and global competitiveness. Innovation is one of the 12 indicators applied by the World Economic Forum in Davos in the last three years to rank competitiveness of 134 countries, including Georgia. It is noteworthy that in the 2008-2009 Global Competitiveness Report (GCR) Georgia ranks 90th, down from the 85th place in the previous 2007-2008 GCR. Worse still, if measured by the innovation index alone, the country is ranked only 107th. Another important data provided by the KAM, is the World Bank’s benchmarking tool created in the framework of the Knowledge for Development Program. On the basis on the KAM indexes, we have made a comparative analysis of Georgia’s position relative to its neighbors and EU member states. The results are summarized in the following table:
Knowledge Economy Index and such indicators as economic incentives, institutional regime, innovation and information/communication technological development show that Georgia is lagging behind its neighbors. It is important to note that some neighbor countries, namely Armenia, Russia, Ukraine and Kazakhstan have already developed and put to use long-term cluster and innovation development strategies based on knowledge economy.
14 See: G. Ivaniashvili, Analyzing EU-Georgia Neighbourhood Policy Action Plan: Modern Benchmarking Approaches to Knowledge Management and Innovations in Georgia, Norwegian Institute of International Affairs, 2007.
15 See: Ibidem.
Table 4
Comparative Analysis of KAM Indexes
Country KEI Economic Incentive and Institutional Regime Innovation Education ICT
t n e o re 1995 t n e c re 1995 recent 1995 t n e c re 1995 t n e c re 1995
Germany 8.54 8.758 8.38 8.41 8.93 9.08 8.08 8.74 8.79 8.75
Estonia 8.07 7.76 8.07 8.2 7.42 6.59 8.29 8.07 8.49 8.18
Armenia 5.36 4.61 5.71 2.25 6.06 5.63 6.03 5.98 3.64 4.58
Georgia 4.4 4.5 2.46 1.25 5.27 5.38 6.4 7.17 3.45 4.19
Azerbaijan 3.56 3.46 3.03 0.89 2.65 4.84 5.04 5.75 3.53 2.36
S o u r c e: Knowledge Assessment Methodology, World Bank, 2008
Georgian public sector, higher education institutes and private companies should pay to increased attention to knowledge management and innovation policy to improve the country’s competitiveness.
To support the U.N. Millennium Declaration and its implementation, the Georgian government endorsed the so-called Paris Declaration on 2 March, 2005, along with other countries of the world. The Paris Declaration was in fact a follow-up to the Rome and Marrakech forums, laying down a practical, action-orientated roadmap to improve the quality of aid and its impact on development, and efficiently tackle poverty and social inequality. Its main purpose is to accelerate the implementation of the millennium development objectives.
Partner countries should commit themselves to creating a national development strategy with detailed description of their strategic priorities, which will be linked to the mid-term expenditure framework and reflected in annual budgets—this is the main message of the declaration to partner countries, including Georgia. If Georgia fails to fulfill the multi-parameter and multi-index requirements of the declaration by 2010, it will join the bunch of “no-hopers”—unsuccessful developing countries, which were excluded from the list of recipients of international aid.
Thus the study has investigated modern approaches to competitiveness and sustainable economic development in understanding the relationship between government, higher education institutions and business, in order to evaluate Georgia’s capacity and capability to foster the development of National and Regional Innovation Systems.
The analysis we have made shows that all actors — public authorities, universities and businesses — must accept their share of the responsibility for raising the levels and efficiency of investment in human capital. Incentives are needed to boost investment in training within individual companies and across sectors in order to support employers in providing suitable access to learning.
Among the actions to be undertaken within the framework of this strategy we provide the following recommendations for the Government of Georgia:
■ Set up a public management institution, involving all stakeholders (government, universities, think-tanks, research institutions, business associations etc), to work out recommendations for a national innovation system;
■ Sharpen understanding of the innovation process, learn and apply best international experience to develop innovative infrastructure and promote innovations in Georgia;
■ Develop a Research and Innovation policy directly relevant to the sustainable and equitable economic development policy objectives of Georgia;
■ Prepare governmental program to promote innovation and competitiveness;
■ Draft, debate and adopt a legislation on innovation policy and competitiveness of Georgia, which should promote the innovation infrastructure and realization of the National innovation system, with clear definitions and unequivocal interpretation, innovation activities, taxation and other incentives;
■ Amend the law on state procurement to encourage purchases of innovative products and services, and reduce corruption;
■ Further reform efforts through amending the Law on Education to increase the role of universities to encourage research activities;
■ Equip Georgia with the highly educated, creative and mobile workforce it needs, so that enough young people are graduating with the appropriate skills to obtain jobs in dynamic, high-value and niche sectors;
■ Reinforce participation of Georgian scientists/students/academics in international and exchange programs;
■ Improve the attractiveness to researchers through urgently addressing the problem of funding for universities;
■ Combat the “brain-drain” process, as too many young scientists continue to leave the country;
■ Encourage life-long and life-wide learning opportunities as well as further the reform efforts in the field of education, science and training to promote sustainable development of human resources and human capital;
■ Develop special programs of education for public servants (primarily for civic integration);
■ Reform science management system through appropriate regulatory framework, financing model and governance based on scientific excellence, capacity-building and joint initiatives;
■ Foster the development of clusters through defining actionable strategies for increasing cluster competitiveness and accelerating growth;
■ Strengthen administrative structures and procedures to ensure strategic planning of environment issues and coordination between relevant actors;
■ Establish centers for production excellence to accelerate knowledge sharing and commercialization, including a network of shared facilities and consortia for manufacturing excellence;
■ Gather Georgia’s top minds on innovation and Catalyze Next Generation Innovators;
■ Strengthen Georgia’s Manufacturing Capacity and energize the entrepreneurial Economy.
It is obvious that good will, or even an initiative demonstrated by government, academia and business sector separately, is not enough to ensure the progress. What is more, if all actors do not use their potential, positive solutions are even less likely to happen. Thorough knowledge about the con-
dition of local economy, which can be obtained through analyzing each of its segments, must become a vital element of the national development policy.
In a market economy, the state can support growth by creating conditions that enhance the competitiveness of the economy. This framework may, therefore, be viewed as one of improving Georgia’s competitiveness, which should promote the formation of the basis of government’s strategic priorities.
C o n c l u s i o n
Based on the latest knowledge and experience from abroad we are convinced, that the long-term competitiveness of Georgia can only be achieved by the implementation of the essential structural reforms creating conditions for the realization of National and Regional Innovation Systems.
Effective fulfillment of proposed concept will require adequate funds, including public and private financing and international donors’ assistance. It is, therefore, important that the resources are invested with the explicit aim of increasing the competitiveness and growth of the entire Georgian economy. Elaborating the innovation policy of the Government of Georgia and the financial instruments for its implementation over the period 2008-2012 will be crucial for the long-term competitiveness of Georgian economy.
Aysel ALLAHVERDIEVA
Ph.D. candidate at the School of Law, University College Dublin (Dublin, Republic of Ireland).
TRAFFICKING IN HUMAN BEINGS: A TRANSNATIONAL THREAT OF THE GLOBALIZATION ERA (COMPARATIVE ANALYSIS OF THE CENTRAL CAUSASIAN STATES)
Abstract
T
he article discusses one of the most dangerous and serious, in the social-humanitarian respect, challenges of
the current stage in world globalization— trafficking in human beings, especially in women and children, which has become
Support for this publication was provided in part by the FLEX Alumni Grants Program, which is funded by the Bureau of Educational and Cultural Affairs of the United States Department of State (ECA) and administered by the
