R&D

Finland is a forerunner in terms of R&D spending, and has held this position for several years. The results have been quite impressive considering indicators such as science and technology degrees and triad patents, yet perhaps less so in high-tech employment. Still, Finland’s reputation as a high-tech country is well-earned. However, the focus of R&D has been about applied research to the disadvantage of basic research, and universities and other basic research institutes have not benefited much. In the long run, the level of applied research of course being dependent on the level and achievements of basic research, this bias will no doubt have negative consequences for product development and productivity. Moreover, the technology transfer from universities to industry leaves something to be desired and academic entrepreneurship is not well developed. The government has launched a national innovation strategy which will attempt to enhance the environment for innovation and improve competitiveness.

Sweden ranks among the very top of countries on public R&D spending per capita and performs quite well on many related indicators as well. Thus, this part of innovation policy works very well. The key problem is transforming innovations into prototypes and later into commercial products. In these areas, Sweden performs rather poorly; this is the essence of the “Swedish paradox” mentioned earlier. The core problem is not related to the policy as such but rather to industrial policy and pro-growth policy. In addition, cultural factors might help account for the “Swedish paradox” (see also 7.1); a fear of failure, risk avoidance, a generous welfare state which makes entrepreneurship less important to a high quality of life, and so on. Furthermore, tax policies may hamper start-up business and the exploitation of technical innovations and patent rights in Sweden. And, finally, the supply of venture capital funding may be too restrictive to allow dynamic exploitations of technical innovations in Sweden.
All in all, innovation policy offers excellent support for innovation. It is the development thereafter in the process of developing commercial products that is the problem.

In the field of research policy, two peculiarities of the Swiss political system have a strong impact: First, it is a liberal country with considerable reluctance to engage in economic or social-policy interventions. Therefore, research funding is mainly done by private actors. Second, as a federal and decentralized country, university research is done by universities that are financed and regulated by cantons. This does not apply to the two Federal Schools of Technology, though.
The output of the research system is impressive, as the following points demonstrate (Braun 2007: 757):
• Switzerland is at the top of the OECD in terms of per capita publications;
• Switzerland’s share of global publications rose between 1981 and 2001;
• Swiss research is among the most-cited in the world;
• Switzerland is among the world’s leading nations in terms of patent registration;
• The Federal Institute of Technology Zurich (Eidgenössische Technische Hochschule Zürich) is one of the best universities in the world;
• Swiss products enjoy strong demand in the foreign market, while a similar amount of foreign technology products are imported; and
• Swiss companies allocate a significant portion of their assets to research.

However, there are several problems, including:
• a decrease in innovation in recent years (although Switzerland is still one of the most innovative countries in the world);
• the need to improve cooperation between universities and companies;
• weaknesses in social science and humanities research relative to that conducted in the natural sciences or technological fields;
• growing skepticism among the population as to the value of cutting-edge research;
• an unclear relationship between the recently created polytechnics and established universities;
• structural friction in coordinating Swiss research programs with EU research policy; and
• very low levels public spending on research as compared to other countries. As a share of total research expenditures, public spending has declined from 28.4% in 1992 to 23.9% in 2004. This may not be a problem, however, as total research expenditure is probably a better indicator of sustainable growth in developing countries.

The basic research and development base of the United States remains strong due to a good mix of private and public institutions. Among public institutions, the National Science Foundation, the various federal laboratories, the National Institute of Health, and various research institutions attached to federal agencies stand out. In addition, there is a vast array of federally supported military research, whose spill-over benefits are hard to pin down. According to the most recent figures, total U.S. R&D stood at roughly $400 billion, or 2.75% of GDP, of which about one-third ($147.3 billion) was direct federal R&D funding. President Obama has put forward the goal of raising total R&D spending to 3% of GDP. Quite notable is also the sustained public investment in nanotechnology. Since the launch of the National Nano Technology Initiative in 2000, Congress has appropriated more than $10 billion through 2009. The Obama administration budget for FY 2010 added another $1.6 billion Most available data point out that this level of support has made the United States the overall global leader in nanotechnology. However, studies point out that commercially productive nano-manufacturing is still a long way off and will require major advances in technology, process tools and instruments as well as safety standards. But there are clear indications that the United States is taking up the nanotechnology challenge.

Denmark scores quite well in international comparisons on competitiveness. Denmark ranked fifth in the World Economic Forum’s Competitiveness Index for 2009, after Switzerland, the United States, Singapore and Sweden, but ahead of Finland, Germany and Japan. This was down from third in 2008.

