THE WORLD BANK June 2011 69222 Guidebook for the Development of Regional Innovation Strategies and Action Plans in the Russian Federation Version 1.0 THE WORLD BANK June 2011 Table of Contents TABLE OF CONTENTS _________________________________________________________________________ 2 ACKNOWLEDGEMENTS _______________________________________________________________________ 4 EXECUTIVE SUMMARY ________________________________________________________________________ 5 1. INTRODUCTION ________________________________________________________________________ 11 1.1. Objective of the Guidebook ___________________________________________________________ 11 1.2. Defining “Innovation� _______________________________________________________________ 12 1.3. Approach of the Guidebook __________________________________________________________ 13 2. RATIONALE AND EXPECTED OUTCOMES ___________________________________________ 16 2.1. Regional Innovation Policies in the Russian Context _______________________________________ 16 2.2. Outcomes for the Regions ____________________________________________________________ 18 2.3. Outcomes for the Federal Government and Development Agencies __________________________ 21 3. INTERNATIONAL EXPERIENCE WITH REGIONAL INNOVATION STRATEGIES 23 4. BASIC FRAMEWORK: SETTING THE STAGE ________________________________________ 27 4.1. A Solid Governance System ___________________________________________________________ 27 4.2. Regional Innovation Taskforce ________________________________________________________ 28 4.3. Awareness-Raising and Consensus-Building _____________________________________________ 31 5. STAGE 1: IDENTIFY OBJECTIVES _____________________________________________________ 33 5.1. Identify Regional Profiles _____________________________________________________________ 33 5.2. Define Innovation Objectives Adapted to Regional Issues __________________________________ 38 6. STAGE 2: REGIONAL INNOVATION SYSTEM ASSESSMENT _______________________ 43 6.1. The Role of Analysis in the Innovation Action Plan ________________________________________ 43 6.2. Defining the Data Collection Needs ____________________________________________________ 43 6.3. Identifying and Mobilizing Stakeholders ________________________________________________ 46 6.4. The Enabling Environment for Innovation _______________________________________________ 48 2 THE WORLD BANK June 2011 6.5. The Innovation Needs of the Productive Sector __________________________________________ 51 6.6. Knowledge Assets ___________________________________________________________________ 57 6.7. Public Support Programs and Innovation Intermediaries ___________________________________ 60 6.8. Regional Policy Development and Implementation _______________________________________ 66 6.9. Cluster Analysis_____________________________________________________________________ 70 6.10. Data Collection Instruments __________________________________________________________ 73 6.11. Benchmarking ______________________________________________________________________ 76 7. STAGE 3: STRATEGY DEVELOPMENT _______________________________________________ 79 7.1. Identifying Gaps ____________________________________________________________________ 79 7.2. Formulating a Strategy _______________________________________________________________ 83 7.3. Building Regional Consensus __________________________________________________________ 92 8. STAGE 4: ACTION PLAN DEVELOPMENT ____________________________________________ 95 8.1. Elements of an Action Plan ___________________________________________________________ 95 8.2. Methodological Framework for Action Plan Development __________________________________ 99 9. STAGES 5 AND 6: IMPLEMENTATION, MONITORING AND EVALUATION _____ 103 9.1. Implementing Action Plans __________________________________________________________ 103 9.2. Keeping on Course and Learning from Policies at the Regional Level ________________________ 103 9.3. Policy Learning at the National Level through an Innovation Observatory ____________________ 113 10. POTENTIAL CHALLENGES _________________________________________________________ 115 APPENDIX ____________________________________________________________________________________ 118 3 THE WORLD BANK June 2011 Acknowledgements This report was prepared by a World Bank team led by Jean-Louis Racine and Ljudmilla Poznanskaya in collaboration with Peter Lindholm and with important contributions from Christina Tippmann and Iwona Borowik. The team would like to thank Grigory Senchenya and Igor Fedyukin of the Ministry of Economic Development, Yuri Udaltzov of RusNano, and Igor Agamarzian and Evgeny Kuznetsov of Russian Venture Company, who provided important guidance and shared their invaluable institutional knowledge during the course of this project. The team is also grateful for their insightful comments to Sophie Sirtaine (World Bank Sector Manager), Pedro Alba (World Bank Country Director), Yevgeny Kuznetsov (World Bank), Thomas Haven (World Bank). The team would like to thank Esperanza Lasagabaster (World Bank) and Bob Hodgson (Zernike) for comments received on the early draft. 4 THE WORLD BANK June 2011 Executive Summary The Russian Federation has deployed a number of measures to increase competitiveness and transition to a knowledge-based economy. As part of this ongoing effort, a positive ecosystem is required to can help entrepreneurs and knowledge institutions succeed and compete internationally. International experience shows that positive ecosystems can best respond to the needs of society when they are promoted and implemented at regional levels. The development of a regional innovation strategy and action plan can be a useful tool to help policymakers in Russian regions create an enabling environment for innovation and competitiveness. This Guidebook will help regions develop locally-adapted, realistic, action-oriented and monitorable strategies to leverage innovation for their economic and social objectives, including sustainable growth, job creation and poverty reduction. A unified core methodological framework will enable regions to benchmark their innovation systems, learn from other regions and will help the federal government provide coherent support to regions. The guide draws on international and national experience to outline expected outcomes for regions and the federal government of the Russian Federation. The Guidebook uses a broad meaning of “innovation� which encompasses product innovation, process innovation, marketing innovation and organizational innovation.1 These innovations can be new to the firm, new to the market/sector or new to the world. The advantage of using a broad concept of innovation is that it includes all activities involved in the process of technological change. These range from identifying problems, to generating new ideas and solutions, to the implementation of new solutions and the diffusion of new technologies. In lagging agricultural regions, innovation can mean using new types agricultural techniques and new types of seeds. In leading metropolitan regions, innovation can mean developing licensing inventions from research laboratories to multinational corporations. 1 As defined in the OECD Oslo Manual 5 THE WORLD BANK June 2011 International experience, particularly from the European Union, has shown that regional innovation strategies and action plans, when well managed, can have catalytic effects for regional innovation. Since 1994, the EU has actively supported European regional innovation strategies (RIS) through technical and financial support – including for regions from the New Member States in Eastern Europe. As part of this work, the EU supported the creation of an Innovating Regions in Europe (IRE) Secretariat and assisted the development of regional innovation strategies in over 120 European regions. Evaluations of EU regional innovation strategies showed both region-specific outcomes as well as common successes, including: Awareness-raising among regional policy makers on the importance of innovation and knowledge with regard to regional competitiveness. Enhanced regional dialogue between stakeholders in the region. Improved consensus on institutional capacity building through raised innovation awareness in policy circles. Enhanced identification of gaps in regional economy. Benchmarking of the region’s policy and support instruments with other regions. The European Regional Innovation Strategy (RIS) programs identified a number of good practices. Effective regional innovation strategies are developed through a bottom-up process based on dialogue between all regional stakeholders. Identifying the real needs of both the public and private sector stakeholders and determining linkages between them will help to build an integrated approach to innovation. In addition, successful programs are multidisciplinary, taking the full technological, economic and institutional criteria into account. They also maintain an international perspective, analyzing global economic trends as well as the national and international context in which the region operates. Russia is a highly heterogeneous country. Among Russia’s 83 regions (i.e. federal subjects), there are visible differences in public and private investments in innovation, in innovation outputs, and in the efficiency of the innovation system in turning investments into outputs. While some regions such as Nizhny Novgorod and Saint-Petersburg have relative levels of R&D investments matching those of top global R&D investors such as Finland, other regions lag far behind other middle income countries. This heterogeneity in innovation systems reflects, among other factors, variances in economic structure, historical endowments in R&D, human and industrial capacity, geography and regional policies. Russia’s regional idiosyncrasies call for tailor-made regional strategies and action plans. Market and system failures are more uniform and easier to pinpoint at the regional level, 6 THE WORLD BANK June 2011 and specific interventions can be implemented by policy-makers. The regional dimension also offers opportunities to target, create and foster new networks, collaborations and socio-cultural values supportive of productive innovation systems that would not be possible at a national scale. Moreover, building more consensus and a shared vision for innovation – a prerequisite for effective innovation policies - is more manageable at the regional level, due to the smaller number and less fragmented nature of public, private and academic stakeholders. Consensus does not imply that all stakeholders agree to every priority and action but that they agree and commit to the ones that affect them while respecting other stakeholders. Regional innovation action plans that are developed in a consistent and coordinated way can have benefits not just for Russian regions but also for the federal government. A coherent system within the country for supporting innovation in regions can enable federal authorities to better monitor successes of regional and national programs. They can create a more intensive and fruitful dialogue between regional and national authorities which can improve the ability of the federal government to target support to regions on the basis of real needs and demands. Moreover, coordinated implantation of the regional innovation strategies can lead to the creation of networks of excellence across the country and the development of effective cluster policies that support national goals for innovation. This Guidebook presents a methodological framework and building blocks for the development of regional innovation strategies and action plan in the Russian Federation. It includes guidelines for assessing regional innovation systems, including innovation infrastructure and measures supported by Federal programs. It includes organizational frameworks for designing realistic and impactful policies that have the buy-in of stakeholders, and systems for monitoring policy measures. The framework reflects Russian idiosyncrasies by emphasizing global linkages in the market for innovation, emphasizing the enabling environment for innovation and the institutional framework for innovation policy, which is very young in many regions. It is designed for all Russian regions, not only leading innovative regions. The development of a well managed strategy and action plan requires a solid governance framework. The regional government is the lead player in developing and facilitating the implementation of the innovation strategy and the action plan, as it is can influence the actions of selected regional stakeholders that are under its direct control. However, the strategy and action plan are best implemented when they include local stakeholders at all stages and are able to reach a greater levels of consensus. This requires strong governance based on a transparent and continuous exchange between regional policy-makers, consultants in charge of carrying the field work and innovation stakeholders. 7 THE WORLD BANK June 2011 A successful strategy and action plan project team combines local knowledge with experts who have successfully developed and implemented regional innovation strategies in other countries. International experts can be best used to introduce a broader vision or undertake analysis on main industrial and technology trends in a specific area of interest to a region. They can help regional actors to renew their practices according to good practices experimented in other regions and can coach regional public administration in the deployment of innovation policy methodologies. Effective regional innovation action plans are grounded in a common vision of innovation, consensus on priorities, and commitment to actions. They require the active involvement of regional stakeholders – those people or organizations that may be affected or engaged in the regional action plan project. To ensure that stakeholders, and in particular the private sector, are an active part of strategy development, awareness-raising and consensus- building activities are central components of the strategy and action plan development process and should take place throughout the project. The first stage in developing a regional strategy is to understand the regional profile and identify relevant objectives. A region’s economic structure provides a bird’s eye view of the innovation needs of the productive sectors, in particular when attempting to learn from measures used in other regions with similar profiles. Classifying regions according to their profiles can help to: Adapt innovation strategies to the regional environment, developing policies based on identified needs. Allow inter-regional comparisons on the basis of comparable challenges. Build interregional innovation system networks to learn from other regions’ policy experiments. Some tentative profiles in which Russian regions can be classified, according to their socio- economic and knowledge creation and diffusion capacity characteristics include: “Metropolitan� regions with some specialization in high-value added services. Regions with tertiary growth potential. Industrial regions with average economic performance and knowledge assets. Declining industrial regions with weak economic performance and knowledge assets. Agricultural regions. 8 THE WORLD BANK June 2011 Other typologies are also possible and should be explored. More accurate regional profiles can be determined through a focused exercise and can be explored in the context of a federal regional innovation program. The initial months of regional innovation strategy and action plan development can be used to assess the current innovation system, in both qualitative and quantitative terms, and benchmark it with comparable regions in Russia and abroad. The innovation system can be analyzed in terms of the enabling environment, innovation needs of the productive sector, public support programs and innovation intermediaries. Analysis of these factors can be used to create a shared understanding of the baseline of the current innovation system, including supply capacity and innovation support needs of all economic actors. This is necessary to create an approach where the priorities, strategies and projects emerge from comprehensive research, analysis and discussion of regional needs. Un-met needs and gaps in services identified through data analysis can be used to develop both long-term strategic goals and define shorter-term priorities. Successful innovation strategies clarify the vision and mission and define major goals and expected results. Strategy development requires a combination of objective analysis of the current state, a subjective evaluation of priorities, and some futuristic thinking about long-term goals. Methods such as SWOT or Supply/Demand Gap analyses can aid in the development of innovation policy objectives. Once strategic priorities have been determined, an action plan is created which lays out the specific actions necessary to achieve each priority. Building and revising an action plan is a collective undertaking, and should include inputs from all stakeholders. Several tools can be utilized to develop the proposals for specific tasks of the action plan, including brainstorming sessions and workshops. Proposals for specific actions can then be further defined and narrowed down into the action plan. Action plans typically address the following topics in each priority area: Goals and objectives Method Process and responsibilities Funding sources Pilot testing Monitoring plan Monitoring and evaluation are a main component of the strategy and action plan and should be considered throughout all stages of their development. An innovation strategy 9 THE WORLD BANK June 2011 will have little impact without a proper monitoring and evaluation system. Monitoring helps to ensure that activities defined in the action plan are managed according to their original objectives, timelines and budgets. Ongoing policy review allows regions to ensure that regional innovation action plans translate into real outcomes. A “national innovation observatory� can be used to learn from innovation policy measures. While almost all types of policy instruments and measures have been made available to stakeholders in Russia, their efficiency is yet to be demonstrated. The pooling of the measurements of the outcomes in a centralized national observatory enables the assessment of the relevance, efficiency and effectiveness of policies, provides federal and regional policy-makers with a better understanding of results and effects, and improves the transparency and accountability of the policy-making process. This allows policy makers to strengthen successful activities or take corrective actions, including reallocation of program budgets, if problems are identified. Policy makers should be aware that while this Guidebook aims to develop a realistic and effective innovation strategy and action plan, several challenges remain due to the complex nature of innovation policy development, implementation and evaluation. Innovation is compound and it is often difficult for stakeholders to agree on a definition of innovation or decide on measures that encourage innovation. In addition, linkages between regional and national policies and the time-lag between policy implementation and real impact make it difficult to identify the cause and effect relationship between inputs and outputs. Finally, regional innovation action plans are demanding in terms of both time and resources. Data collection can be costly and requires a thorough understanding of objectives actions and data to collect. Anticipating and handling potential barriers to the success of the regional innovation strategy is a core component in the implementation process. 