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BRIEF November 25, 2020

Public Expenditure Review in Science, Technology, and Innovation in Croatia



1.       What is the assignment that the Bank received?

In December 2018, the Ministry of Science and Education requested technical assistance from the World Bank in conducting a Public Expenditure Review in Science, Technology, and Innovation (PER STI). The Public Expenditure Review in Science, Technology and Innovation is a methodological framework developed by the World Bank for comprehensive analysis of national research and innovation systems, with an emphasis on their contribution to economic development of the country. It examines the conditions under which researchers and the private sector act, identifies strengths and areas for improvement, and reviews the amount and the quality of government support for science, technology and innovation. The Reimbursable Advisory Services (RAS) engagement started in May 2019 and has been initially structured around three areas: (i) quality and coherence of the policy mix, (ii) functional and governance analysis, and (iii) monitoring and evaluation. In March 2020, the assignment was expanded to include the evaluation of Croatia’s Smart Specialization Strategy (S3) 2016-2020, consisting of two additional activities: (i) mid-term evaluation of S3, and (ii) final evaluation of S3.

2.       Why is the PER in STI conducted?

The PER in STI analyzes public funding for science, technology and innovation and recommends how to improve its effectiveness through smarter allocation of funds, improved design, implementation, and governance of public support programs, and better monitoring and evaluation systems. The project also aims to review the logical framework, governance structure, and results of the S3, which will be of great significance in the preparation of Croatia’s next Smart Specialization Strategy.

3.       What is the role of the WB in conducting the PER in STI?

The role of the World Bank's technical assistance is to provide the analytical basis for improving the effectiveness of public spending for science, technology, and innovation. Over the medium term, the project is expected to contribute to increasing the absorption of EU funds for science, technology, and innovation. In the long term, this should lead to improved innovation performance of Croatia, as measured by innovation outputs such as intellectual property, publications, and similar.

The World Bank’s partners in this project are policymakers involved in the research and innovation agenda. The project is implemented in close cooperation with the Ministry of Science and Education (MSE). The Ministry of Economy and Sustainable Development (MESD), the Ministry of Regional Development and EU funds (MRDEUF), the Croatian Science Foundation, and HAMAG-BICRO (Croatian Agency for SMEs, Innovations and Investments) are also involved in some of the project activities.  The analysis can also benefit the broader public, especially the scientific community and prospective and current beneficiaries of public support programs for science, technology, and innovation.

The project consists of five components:

  1. Quality and Coherence of the Policy Mix - presents a diagnostic of the Croatian National Innovation System, analyzes public funding for science, technology and innovation, and identifies gaps and overlaps in the policy mix. Work under this activity has been completed, and the report can be accessed here.
  2. Functional and Governance Analysis of the Policy Mix - reviews the processes and practices related to the design, implementation, and governance of public support programs for science, technology, and innovation, and identifies strengths and areas for improvement. Work under this activity has been completed, and the report can be accessed here.
  3. Monitoring and Evaluation of the Policy Mix – reviews the monitoring and evaluation (M&E) framework in place for STI support programs and suggests a revamped and harmonized setup of the M&E system for STI funding, as well as a revised M&E framework of individual programs. This activity also takes stock of the results achieved in selected programs, as well as the costs needed to run those programs. Work under this activity has been completed. The Analysis of Theory of Change and Results Framework can be accessed here, and the Analysis of Outputs and Outcomes can be accessed  here.
  4. Midterm Evaluation of Croatia’s S3 Policy Framework – provides an assessment of the logical framework of the S3 policy and governance structure (see the report here), proposes an evaluation design of specific instruments (see the report here), and reviews the progress on the smart skills agenda (see the report here).
  5. Ex-post Evaluation of Croatia’s S3 Policy Framework – analyzes the achievement of expected goals and indicators and provides some evidence of outcomes of the S3. Work under this activity finished in December 2023.

4.      What are some of the key findings?

There are several key initial findings of the RAS:

  • Reform in the public research sector is incomplete, limiting its ability to foster research excellence and create linkages with the economy. The effectiveness of the research sector in producing influential work is limited with a large volume of uncited scientific publications. The current governance, institutional, and career advancement framework constrains research and development (R&D) activities of higher education institutions and discourages collaboration both (i) within the research sector and (ii) between the research sector and the private sector. However, collaboration among researchers, especially international collaboration tends to yield more influential work. Public-private linkages should be strengthened by supporting technology transfer activities and allocating more funds towards applied research and experimental development.
  • Croatia’s low productivity and growth could be raised by supporting R&D-based innovation, especially in smaller and younger firms. In Croatia, smaller and younger firms experience more productivity gains from investing in R&D. Yet, these firms are less represented among beneficiaries of the European Structural and Investment Funds (ESIF).
  • High-level reforms of innovation policy governance and financing are needed to improve Croatia’s innovation performance. Research and innovation support programs would need to be more targeted and coordinated. The various sources of funding should be linked better, combining programs more effectively. The current system for financing STI with EU funds needs to be reshaped and streamlined. The selection process for projects would need to be made much shorter. Interactions with beneficiaries would benefit from improvements by providing regular and reliable calls and reducing unnecessary requirements on applicants and beneficiaries.
  • The M&E system for STI support programs would need to be revised and fully integrated, and used for systematic learning and facilitation of decision making. Results frameworks for programs should be developed based on explicit theories of change, and indicators standardized and harmonized across programs to allow for comparability and aggregation of results across programs.
  • The intervention logic, policy mix and instruments, and M&E framework of S3 need to be streamlined, clarified and better connected. The specialization aspect of the S3 should be fully integrated in the overall intervention logic by combining horizontal and vertical RDI policies. The policy mix and instruments should be more clearly defined, with robust connections to the intervention logic and sectoral needs. Policy instruments should be carefully defined and consistent with the horizontal objectives set in the policy and sectoral needs and opportunities. The S3 should reflect a culture of experimentation and adjustments driven by the entrepreneurial discovery process (EDP). The M&E framework should be improved to provide timely information on the pace of change and enable policymakers to make appropriate adjustments.
  • The S3 has a multi-layered governance structure that creates coordination challenges. There are three modes of governance observed in Croatia: policy governance, EDP governance, and implementation governance. These three modes of governance need to be more integrated. EDP governance should be strengthened by enhancing the participation of the business sector and academia in policy co-creation. In terms of implementation governance, Croatia should streamline the governance structure to improve absorption and increase agility.
  • In order to respond to rapidly changing skills demand, Croatia must ensure that its entire population can continue to upskill and reskill throughout their working lives. Croatia needs to develop flexible and high-quality skills development systems that can provide both transversal and specialized skills throughout life. To accelerate skills development, Croatia needs to substantially strengthen its education and training systems and address training needs from a short- and long-term perspective. Action is needed to: improve governance; raise the level and relevance of skills developed in the formal education sector; and increase the access to relevant lifelong learning opportunities.