The report emphasized the country’s high rankings with regard to macroeconomic stability, its high national savings and narrow interest-rate spreads. However, this ranking should be interpreted carefully in a forward-looking perspective, given the serious deterioration of wage competitiveness and falling productivity.

Denmark and other Nordic countries are said to “have among the best functioning and most transparent institutions in the world.” These countries “also continue to occupy the top three positions in the higher education and training pillar, the result of a strong focus on education over recent decades.” Further, “this has provided the workforce with the skills needed to adapt rapidly to a changing environment and has laid the ground for their high levels of technological adoption and innovation.”

On one point Denmark scored better than its Northern neighbors: “Denmark continues to distinguish itself as having one of the most flexible and efficient labor markets internationally.”

In 2010 the public sector R&D expenditures in Denmark is to reach 1% of GDP. Significant increases were budgeted for 2009 and 2010. Private sector R&D expenditure was 1.65% of GDP in 2006, lower than in Sweden and Finland, but above the EU average.

Due to comparatively high production costs, the German government hopes to gain competitive advantages by placing emphasis on innovation. As a result, Germany has increased its expenditure on research and development, and now spends above the European average. In fact, Germany has a leading position in Europe with regard to the number of patent applications. In recent years, medium-sized businesses have begun contributing markedly to this development.
The government has also continued its “excellence initiative.” The federal government and the federal states agreed to resume the Joint Initiative for Research and Innovation, and want to increase the budget by 5% every year (2011 – 2015).
In 2010, the government increased the budget of the Ministry of Education and Research by €660 million (to a total €10.6 billion). The goal is to encourage the translation of research results into products. In addition, the Ministry of Economics and Technology spent €2.5 billion on technological research. To boost the business innovation budget, the ministry established a program targeting small and medium-sized businesses (SMEs) in 2008. All in all, the government plans to increase spending on research and innovation to a total of 3% of GDP by 2015.
Though Germany thus mobilizes substantive resources, there is a debate as to whether the instruments chosen are appropriate. Many other industrial countries foster corporate R&D activities through general tax incentives. By contrast, Germany fosters R&D through government expenditure, which involves a difficult assessment as to which R&D activities are promising. Therefore, the German approach faces the criticism that politicians and bureaucrats determine R&D allocation, this bearing a responsibility they are unable to fulfill. With this in mind, the new German government has announced general tax incentives for R&D for SMEs. As of the time of writing, however, this had not been enacted.

Public and private spending on research and development (R&D) in Iceland increased from 2% of GDP in 1998 to 3% in 2007, one of the highest levels in the OECD region. About 40% of this expenditure, or 1% of GDP, was provided by the government. The increase in R&D activity to some extent reflects the ongoing transformation of the Icelandic economy from agriculture and fisheries to manufacturing and services, with the emergence of new private firms in biotechnology, pharmaceuticals, and some high-tech manufacturing, among other new sectors. The government fosters research and innovation in the fields of geothermal energy, hydrogen power, genetics and information technology, and has lately made an effort to spur innovation. Innovation Center Iceland (NýsköpunarmiðstöðÍslands), a government institute, was established in 2007 with the merger of the Technical Institute of Iceland (IceTec) and the Icelandic Building Research Institute (IBRI). It operates under the Ministry of Industry and receives funding from both the public and private sectors.

Overcoming the backlog of Luxembourg’s research activities is a declared objective of the government. For this reason, it plans to raise expenditure for public and private research to 3% of GNP by the end of the legislative period in 2014. The two major actors of public research activities are the national research foundation (Fonds national de la recherché, FNR) and the University of Luxembourg.
The activities of the FNR cover three distinct domains: 1) supporting researchers (implementing a research program which reflects national research priorities; attracting outstanding researchers to Luxembourg; improving young researchers’ working conditions with grants for doctorate and post-doctorate training); 2) improving Luxembourg’s research environment and institutional framework; and 3) promoting scientific culture, particularly among the young. The government funds are allocated through a three-year performance contract (€40 million in 2010). A common criticism of the FNR is that its bureaucracy grows more quickly than its research activities and that too much money is spent on ancillary costs.
The University of Luxembourg was founded in 2003 and is still in its formative phase. Momentum has been slowed as its new campus, on former industrial wasteland, is still under construction. The university thus is a good example of a widespread problem in Luxembourg: projects are started before they are fully designed and are then further developed through improvisation and negotiation among stakeholders, leading to troubles and unwanted outcomes. But in a small country that lacks critical mass in its administration, this grassroots or bottom-up approach is often the only possibility to effect change.
The university’s four-year development plan for 2010 to 2013 defines five research priorities: 1) international finance; 2) security, reliability and trust in information technology; 3) systems biomedicine; 4) European and business law; and 5) learning and development in multilingual and multicultural contexts. Critical voices note the strong emphasis given to the finance department in these priorities (the so-called Luxembourg School of Finance) and view some industry sponsored chairs as a “submission to the neoliberal ideology.”