10 THE WORLD BANK June 2011 1. Introduction This chapter provides a general overview of regional innovation strategies and action plans and the Guidebook’s approach to their development. 1.1. Objective of the Guidebook This Guidebook describes a methodology for developing regional innovation strategies (RIS) and action plans in the Russian Federation. It includes guidelines for assessing regional innovation systems, including innovation infrastructure and measures supported by Federal programs. It includes organizational frameworks for designing realistic and impactful policies that have the buy-in of key stakeholders, and systems for monitoring policy measures. The framework reflects Russian idiosyncrasies by emphasizing global linkages in the market for innovation, emphasizing the enabling environment for innovation, and emphasizing the institutional framework for innovation policy, which is very young in many regions. It is designed for all Russian regions, not only leading innovative regions. A regional innovation strategy document describes the following: The current situation in the region, and in particular with respects to other economies, as well as the major innovation needs that should be addressed. Shared objectives and priorities in terms of innovation support and development, as well as their justification. Desired results are described in terms measurable indicators. The coordination of actions to achieve these objectives. The required financial and human capital resources. An effective strategy should have the following attributes:2 It should be understandable to the entire regional innovation system, including the government, enterprises, R&D institutions, technoparks, etc. It should focus on a limited set of priorities shared, to a maximum extent, by the stakeholders, rather than enumerate a long list of priorities that satisfy every single stakeholder. It should provide a clear roadmap to achieve the stated objectives. It should be customized to the profile of the region. 2 EU Stage 2 guide 11 THE WORLD BANK June 2011 It should be realistic, in terms of available resources and objectives. It should represent a consensus among the key stakeholders. Consensus does not imply that all stakeholders agree to every priority and action but that they agree and commit to the ones that affect them while respecting other stakeholders. An innovation action plan describes the implementation of the innovation strategy. It includes concrete actions and projects, their timeframe, responsibilities and identifies required funding sources. 1.2. Defining “Innovation� The Guidebook addresses four types of innovations: product innovation, process innovation, marketing innovation and organizational innovation.3 These innovations can be new to the firm, new to the market/sector or new to the world. The advantage of using a broad concept of innovation is that it includes all activities involved in the process of technological change. These range from identifying problems, to generating new ideas and solutions, to the implementation of new solutions and the diffusion of new technologies. Such a broad definition is practical for policy purposes since similar ingredients are required for all of these activities. In effect, at the core of innovation is learning, as a collective process, which includes learning by doing, learning by using, learning by interacting and learning by searching.4 A broad definition of innovation will be used for the purpose of this report. It is also useful to define what innovation is not, in order to shed any preconceptions right from the start. Innovation is not Invention: innovation is not just about the implementation of an idea but about its application in widespread use, in an institution, the market or society. High-technology: innovation is a process while high-technology is a product. Innovation is usually not Radical or revolutionary: most innovation is incremental. 3 As defined in the OECD Oslo Manual 4 Philip Cooke, Strategies for Regional Innovation Systems: Learning Transfer and Applications, Center for Advanced Studies Cardiff University, Background paper Prepared for UNIDO World Industrial Development Report (WIDR) 2001, January 2001 12 THE WORLD BANK June 2011 The first-time commercialization of an invention: most innovation involves learning and experimentation to imitate a technology, process or service already existing elsewhere. Achieved by using high-technology: most innovations evolve around more mundane technologies or concepts, yet create enormous economic value. 1.3. Approach of the Guidebook The Guidebook describes the rationale and building blocks of a regional innovation action plan process. It then draws on international and national experience to outline expected outcomes for regions and the federal government of the Russian Federation. It then illustrates possible outcomes by presenting international experience on regional innovation strategy, mostly from the EU which has accumulated a considerable body of knowledge and experience on this topic, through a dedicated program. The basic framework of the regional action plans is made up of its governance structure, the regional innovation taskforce, and the communication campaign. These elements need to be established together with the first stage of the action plan process, the objectives-setting stage. The objectives will partly define the composition of the governance structure, regional innovation taskforce and the format of the communication campaign. The Guidebook then describes the three following stages of the action plan development process: assessment, strategy and action plan. This is followed by its implementation, monitoring and evaluation. Figure 1 summarizes the interaction between the stages and Figure 2 outlines their content. Figure 3 provides a typical timeline for a strategy and action plan process. Figure 1: Building blocks of a regional innovation strategy and action plan Governance Taskforce Stage 1: Stage 2: Stage 3: Stage 4: Stage 5: Stage 6: Objectives Assessment Strategy Action Implementation Monitoring plan & evaluation Feedback loops across all stages Communication 13 THE WORLD BANK June 2011 Figure 2: Stages of the methodological framework Stage 1:  Determine regional profile Set strategy and  Identify objectives. action plan  Develop project plan. objectives  Build networks of regions with similar profiles.  Identify information to collect.  Design questionnaires and surveys.  Collect and organize data. Stage 2:  Achieve coherence of data gathering to allow regional Assess regional comparisons and national aggregation (observatory). innovation system  Relevance analysis. INPUTS performance  Effectiveness analysis.  Impact analysis.  Build consensus on regional innovation gaps. Stage 3:  Bring in of international best practices in the scope of Determine gaps and innovation policies. strategic priorities  Adapt RIS methodology (indicators, data collection action plan, information sources … ). Stage 4:  Build consensus on contribution of regional stakeholders. Design innovation  Gather real needs and propose policies and pilot projects with policy measures and direct impact on regional innovation projects (action plan) Stage 5:  Identify regional management team and build federal network Implement measures of innovation “specialists�. and projects OUTPUTS Stage 6:  Monitor strategy performance indicators. Monitor regional innovation  Evaluate policies and implementation efficiency. performance and  Identify good practices and disseminate at the federal level. assess impact of strategy 14 THE WORLD BANK June 2011 Figure 3: Typical timeline of a strategy and action plan process Months 1-3 • Preparation work • Define objectives for each region Months 3-4 Months 5-12 Months 12-18 • Create regional • Assess data • Agree on strategy and innovation taskforce • Collect and analyze data action plans • Conduct assessments Months 5-12 • Establish monitoring systems Months 18+ • Implement and monitor action plans 15 THE WORLD BANK June 2011 2. Rationale and Expected Outcomes This chapter describes the rationale for deploying a regional innovation system program under the auspices of the Federal Government and its expected outcomes for regions and for the Government of the Russian Federation. Regional specificities call for tailor-made regional strategies. Market and system failures are more uniform and easier to pinpoint at the regional level, and specific interventions can be implemented by policy-makers. The regional dimension also offers opportunities to target, create and foster new networks, collaborations and socio-cultural values supportive of productive innovation systems that would not be possible at a national scale. Moreover, building consensus and a shared vision for innovation – a prerequisite for effective innovation policies - is more manageable at the regional level, due to the smaller number and less fragmented nature of public, private and academic stakeholders. Depending on the institutional and social development of a given region, its intrinsic competences, history and culture - this mobilization requires more or less intervention from public authorities. 2.1. Regional Innovation Policies in the Russian Context Global benchmarking finds that Russian regions lag behind international comparators. In view of national ambitions for innovation and modernization, regions have yet to follow with effective policies. The vast economic, geographic and social diversity across the Russian Federation provides additional challenges to a unified national approach to innovation policy. The Russian Federation presents a rich picture of complex regional differences which include highly uneven distributions of natural endowments, differences in distributions of economic growth and settlements that for historical reasons are not always related to current economic comparative advantages. 5 While some regions have per capita incomes and levels of development comparable to Western and Central European economies, others reach the levels of low-income economies (Figure 4). National innovation performance statistics hide a high level of heterogeneity across regions. Among Russia’s 83 regions (i.e. federal subjects), there are visible differences in public and private investments in innovation, in innovation outputs, and in the efficiency of the innovation system in turning investments into outputs. While some regions such as Nizhny 5 Russian Federation Regional Development and Growth Agglomerations, the Longer Term Challenges of Economic Transition in the Russian Federation: A Country Economic Memorandum for Russia, the World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, January 16, 2009. 16 THE WORLD BANK June 2011 Novgorod and Saint-Petersburg have relative levels of R&D investments matching those of top global R&D investors such as Finland, other regions lag far behind other middle income countries. Similarly, while regions such as Saint-Petersburg performs as well as Finland along some measures of R&D efficiency such as R&D expenditures per international patent, others with similar relative funding levels are ten times less efficient (Figure 5). This heterogeneity in innovation systems reflect, among other factors, economic structure, historical endowments in R&D, human and industrial capacity, geography and regional policies. Figure 4: Income per capita of Russian regions and comparator countries 60 50 GDP PPP, thousands of $ 40 30 20 10 0 Countries and regions Source: WDI; National Human Development Report Russian Federation 2008, UNDP. Note: Dark bars represent countries, light bars represent Russian regions. 17 THE WORLD BANK June 2011 Figure 5: Performance of regional innovation systems in Russia 4.5 Nizhny Finland 4.0 Novgorod (R&D as a % of GRP or GDP) 3.5 Saint-Petersburg 3.0 bubble size R&D intensity 2.5 indicates Moscow average 2.0 Novosibirsk number of Tver Tomsk annual USPTO 1.5 Samara patents per Estonia 1.0 Sverdlovsk Perm Russia million residents Tatarstan Turkey (2004-2009) 0.5 Tyumen Bashkortostan Krasnodar 0.0 0.0 0.1 1.0 10.0 100.0 1000.0 R&D efficiency (log of patents per billion PPP$ of R&D) Source: USPTO, UNESCO, Russian Federal Statistics. 2.2. Outcomes for the Regions Effective policies depend on the relevance and the quality of regional innovation policies (Figure 6). Key elements in the context of effective policies are that (a) government and regional experts have the capacity to develop and implement regional innovation strategy and action plans, and (b) main regional stakeholders, including the private sector, share the ownership of the regional strategy and its implementation plan. 18 THE WORLD BANK June 2011 Figure 6: Key factors in creation of effective policies In that context, innovation action plans can bring regions the following benefits: An understanding of what types of measures are best adapted to the region. Decreased risk in the implementation of innovation measures. Regions will be able to deploy programs that are in line with the objectives and capabilities of stakeholders through consensus-based processes (including both stakeholders based exclusively in the region as well as those who depend on decisions made elsewhere, i.e. branches of large companies, universities depending on the Ministry of Education of Education and Science or branches of the Russian Academy of Sciences). Consensus between regional authorities, business community and knowledge-based institutions is the cornerstone of successfully implementing innovation measures and infrastructure. The capacity to prepare for key threats, on the basis of regional assets and global competition. The ability to engage in a more constructive dialogue with the ministries of the Federation. The ability to monitor the progress of the regional innovation system and continuously adapt and fine-tune regional innovation policies. Within the Russian Federation, the Tomsk region provides an example of a bottom up, inclusive, well-managed strategy process that has yielded good results (Box 1). 19 THE WORLD BANK June 2011 Box 1: Innovation policy of Tomsk One of the most advanced territories in Russia in terms of development of the regional innovation system is the Tomsk Region. It was the first region in Russia to approve a regional law on innovative activity in 1999 and the regional innovation strategy in 2001. In 2002-2008 two Interdepartmental Programs on designing and implementation of a model of the innovative territory were fulfilled. The Programs were agreed with the Russian Ministry of Education, Russian Ministry of Industry, Science and Technologies and the Russian Academy of Sciences as well as with the main innovation stakeholders of the region. In 2005 the Tomsk government approved the Strategy of Tomsk Region Development Until 2020. In the Strategy, the research and innovation was determined as a priority area. Since then, innovation has been supported by the strong political will of the Governor and the regional administration. Although the volume of financial resources allocated to innovation was modest, this was only due to modest budget of the region. One of the key success factors for the Tomsk RIS is the strong consensus between innovation stakeholders. The process of consensus building has been developing for about 10 years and has yielded very good results connected with designing and implementing an adequate, clear and consistent innovation policy supported by all stakeholders. Very close interaction between all parts of the RIS has been organized though numerous meetings, seminars, conferences, etc. The Innovation Forum plays an important role in this process. Consensus building was achieved thanks to the innovative approach of the Tomsk Region Administration and other stakeholders. It led to the creation of a sincere mutual understanding and willingness to cooperate between the government, universities, research institutes and innovative enterprises. They used all possible foreign and Russian experience and developed new mechanisms in the fields of innovation projects evaluation and support, interregional and international cooperation, integration of science, education and industry, creation of a new regional system for monitoring of innovation sphere, educational innovations, etc. Tomsk’s inclusive and well-managed approach to innovation policy has led to remarkable result in light of the region’s geographical location, industrial capacity and limited fiscal resources: A comprehensive regional innovation system was established (special economic zone, commercialization offices, business incubators, technology transfer centers, centers for international cooperation, consulting organizations, a regional venture fund). Considerable financial resources were obtained from the federal government (creation of the Research and Innovation Special Economic Zone, development of the universities, creation of centers for collective use of research equipment, implementation of a big number of R&D and innovation projects). A large number of innovative enterprises was created. 20 THE WORLD BANK June 2011 The capabilities of all innovation stakeholders were significantly improved. The volume of innovation production and services was increased. The image of the region was improved. Investors, including foreign investors, were attracted to the region. An interregional and international collaboration system was developed. 