From Imitation to Innovation

May 14, 2015

Marcin Pia…tkowski, Natasha Kapil Rzeczpospolita

Poland has just had the best 25 years in its history. During that time Poland has become Europe’s champion in economic growth, leaving behind all other transition countries and all of Western Europe, World Bank representatives write.

Moreover, in the last 20 years Poland was the fastest developing economy in the world in the group of countries with similar level of development.

This year, the level of income in Poland will exceed USD 20 000 (purchasing power parity basis), representing more than 65 percent of income level in the eurozone. In absolute as well as in relative terms, this will be the highest level of income after year 1500. Poland’s new golden age will have settled in.

No time for complacency

Yet, past success is no guarantee of success in the future. Poland cannot rest on its laurels. Considering significant gap in productivity (GDP per hour worked in Poland is less than half of productivity in Germany), private sector productivity growth will continue to be driven in the near future by absorption of technologies and innovations that are new only at the scale of a company or country. The point is that this will not help maintain, let alone accelerate, economic growth in the long run when Poland’s productivity levels converge with Western Europe countries and simple technology imitation will not be sufficient any more.

We need faster growth of investments in R&D and innovations. Economy might stagnate if Poland doesn’t start shifting from imitating others to generating new ideas, from quantity to quality, from potato chips to microchips.

Poland has not yet invested enough in R&D and innovation. And the impact of that spending seems to be less meaningful than similar spending by its Central European peers. In 2013, R&D spending amounted to only 0.9 percent of Poland’s GDP, at the tail end of European Union rankings. Private spending on R&D was particularly low and represented just one third of total R&D spending.

To change that, an overhaul of public support system for innovations is needed, involving reorientation towards global best practice and greater role of the private sector. Keeping the status quo is not good enough by any measure.

Poland simply can’t afford to increase public spending on R&D while continuing to achieve negligible results. Efficient investment of more than 10 billion euros from the EU until 2020 will be instrumental in pushing the country toward knowledge creation, technology improvements and disruptive innovations.

What does it take, then, to promote a global champion ‘made in Poland’? Innovations must be moved from the level and quality of Polish football league to that of the Champion’s League. How can Polish authorities help make that happen?|

We suggest five priorities for innovation policy.

  • First, focus on the outcomes, not the outlays.

    In place of simple allocation of EU funds, Poland should now focus on return on investment and tangible business results. In the last EU perspective of such magnitude we should not ask how much money was spent, but what outcomes were achieved.

    We must support firms and researchers in their journey on uncharted waters; identify entrepreneurs for whom innovation is the key to competitiveness, and provide them with services of world class quality. Further, we must encourage traditional companies spoilt with low cost of labor, high quality of human capital, huge domestic market and weak zloty to start building their R&D competence and to innovate.

  • Second, business takes the lead.

    To date, a lion’s share of funding dedicated to R&D and innovations has been channeled to scientific community and public research institutes, whose agenda still gives preference to research and publications before commercialization. Direction for the future is to focus on more direct support for research and development activity in enterprises, making sure that public money is never spent without proportionate investment from the business. Success is closer when genuine private money is at stake.

    Priorities of innovation policy of the state, i.e. smart specializations, should not be treated like ten commandments cast in stone. Rather, they should be subject to continuous verification based on uninterrupted dialog with business; restless search for new, emerging business and technology potential; and discovery of real needs of enterprises and barriers to growth.  

  • Third, implementation has priority.

    Strategy is important but the devil is always in the detail. It seems that all people in the country agree about lofty goals, but hardly anyone cares to check if those goals have anything in common with what is actually happening. This could be observed in last perspective when money was supposed to be spent on high risk innovations but it turned out that it had been spent on the purchase of low risk technologies instead; support was to be targeted at SMEs but in fact it was offered to large companies; priority was to be given to R&D funding in business but, eventually, subsidies were consumed by scientists and academics.

    Therefore it is imperative in the new perspective to develop efficient framework for project selection to make sure that the money goes where it is needed the most: for the financing of new, high risk and innovative enterprises and technologically advanced projects that are new to the world. Procedures must be simplified; risk aversion so deeply ingrained in public institutions must be mitigated. Public officials should no longer be afraid to go out and talk to business.

  • Fourth, we must be open to the world.

    Without international contacts we are unlikely to create anything meaningful in a global village. It really makes sense that Polish entrepreneurs and scientists should start filing funding applications in English; international experts should be invited to sit on investment panels taking project selection decisions; and Polish research ideas should be verified by international reviewers.

    Higher education facilities should finally open to the big wide world. Seeing a foreign professor at a Polish university should not be as rare as seeing the total eclipse of the sun. Command of English, international cooperation and publications abroad should be required of those who aspire to become professors and of those who already hold that title.

    Another key step for Poland is to welcome foreign scientists, young entrepreneurs, venture capital specialists and professional managers of technology parks and incubators. Back in 1990s we imported banking know-how from abroad and it did us good: now is the time to import R&D and innovation  know-how.

    Finally, Poland should help as many citizens as possible attend international university courses and participate in research programs offered by top universities, and then help them re-integrate and spread their wings upon return.

  • Last but not least, we should invest in institutional capacity development and in business-friendly economic environment.

    Any national strategy is only as good as institutions and people who implement it in practice. If innovations are a true priority for the authorities, innovation support institutions should hire only the best professionals qualified to pursue innovations and take risks. Proverbial ‘bureaucrats’ who never accept anything new and only give a green light to something that had been developed by someone else before definitely won’t do. 

    Fast-track procedures are needed so that grant applications can be evaluated and decisions can be taken within 60-90 days, at the maximum. R&D tax relief for medium and large enterprises should be introduced, given that Poland is lagging behind most of Europe in that respect. We also need a friendly system of taxation of intellectual property rights and VC investments.

    Poland has an opportunity to repeat glorious success of the last 25 years and be at par with the West for the first time in history. Still, no country in the world except for oil producers has ever become rich without innovations. Poland is no exception. We must keep that in mind.