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NATIONAL INNOVATION POLICY

 

Teres N., Peretiatko I., Topenko J.

Ukraine, Kyiv,

Kyiv National University of Technologies and Design

 

Слово "инновации" уже давно стало неотъемлемой частью нашего лексикона. Однако означает ли это, что экономика Украины приобрела инновационный характер, что инновации действительно легли в основу экономического роста и социального развития Украины?

 

The viability of the economy of any country is determined by the scale and quality of accumulation of innovations, such as: new ideas, technologies, products, management systems, which are the result of the development of science and innovation activity. Innovation processes and their implementation in new technologies, new products, new services, new management systems are the basis for sustainable socio-economic development. Nowadays, innovations covering all areas of human activity, radically affect the economy, changing social and economic relations in society. A characteristic feature of our time is the extensive growth of innovative activities at the international level: the cost of research and development is increasing, education and training are changing, national innovation systems are emerging, processes of introduction and innovations spreading are conceiving.

Innovation is regarded as a basic driving force in the process of narrowing gaps with developing countries in global economy. Innovation is considered as important precondition towards a transition into self-sustaining innovation led- growth economy. Effective innovation system includes firms, research centers, R&D institutions which provide new goods creation, new processes and new knowledge. In first years of independence, the governments of Ukraine did not pay adequate attention to innovation development despite some important legislative acts being passed in the 1990s and early 2000s [1]. A calamitous reduction of funding for scientific research occurred during the period of market transformation including a cutting down of funds for research equipment.

In the mid-1990s, Ukraine's official GDP decreased by more than 60% in comparison with the level in 1990. Whole hi-tech industries disappeared (for example, electronics). The size of domestic demand for numerous products, and especially high-tech ones, fell dramatically.

According to the estimates of specialists, in order to increase the competitive production by 5 percent it is necessary to invest 25 percent of the GDP into innovative process, scientific research and technological development. The size and structure of investments, the quality and speed of their realization are decisive in the process of technical and technological renovation, which ensures the country’s technological safety.

It is also necessary to note that the negative structural changes stemmed from the low level of innovation activities amongst the majority of Ukrainian enterprises. The values for indicators concerning basic innovation activities (e.g. number of new technologies, the number of inventions, etc.) went down 5-15 times between the 1990s and 2000s. Yet the pattern of science and technology activities has changed gradually. Key efforts were not directed towards the development and introduction of domestic technologies and products but towards the adaptation of imported equivalents.

The economy of the country has become increasingly oriented towards producing of relatively simple goods for export. Essential to the understanding of innovation policy in Ukraine is the selection of innovation projects. The state does not support innovation activities of commercial companies or R&D organizations or commercial companies but the innovation projects that they undertake. The assessment of Ukrainian competitiveness shows the markets concentration at national level and inadequate finance and human capital distribution in regions. The competition is still weaker at regional level. Concentration has a negative and highly significant effect on labor productivity growth. The financial shortage causes the reduction of the quantity of enterprises applied the innovations.

For years regional authorities had no resources for any special innovation support activities, although some regions had special chapters devoted to the innovation activities. Some administrations, such as those in the Kiev and Donetsk regions, have special departments responsible for the support of S&T and innovation activities. However only Kiev, Lviv, Nikolayev and Chernovtsy regions have provided some money for innovation activities from their budgets. The contribution of regions to the total volume of financing of innovation reached 1.4% in 2005. The main source of innovation funding came from enterprises' own funds (77.3%) and loans (17.8%).

Thus, declarations on support of innovation development and the real support of innovations differ substantially in different regions. At the same time, it is evident that almost all regions are trying to develop elements of local S&T and innovation infrastructures (e.g. research institutes, techno parks, universities and hi-tech companies). These steps had had positive impact on the general level of innovation activities in the country, which resulted in the growth of innovation production in some regions of the country.

The development of research activities is a potential driving force for innovation in Ukraine. As it was mentioned above, in 1990s key parameters of R&D and innovation spheres shrunk by 2-5 times. In spite of the substantial increase in resources allocated to R&D during the last six years, the amount of finances and the manpower remains considerably lower than the EU average (both in absolute and relative terms).

According to its size and potential, the scientific and technical complex of Ukraine remains one of the biggest in Europe and the second (after Russia) among the CIS countries [2]. The economy of Ukraine has the following advantages: good geopolitical position, developed basis of raw materials and transportation infrastructure, considerable scientific and technological potential of civil and defense industries, high level of engineering science and education.