The Korean government invests heavily in research and innovation, particularly in those fields that can be directly commercialized. The green growth policy is a good example of the government’s willingness to support domestic industry’s research and development of new products or production techniques. The government also uses protectionist measures that help Korean companies to develop indigenous technologies without facing competition. One example of this infant-stage technology protection is the requirement that all mobile phones sold in Korea must support a particular Korean Internet platform. Such trade barriers have resulted in the complete dominance of Korean mobile phone makers in the Korean market, because it is too expensive for foreign companies design special models just for the Korean market. In November 2009, the Korean government granted an exemption from the local requirement rule for the Apple iPhone, but the rule otherwise remains in place.
The Korean government started investing in modern telecommunication infrastructure early, although it has seemed to lose its competitive edge as other countries catch up.
Weaknesses include a lack of high-quality fundamental research that cannot easily be commercialized. The ever-increasing dominance of large business conglomerates (chaebol) impedes the rise of small and medium-sized enterprises, as well as the startups that are often the source of new innovations (as opposed to incremental ones).

Universities are mostly publicly funded, but this financial support is insufficient. Partial tax exemptions apply to researchers. The European Commission has noted that the government budget appropriations for R&D have been more or less stagnant since the beginning of the century, representing just 0.61% of GDP in 2006, which is far below the EU-27 average of 0.76%. The distribution of spending by political region is as follows: Federal level: 26.3%; French-speaking community: 12.63%; Flanders: 49.74%; Walloon region: 10.28%; Brussels-capital: 1.07%.
During the last few years, the regions have become more proactive in supporting innovation (through universities, start-ups, public-private partnerships, “technopoles,” etc.). They have also streamlined regulatory procedures, provided customized help (“single counters”) to support innovators, and provided risk capital and tax advantages to support R&D and innovation. Altogether, many innovative and successful operations have been developed through these programs, in a decidedly decentralized way (“small is beautiful”). This partly compensates for the relatively low level of public resources allocated to R&D.

It is important to note that the focus of inquiry in SGI terms is on the government’s role in supporting research and innovation specifically. In terms of technological innovation supported by business, Canada’s business sector research and development expenditure expressed as a share of GDP (business enterprise research and development, or BERD) is relatively low, as is Canada’s total factor productivity growth, which is considered by some to be an indicator of underlying technological progress. In terms of actual policy support, at least in some areas, Canada does well. It offers generous fiscal incentive programs for business R&D, both at the national and provincial level, and provides significant financial support for higher education-based R&D (Canada has the second-highest higher education/GDP intensity among OECD countries).

Many believe that Canada’s low BERD intensity and poor productivity performance represents a failure on the part of the business sector rather than inadequate public policy. Nevertheless, there are a number of issues in the innovation policy area which may be a cause for concern and merit study: the effectiveness of the federal government’s Scientific Research & Experimental Development (SR&ED) tax program in increasing business sector R&D (the program has never been formally evaluated); the impact of cuts in government lab R&D budgets; the inadequacy of government programs to facilitate technology transfer or the adoption of best practice techniques by small and medium-sized businesses; and the relationship, or lack thereof, between increased higher education and business sector R&D and productivity.