2.3. Outcomes for the Federal Government and Development Agencies Regional innovation action plans that are developed in a consistent and coordinated way throughout Russia can bring the following benefits to Federal entities that oversee national innovation programs: A coherent system for supporting regions. This can enable federal authorities such as the Ministry of Economic Development (MoED) to “monitor� success of regional and national programs. The ability to create a more intensive and fruitful dialog with regional authorities. This dialogue shall be based on tangible facts rather than on requests that are not always entirely justified by the actual regional needs. The ability to target federal support to regions on the basis of the “real and proven� needs, demands and assets of individual regions, spanning from universities, companies and the innovation infrastructure. Monitoring mechanisms encapsulated in each regional innovation action plan can provide a set of indicators allowing the Federal authorities to fine tune national policies and programs. These indicators can not only monitor regional performances but also benchmark Russian regions towards key external competitors. The capacity to create networks of excellence across the country. This may include the development of effective cluster policies that support the national goals for modernization. Regional innovation strategy and action plan can contribute to the creation of: Consistent policies 21 THE WORLD BANK June 2011 - Avoiding policy fads or using R&D funds for short term projects in public research institutions. - Developing institutions that survive new administrations. - Evolutionary changes based on regular evaluations. Predictable and critical mass funding - Funding projects that fit the state’s strengths and needs. - Secure and predictable funding streams. - Long term funding contingent on achieving clearly set goals. - Differentiating funding streams that must continue to be funded by the public sector from those that could be leveraged through the private sector. - Avoiding diluting resources by spreading them across the country. 22 THE WORLD BANK June 2011 3. International Experience with Regional Innovation Strategies This chapter describes the approach and outcomes of regional innovation strategy efforts in the European Union over the past two decades. EU RIS Program A systematic approach for developing Regional Innovations Strategies (RIS) was designed and tested by the European Commission (EC) starting in 1994. To promote the development of RIS and ensure that regions would use standardized methodologies, the EC designed a set of programs based on a co-financing grant6 - accessible also by regions from the New Member States of Eastern Europe.7 As a result, over 120 European regions received EU support since 1994 for RIS projects. European regions come in various sizes, ranging from several hundred square kilometers and several tens of thousands of inhabitants, to more than 20,000 km2 and more than 10 million inhabitants. Additionally, the EU supported the creation of the Innovating Regions in Europe (IRE)8 Secretariat (i.e. a network of regions), the establishment of the European Regions Research and Innovation Network (ERRIN) that operates as an independent body of learning and partnership for more than 90 regions, as well as developed several Methodological Guides on innovating regions.9 The European RIS program aims at facilitating the development of a shared vision of the role of innovation in regional development, without interfering with specific strategy building processes in regions. The program focused on delivering concrete tailor-made action plans that each region could deploy to achieve the designed goals. The program proved to be particularly effective in developing regional strategies through a bottom-up process based on dialogue and discussion, unveiling the real and concrete needs of the regional stakeholders. It contributed to awareness-raising among regional policy 6 The Commission launched competitions that offered to finance up to 50 percent of eligible costs for the elaboration of a RIS, with a maximum of €250,000 per region. 7 Pilot projects between 1990 and 1993, the RIS (Regional Innovation Strategies) in 1994-1999, the Regional Programs of Innovative Actions (PRAI) 2000-2006, the -NAC (Regional Innovation Strategies in Newly Associated Countries) first generation: 2001/2-2005 and second generation 2005-2008, managed by the Directorate General for Enterprise of the European Commission. 8 Innovating Regions of Europe (IRE) - www.innovating-regions.org. , now transformed into “Enterprise Europe�. 9 Innovating Regions in Europe - RIS Methodological Guide – Stage 0, IRE Secretariat, July 2005; Innovating Regions in Europe - RIS Methodological Guide – Stage 1, IRE Secretariat, February 2006; Innovating Regions in Europe - RIS Methodological Guide – Stage 2, IRE Secretariat, February 2007. 23 THE WORLD BANK June 2011 makers on the importance of innovation and knowledge with regard to regional competitiveness. EU RIS Characteristics Over the years a full-fledged RIS program was developed, demonstrating the following main aspects of regional innovation strategies: Regional: Each project relates to a specific geographical area fully taking into account the national and international context the region operates in. In other words, RIS aimed at serving both a given region and national interests of the country. Bottom-up: Both the private sector and representatives of the regional and national scientific and technological communities take an active role in RIS process. Continuous and deep involvement of practitioners facilitates a stronger regional partnership and assures that recommendations spanning from RIS will be implemented with the necessary consensus of challenges and opportunities faced by a region. Strategic: The strategies procured thanks to RIS process aim at responding to immediate challenges but also build on long-term potential. Integrated: Each project tries to link efforts from the public sector (local, regional, national and European) and the private sector to the common goal of increasing regional productivity and competitiveness. This integration also looks at how locally supported initiatives can take advantage of national programs and policies. In turn, national authorities are able to collect critical data about the “real needs and results� of local stakeholders living in different economic environments. Multidisciplinary: Each project takes technological, economic and institutional criteria fully into account. Innovation is the main focus but the overall goal is to ensure a sustained economic development. International: Each project retains an international perspective in terms of its analysis of global economic trends as well as its focus on national and international cooperation in innovation. This dimension leads to a better understanding of international challenges as well as of the best opportunities for the region. Such an approach can also lead to the development of concrete collaborative measures between regions. 24 THE WORLD BANK June 2011 Moreover, the IRE Secretariat listed the following critical success factors for effective RIS development: interaction, openness, orientation towards regional needs, steering, strategy, and vision. Figure 7 illustrates the main features of the regional innovation strategy development. It highlights its character as a continuous process of consensus-building; orientation toward the needs of regional shareholder; development of external connections, as well as designing actions related to project development and implementation. Figure 7: Main characteristics of the EU RIS PROCESS ORIENTED  Strong political support  Consensus building CUSTOMER ACTION ORIENTED ORIENTED  Identifiable outputs  Pilot projects RIS  Private sectors representatives  Functional approach  Sectoral approach EXTERNALLY ORIENTED  Staff exchange program  International panel  Networking Lessons from the RIS experience Specific results from each EU RIS project differ according to the goals and tasks set by each region. However, a thread of common outcomes emerges from responses to two questions: “has the RIS been successful?� and, “to what extent will the program help the region’s economic development?� Responses to these questions reveal the following: 25 THE WORLD BANK June 2011 Intensification of learning process: Successful implementation of a bottom-up, transparent approach leads to the effectiveness of RIS as a learning process for regional stakeholders. Dialogue: The creation or enhancement of an inclusive regional dialogue between stakeholders concerned with technology transfer institutions in the region. Institutional capacity building: Raising innovation awareness in policy circles, improved consensus building capacity, reinforcing governance at sub-regional level. Enhanced identification of gaps in regional economy: A RIS effectively raises the awareness about the significance of innovation in economic development. Benchmarking: Possibility to compare the region’s policy and support instruments with other regions. Lessons for the Russian Federation The Russian Federation can build on the EU RIS experience. Evaluations of the EU’s regional innovation strategies projects have uncovered their value added as well as a number of good practices. Evaluations of EU innovation strategies show that well-managed strategies have catalytic effects for regional innovation.10 Strategies promote cooperation between the various stakeholders on the basis of shared objectives. Evaluations also uncovered value in the EC’s contributions along three lines: a methodology that could be adapted to different EU regions, the use of consultants and experts from other member states, and the management support and opportunities for networking.11 10 Innovative strategies and actions: Results from 15 years of regional experimentation, European Commission, Directorate General Regional Policy, Thematic development, impact, evaluation and innovative actions 11 Ex-post evaluation of the RIS, RTTs and RISI ERDF innovative actions for the period 1994-99, Socintec and Inno-Group, 2004. 26 THE WORLD BANK June 2011 4. Basic Framework: Setting the Stage This chapter describes the preparatory steps to developing a regional innovation strategy and action plan, along with the management of the strategy and action plan process. 4.1. A Solid Governance System The regional government is the lead player in developing and facilitating the implementation of the innovation strategy and the action plan, as it is able to influence the actions of selected regional stakeholders that are under its direct control. However, a regional strategy and action plan exercise is not a typical consultancy project that can be fully outsourced to experts. It involves at all stages local public and private stakeholders to make sure they “capture� the right ownership that will be of help when the time for implementation comes. Ownership of the regional innovation strategy and the action plan must be shared among all key regional actors if these are to become effective instruments. In this context, reaching a consensus is necessary. This implies strong governance based on a transparent and continuous exchange between regional policy-makers, consultants in charge of carrying the field work and innovation stakeholders. There is no single form for a governance system. Each region must be prepared to think about the best model adapted to its culture and its needs. However, effective organizational structures usually include a steering committee, a regional innovation taskforce and working groups that contribute to achieving the aims of the project. The role of the steering committee is to strategically guide and promote the innovation action plan project, and be in charge of delivering and monitoring it. The steering committee is a critical co-developer to the project management team. It acts as a mentor to the regional innovation taskforce, providing feedback and advice. It also takes key decisions at project milestones. It promotes the project within the main stakeholder groups (regions, industry organizations, Academy of Science etc.) and disseminates information about the project. It evaluates progress at key project milestones and is a point of contact for any discussions on re-orientation of objectives or activities with the regional innovation taskforce. And finally, it serves as a forum of discussion, communication and consensus-making among the steering committee participants. Because the steering committee is expected to lead actors that are not all under the control of the regional authorities, to be effective it must be composed of a representative sample of the various key innovation stakeholders of the region. It is recommended that the leader of the steering committee be recognized by the innovation community. 27 THE WORLD BANK June 2011 The following ingredients can help establish an effective governance system: The overall project organization must be transparent, e.g. roles and responsibilities must be clearly defined and delegated internally; Project objectives and their relationship to existing regional initiatives must be clear to all and communicated to the stakeholders. The regional innovation taskforce should have in its terms of reference the development of clear proposals about the governance system that facilitates implementation of the innovation action plan. The regional authorities, starting from the highest levels of the administration, must be prepared to spend time to discuss findings and options spanning from the field work. Regional authorities should carry some preparatory work to make sure that business and research communities welcome the initiative and are ready to actively participate. Regional decision-makers must be prepared to tune the terms of reference of the strategy in new directions if relevant opportunities spin-out from the regional innovation taskforce’s work. 4.2. Regional Innovation Taskforce Role of the regional innovation taskforce Key to the successful deployment and ownership-taking of the regional innovation action plan by key regional stakeholders is the way the action plan methodologies are implemented. International experience suggests that regional innovation strategy and action plan projects are best coordinated by a core team of consultants and advisors (and not by civil servants), with counterparts in departments of the regional public administration. Both the consultants and civil servants must have the capacity to understand the entire regional innovation system in the national and global context in order to deliver efficient and innovative recommendations to policy-makers and local stakeholders. Innovation action plans require that the taskforce have capacity to: Carry out in-depth analysis of needs and demands12 of companies. 12 Demands and needs can be of different nature (demands are expressed by the interviewee while needs result from the analysis of the interviewer. 28 THE WORLD BANK June 2011 Evaluate and map the “knowledge-assets� embedded in R&D institutions and universities (this mapping will focus on the potential market value of such assets). Carry out in-depth analyses of the existing support programs (incubators, technoparks, innovation funds, grant programs, etc.). Analyze the regional innovation ecosystem and understand its efficiency. Assess key strengths and weaknesses of the existing innovation system. Propose a series of strategic actions to regional stakeholders on the basis of national and international experience. The “package� of actions must build on a mix of the policy vision of decision-makers and the absorption abilities of stakeholders. Facilitate meetings between stakeholders to generate a strong local ownership of the proposed strategy and action plans. Improve (when needed) the abilities of local consultants and civil servants to carry out all steps of the process. When and if possible, support the monitoring of the agreed action plans. The taskforce may carry out the collective activities for policy-makers to: Monitor progress of the pilot projects, ensure that they respond to the needs of regional stakeholders and discuss implementation processes. Provide detailed and concrete exposure to international practices and experienced regions. Generate feedback loops between regional and federal policymakers in order to improve the impact of national and regional innovation policies and programs. Selecting members of the taskforce Russia has not yet developed a critical mass of high-level innovation policy consultants and advisors with the experience to understand and design strategies and equally able to support the implementation of key measures. This market gap creates a challenge to the implementation of national and regional policies. The success of the innovation strategy and action plan projects depends on strong political support as well as from the skills and experience of the regional innovation taskforce. Federal support for a new community of professional advisors able and willing to deliver high standards work to regions and to the federal authorities can help address this gap. 29 THE WORLD BANK June 2011 These advisors may play a critical role for federal development institutions such as the RVC and RusNano, which already face challenges of lack of availability of such competencies – and in particular for professionals with an understanding major international trends and challenges. To build up innovation policy capacity at the regional and national level, regions that develop innovation action plans can take into account engagement of regional innovation taskforces that typically consist of: A core team of experts with prior international experience with regional innovation strategies - in addition to hands-on experience with implementation activities. International experts might be best use for introducing a broader vision or undertaking analysis on main industrial and technology trends in a specific area of interest to a region. They also allow the actors of the region to renew their practices according to best practices experimented elsewhere and coach the consultants and regional public administration in the deployment of innovation policy methodologies. During the strategy and action plan process, these core experts can deliver training to regional experts and civil servants. Regional and federal experts. Regional and federal experts from the private and academic sectors bring an understanding of the national innovation system and culture, they take actions on the communication side, and help ensure that the regional exercise is coherent with the national policy lines. The involvement of regional consultants ensures that knowledge of the regional innovation action plan methodology is absorbed in the region. The involvement of federal consultants ensures that the methodology is coherent across different Russian regions. Civil servants from the regional administration. Civil servants lead the process of innovation policy development and implementation. Creating a critical mass of capable advisors is an important need in the Russian market. The following steps may be taken in the selection of advisors: Defining a set of characteristics for innovation consultants. Using a “snow ball� process: people recommend other people and rank them. Calling for experts recommended by RusNano and RVC. Requesting for proposals in the selected regions. Opening a tender for CVs. 30 THE WORLD BANK June 2011 4.3. Awareness-Raising and Consensus-Building Effective regional innovation action plans are grounded on a common vision of innovation, consensus on priorities, and commitment to actions in a region. They therefore require the active involvement of key regional stakeholders i.e. people or organizations that may be affected or engaged in the regional action plan project. Stakeholders’ participation in the regional innovation action plan development process is critical because it: Helps in collection and analysis of data, including identification of data gaps, sources and gathering priorities. Helps create acceptance of the results of the innovation landscape - all relevant actors in the region should be involved in the analysis of the region’s innovation potential (e.g. R&D quality and infrastructure, key sectors, R&D commercialization practice, existing law affecting R&D, patenting, etc). This is a basis for the formulation of strategic priorities and actions. Also, analysis results should be broadly communicated. Provides transparency, and in some cases a sense of ownership regarding the decision-making process and the decisions taken. Accustoms stakeholders to the fact that difficult choices and tradeoffs will have to be made. Ensures that alternatives serving a broad range of interests are considered. Helps to shares the responsibility and leadership in strategy implementation - once the strategy has been agreed upon, an action plan is to be designed specifying the measures, actions and tools how to achieve them. This implies taking a decision on who is responsible for implementation. Consensus building as a continuous process beyond the innovation action plan project duration - the strategy needs to be regarded as a living document being continuously developed and adapted to the changing framework conditions and consensus with all key stakeholders. One component of building ownership for the action plan in the region is a communication plan that raises the awareness of the importance of the regional innovation action plan. The communication plan targets a wide variety of actors, including: Companies - SMEs that are oriented towards innovation and new technologies are of particular interest. 