Unfortunately, Ukraine – a state with enormous innovative potential in the past – today is unable to realize it in the competitive environment of the open market, lagging behind in economic development after the recently less powerful Poland, Hungary, Slovakia and even Romania.

The Organization for Economic Co-op­eration and Development [3] defines an organizational innovation as the implementation of a new organizational method in:

the enterprise’s business practices (the implementation of new methods for organizing routines and procedures for the conduct of work);

the enterprise’s workplace organization (the implementation of new methods for distributing responsibilities and decision making among employees for the division of work within and between enterprise activities (and organizational units), as well as new concepts for the structuring of activities, such as the inte­gration of different business activities);

• the enterprise’s external relations (the implementation of new ways of organizing relations with other firms or public institutions, such as the establishment of new types of collaboration with re­search organizations or customers, new methods of integration with suppliers, and the outsourcing or subcontracting for the first time of business activities in production, procuring, distribution, recruiting and ancillary services).

The intention of organizational innova­tions is to increase an enterprise’s perfor­mance by:

• reducing administrative costs or transac­tion costs;

• improving workplace satisfaction (and thus labor productivity);

• gaining access to non-tradable assets (such as non-codified external knowl­edge);

• reducing the costs of supplies.

Despite the fact that in the last years there has been a positive dynamics of the in­novation activity of Ukrainian enterprises, its level is low. According to the State Statistics Service of Ukraine, the share of innovative enterprises was 17.4%. The level of innovation activity has not reached the level of the early 90s of the 20th century. In 1992–1995, the share of innovatively active enterprises ranged within 20–26%. At the end of the 1980s, the share of en­terprises that developed and adopted new or improved the existing products in the industry was 60–70% [4]. Today, in the European Union (EU) more than half of all enterprises (52.9%) reported innovation activity. The highest shares of innovative enterprises were observed in Germany (79.3%), Luxembourg (68.1%), Belgium (60.9%) and Portugal (60.3%). The lowest shares were recorded in Bul­garia (27.1%), Poland (28.1%), and Latvia (29.9%). In Ukraine, the share of innovative enterprises is 3.0 times lower in comparison with the average level of the EU countries, 4.6 times lower than the maximum level, and 1.6 times lower than the minimum level of the EU countries.

Industrial enterprises of Ukraine are more focused on the implementation of technological innovations; the share of their implementation had a positive dynamics during 2006–2012. The proportion of in­dustrial enterprises that adopted the product innovations was 11.7% and the process innovations – 12.4% in 2010–2012. Ukrai­nian industrial enterprises don’t use the potential of introducing non-technological innovations (organizational and marketing); the share of this type of innovations was 6.2% in 2010–2012.

In Ukraine, the percentage of the total innovation costs of industrial enterprises is inefficient. About 60% of all expenses on innovations are the expenses on the pur­chase of machines, equipment and software, whereas expenses on R&D operations reach only 17.1%.

Expenses on research and develop­ment investments exceed 1.5–2 times the investing in equipment in the EU Member States. In Eastern Europe, the investing is more focused on the purchase of machines, equipment and software, and the renewal of existing equipment. The correlation of expenses on research and the purchase of equipment is 1:3 in Ukraine.

Ukraine has an unstable dynamics by the international position of the innovation index.

In 2013–2014, by the “innovation” sub-index Ukraine occupied the 93rd place. Compared to data of the Global Competi­tiveness Report 2012–2013, Ukraine has shifted down by 22 positions [5]. The rating of Ukraine by all elements of the sub-index of innovation has decreased. According to the “capacity for innovation” index, Ukraine has the biggest drop – by 44 positions. The main reason for such a drop is that the Ukrai­nian business has become less innovative.

According to the Global Competitiveness Report 2013–2014, the most problematic factors for doing business in Ukraine are:

access to financing (16.7%);

corruption (15.5%);

inefficient government bureaucracy (13.4%);

• tax regulations (11.0%);

policy instability (10.1%);

• tax rates (8.4%);

others.

Stressing the need to revitalize the innovation sector, it should be noted that in recent years the government adopted a number of resolutions and decisions of government programs aimed at improving the innovation performance of enterprises, but most of them failed to be realized in full in the real economy. It is therefore natural law of Ukraine «On National Security of Ukraine’s» № 964-IV dated 19.06.03 refers to strengthening innovative model of a major national priority (Article 6 of the Law). At the same time in Article 7 of the Law is specified that the inefficiency of the state innovation policy mechanisms to stimulate innovation activities threaten the national security of Ukraine. In fact, we are dealing with ineffective innovative policy. However, the responsibility for this no one has, the law in this respect is not valid.