France has a rather good overall performance concerning research and innovation. According to the EU Innovation Policy Report, France is ranked tenth (out of 27 EU countries) with respect to innovation capacity; as for the global innovation index, France performs above the EU average but is put in the group of “innovation followers,” behind the group of “innovation leaders.” The report says that “over the past five years, France has been above the EU average in two such dimensions: enablers i.e., the main drivers of innovation that are external to the firm and in particular to human resources, and finance and support; outputs, specifically in terms of innovators and economic effects indicators. On the other hand, France is below the EU average in the firm activities dimension (firm investments, linkage, entrepreneurship and throughputs).” The main weaknesses are seen in a relatively low private resource mobilization for R&D, a low innovative behavior of companies, especially small- and medium-size businesses, as well as a rather weak collaboration between the private and the public sectors.
Since 2007, the government has taken several measures to facilitate and promote innovation: fiscal rebates for companies and citizens have been introduced; major projects have been financed; private funds have been mobilized through the creation of foundations; and a €30 billion public loan has been launched to support “innovative” ventures. Some procurement policies (such as the commitment by public authorities to order up to 100,000 electric cars for the use of public services or administrations) have also been put in place. In many ways the traditional French model of state support for large technological projects (Airbus, Arianespace, high speed trains, and so on) has been revamped. However, given the new environment of globalization, it remains to be seen if this traditional model can efficiently work.

Support for research, development and innovation figures prominently in Ireland’s industrial policy rhetoric. The state industrial promotion agencies exploit the fact that state aid to industry is compatible with EU policy provided that it fosters innovation and R&D.
In the educational sphere, the Science Foundation Ireland (SFI) organization is charged with implementing the National Strategy for Science, Technology and Innovation 2006 – 2013. A sum of €8.2 billion has been allocated for scientific research under the National Development Plan (2007 – 2013). SFI will invest up to €1.5 billion in academic research over this period.
While policy is supportive of research and innovation in indigenous firms, the most striking success of Irish industrial policy has been in attracting foreign-owned firms in high-tech sectors to Ireland. Although the inflow of foreign direct investment to Ireland has fallen to a relatively low level during the current recession, there have been several recent announcements of significant investment in R&D activities by foreign-owned (especially U.S.) firms. The location of these activities in Ireland has created opportunities for innovative small Irish firms to develop technologies enabling them to supply inputs to the new foreign-owned firms.
On the other hand, there are widespread and loud complaints from the business sector about Ireland’s information and communication technology (ICT) readiness. These complaints are supported by some of the data in the World Economic Forum’s latest Global Information Technology Report (March 2010), which contains the Networked Readiness Index 2009 – 2010. Ireland ranked only 23rd (out of 133 countries) on this measure, and also scored poorly in terms of government prioritization of ICT (63rd out of 133 countries), government procurement of ICT (59th), importance of ICT to government vision (56th), and government success in ICT promotion (64th).

Japan developed into one of the world’s leading research and development (R&D) nations during the postwar period. Current policies are based on the Third Science and Technology Basic Plan, put into effect in 2006. The policy field is overseen by the Council for Science and Technology Policy, which is headed by the prime minister and oversees the various ministries and agencies involved, a fact offering evidence of the high status given to this issue. Following the success of the DPJ in the September 2009 elections, the coordination authority was supposed to be transferred to a newly created National Strategy Office, but progress on this matter has proved slow. Basically, the government has in recent years sought to focus its expenditures on R&D areas it considers “strategic”; in October 2008, it therefore introduced a process for the prioritization of science and technology (S&T) matters. As an additional measure to focus policies, five top-priority policy issues were defined in 2009: transformative technologies, low-carbon technology, S&T diplomacy, regional empowerment through S&T, and pioneering projects for accelerating social returns. In fiscal 2009, 35% of the funds earmarked for strategic priorities were allocated to five areas, including fast breeder-reactor technology, rockets, ocean and earth observation systems, supercomputers, and free-electron X-ray lasers. The matrix of “priorities” is considered somewhat bewildering by many observers.

R&D-related policies have played a considerable role in the anticrisis stimulus program as well. As the reporting period ended, the new DPJ-led government was still in the process of clarifying its priorities, which will enter the Fourth Basic Plan in the near future. It is generally understood that “green development” will play a leading role, in line with U.N. backing for a “Green New Deal,” and the prospect of social returns will receive wider attention.

New Zealand policy is clearly deficient regarding research and development, high-technology employment and patent indicators. This has also been criticized by the OECD. In addition, the OECD strongly recommends a coherent policy that makes more use of incentives for enterprises to invest in research and development and that steers and funds public infrastructure with regard to basic and applied research institutions. The problem does not seem to result from bureaucratic procedures but has mainly to do with the size and geographical isolation of the country and the lack of large companies operating at an international level. The outgoing government during the period under review reacted to this with its “Economic Transformation Agenda” (ETA) that aimed at increasing research and development in biotechnology, information and communication technology, design and film production. However it remains unclear what policies were actually implemented. The following government introduced new initiatives, inter alia a research and development tax credit, but canceled the move with the onset of the world financial crisis. In addition a Business R&D Investment Forum was established. Finally, international cooperation (the science and technology cooperation agreement with the European Union, and cooperation with China) is seen as way to increase research and development investments in the longer term.