31 THE WORLD BANK June 2011 Innovation support institutions and organizations - entities that provide companies with different innovation related services, e.g. research institutions, universities, innovation agencies, consultants. Policy-makers from local, regional and national level. International partners - collaboration with international partners can open the way for new knowledge and new market opportunities. Mass media – TV, radio, newspapers, magazines, internet-based news agencies etc. support the creation of a social opinion about the regional innovation action plan process. Numerous communication methods can be used to involve stakeholders into the regional innovation action plan development process and dissemination. These methods may be divided into passive and active: Passive tools Active tools RIS Name and logo. Meetings with stakeholders. Web pages / social media. Press conferences. Newsletters and leaflets, brochures. Round table discussions. Press campaign (information for the Conferences, seminars, presentations mass media, articles for the target throughout the region to industry groups in appropriate mass media, groups, local or community meetings participation in the steering committee and / or existing meetings of regional in TV and radio broadcasts, work with actors. the press claims). Involvement of important political Seminar and conference material. figures to attract participants to the project. Press releases. Pilot projects. Many tools and processes exist to reach a consensus, but the key words here are time and leadership. A government official must become the “innovation champion� and must be willing and able to allocate a significant amount of his or her energy and time to reach this consensus goal. This innovation champion must have the power and legitimacy to lead the strategy and action plan development process and its implementation. 32 THE WORLD BANK June 2011 5. Stage 1: Identify Objectives This chapter proposes regional typologies, classification mechanisms and possible innovation policy objectives for each typology. The objective of this chapter is to provide guidance to a federal-level steering committee as it prepares to launch a regional innovation action plan program. 5.1. Identify Regional Profiles A region’s economic structure provides a bird’s eye view of the innovation needs of the productive sectors, in particular when attempting to learn from measures used in other regions with similar profiles. Regions are not all alike. This holds particularly true for the 83 Subjects of the Russian Federation. Classifying regions according to the profiles of their innovation systems can help: Adapt innovation strategies to the regional environment, developing policies based on identified needs. Allow inter-regional comparisons on the basis of comparable challenges. Build interregional innovation system networks to learn from other regions’ policy experiments. The EU experience also showed that it was not possible to “impose� a strict unified methodology for all regions. Methodologies still need to be adapted to the peculiarities of each region. Only adapted methodologies lead to the necessary ownership by local stakeholders. Methodologies can be adapted while retaining a core of comparable data by classifying regions according to their innovation and socioeconomic profiles. Russian regions can be classified into one or more of the five profiles shown in Table 1, according to their socio-economic and knowledge creation and diffusion capacity characteristics (Figure 8). Throughout the Guidebook, the icons shown in Table 1 will be used to refer to the regional profiles. Other typologies are also possible and can be explored in the context of a federal regional innovation program (Box 2).13 Regional profiles can be determined through indicator analysis issued from federal and regional statistics. A limited 13 The proposed typology is adapted from a principal component and cluster analysis of European new member states and candidate countries in Muller, E., Jappe, A., Héraud, J.-A. and Zenker, A. (2006) A regional typology of innovation in New Member States and Candidate Countries, Working Papers Firms and Region No. R1/2006, Fraunhofer Institute of Systems and Innovation Research. A more definite typology would require a similar analysis for the regions of the Russian Federation. 33 THE WORLD BANK June 2011 set of possible indicators is shown in Table 1. A more rigorous classification would require a principal component and cluster analysis.14 Table 1: Regional profiles and corresponding icons used in the Guidebook Region Profile Icon “Metropolitan� regions with some specialization in high-value added services. Regions with tertiary growth potential. Industrial regions with average economic performance and knowledge assets. Declining industrial regions with weak economic performance and knowledge assets. Agricultural regions. 14 See Muller, E., Jappe, A., Héraud, J.-A. and Zenker, A. (2006) A regional typology of innovation in New Member States and Candidate Countries, Working Papers Firms and Region No. R1/2006, Fraunhofer Institute of Systems and Innovation Research; Aguado, R., Gibaja J.J., Navarro, M.,and Bilbao-Osorio, B. (2008) Regional innovation systems in EU-10: a typology and policy recommendations, Paper presented in the IV Globelics Conference at Mexico City, September 22-24 2008; 34 THE WORLD BANK June 2011 Figure 8: Characteristics of regional profiles High Metropolitan regions Knowledge creation Regions with tertiary and growth potential Industrial regions diffusion capacity Declining industrial Agricultural regions regions Low Not oriented towards Oriented mainly towards manufacturing activities Economic manufacturing activities structure Source: adapted from Muller, E., Jappe, A., Héraud, J.-A. and Zenker, A. (2006) A regional typology of innovation in New Member States and Candidate Countries, Working Papers Firms and Region No. R1/2006, Fraunhofer Institute of Systems and Innovation Research. Metropolitan regions have the highest potential to develop into globally-competitive knowledge-based economies. They are better integrated globally than other regions but also provide services to other Russian regions. Compared to other regions, a relatively high share of their economy is dedicated to services, and they have developed some high-value added service sectors such as banking or ICT. Regions with tertiary growth potential have important and high-performing knowledge creation institutions such as universities and research institutes, and well- educated workforces. These, however are not matched by industry demand for R&D-led innovation. These regions’ economies are focused on natural resource extraction and services rather than manufacturing. Industrial regions exhibit large employment shares in manufacturing sectors and have relatively well educated populations. They have moderate levels of technological performance as measured by R&D investments, patents and publications. 35 THE WORLD BANK June 2011 Declining industrial regions have declining economic output with a share of employment in manufacturing. They are often dominated by large enterprises, sometimes around a single sector. They have very limited knowledge and technology-related activities. Agricultural regions lag other regions in terms of economic growth and knowledge assets. They have few linkages with the national and international economies besides some level of exports of unprocessed or semi-processed agricultural products. They have high shares of employment in agriculture and low shares of their population have a tertiary education. Box 2: Regional innovation strategies and regional profiles in Poland “ On the basis of an analysis undertaken earlier for the European Commission, the government outlined four different (proto-) types of regions: Production sites regional economies - regions that are attractive to significant flows of inward investment and conducive to export-driven manufacturing companies (examples in Poland: e.g. Slaskie, Wielkopolskie). Regions as sites of increasing returns - regions that have clustered and locally based internationally competitive industries (e.g. Pomorskie). Regions as hubs of knowledge - regions that receive and transmit high levels of internationalized knowledge, both formalized and tacit, and are dependent on high tech enterprises and high value services (e.g. Greater Warsawa). Mixed regional economies – regions with mainly low productive sectors with limited exports (e.g. Lubelskie, Warminsko-Mazurskie). Each type of region calls for a different strategy towards economic development and innovation.� Source: ECORYS (2004) Regional innovation strategies in Poland: lessons and recommendations 36 THE WORLD BANK June 2011 Table 2: Examples of indicators to define regional profiles Profile Example of socio-economic Example of innovation indicators indicators Metropolitan regions High share of workforce in High publication and patenting services rates High share of population with Moderate investments in R&D tertiary education High per capita income Tertiary growth potential regions High share of population with Moderate publication and tertiary education patenting rates Moderate investments in R&D Industrial regions High share of workforce in Moderate publication and industry patenting rates Moderate investments in R&D Declining industrial regions High share of workforce in Low publication and patenting industry rates Low economic growth Low investments in R&D Low exports Low technology investments Agricultural regions High share of workforce in Low publication and patenting agriculture rates Low economic growth and per Low investments in R&D capita income Low share of the population with tertiary education Another form of regional typology is related to the capacity of a region to formulate and implement innovation policies. Regions that do not have a history of innovation policy have few civil servants, academics and consultants specializin in this field, and that have very limited fiscal resources fall into this category. Many agricultural regions are in this category. These regions can start with a minimalist approach to innovation strategy and action plan development. The Guidebook will identify methodologies that are only suitable for regions with adequate capacity through the following icon: 37 THE WORLD BANK June 2011 5.2. Define Innovation Objectives Adapted to Regional Issues The regional innovation action plan project should start with a solid inception phase, where the objectives and questions to be solved by project are discussed and detailed. Clear objectives, which are easily communicable, are an overarching and critical success factor of regional innovation action plan projects as they provide them with a direction. Objectives should be written down in words and phrases that everyone can understand. Having at least one mission statement, a very clear one, is advisable. After the assessment of the regional innovation system and in later stages of the strategy process objectives can be reviewed in light of new emerging evidence. The aims and objectives of regional strategy and action plan projects vary considerably between regions. The successful implementation of a regional innovation action plan largely depends on whether the objectives are realistic and relevant to the region. To set appropriate objectives and analyze their consequence, decision-makers can work in close cooperation with regional action plan practitioners with experience in other regions with similar profiles. This could be useful, for example, to address questions related to regional economic growth models (Box 3). 38 THE WORLD BANK June 2011 Box 3: What makes a region successful? Successful regions have similar structural characteristics. A regional innovation system can be deemed successful if it generates shared economic growth. While there has been a long academic debate on what leads to regional growth, there is evidence that growth occurs in contexts of related variety economic platforms.15 In plain words, this occurs when there are closely related industrial sectors operating in geographic proximity of one another. Related variety allows innovation to be diffused more rapidly among communities. Innovation, of course is at the core of this type of diversification. It involves learning new ways of doing new things with existing knowledge and institutional assets. The implication of this finding is that innovation policy must not be rigidly sectoral (i.e. restricted to a particular industry). First of all, sectoral policies are not sustainable, since they will never protect an industry from moving to lower-cost countries in the long run. Second, rigid sectoral policies prevent scientific and technological opportunities that occur in other sectors from being exploited in the region. Third, while sectors can be neatly defined using statistical definitions, the market is continuously redefining the organization of value chains, and the notion of “sectors� is a moving target. Different tasks within a sector are being conducted in different regions. And these tasks may have more in common with tasks in different “sectors� than with tasks in their own sectors.16 Industries are able to diversify into closely related industries through various knowledge transfer mechanisms that operate mainly at the regional level. One is diversification of products and services within firms. A second is entrepreneurship through spinoffs. A third is labor mobility. And a fourth is social networking.17 A workshop held for the regional steering committee and external experts can help reach consensus on the main objectives of the project. Preliminary question to ask are: Why are we willing to do a regional action plan project? What do we want to achieve? What do we know already about innovation in the region? What do we need to find out? How will we achieve our goals and what will it cost? 15 European Commission, Constructing Regional Advantage - principles – perspectives – policies, Directorate-General for Research, 2006. UNIDO, Industrial Development Report 2009 - Breaking In and Moving Up: New Industrial Challenges for the Bottom Billionand the Middle-Income Countries 16 European Commission, Constructing Regional Advantage - principles – perspectives – policies, Directorate-General for Research, 2006. 17 Frank Neffke, Martin Henning and Ron Boschma, “How do regions diversify over time? Industry relatedness and the development of new growth paths in regions�, Papers in Evolutionary Economic Geography, # 09.16, October 2009 39 THE WORLD BANK June 2011 What can we do by ourselves? What help do we need from the experts, and from other regions? A list of regional innovation policy objectives should emerge from these questions. These objectives can be based on international experience and can help structure the regional innovation action plan exercise (tailored data gathering, actors to involve, tools used to collect data…). The regional innovation action plan methodology can be used to bring together Russian regions that face similar sets of challenges. Russian regions will be able to prioritize innovation policies and tailor action plan methodologies (objectives, data gathering, and impact analysis) on the basis of: The greatest benefit to the most people affected in the region. The frequency in which the problem is encountered in the region. The number of regions that are affected by the problem. The feasibility of the action plan compared to the innovative potential of the region (gaps may be too large to overcome). Level of risk (for instance, regional strategic actors’ involvement). Innovation policy objectives will differ by region depending on the regional context. Table 3 provides some preliminary examples objectives as they correspond to the different regional profiles. An example of innovation strategy objectives developed by the Slovak Republic region of Nitra is provided in Box 12. 