Legislation approving the 1.7% of GDP as a ratio of budget funding for science, the state allocates for many years to science only 0.3% of GDP. Every new president and every new government of independent Ukraine proclaimed science and innovation as one of the most important strategic components of the state ideology of social and economic [6].

As a result, over the last 22 years in Ukraine:

• 3.3 times decreased the number of workers in innovation (in the U.S. and Western Europe in that time it has grown 2 times in Southeast Asia – to 4-fold);

• 3.5 times decreased the number of researchers in technical sciences (with 5.6 times increased their numbers in political scientists, 3.5 – in law);

• decreased to 14.3 times the development of new technology;

• 5.5 times (from 60% to 11.2%) dropped share of innovation active enterprises (in Russia, their share is 10%, - 16 in Poland in the EU – an average of 60);

almost completely destroyed industry science (of 220 organizations, only 20 left);

• GDP growth through the introduction of new technologies in Ukraine is 0.7%, meanwhile in developed countries this figure is 60-90% [7].

Enhancing innovations is only possible on the basis of a developed system of financing that is designed to provide a solution of the following major tasks:

1. Creating the necessary conditions for rapid and effective innovation sphere at all levels of the national economy, ensuring its structural and technological restructuring;

2. Preservation and development of strategic scientific and technological capabilities in priority areas of development;

3. Creating the necessary material conditions for the preservation of human resources of science and technology, to prevent his moving abroad.

So, taking into account all the above, it would be possible to summaries positive and negative moments in the national innovation policy in recent years.

The positive changes in Ukrainian innovation policy formulation and implementation are as follows:

• Preparation of various laws in innovation sphere, which cover different aspects of innovation activities;

• Declaration of innovation development as a key priority at the national level and attempts are being made to implement different innovation - related programs;

• Creation of the national patent system and its development in accordance with the international standards;

• Creation of specialized state agencies, responsible for R&D and innovation;

• Attempts are being made to stimulate development of different instruments of innovation support (techno parks, business incubators, direct financing and favorable tax regime for R&D organizations).

The negative aspects of the process of forming innovation policy are the following ones:

• Ukrainian legal system is not harmonized, as some lobbying groups with the help of the Law on Budget could stop implementation of the most important clauses of the laws, which are aimed at support of innovations.

• Innovation-related programs are numerous, and in the past it was difficult to find money for their realization. It is much better to have less programs that will receive better financing Ukraine has very few American or EU patents, if compare with other countries of the region, even with countries of smaller size. Partially, it could be explained by relatively high costs of patenting in these countries but the state has no special program of support patenting abroad, despite discussion about such program is still continuing in Ukraine [8]. Specialized state agencies that have to support innovation, have overlapping functions, which are not clearly defined;

• Support of specialized instruments and elements of innovation infrastructure are not very effective, as the demand for innovation is low and the rules of functioning of the techno parks are revised substantially (and mostly negatively) within relatively short period of time.

 

References:

1.     Hanouz, M. D., Geiger, T. (2008): The Ukrainian Competitiveness Report 2008. Towards Sustained Growth and Prosperity. - World Economic Forum 2008, Geneva, Switzerland. pp. 47 –109.

2.     Global Economic Outlook (2013): May 2013 update. http://www.conference-board.org/data/globaloutlook.cfm

3.     Organisation for Economic Co-operation and Development (OECD), 2005: Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data, 3rd Edition, Paris.

4.     BUBENKO, P. T. (2008). Instytutsiina dynamika prostorovoi orhanizatsii ekonomichnoho rozvytkumonohrafiia. Kharkiv: KhNAMG. 295 p.

5.     The Global Competitiveness Report 2013–2014[interactive]. Geneva: World Economic Forum [accessed 1 July 2014]. Access through Internet: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf

6.     Давідов  M. B. Шляхи організаційно-фінансового забезпечення інноваційного процесу на підприємствах України  //  Актуальні проблеми економіки.  ‑ 2008. ‑ № 4 (82). ‑  С.  130‑134.

7.     Денисюк В.М. Інноваційна активність національної економіки: вдосконалення методології, показники промислових підприємств, державна підтримка //Економіст. ‑ 2005. ‑ № 8. ‑ С. 45‑49.

8.     Осецький В.Л. Інвестиції як інструмент інноваційного розвитку економіки // Вісник УАБС . – 2005. – №1 (18). – С. 3-6.



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