Comparative indicators of economic competitiveness such as the World Economic Forum’s “Global Competitiveness Index” rank the United Kingdom highly, and emphasize its strength particularly in financial markets, where efficiency is high and its innovation capacity is among the world’s leaders. But this innovation is only indirectly helped by government policy, through a light touch regulation which is highly market-oriented.
Attempts at slowing down the pace of deindustrialization through more progress in research and development have been numerous over the last few decades, but have not been very successful. The comparative advantage of the British economy does not seem to lie in high-skill, high-wage, high-productivity specialization in the manufacturing sector, spurred on by a network of world-class applied research institutions such as the Max Planck or Fraunhofer institutes, as is the case in Germany.
But the United Kingdom is home to a number of world-class universities and business schools, and close links exist between them and the business community. Many of these higher education institutions specialize in science and technology, and they as well as their alumni profit from the financial markets’ ability and willingness to provide funding for start-up companies.

An important distinction has to be made between the comparatively pedestrian British performance on R&D, which lags behind the EU average, and the much better standing on innovation indicators, where the UK is in the top five in the EU according to the government’s 2010 annual innovation report. The “Skills for Growth” strategy launched in November 2009 represents a further boost to skills development aimed at nurturing innovation, although the inevitable criticism is that past deficiencies in these policies lie behind the UK’s relatively low standing on some indicators. A rather more positive assessment of these recent initiatives would argue that the latest policy developments take the UK in the right direction.

Despite its high GDP per capita, Norway spends comparatively little on R&D, including when compared to its Nordic neighbors. Research policy is non-pluralistic, government-led, and is not strongly oriented toward enterprise or innovation. One notable exception is in innovative company-based research on the elimination of CO2 emissions in gas exploitation. The country’s strength lies in applied economic and social research rather than in basic and hard science research. Research funds are mainly public, distributed through a single research council, and politically directed from above. Recent reforms have not been very successful and the government is frequently criticized for insufficient investment in research. This low aggregate investment level is reflected in the relatively low number of patents that are granted. It is also interesting to note that the share of degrees granted in science and technology is low and that Norwegian children have fared especially low in science knowledge in the OECD’s Program for International Student Assessment (PISA) study.
The country would certainly benefit from a higher absolute level of investment in R&D. However, the research council’s centralized allocation of funds and state subsidies, with only limited participation by private donors, has also been criticized. The council’s selection of priorities has often been narrow. There is thus ample scope for increasing investment in academic and basic research, as well for promoting more involvement by private and public actors.

The first Sócrates government (2005 – 2009) placed innovation and R&D at the heart of its development strategy, as part of the planned “technological shock” that constituted a central element of the party’s electoral appeal at the 2005 elections. As such, the government has sought to place a high priority on science and innovation. The sustained investment in R&D by the Portuguese government since the 1990s (to a large extent spearheaded since 2005 by Sócrates’ minister for science and higher education, Mariano Gago, who was also minister for science in the António Guterres administration from 1995 to 2002) has consistently improved the country’s position in terms of European R&D rankings. The 2009 European Innovation Scoreboard found Portugal’s innovation performance to be below the EU-27 average, putting it in the group of moderate innovators. However, it notes that “the rate of improvement [in Portugal] is three times that of the EU-27, making it a growth leader within the group of moderate innovators.”
However, Portugal has a substantial amount of catching up still ahead. On a broader global scale, Portugal ranked 30th out of 45 countries on the EU’s Global Innovation Scoreboard for 2008. Structural deficiencies in Portugal’s R&D arrangements remain, notably with respect to the relatively weak level of private R&D expenditure and low levels of educational attainment, including youth and tertiary education and lifelong training. The private-sector issue is showing improvement, with considerable growth in private R&D investment in recent years, including a 28% increase between 2007 and 2008 alone. The educational weaknesses generate a very segmented labor force, which inevitably limits the development of broader knowledge-based economic activities.

There has been mixed success in encouraging innovation in Australia. This is, in part, the consequence of a strong primary sector based on resources and agriculture; the industries most associated with innovation, such as pharmaceuticals and information technology, comprise a relatively small part of the economy. The mixed record of success in encouraging innovation is also a function of the fact that the responsibilities for innovation are divided between the federal government and the states, and the absence of any strong policy of coordination on innovation policy.

The Labor government elected in 2007 included in its policy platform a strong commitment to encouraging innovation. It established a Review of the National Innovation System in January 2008 and the committee’s report, Venturous Australia - Building Strength in Innovation, was published in 2009. The report recommended measures to increase human capital, enhance intellectual property rights, increase innovation in government, and it advocated the introduction of more comprehensive tax incentives to encourage greater investment in innovation. To date, the government has not formally responded to the report.

Austria is not a leading example of research and innovation, as evidenced by the ranking of Austrian universities. Though prosperous, Austria has not been able to attract significant research institutions and personnel, and to produce a significant output. However, there is one exception: the newly created center of excellence in science. Moreover, centers in medical science, physics and biotechnology are excellent.
Year after year, Austrian governments promise to give research and technology priority. But this policy is limited by the given budget structures, the vested interests linked to these structures and (especially since 2009) the budget crisis.

Czech governments have made strong verbal commitments to supporting research and innovation. A government body, the Research and Innovation Council, is chaired by the prime minister and produces regular and substantial reports on the comparative level of Czech research activity. In 2008, the council called for far-reaching changes in Czech research and innovation policy. One major proposal, the establishment of a new agency in charge of distributing state funding for applied research, was implemented in 2009. A second major proposal – a drastic shift of resources from basic to applied research – was realized only partly due to massive protests by researchers from universities and public research institutes. Overall spending on R&D relative to GDP in the Czech Republic falls near the EU average, with growth in recent years. However, much of the research that can lead to innovation is conducted by multinational companies, particularly in the motor-vehicle sector. This is advantageous for them because of lower Czech labor costs and the established research and production base. It does not reflect results of government initiatives or policies, nor does it depend on contacts with government research institutes or universities. Existing government programs have been taken up by some private companies, but there is no sign as yet of the development of a significant domestically owned high-tech sector. Barriers remain in the poor links between production and research and in the lack of access to capital.

Research and innovation policy has not yet received the proper support and attention in Hungary. The Gyurcsány and Bajnai governments were preoccupied with other issues and largely counted on economic development through foreign direct investment. The National Office for Research and Technology (Nemzeti Kutatási és Technológiai Hivatal, NKTH), established in late 2004 in order to coordinate the government’s research and innovation policy, had been given to the liberal coalition partner as part of the coalition game after the 2006 elections and thus did not play a major role. A 2009 act on the Hungarian Academy of Sciences (Magyar Tudományos Akadémia, MTA) failed to overhaul Hungary’s basic research institution. It concentrated on strengthening the power of the president of the Academy, thereby creating a row in the scientific community. Hungary also succeeded in becoming host country of the European Institute of Innovation and Technology (Európai Innovációs és Technológiai Intézet, EIT), an EU agency established in September 2008. However, the EIT has not yet given a major push for R&D in Hungary.

Although the Netherlands aims to number among the top 5 most innovative countries, its capacity to meet this goal is fading. The Balkenende IV cabinet placed innovation high on its agenda and pursued policies facilitating innovation in the Dutch economy. However, the requisite circumstances for such a platform to succeed were undermined by the centrifugal forces of departmental interests and special interests pursued by government insiders. During the review period, progress in innovation policy was achieved in only a few sectors.
In June 2008, the government presented its long-term strategy for sustainable productivity growth. However, research and development (R&D) investment has kept pace neither with GDP growth nor with investment levels in other developed countries. Although there are some promising individual measures in the policy mix, the Netherlands lags behind other countries in terms of measures taken to expand the number of SMEs, and develop and exploit (technological) knowledge. Considering innovation performance, the Netherlands is just above the EU-27 average (European Innovation Scoreboard 2008), but the rate of improvement is below that of the EU-27.
In its Strategic Plan 2007-2010 the Netherlands Organization for Scientific Research (NWO) states that in the past years the investments in scientific research and innovation have structurally failed to meet the ambitions of the Netherlands. Recently the Council of Economic Advisors states that an additional annual investment of 10 to 15 thousand million euros for the knowledge system as a whole is needed in order to meet the country’s targeted policy objectives. The economic crisis will negatively affect R&D investment and innovation. Businesses in the high-tech sector have already reduced R&D spending and shifted attention toward short-term and low-risk innovation.

Poland has suffered from low levels of public and private R&D expenditures and weak links between science and industry. The Tusk government’s research and innovation policy has largely focused on the public research sector. In 2008, it launched a medium-term reform based on a comprehensive analysis of the status quo provided by a commission. The reform has aimed at strengthening R&D at universities and research institutions, developing more flexible public-private partnerships, promoting more interdisciplinary research, and improving conditions for successful academic careers. Save for a substantial increase in public research funding, however, concrete measures have been limited so far.

Spain has traditionally lagged behind its European neighbors in terms of research and innovation, and scores far below OECD averages on all R&D indicators. After some years of increasing investment in innovation policy, the financial and economic crisis has led the government to make regrettable cuts in public expenditure in this sector: The 2010 R&D budget was reduced by 15% as compared to the previous year’s already diminished level. Nor has the crisis encouraged private investment. Thus, for example, Nokia – the top European company from an R&D spending perspective – spends four times more than the top 21 Spanish companies put together. As a consequence, the Spanish research sector has experienced a brain drain of growing severity.

The alleged commitment of the government to supporting research and development resulted in the creation of the Ministry of Science and Innovation in 2008. This ministry quickly proposed a draft law on research, development and innovation (intended to improve researchers’ professional career prospects, as well as the overall stability and efficiency of the system); a medium-term national scientific research, development and technological innovation plan (National RDI plan 2008 – 2011) and the Integral System of Monitoring and Assessment (SISE), aimed at overseeing public grant programs. At the regional level, it is worth noting the Catalonia government’s 2010 – 2013 research and innovation plan (PRI), aimed at planning and promoting Catalonia’s research and innovation, and at encouraging cooperation between research centers.

Overall, budgetary constraints are conflicting with the government’s pledge to sponsor a new model of economic growth based on brainpower rather than on construction. Moreover, resources could be used more efficiently by enhancing mechanisms of intergovernmental coordination between the central government and the autonomous regions.

R&D expenditure as a share of GDP is very low in Chile compared to other OECD countries, and most this expenditure is undertaken by the government rather than the private sector. Significant reforms have been put in place aimed at raising R&D funding, including earmarked taxation (a royalty tax on mining), higher government expenditure, and the improvement of tax incentives for private R&D. However, results have to date been disappointing, in large part because of bureaucratic hurdles to the approval of private and public projects. Universities are not well-equipped to perform applied research that can be transferred easily to industrial settings.

Italian government research policies in recent years have been weak, without strategic orientation and underfunded. In particular, financial support for basic research has been significantly reduced. The current government has continued along these lines. The only change of potential importance in this field during the period under review is the reform of the university system under discussion in the parliament. This proposal contains some interesting innovations, including a strengthening of university governance systems with the inclusion of external representatives such as enterprises and local authorities, as well as assigning a greater role to a national evaluation system. If approved, this reform could stimulate more research in university settings. Support for applied research has been sporadic, largely in the form of limited tax incentives for enterprises. The government has also discussed a project aimed at speeding the availability of high-speed Internet connections, helping to finance the required infrastructure, but the project has been delayed because of budgetary restrictions.
Research and innovation policy is more effective inside state-owned companies such as Finmeccanica. The air, space and defense industry has created several high-tech clusters in Italy. The automotive and pharmaceutical industries have also contributed to overall research and innovation. However, a strategic concept for the creation of new products and industries is missing. For example, much more could be done in environmental technology. There is a strong brain drain of professionals in high tech fields to other EU countries or elsewhere abroad.

Slovakia has suffered from a low volume and quality of R&D activities. The research and innovation policy of the Fico government, which approved a reform program for 2008-2010 in February 2008, was broadly in line with that of the previous government and aimed at strengthening R&D in enterprises through the creation of regional innovation structures involving enterprises, municipalities, universities and other public research institutes. Financial assistance has focused on technology transfers, business and technology incubators, R&D cooperation and risk capital schemes supporting SMEs. The Fico government increased the share of EU funds devoted to the support of research and innovation, but failed to raise overall spending on R&D. At nearly 0.47% of GDP, R&D spending has remained low by EU and broader regional standards, and failed to meet the targets set by the previous government.

In the period under review here, the Turkish government spent only between 0.7% and 0.8% of GDP for research and development. As comparison, this share was 1.9% in the European Union, 2.7% in the United States and 3% in Japan. Multinational holdings and industry sectors in developed countries reserve between 2.5% and 5% of their turnover for R&D. Due to the high share of small and medium-sized enterprises (SMEs), Turkish industry is in this regard not in a position to compete.
The main objectives of science and technology policy are to increase the private sector’s innovation capacity, to develop competency in science and technology, and to transform this competency into a social benefit. Turkey realizes that science, technology and innovation capacities are among of the most prominent factors of competitiveness. Raising productivity and innovation in Turkey’s main economic sectors such as agriculture, textiles and clothing, machinery, steel, lumber, paper, and transport equipment will be crucial for maintaining competitiveness and attracting the foreign direct investment needed to continue the modernization process.
The National Science, Technology and Innovation Strategy has set two major targets for 2013: to increase research intensity to 2% and the number of full-time equivalent researchers to 150,000. As of 2008, the share of R&D expenditures in GDP is 0.73%, and the number of full-time equivalent researchers is 53,000.
Since the private sector plays an important role in making R&D activities productive and translating them into an aspect of national competitiveness, Turkey has sought to increase the share of total R&D activities performed by the private sector. As a result of these efforts, the business enterprise sector for the first time in 2008 outperformed the higher education sector in R&D, responsible for 44.2% of the country’s total. Furthermore, the share of funding by the business enterprise sector reached 47.3% of total R&D expenditures in 2008, with self-funding by the business enterprise sector representing 38.8% of total R&D expenditures. In addition, the number of technology development zones (TDZ) and research centers has recently increased considerably. As of August 2009, 36 TDZ’s had been established, and 20 are by now operational. In addition, Law No. 5746 on Supporting Research and Development Activities, aimed at regulating tax incentives provided for R&D, entered into effect in March 2008.
In 2007, the private sector employed 38.2% of the country’s full-time equivalent R&D personnel. The country ranks 14th in the world in terms of its absolute number of well-trained engineers. The country has a young population interested in and open to technical developments. Although primary and secondary performance is below average, the country has a history of producing a small but high-quality population of science and engineering graduates and researchers, most of whom work in the higher education sector. Turkey’s universities employ some 45% of the country’s research personnel and carry out almost 50% of its research activities. Turkey notes that it has developed its research personnel in number as well as in skills.
Thus, R&D in Turkey is a mixed picture. This explains why Turkey ranks only 31st in a list of European counties when it comes to innovation, but nonetheless shows very fast progress. Thus, growth in innovation performance averaged 1.8% for the 33 European countries ranked in the European Innovation Scoreboard, while Turkey showed 5.5% growth in 2009. In this context, the strong suits of Turkey include human resources, particularly the training of scientists and engineers; the considerable growth in private sector R&D spending; a growth of 15% in the number of EU-registered patents; the continuing development of trademarks; and growth in high-tech employment.

Research in Greece is largely carried out in the private sector, as well as in universities and state-owned research centers. Despite the existence of high quality human capital and well-known research centers, such as the Democritus National Center for Research in the Natural Sciences or the Biomedical Research Foundation of the Academy of Athens, research and innovation policy has been inconsistent and underfunded. Successive governments have failed to provide researchers with the necessary funds and infrastructure. In 2007, expenditure on research and innovation amounted to just 0.5% of Greece’s GDP (European Commission data), which was significantly below the EU-27 average of approximately 2%. Private sector companies have shown little interest in establishing research structures either on their own or in cooperation with the state.
The lack of interest in research and innovation in the private sector and the underfunding of research by the state are visible in the corresponding employment trends: Only 2.4% of the total workforce works in high-tech manufacturing companies, while Greece ranks 27th among the 31 OECD countries (2007 data) in terms of the number of science graduates in the 25-34 age group. In part, this pattern is related to the size of firms in the economy: There are very few large firms in Greece, and this limits the capacity to support R&D.
The structures and functions of state-owned research centers are fragmented and overlapping. A recent law, passed in March 2008, attempted to rationalize the organization of research in Greece, but the scheduled mergers among research units met with opposition from the academic and research community. Part of the negative reaction to the new law stemmed from the haphazard and hasty manner in which mergers were conceived.
In sum, Greece’s state-funded research sector lacks sufficient resources (and correspondingly finds it difficult to retain or provide incentives for staff). In addition, the country faces problems with graduate quality, has a private sector that is ill-suited to supporting research, and maintains a regulatory environment that stifles innovation.

National spending on research and development since 2005 has been very low. One consequence of Mexico’s economic oligopolization has been severe polarization, in which a very large number of “micro” firms have little or no institutionalized access to state R&D spending, while large and efficient firms undertake their own research and development spending. There is at last growing awareness of this problem within Mexico itself.