40 THE WORLD BANK June 2011 Table 3: Examples of innovation policy objectives by regional profile Profile Possible innovation policy objectives Metropolitan regions Stimulate new firm formation Improve global linkages Improve labor productivity Tertiary growth potential regions Stimulate new firm formation Develop global R&D linkages Stimulate investments in knowledge-based firms Industrial regions Stimulate networking and cooperation Improve global linkages Increase knowledge-content of production Declining industrial regions Stimulate new firm formation Develop related industries Attract knowledge from outside the region Agricultural regions Increase knowledge diffusion Increase demand-driven research Improve productivity 41 THE WORLD BANK June 2011 Box 4: Example of Strategic Objectives for the Agricultural Region of Nitra The Nitra region belongs to warmest and most productive agricultural areas of the Slovak Republic. It is situated at the border with Hungary and is part of the water catchment of the Danube River, creating quality agricultural soil. The share of industry on gross production in Nitra is lower than the average of the Slovak Republic and the region has not experienced positive and dynamic growth. This regional and economic context provided the backdrop for the Steering Committee in forming the regional innovation strategy. Below are the five strategic objectives of the Innovation Strategy: To mobilize and support development of innovation potential and innovation skills of towns and villages in Nitra region and its citizens. To focus on development of human potential, to pursue creativity and innovation. To create an optimal environment for innovative people, for creative life, for creative and innovative business making. To establish infrastructure of regional innovation and education incubation network, covering the whole Nitra self-governing region. By use of innovation potential and establishment of own innovation base to provide a sustainable competitiveness of wide business sphere in short term and long term future. Source: European Community – Slovakia. Nitra self-governing region: Regional Innovation Strategy 2004. 42 THE WORLD BANK June 2011 6. Stage 2: Regional Innovation System Assessment This chapter describes the process for collecting data and analyzing the performance of regional innovation systems. 6.1. The Role of Analysis in the Innovation Action Plan The first few months of the regional innovation action plan project can be used to understand where the region is now in qualitative and quantitative terms, benchmarked towards comparable regions in Russia and abroad. Later on, progress can be measured according to the deviations from this initial condition. In that sense the priorities, strategies and projects emerging from comprehensive research, analysis and discussion in the region. The question of whether they all have to be measurable is to be addressed by policymakers. The analysis of the region should be credible and accepted by key stakeholders. This implies that relevant stakeholders must be involved in the analysis and the interpretation of the analysis. Results must be understood and broadly communicated to all stakeholders. Without agreeing on the interpretation of the results it will be difficult to convince stakeholders to support the strategy and a shared vision will not be achievable. A regional innovation strategy should then start with a summary of the analysis of the innovation assessment, highlighting the areas that the strategy will focus on. These must be areas in which the the stakeholders involved in developing the strategy can really have an impact, not those which are affected by Federal Government decisions or market forces. An effective methodology is to systematically link the actions of the strategy to the strengths, weaknesses, opportunities and threats presented in the summary of the analysis. 6.2. Defining the Data Collection Needs Types of indicators The design of a regional innovation strategy and action plan should be based on a reliable (recent) and comprehensive survey of actors and organizations involved in the supply of technology, innovation services (interfaces and finance organizations) and the potential clients (the demand) of these services, namely companies. One of the key outputs from these activities is the identification of the “gaps� between the technology and innovation 43 THE WORLD BANK June 2011 demand and offer. The identification of these gaps helps determine the nature of the action programs that shall be developed as part of the regional innovation strategy and action plan. Indicators provide information that enables to see trends and interconnections between different factors in complex socio-economic setting. Information is gathered from four main sources: public data, reports, surveys, and interviews. The innovation assessment framework can be built around three sets of indicators: 1. Contextual indicators – describing the broad context for innovation processes, with particular reference to those assets that give rise to innovative behavior and which are outside the specific remit and intended area of influence of the regional innovation action plan. Enabling environment, such as the legal and tax environment, the national and international context (national level indicator). Asset indicators including the human, financial, physical, and institutional capital residing in a country or region. The impact of these factors on regional dynamics has as much to do with their quantity as their quality and how well they are used (regional and national level indicators). Micro-economic and relational fundamentals, that of the efficiency and dynamics of the stakeholders and knowledge networks (regional and national level indicators). 2. Program indicators – measuring the resources, inputs, activities, outputs and of the regional innovation action plan. They answer the question “how well is the region implementing the measures outlined in the region’s innovation policy? Program indicators can include: Baseline data – describing the current trends or levels in selected program indicators against which to measure progress (usually outputs). Targets – describing the intended levels on selected indicators of inputs, outputs, to be achieved at specified future times. 3. Impact indicators – answer the question “did the measures outlined in the region’s innovation policy lead to the desired outcomes?� These indicators should comply with the following criteria: Relevant to the outcomes a regional innovation action plan is aiming to achieve (e.g. job creation, increased productivity, growth in exports, company creation). Well-defined - with a clear, unambiguous definition so that data will be collected consistently, and the measure is easy to understand and use. 44 THE WORLD BANK June 2011 Avoid perverse incentives - not encourage unwanted or wasteful behavior. Timely, producing data regularly enough to track progress, and quickly enough for the data to still be useful. Additionally, regional innovation strategy and action plan indicators should comply with the following criteria: Relevance (especially political) to the outcomes a RIS is aiming to achieve (e.g. job creation, increased productivity, growth in exports, company creation, etc.). Accuracy: Closeness of indicators to the exact or true policy / impact that the indicators were intended to measure. Timeliness and punctuality. Punctuality refers to the time lag between the release date of data and the target date when it should have been delivered Accessibility and clarity. Well-defined - with a clear, unambiguous definition so that data will be collected consistently, and the measure is easy to understand and use. Comparability across countries and regions over time. Timely, producing data regularly enough to track progress, and quickly enough for the data to still be useful. Coherence. Coherence of indicators – i.e. their adequacy to be reliably combined in different ways and for various uses. The process of data collection and the analysis may be conducted according to the following methodological framework comprised of two stages: Data Assessment Stage and Data Collection and Analysis Stage. Data Assessment Stage The first step is the identification of data requirements and an assessment of data availability and quality. The following approach may be used: Data that is relevant and reliable should be considered for the analysis. Data that is relevant but unreliable or uncertain should not be taken into account. Data that is essential but lacking could be collected through customized surveys and case studies. Data that is irrelevant and unreliable should not be used. 45 THE WORLD BANK June 2011 In general, at the end of the data assessment stage the following information is gathered: data availability, quality, data collection requirements, data gaps that cannot be addressed by the time and budget resources. Data Collection and Analysis Stage Once data gaps are identified, surveys, interviews and case studies can be undertaken to complement missing statistics. Once statistics is complete, the next step is data analysis. It is recommended that it both stages – data gap assessment as well as data collection and analysis, mixed teams of international, national experts and regional consultants with the support of regional administration staff are engaged. This ensures that the regional capacity is built up and guarantees the sustainability and quality of the approach. 6.3. Identifying and Mobilizing Stakeholders The principal regional action plan stakeholders to involve in the data gathering exercise depends on regional profiles and regional innovation objectives (Table 4). For instance, agricultural and declining industrial regions will not focus their data gathering on research and innovation but on traditional industries willing to integrate innovation in their production process. 46 THE WORLD BANK June 2011 Table 4: Main regional innovation stakeholders to involve in data gathering Profile Productive sector Knowledge Support and Policymakers demand providers intermediary organizations Metropolitan High-value service Research institutes, Technology transfer Regional and local regions firms, technology- universities, private centers, specialized authorities based firms, sector laboratories consultancies, innovative start-ups, venture and seed foreign investors capital organizations, banks, innovation centers, science and technology parks Tertiary Technology-based Research institutes, Technology transfer Regional and local growth firms, innovative universities centers, specialized authorities potential start-ups consultancies, regions venture and seed capital organizations, innovation centers, science and technology parks Industrial Large firms, SMEs, Training providers, Chambers of Regional and local regions foreign investors universities, quality commerce, authorities associations specialized consultancies, business centers, service companies Declining Large firms, SMEs Training providers, Chambers of Regional and local industrial universities commerce, authorities regions specialized consultancies, business centers, service companies Agricultural Traditional SMEs Training providers, Chambers of Regional and local regions testing and commerce authorities certification bodies 47 THE WORLD BANK June 2011 6.4. The Enabling Environment for Innovation Possible indicators Composite indicators • Access to finance • Competitive environment • Starting a new business • Trading across borders • Management time spent dealing with regulations A regional business environment assessment An enabling business environment assessment can be the basis for strengthening a region’s competitive position with respect to labor and investors. An enabling business environment can promote investments in innovative projects by strengthening incentives and decreasing risks for businesses. It can also help bring in foreign direct investment, reduce transaction costs and open the path for greater access to finance, all of which encourage new business development. International comparisons indicate that Russia’s business environment is more restrictive than in most high-income benchmark countries.18 SMEs and start-ups are particularly impacted by a restrictive business environment. Many of these firms face high barriers to entry and an often opaque regulatory environment, reducing their propensity to innovate. In 2003, 22 percent of Russian SMEs cited incomplete and misleading legislation as a factor hindering innovative activity and 46 percent cited underdeveloped infrastructure in the area of technology commercialization. 19 Russian regions are heterogeneous with respect to federal budget funding, tax and regulatory policy, and enforcement of federal statutes and laws, all of which influence firm behavior.20 The World Bank’s Doing Business in Russia 2009 report shows a rather wide disparity in the business environment across Russia’s regions on issues such as starting a business or trading across borders. 21 18 Desai, Raj M. and Itzhak Goldberg, Eds. Can Russia Compete? Brookings Institute. Washington, DC. 2008. 19 Fostering Public-Private partnerships for Innovation in Russia. OECD Report. 2005 20 Safavian, Mahnaz s., Douglas H. Graham and Glaudio Gonzalez-Vega. “The Legal and Regulatory Environment for Micro and Small Enterprises in Russia: Survey Evidence form Samara.� Economics and Sociology Occasional Paper No. 2566 21 Doing Business in Russia 2009. The World Bank and the International Finance Corporation. 2009. 48 THE WORLD BANK June 2011 Conducting a Regional Business Environment Assessment Regional assessments can focus on regulatory elements which are particular to the region and can take into account unique attributes of the region not captured in a national assessment. The regional business environment can be assessed from two perspectives, the firm-level perspective (demand-side) and the legislative environment (supply-side). It is important that business environment assessors not rely solely on external experts to analyze the business environment legislation without involving the business community, as they provide a vital perspective as to the real impact of legislation. Firm-level Survey Business environment surveys are commonly utilized as tools in assessing the regulatory and administrative environment. Widely-conducted assessments such as the Business Environment and Enterprise Performance Survey (BEEPS), Doing Business Report and Global Competitiveness Index have proven to be effective instruments to provide information on the Business environment, each tracking a slightly different set of business environment indicators (Appendix). Several of these international assessments also collect data on a regional level in Russia, such as Doing Business and the BEEPS, and can be used by regional policy makers to benchmark performance to that of other regions. Policy makers have also seen value in creating their own business climate assessments to complement international business environment surveys, particularly at the regional level. Where not existing data is available a survey can be used to capture both the perceptions of businesses. A survey can provide a clear understanding of the needs and capacities of regional enterprises in terms of development and innovation support and will lead to an understanding of the factors hindering enterprises’ business activities and development. The survey can focus on questions that indicate bottlenecks to innovative activity as well as determinants of international competitiveness (Table 5). Existing global business environment surveys can be utilized to determine specific areas and questions to be covered in the regional business environment survey. Successful surveys are generally those conducted by specialists in economic regulation who are independent from the government and have no stake in the outcome of the evaluation. Such surveys must also guarantee confidentiality of data in order to facilitate the collection of reliable information. 49 THE WORLD BANK June 2011 Table 5: Examples of business environment areas and indicators Business Environment Area Sample Indicator Access to finance What proportion of your firm’s working capital and new fixed investment has been financed from each of the following sources, over the last year: Internal funds, borrowing from local private commercial banks, borrowing from state-owned banks, loans from friends, trade credits from customers or suppliers? Starting a new business List the number of procedures involved in registering a new business. What was the capital requirement as a percent of annual income per capita required to start your business? Regulatory Environment What percent of senior management’s time over the last year was spent in dealing with public officials about the application and interpretation of laws and regulations and to get or to maintain access to public services? Competitive environment How many competitors in the national market do you currently face for your main product line or service? Labor Force What percentage of your current permanent, full-time workers are managers, professionals, skilled workers, unskilled workers or non-production workers? Additional assessments Regions with particularly low levels of entrepreneurship, inward investment and exports can conduct a full Doing Business or BEEPS assessment, including all the indicators found in the global survey. Regulatory Framework Assessment For completeness, an independent assessment of the region’s regulatory infrastructure can accompany the firm-level analysis of the business environment. The scope of the assessment should not be limited only to the primarily laws but should also include subordinate regulations, such as presidential decrees, directives or guidelines that often made to implement the primary laws. A review of the complete body of legislation will provide a fully picture of the business environment infrastructure. 50 THE WORLD BANK June 2011 Laws and regulations governing the business environment should be documented and assessed by experts as to their effects on competition and market openness. Linkages or inconsistencies between regulations should be noted, as well as those laws and which are particularly restrictive and the actors primarily impacted by the regulation. Analysis of Results The data and findings from both the supply and demand-side analyses can be evaluated to determine linkages between regulations and business environment burdens experienced by enterprises. The data gathered can be used to map strengths and weakness of the business environment in the region. In addition, understanding the region’s positioning in an international comparison will be important for future policy formation, helping policy makers identify structurally similar regions where lessons could be learned. As such, it is useful to benchmark against other regions and countries. 6.5. The Innovation Needs of the Productive Sector Possible indicators • Revenue, employment or profit Enterprise survey indicators on: growth by sector • Innovation barriers and needs • Non-fuel exports as a share of • Collaboration in innovation GRP • Sources of innovation • Share of foreign-controlled enterprises by sector • Investments in technology, skills and innovation • New firms per thousand working • International orientation age population 6.5.1. Overall Productive Sector Potential A region’s overall economic performance using readily available regional statistics can provide a bird’s eye view of the needs of the productive sector. Revenue, profit and employment growth rates can help identify sectors that are taking the region forward and those that are lagging behind, and seek to understand underlying factors. Unlike large countries, regions can also more easily sift through existing economic data reported at the firm level to identify fast-growing companies. The presence of fast- growing companies can be a signal of either a newly-found regional competitive advantage 51 THE WORLD BANK June 2011 or of a growing market. These in turn may suggest opportunities for economic diversification. Exporting also has its advantages, particularly in manufacturing. It creates pressures on companies to innovate and upgrade their products, since they must compete globally with a wide range of countries, many of which have lower factor costs or superior technology. Exporting is also a known channel for knowledge transfer. It enables firms to learn from global supply chains and buyers on how to meet international quality standards. Regions with low shares of exports in their economies may seek to address underlying causes. Innovation and entrepreneurship are closely linked. According to Schumpeter, entrepreneurs distort the market equilibrium by introducing new combinations of products and markets which drive out less productive firms and advance the product frontier. One aspect of entrepreneurship is the rate of new firm formation in the formal sector. Particularly for non-agricultural regions, foreign direct investment (FDI) can act as a channel of technology transfer when investors introduce international practices in product, process and management techniques from their home countries to their domestic subsidiary. Spillovers, through backward and forward linkages, imitation and worker mobility can transmit technology to domestically-owned firms. An understanding of the level of FDI in the economy and its concentration in knowledge-intensive sectors can provide regions insights on opportunities to leverage or of measures to improve attractiveness to FDI. 6.5.2. Enterprise Innovation Survey The analysis of enterprise needs should not simply be considered as a study, but should also be used as a tool for dialogue and strategy development. An enterprise survey can serve this double function. Regional innovation task force members in charge of collecting data should be capable of understanding explicit needs on the basis of interviews and data as well as latent needs that are not expressed (e.g. almost all entrepreneurs will start stating they lack easily available finance while not acknowledging the fact they should better organize their industrial and market processes). Interviewers should be able to report and summarize qualitative 52 THE WORLD BANK June 2011 information as well as collect quantitative information. Interviewers require a strong ability to create a trustful and transparent relationship with the interviewees. A sound survey methodology will help to ward off any criticisms of the survey or survey results on the basis of methodological flaws. Prior to the initiation of data gathering, there are several elements which must be considered, such as defining the survey priorities, target groups and timeframe (Box 5). Once the target group has been determined, a large enough sample size should be obtained, as well as one that is representative of the target group in firm sizes, sectors, location, ownership and technological intensity. The target group can be based on the objectives of the innovation strategy, the profile of the region and the identified strengths and weaknesses of the region from previous assessments. One approach for selecting the sample is to organize a workshop with a limited number of intermediaries to develop an initial segmentation, followed by piloting on randomly chosen companies. The following factors should be taken into account while structuring the survey: Geographical Spread - The sample should avoid any sub-regional bias not supported by the general distribution of firms in the region. Size of the Firm - A representative sample of firms is required. Some bias towards larger firms may be required. Sector - A representative sample is desirable, although some bias towards manufacturing sectors and the larger firms in the service sector operating in markets outside the region may be required. Random samples will generate large numbers of “local� service sector firms whose future will be less critical to the region. However, regional innovation strategies do not necessarily need to be restricted to the manufacturing sector and may well include analysis regarding the tertiary sector, business services in particular, and the primary sector depending on the characteristics of the regional productive tissue and the strategic choices made by the relevant economic actors carrying out the exercise. Technological Orientation - It is necessary to differentiate between two kinds of firms in the region: firms that are ready to innovate and the firms which are not. The first category of firms is aware of the possibilities innovation has to offer and they are ready to act. These companies may be the target audience for technology commercialization measures in regions with important knowledge assets. The second category of firms includes companies that are not yet aware of the importance of innovation for their own firm and that are not able to manage innovation effectively. Ownership and Control - This should include firms owned and controlled outside of the region, by both the state and the private sector. 53 THE WORLD BANK June 2011 Likelihood of co-operation with the exercise. Box 5: Example of data gathering exercise in EU regional innovation strategies. “Both Strathclyde, UK and Calabria, Italy regional innovation strategies used sample face-to- face interviews to assess the needs and characteristics of regional firms. In both cases companies were identified through local economic development organizations. The sampling framework was based upon geographical location and industrial sector. Both Strathclyde and Calabria regional innovation strategies also targeted the electronics sector and over-sampled firms in this sector.� Source: Innovating Regions in Europe (2002) The analysis phase: lessons from 7 years’ experience. The regional innovation taskforce can work with regional development agencies to develop an enterprise innovation database. Within a company the preferred contact is at the director/owner level or the senior manager level. Issues to be investigated include: Technology areas within which regional firms operate. Attitudes of firm’s managers towards innovation (including what is meant by innovation in this specific environment). Extent and nature of inter-firm collaboration and networks. Extent of collaboration with regional innovation institutions. Level of skills and education of the firms’ managers and workforce. Investments in training, R&D, capital equipment and ICT. Supply chain relationship of the firm. Access to finance. Sources of innovation. 54 THE WORLD BANK June 2011 Box 6: Most commonly identified unsatisfied needs in the EU For a third of the Regional Innovation Strategies : Lack of financing of innovation and risk-capital. Lack of skilled staff in firms dealing with innovation, but it is also acknowledged that SMEs do not make use of the knowledge of their staff. For 20 percent of the Regional Innovation and Technology Transfer Strategies and Infrastructures: Lack of marketing skills. Lack of managerial skills. Low level of innovative start-ups. Low level of innovation in firms. Low level of co-operation between firms, even though it is acknowledged that innovation often comes from clients and suppliers. Sub-contracting firms have often a low level of innovation. To a lesser extent : Negative attitude in firms towards change and innovation. Need for technological information/intelligence. Low level of openness and internationalization in firms. Difficulty of firms in expressing needs for innovation. Need to review intellectual property rights. Low contribution of SMEs to the design of R&D programs and policies. Lack of relevant technical support in specific sectors. Source: Charles, D., Nauwelaers, C., Mouton, B. and Bradley, D. (2000) Assessment Of The Regional Innovation And Technology Transfer Strategies And Infrastructures (RITTS) Scheme - Final Evaluation report. An important idea to keep in mind is that firms will only participate actively and fairly if they see a clear and concrete benefit for themselves in the regional innovation strategy project. Different methods can be used to involve them in a regional innovation strategy exercise: organization of workshops, organization of sectoral meetings, Involvement of large companies (especially if a supply-chain relationship exists), Private sector funding of RIS exercise through pilot projects, etc. 55 THE WORLD BANK June 2011 Intermediaries’ tacit knowledge of companies can also be tapped into. Using such indirect information on enterprises, however, needs at least validation, since several previous experiences have shown that intermediaries often do not know their customers very well. They often have difficulties in aggregating information they might have on companies. Moreover, letting them handle the selection of the sample of companies to be interviewed might lead you to biased results. In-depth understanding of enterprise needs in regions with active productive sectors More in-depth and specialized surveys can be used to assess the needs of SMEs. Two existing survey instruments that allow enterprises to be benchmarked against other SMEs enterprises across Europe and in some other countries, are the European Union-sponsored IMP3rove innovation management assessment methodology and the EFQM excellence model. Both, are more costly to implement. They taking several hours for each interviewed company, and interviews must be delivered by trained and experienced innovation management or quality management experts. Translating the survey results into a meaningful analysis of SME needs and corresponding policy options requires particular experience as well. These instruments should hence be used by regions that have the required resources for such an exercise and are specifically targeting improvements in SME innovation. 6.5.3. Entrepreneurship Survey Appropriate regional profiles Regions with appropriate profiles (see chapter 5) can prioritize entrepreneurship as a catalyst for economic growth and national competitiveness. Entrepreneurs create jobs, drive and shape innovation, speeding up structural changes in the economy and introducing new competition. In regions for which new firms formation is a strategic objective, a population survey can be used to identify barriers to entrepreneurship. One tool with available global benchmarks is the Global Entrepreneurship Monitor (GEM) Adult Population Survey22 which serves three main objectives: 22 In the GEM, the survey sample consists of at least 2000 adults in each country using best practice social survey techniques. 56 THE WORLD BANK June 2011 To measure differences in entrepreneurial attitudes, activity and aspirations among economies. To uncover factors determining the nature and level of national entrepreneurial activity. To identify policy implications for enhancing entrepreneurship in an economy. According to the GEM 2010 Global Report, Russia’s results in the entrepreneurial attitudes and activities are well below the average of its country profile group. 6.6. Knowledge Assets Possible indicators • Students in science and • Number of international patents per capita or engineering as a share of the per GRP. population. • Ratio of international patents to Russian • R&D expenditures as a share of patents. GRP. • Co-patenting with other countries. • Share of R&D expenditures by • Number of patents standardized by R&D industry. expenditures. • Number of Russian patents per capita or per GRP. Knowledge “assets� include the workforce, universities, public research organizations and private R&D centers located in the region. 6.6.1. Regional investment in R&D Appropriate regional profiles R&D investments are important for both innovation and technology absorption. R&D is a basic input for innovation since it leads to new or improved products but it is also vital to developing technological absorptive capacities in firms.23 R&D investments in the private sector responds to market incentives and are more likely to lead to useful innovations than public sector-funded R&D, although the two are complementary. High income economies 23 Cohen and Levinthal (1990) 57 THE WORLD BANK June 2011 generally spend around 2 to 3 percent of their GDP on R&D. Countries typically invest more in R&D as they develop their industrial base. Some mature economic sectors offer more opportunities for R&D than others. R&D analyses should consider for sectoral biases when comparing expenditures across regions and countries. Moreover, many types of innovation do not involve formal R&D, including service innovation. 6.6.2. Regional patents as a window on R&D-based innovation Appropriate regional profiles Patents are a useful general measure of innovation since they are used by firms and research institutions to protect their profits from invention. Russian patent applications are a measure of inventions which are new to the national market. They cannot be compared to national patents from other countries since they imply different levels of innovation, but they can be compared within Russia. International patents are comparable across countries and this data is publicly available on a geographic basis through various websites.24 The ratio of Russian to international patents, and the level of co-patenting with international partners, can provide insight on the global-orientation of the regional innovation system. More insular patenting activity is likely to reflect difficulties in tapping external knowledge and leverage global market opportunities. The number of patents produced per unit of R&D expenditures is a possible measure of the efficiency of the innovation system at generating inventions. Low levels of patenting activity are not necessarily a sign of low level of innovation, it is also a reflection of the type of innovative activity in the region. Low patenting activity could indicate that firms and research institutions are engaged in technological catch-up rather than in pushing the technological frontier. It may also be a reflection of economic structures where firms compete more through process innovations,25 which can be protected by secrecy, or through low labor costs and flexibility of production. Regions where agriculture or mining account for most of the economy cannot expect to significantly increase patenting activity without restructuring their economy. 24 USPTO, EPO and WIPO 25 rather than product innovation 58 THE WORLD BANK June 2011 6.6.3. Workforce Science and engineering students, along with business students, constitute core inputs to innovation. Highly innovative rapidly-growing economies such as Singapore and the Republic of Korea have fostered large science and engineering student populations as part of their growth strategies. Ensuring the right mix and quality of graduates is also necessary. Post- graduate students not only acquire critical skills for engineering and research activities, but act as a low-cost and flexible pool of labor for universities and research institutes to draw from as they engage industry. Regions can gauge whether they have the required human capital inputs for innovation through education statistics that are widely available, on science, engineering and business student enrolment as a share of the student population and the regional population, as we as the number of graduate students. Understanding human capital mismatch in lagging regions More in-depth education and labor force studies are required to assess the quality of education and the match between the supply of students and the demand in the labor market. Finally, the analysis should make a difference between R&D workforce in the productive sector and in the government/academic sector. R&D conducted in the business sector is more likely to be successfully commercialized since its incentive structures are more profit- oriented and businesses tend to have more practical marketing and production experience than research institutions. 6.6.4. Knowledge institutions The analysis should briefly list all of the units and structures available (and the technology/services they provide) within the region, categorize them and then identify their capabilities. The following basic information can be collected from each knowledge “producer� on an annual basis: R&D expenditure. Number of researchers and scientists. Number of contracts with the government sector. Number of contracts with the productive sector. Number of national patents. Number of international patents. 59 THE WORLD BANK June 2011 Number of licenses. Royalties. Number of spin –offs. To be comparable across institutions, these data need to be standardized by R&D budget or by number of researchers. Assessing scientific potential in regions with important knowledge assets Regions with an important base of knowledge institutions can go further to assess their scientific potential. This can be achieved through international publication and citation counts as a function of the annual R&D budget or of the number of researchers. This requires using databases such as Web of Knowledge from Thomson Reuters. However, this fact finding aspect is not enough to define the ability of these providers to support innovation locally. This requires measuring intangible factors that include the willingness and ability of the heads of departments to collaborate with companies and/or to generate new companies based on the knowledge created in each laboratory. This dimension is most often under-evaluated while it is the main driver for changes and success in a RIS. A further understanding of ability and willingness can be done through a combination of interviews and surveys of knowledge institution management and researchers. Some of these institutions being very sensitive, reliance upon private and external assessments may encourage more openness and cooperation. 6.7. Public Support Programs and Innovation Intermediaries Possible indicators - Needs of enterprises - Outputs relative to inputs - Services offered by programs and intermediates The organizations for transfer and diffusion of knowledge are of varied nature and purpose. They are involved in transferring technology of itself and include public or private centers for technology transfer, incubators, technopark management teams, the information or advice needed for innovation (patent consultants, technology consultants, strategy consultants, technological watch etc.), as well as dissemination of knowledge and technologies. 60 THE WORLD BANK June 2011 The issues to be addressed in this section are the availability, relevance and effectiveness of these institutions. Questions to be asked include: Who does what in innovation and support activities in the region? What resources (financial and human) are involved in support activities? What has been the achievement of the support activity? How well does the supply correspond to identified/expressed needs in the Region (in particular of SMEs)? What is the level of investment in innovation support activities in the region? (by industry; by government; by research institute/universities) How many people are directly employed/involved in support activities? At what technical or managerial level? What characteristics of the regional economy explain these levels of supply? Are there structural problems which need to be taken into account? (e.g. predominance of low technology sectors; lack of government research centers, etc.)? Several analytical tools can be used, including: Surveys of potential beneficiaries to identify their stated needs. Expert interviews with potential beneficiaries to identify their unstated needs. Survey of support program and intermediary institution head managers to identify their service offerings. Expert interviews with support programs and intermediary institution staff to understand their technical capacity and the depth of their service offerings. Surveys of support programs and intermediary institution to understand the relationship between their inputs and outputs. Surveys of support programs and intermediary institution beneficiaries/clients to understand the perceived impact of the program on their performance. Expert interviews with beneficiaries/clients to understand the unstated impact of the program. 61 THE WORLD BANK June 2011 Experienced regional innovation assessment teams with access to detailed institutional information from public support organizations can use comprehensive analytical tools that relate policy objectives to innovation impact, via public programs to create snapshots of the performance of public innovation system. These include tools, such as IMPACTSCAN, developed under an EU program for European regions (Box 7).26 26 www. Impactscan.net 62 THE WORLD BANK June 2011 Box 7: An example of a comprehensive policy monitoring and impact assessment tool. IMPACTSCAN is an MS-Excel -based monitoring and impact assessment tool which allows regional authorities to graphically visualize and benchmark the impact of public support to innovation. IMPACTSCAN includes two elements: A matrix model to quantify and analyze regional innovation policy. Context setting information to describe regional environment for innovation. The matrix system has two main parts: Matrixes 1 and 2: provide analyses of public budget for regional innovation policies, for regional intermediaries and for innovation support services. Matrix 3: assesses the impact of those services on factors enabling innovation in firms, based on collections of firms’ views on these services. the context setting part, which gathers data to describe regional environments in which the innovation support systems operate. This description is needed in order to use the international benchmarking possibility of the tool. The context setting part includes a mix of qualitative and quantitative indicators reflecting key dimensions of the regional context: size and density; the general position of the region in the knowledge economy; regional innovation policy governance characteristics; innovation support; and the demand side of innovation. Regional spider diagrams indicate strengths and weaknesses of regions compared to other regions or to a mean value. 63 THE WORLD BANK June 2011 Bar charts illustrate the allocation of regional innovation budget with respect to policy objectives, service types or intermediaries categories as well as a combination of them. Source: IMPACTSCAN, A policy intelligence tool for regional innovation policy - USERS GUIDE Benchmarking programs and institutions against international good practices can provide an understanding of the root cause of performance or relevance gaps identified during surveys and interviews. This type of benchmarking is more qualitative than quantitative in nature, and hence requires teams with extensive experience with both national and international innovation institutions. Box 8 provides an example of an assessment methodology for public venture capital funds. Similar methodologies can be developed for other institutions. 64 THE WORLD BANK June 2011 Box 8: Example of a methodology for “benchmarking “public venture capital funds against good practices To be effective, a public venture fund should comply with the following practices: Addressing non-monetary barriers to entrepreneurship: Non-monetary barriers include both regulatory hurdles and institutional and infrastructural measures, such as education, services, technology transfer, networking and public awareness. Leveraging the local academic scientific and research base: Technology transfer offices are critical to entrepreneurship growth, in particular when they also involve in educating researchers in entrepreneurship and provide business advice, in particular connections to corporations. Conformity with global standards: With exception of China, global investors are stimulated positively by presence of common regulatory and tax framework (in particular tax-exempt structures, partnerships and public securities markets). Direction of the program determined by the market: The principles that provide the best results include - Careful and prolonged selection of firms and funds. - Avoidance of competition with independent investors. - Market-level investment standards. - Co-financing from private sources wherever possible. - Leveraging local industries, existing competitive advantages and investors. - Broad and flexible investment focus (e.g. funding corporate spinouts and corporate funds). - Non-monetary intervention to raise investability of local companies (strategy advisory, connections to partners, financial planning etc.). - Public evaluation criteria similar to ones used by private investors. Limited amount of program engineering: Limits on business location, types of allowed securities, partners, and corporate reorganizations, as well as micromanagement of program participants have proven particularly detrimental to long-term success. Long-term result orientation: 5 to 10 year term is recommended before first principal critical re-evaluation of the program. Proper financial size of the initiative: Financial commitment to the initiative must be balanced against the local opportunities; excessive allocations create waste and inefficiencies, while funding that is too small (and in particular lack of reserves to continue funding longer than originally expected) fails to produce mature results. Access to global connections: While local hiring and management may be 65 THE WORLD BANK June 2011 encouraged, the global nature of entrepreneurship requires maintaining business ties outside the geography where the program operates. Institutionalization of careful evaluation of initiatives: The principles that provide the best results include - Collecting and publicizing accurate data on the extent of entrepreneurship growth and venture investment activity. - Comparing companies and venture funds supported under the program to their peers to identify the difference the program makes. - Tracking the performance of non-participating fund and companies, including investment returns, financial results and job growth. Expectations of program creativity and flexibility: A non-performing program must be reformed or shut down, despite the vested interest in its continuation. Acceptance of agency problems as inevitable: Procedural independence, firewall between public officials and program administrators and proper assessment of the program are required to prevent political influence on investment processes. Emphasis on education of investors and entrepreneurs: The principles that provide the best results include - Building the understanding of outsiders about the local market potential. - Educating entrepreneurs on working with investors. - Educating the public sector officials about how the venture investments and entrepreneurship works. Source: Lerner, Joshua. Boulevard of Broken Dreams: why public efforts to boost entrepreneurship have failed and what to do about it. Princeton University Press, 2009. 6.8. Regional Policy Development and Implementation Appropriate regional profiles Successful policy implementation relies on transparent governance of the innovation policy process. Table 6 presents the way how to analyze the status of innovation policy governance in the region. One important aspect the analysis should focus on is the coordination of the policy development process among the various stakeholders of the innovation system. Effective policies for innovation call for vertical and horizontal coherence in policy development and program delivery. 66 THE WORLD BANK June 2011 Table 6: Defining the innovation system governance status Examples of questions Field of the analysis Map out and understand the What is the relationships between them (in terms of hierarchy, roles of the regional actors budget)? What is the flow of funding? Are there duplications in involved in innovation policy functions between institutions and policies, gaps, contradictions? and its implementation (ministries, agencies, research How much is directed to which organization? Is this proportional institutions, etc). to their assigned tasks? Is there fragmentation in policy-making and implementation? What are the consequences of this? How much does each institution really control? Are some policy- making bodies also acting as implementing bodies? How are the bodies responsible for policy implementation accountable to policymakers? Compare the results to other countries and regions. Map out understand the roles What are their key points? What is their function? Who is of the different policy involved in writing them and their approval? Who is in charge of documents: strategies, their implementation? legislation, regulations. Analyze innovation programs Do they reflect the contents of the strategies and policies implemented in the region. implemented in the region? What are the differences? Are there differences between the strategy objectives and actual outcomes? If so, what these differences? Are the strategies/policies realistic? Do they serve the regions’ objectives? Why or why not? Investigate existing legislation Does innovation legislation exist? Is it clear? Is it supportive to conducive to innovation. R&D commercialization? Can it be strengthened? Analyze coordination with How well is the policy coordinated with the federal level? Is there federal bodies. a regional monitoring and evaluation framework? Does it work well? Why or why not? Regional Innovation policies with strong linkages between central and sub-national governments are important to support coordination of innovation policy. However, multi- level governance coordination also creates much added complexity in implementing regional innovation policy. 67 THE WORLD BANK June 2011 A number of areas pose challenges for governments coordinating innovation policy, including: Information sharing across levels of government to inform each other’s policy; Coordination of financial resources; Administrative boundaries at the regional and city/local level; Policy silos at supranational/national level which undermine efforts to coordinate at the sub-national level. A variety of policy coordination tools can help regional governments successfully implement regional innovation policies. Policy coordination tools include: consultation process, regional dialogue, agencies, agreements and contracts, project co-financing and involvement of national territorial representative. Trends witnessed in OECD countries indicate that the same coordination mechanisms can apply to the regional and national level, as there is no clear relationship between the type of institutional structure (federal, unitary with elected regions or unitary with non-elected regions) and the type or number of multi-level coordination tools used. Box 8 provides more detail on innovation policy coordination mechanisms utilized in the OECD. 68 THE WORLD BANK June 2011 Box 9: Innovation policy coordination in the OECD OECD countries utilize a variety of tools for policy coordination, including both formalized and not formalized mechanisms. With regard to vertical coordination across levels of government, one lesson that emerges most clearly is that regular dialogue and consultation are considered to be the most effective tools for coordination. In fact, most countries report using four or more tools. Contracts are a commonly used instrument for coordination of regional development policy among OECD countries. However, a contract approach requires the definition of a clear target for policy action as well as a clear path to achieve that target. This can be a challenge for coordination of regional innovation strategies since experimentation and failure are an important part of the innovation strategy development process. Figure 9: Most important OECD policy coordination tools Notes: Twenty-four reporting countries (20 OECD member countries, 4 non-member countries), one country reported two top tools. Regarding horizontal coordination, collaboration of public and private stakeholders is needed to take governance beyond government. Inter-departmental commissions, high-level strategic councils and regional innovation agencies are among the tools used to achieve a multi-actor and multi-sector approach. For instance, the government of Catalonia (Spain) has merged ministries to create the Department of Innovation, Universities and Enterprise. Castile and Leon (Spain) established two bodies: the Coordination Commission for Science and Technology that includes representatives of all relevant regional government departments (8 of the 12) and the Advisory Council of Science and Technology that encompasses leading innovation system actors, both public and private, as a forum to work together in strategy design and development. Source: OECD (2011) Regions And Innovation Policy; OECD (2010) Regional Development Policies In OECD Countries 69 THE WORLD BANK June 2011 6.9. Cluster Analysis Possible indicators - Clusters location - Cluster needs - Cluster internal interactions - Cluster support Appropriate regional profiles 6.9.1. What are clusters ? A common element of most cluster definitions is the aspect of a concentration of one or more sectors within a given region as well as the emphasis on networking and cooperation between companies and institutions. Using the definition of Michael Porter27 clusters are “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in particular fields that compete but also cooperate�. When present, active clusters leave traces that can be statistically captured, e.g. in terms of specialization or concentration of employment within a particular sector. 6.9.2. Clusters policy Cluster policies can be defined as specific governmental efforts to support clusters. Cluster policies can be understood as organized efforts to increase growth and competitiveness of clusters within a region, involving cluster firms, government and the research community. They recognize that promoting greater linkages between actors and pooling assets can be more effective than funding single research projects and subsidizing large firms. Table 7 presents policy trends supporting clusters and regional innovation systems. 27 Porter, E. M. (1998) The Competitive Advantage of Nations 70 THE WORLD BANK June 2011 Table 7: Policy trends supporting clusters and regional innovation systems Policy Old New Approach Cluster Program Focus Stream Approach Regional Redistributi Building competitive - Target or often include lagging region policy on from regions by bringing - Focus on smaller firms as opposed to larger firms, leading to local actors and assets if not explicitly then de facto lagging together - Broad approach to sector and innovation targets regions - Emphasis on engagement of actors Science and Financing of Financing of - Usually a high-technology focus technology individual, collaborative research - Both take advantage of and reinforce spatial policy single-sec involving networks impacts of R&D investment with industry and links - Promote collaborative R&D instruments to with commercialization support commercialization - Include both large and small firms; can emphasize support for spin-offs and start-ups Industrial Subsidies to Supporting common Programs often adopt one of the following and firms; needs of firm groups approaches: enterprise national and technology - Target the drivers of national growth. policy champions absorption (especially - Support industries undergoing transitions and SMEs) shredding jobs - Help small firms overcome obstacles to technology absorption and growth - Create competitive advantages to attract inward investment and branding for exports Source: OECD Reviews of Regional Innovation Competitive (2007) Regional Clusters. NATIONAL POLICY APPROACHES. 6.9.3. Advantages of clusters Cluster development policies share a number of key objectives and characteristics. Among main features are: Promoting economic development and structural changes, often through enhancing (regional) innovation capacity. Improving business cooperation and networking, which may demand the stimulation of social processes. Linking firms to the (regional) technological infra-structures of education and R&D institutions. In the end, they mean fostering “regional innovation systems.� Public or semi-public organizations as mediators in encouraging inter-firm networks and joint projects. Especially in the early stage of cluster building, a third party often needs to take care of the flow of information, of the building of mutual trust between cluster members, of supporting the organization of business networks, etc. The main players in cluster development must be the firms that are involved. Only through their active engagement a cluster will strengthen and develop. 71 THE WORLD BANK June 2011 Both local and distant networks are often needed for successful cooperative projects, in particular for projects of innovation and product development when it is usually necessary to combine both local and non-local skills and competences in order to go beyond the limits of the region. 6.9.4. Cluster mapping Accurate information about the clusters in the region contributes to the successful innovation policy planning. Cluster mapping is a tool that can help identify the existing, growing, declining and emerging industry clusters in a given geographical area. It therefore offers the possibility to build cluster policies based on well-identified industrial strengths and weaknesses in a region. There are two different complementary approaches on how to map clusters: 1. Case studies that provide in-depth qualitative information made available through desk research and interviews with local experts. - Advantage: gathers information describing in some detail the essence of crucial cluster linkages, processes and interactions between innovation actors as well as other important factors for the emergence and working of a particular cluster. - Drawback: interviews are time-intensive to undertake and analyze. Individual anecdotal evidence is always case-specific, which makes it difficult to compare different case studies of clusters and which makes it difficult to draw conclusions. Therefore, the case study approach is often used to complement statistical analysis. 2. Quantitative techniques that rely on more sophisticated economic modeling and are based on statistical methods that aim to identify clusters indirectly through data such as employment and sectoral specialization. Network analysis goes one step further and helps identify how well clusters are functioning by measuring the degree and quality of interactions between firms through interviews. - Advantage: enables comparability between different countries and over time. The statistical data obtained by such an approach can be related to other statistical indicators, thus offering new insights into economic realities and dynamics by further correlation analysis. - Drawback: does not allow attributing the observed cluster performance to its underlying factors. 72 THE WORLD BANK June 2011 6.10. Data Collection Instruments Data collection implies gathering information to address indicators that have been identified earlier in the regional innovation action plan process. There are many methods available to gather information, and a wide variety of information sources. The selection of a method for collecting information must balance several concerns including: resources available, credibility, analysis and reporting resources, and the skills of evaluators. Observation protocols and guidelines for conducting loosely structured data collection and interviews should be prepared, and training and practice should be provided to data collectors in using both these tools. Moreover it is highly recommended that data collectors work in pairs when using flexible research techniques and discuss and interpret the data immediately after collecting it. Below are some issues to remember when choosing data collection methods. Need for training or expert assistance: Some information collection methods will require special skill on the part of the evaluator, or perhaps staff will need to be trained to assist with the regional innovation action plan implementation. Protocol needs: In many situations, the innovation assessment team will need to obtain appropriate permission or clearance to collect information from people or other sources. The team will have to allow time to work through the proper channels. Validity: Will the information collection methods you have designed produce information that measures what you say you are measuring? The team will need to be sure that the information collected is relevant to the evaluation questions. Various approaches have been adopted to generate information from data gathering. Most involve detailed surveys of individual firms using face-to-face interviews or self completion questionnaires. Face-to-face contacts are likely to be more effective in raising awareness and support for the regional innovation action plan process. In any case, the choice of tools depends on the outputs required. No single tool represents best practice. In fact, a mix of methodologies may produce the required results. Most data that is not collected from desk research will need to be collected through on-line or paper questionnaires, face-to-face interviews, workshops (Box 10) and for highly- experienced innovation assessment teams, technology audits. 73 THE WORLD BANK June 2011 Box 10: Different means can be used to involve enterprises in a regional innovation action plan exercise. “Organization of workshops: SMEs can be invited to a workshop for discussing the results of the study on their needs. The same can be done with organizations from the supply side. Organization of sectoral meetings: In the Castilla y Leon, Spain regional innovation strategies exercise; the sectoral meetings, two per each selected sectors, that took place were pointed out as an excellent opportunity to create a vision, exchange views in a focused environment and forge consensus.� Source: IRE : Management of a RIS project : lessons from 7 years’ experience On–line or paper questionnaires have an expected return rate of 10 to 15 percent. Short surveys improve response rates (e.g. 20 questions). The questionnaire should be tested with a few firms before sending it off. An acknowledged institution in the field of innovation (Regional Authority, Association of Entrepreneurs, etc.) can be an effective vehicle for distributing the questionnaire. An attached reference letter can be used to briefly introduce the regional innovation action plan project (as part of the project’s communication strategy). Attention to detail is vital (contact person, confidential treatment, pre-paid envelopes). The results obtained, since they are based on a large-scale database, allow easier comparison with other regions and an overall understanding of the usage of technology. The organization of face-to-face interviews for companies will take place after the completion and analysis of the on-line questionnaires and will usually comprise a letter being sent to potential interviewees explaining the project and the purpose of the interview followed by a telephone call to fix the meeting. In some cases the letter can be co-signed (Regional Development Agency and chamber of commerce representative or steering group member) to facilitate the organization of the interview process. The face-to-face interview time will be between 1 1/2 and 2 hours. The purpose of the face-to-face interviews is to develop a more detailed understanding of the company needs and support the construction of an innovation strategy to support SMEs and the priorities it should seek to address. It will also provide an insight into the current use and perception of the regional interface and technology resources and current innovation programs. 74 THE WORLD BANK June 2011 Using technology audits to understand assets In regions with important knowledge assets, a technology audit provides a snapshot of an organization’s technology infrastructure, and can be used to determine the commercial potential of an organization’s intellectual property by identifying strengths and weaknesses. It can also help gain a qualitative understanding of management attitudes and procedures towards technology commercialization. Conducting technology audits in companies as well as research institutions throughout the region can help policy makers identify regional scientific competences. Technology audits are not about evaluating scientific excellence of knowledge institutions, but about understanding how this knowledge can be mobilized for sustaining regional economic development. The main goals of technology audits are to: Inform policy-makers about the innovation assets of the region (existing and potential). Help scientists review their comparative position. Disseminate opportunities and competences to the national and international business community. Create links between scientists working in different technology areas. A range of tools can be used for technology audits. Self-assessment is typically not thought to be the most effective tools, as employees may be reluctant to fill out forms or may omit valuable details. Questionnaires and interviews often work well when interviewer(s) have an understanding of the region’s scientific and technical landscape as well as some external experience. Effective audits are often conducted by both an internal auditor with knowledge of the organization and an external subject matter expert. Prior to the audit, considerable background research should be done to have an understanding of the organization and which departments should be involved. Audits which focus on identifying the strengths and areas of expertise of scientific and technical staff instead of focusing on their weaknesses have typically been more successful. Audits should be conducted regularly to keep information up-to-date. Information gathered should include know-how, documents, processes, techniques, skills, equipment and software. Scientists working closely with the technologies can be asked to provide brief written descriptions of the technologies, including potential applicability in other situations. It may also be a useful exercise to categorize technology, to gain a fuller understanding of the types of and usages for technologies within an organization. When the audit is part of a broader competencies mapping effort within a company or R&D 75 THE WORLD BANK June 2011 institute, the information gathered can lead to improved internal communications; promote internal technology transfer, thereby preventing duplication of efforts; and enable employees to feel recognized and rewarded for their technical contributions. Regardless of the instrument adopted, confidentiality will be an important pre-requisite for companies to participate. In addition, the approach/survey must be adapted to the maturity of companies. Securing commitment of companies can be aided by obtaining the support of relevant trade/industrial organizations. 6.11. Benchmarking While evidence shows that simply copying successful measures from other regions and countries is rarely enough to succeed, benchmarking is considered as a useful tool for learning from others. To be efficient, benchmarking exercise should:  Focus on measurable features  Alert on policy issues  Enable comparison across regions, including regions outside of the Russian Federation An example of benchmarking indicator categories is provided below (see also Appendix for indicator examples and global benchmarking data sources): 1. Industry Demand for Innovation 1.1.Business dynamism and entrepreneurship (by sector and aggregate) 1.2.Start-ups and entrepreneurship 1.3.Manufacturing sectors 1.4.High-technology sectors 1.5.Business Globalization 1.6.Knowledge Economy 1.7.Appetite for innovation 1.8.Innovation activities 2. Knowledge Providers in the region (universities, R&D organizations) 2.1.Evolution of the transfer systems 76 THE WORLD BANK June 2011 2.2.Competence mapping in institutions depending from the region 2.3.Competence mapping in institutions not depending from the region 2.4.Overall R&D Activity Indicator 2.5.Human Capital 2.6.Academic R&D performance 2.7.Research Commercialization 2.8. Revenues generated thanks to technology transfer (to be measured by independent auditors) 3. Support Structures in the region (innovation support infrastructure, funds, consultancy services, etc.) 3.1.Description of existing support programs 3.2.Programs results growth 3.3.Investments made by the region to facilitate the transformation into a knowledge- based economy 3.4.Investments made through the channel of federal support programs; the goal being to make sure the region and its stakeholders do develop a coherent approach towards the many programs implemented at the federal levels (including the different agencies). 3.5.Investments made by other parties (Federal government, international organizations, inward investors) in tenant firms and in infrastructure Exchanges of experience between projects in the same country through national seminars, in different countries in international seminars, creation of networks, visits and exchanges should be supported. These exchanges can easily take place during small workshops where project leaders of different organizations do not hesitate to discuss the problems and weaknesses of their own problem very honestly. It is beneficial to conduct impact assessment and benchmarking in an integrated way. On one hand, the benchmarking can be used to compare the results of impact assessment, and with use of the same methodology various regional results can be compared more easily when the information is obtained. On the other hand, comparisons between regions can help to better define the impacts of policy interventions. Benchmarking regional innovation using performance indicators can be a useful “wake-up call� for policy-makers who in this way clearly see where their region stands in comparison 77 THE WORLD BANK June 2011 with others. In order to use benchmarking to improve policies, however, it is crucial to go further and identify relevant policy areas to study, decide on suitable benchmarking partners, and then share and analyze information with the objective of implementing changes in the own policy based on the knowledge gained. 78 THE WORLD BANK June 2011 7. Stage 3: Strategy Development This chapter describes the process of translating research and analysis into a path forward, identifying specific goals and priorities for the innovation system. 7.1. Identifying Gaps The first step in developing a strategy is to have a clear understanding, agreed upon by all stakeholders, of the current innovation system. This involves identifying a baseline of both the supply capacity and the innovation support needs of all relevant economic actors. Once such a baseline has been determined, gaps in services and un-met needs of innovation system actors can then be identified. These gaps will become the focus of the innovation strategy. Box 11 provides the results of such an exercise in South Sweden. Box 11: The value added of analyses in South Sweden “The main results of the regional innovation strategy analysis were that the supply infrastructure is not transparent for the users, that suppliers overlap with each other concerning the services they claim to offer, and that limited co-operation was found between these organizations. The results were presented in a number of easy-to-read charts, showing the respective importance of the various suppliers in the eyes of the companies, and the mismatch between, on the one hand, the intensity of the needs expressed in some areas, and on the other hand, the relevance of the services provided in the same areas.� Source: IRE - Turning analysis into action – Methodological guide Two tools are commonly utilized to determine and display gaps in the innovation system: The Supply/Demand Gaps presentation and the SWOT analysis. Supply/Demand Gaps presentation A central element of a regional innovation strategy will be addressing the innovation needs of companies in the region. Policy makers can visualize areas not being supported through a supply/demand gap illustration. Figure 10 provides two different views of the supply/demand requirements that can be presented in a strategy document. 79 THE WORLD BANK June 2011 Figure 10: Supply/demand gap illustration for Lower Austria Financing Market Organization Usage Need Technnology 0% 10% 20% 30% 40% 50% Inward Investment in Lower Austria Marketing of new Quality products 350 management/certifica… Development of new 300 Information events projects Management/strategy Market diversification 250 consulting Search for cooperation 200 Qualification of own partners 150 staff 100 Search for qualified Feasibility studies 50 personel 0 Technology screening Venture capital Technical problem International support solving programs Project management for National Support R&D projects programs Use of Regional support laboratories/appliances programs R&D project realization on R&D Information Search of Exploitationfor new clients offer intellectual property… Demand Supply Strengths, weaknesses, opportunities and threat (SWOT) analysis A SWOT analysis is a tool to determine the potentials and needs of the region from the innovation standpoint. Policy makers can use SWOTs to identify strategies that build on strengths, resolve weaknesses, exploit opportunities and avoid threats. A SWOT is most 80 THE WORLD BANK June 2011 useful when analyzing the complete body of a region’s innovation assets, instead of focusing on a particular component or aspect of the innovation system. A SWOT analysis is broken down into the following components: Strengths: Attributes which are at least partly under the influence of the region and promote innovation (or a specific outcome of innovation). Weaknesses: Attributes which are at least partly under the influence of the region and hamper innovation (or a specific outcome of innovation). Opportunities: Parameters of the environment which are not under the influence of regional actors and could promote innovation (or a specific outcome of innovation). Threats: Parameters of the environment which are not under the influence of regional actors and could hamper innovation (or a specific outcome of innovation). Figure 11 presents an example of a SWOT for the Republic of Tatarstan, summarizing its different components. The “Strengths� component is seen in more detail in Table 8 . 81 THE WORLD BANK June 2011 Figure 11: A summary SWOT of the Republic of Tatarstan Strengths Weaknesses - Important manufacturing base. - Very limited number of globally-oriented firms. - A critical mass of R&D/HEI organizations in - Declining number of science and engineering students Kazan and across the Region. and not enough graduate students. - Oil resources currently providing fiscal - A lack of innovation culture among the business and resources to promote innovation. research communities. - Political will to support innovation. - Limited linkages between research institutions and - Good image for Russian investors. industry. - Limited monitoring and evaluation mechanisms for - Good quality of life. innovation policy. Opportunities Threats - Appointment of regional universities federal - Barriers to trade imposed at the federal level. universities and national research universities. - Governance and funding of research institutes and - FDI in Tatarstan tends to be more knowledge universities at the Federal level are not conducive to intensive. market-oriented R&D. - Access to more markets through Russia’s - Federal innovation support programs do not provide potential accession to the World Trade sufficient support for market-oriented R&D or to the Organization. early stages of innovation. - Creation of a Nanotechnology center in - Weak competition policy at the national level. Technopark IDEA. - National IPR protection is inappropriate and unstable. Source: World Bank (2010) Advancing Innovation in the Republic of Tatarstan, A Framework for Competing and Thriving in the Global Economy. 82 THE WORLD BANK June 2011 Table 8: Strengths of the Republic of Tatarstan Strengths Attributes which are at least partly under the control of the Republic of Tatarstan and promote innovation-led growth. Demand for innovation - Important manufacturing base - Large established industrial players - Good level of business entry - Apparent understanding from some firms that innovation is crucial to survive and grow Sources of innovation - A few world-class R&D poles in the public and private sectors - Growing R&D and engineering sector - Good quality higher education institutions - A critical mass of R&D/HEI organizations in Kazan and across the Region Diffusion of knowledge and - R&D and higher education institutions tend to speak highly about innovation the need for more commercialization of science, more interaction between them and more international exposure Policy - