Innovation in Europe and Central Asia: From Horse Carts to Driverless Cars

When talking about innovation, countries in the Europe and Central Asia Region face challenges that lie somewhere between a horse cart and an autonomous car. In some parts of the region, people still use horse carts to move around while in other parts – sometimes even within the same country – people contemplate how to locally produce autonomous vehicles.

With this reality as a backdrop, the question arises: what can countries in the region do to use innovation and disruptive technologies to accelerate economic growth?

 “Today we don’t need linear but exponential thinking to create a world of abundance” says Nicholas Haan, Vice President of Impact and Faculty Chair of Global Grand Challenges, Singularity University.

To hammer home this concept, he gives an example: if you take 30 one-meter steps in linear terms, they will take you 30 meters; if the same number of steps are taken exponentially, however, they will take you around the globe 2.8 times!

“Innovation is happening whether we like it or not. Today’s leaders must be innovators,” says Haan.

Like the rest of the world, countries in the Europe and Central Asia are at a crossroads between linear thinking and exponential technological change.

Reflecting on this, Vazil Hudak, Vice President of the European Bank Investment Bank (EIB) from Slovakia, concludes: “we need innovation to survive. Innovation must shape the future of Slovakia,” he says.

To address these challenges, government officials, researchers, entrepreneurs, and representatives from different International Financial Institutions (IFIs) gathered at the Regional Innovation Forum in Bratislava from March 22-24 to identify innovation and technology challenges facing the region, translate uncertainty into opportunity, and learn from regional and global experiences.

There is ample evidence that innovation and the adoption of existing technologies can accelerate economic growth. It has been shown that innovative firms grow faster – 15% faster in sales and 8% faster in labor productivity.

Yet, it is not easy to embrace change.

“Innovation and disruptive technology are extraordinary opportunities for accelerating economic growth, but they are also a source of anxiety for governments, firms, and people,” says Cyril Muller, World Bank Vice President for the Europe and Central Asia Region.

The recent World Bank report “The Innovation Paradox” highlights two failures that undermine the impact of innovation and technology adoption.

First, most firms in developing countries are slow to identify and adapt to more advanced technologies -thus fail to accrue the high returns that technology upgrades and innovation can bring. Second, governments find it challenging to develop innovation policies that can effectively facilitate a process of ‘technological catch-up.’

So, what needs to be done?

The first task for policy makers is to create an eco-system which will unleash innovation potential.

“Innovators don’t want zero regulation, they want the right regulation,” says Muller.

Policy makers have an array of instruments at their disposal – among them innovation grants, matching grants, venture capital, equity funds, loan guarantee schemes. In selecting the best mix, the key is finding evidence of what works and what doesn’t.

Igor Kočiš, an innovator and founder of GA Drilling, says a lot of innovators are leaving Slovakia because of the lack of funding for developing their ideas. His advice to policy makers focuses on funding.

“I think the best solution is to combine private money with public money,” says Kočiš. “Initial experiments should start with private money. It is faster to do this with your own money. Once you develop a prototype, public money should come in. After this stage you then go back to the private money for investment.”

The World Bank Group, in coordination with many clients in the region, has already recognized the importance of innovation for development and has worked over the last two decades to make innovation systems more robust. Over fifty projects have been financed by the World Bank that touch upon innovation in the region.

These initiatives cover a wide range of issues, from increasing innovative activities of firms and individuals in Georgia, to promoting high-quality, nationally relevant research and commercialization of technologies in Kazakhstan and in Serbia, to helping countries in the Western Balkans build a better eco system for innovation.

“The World Bank has accumulated global knowledge and expertise,” says Bagrat Yengibaryan, Director of the Enterprise Incubator Foundation in Armenia.” No government is willing to share failure, but the World Bank is. Thus, we can learn what works and what doesn’t. We don’t have to invent the bicycle all over again.”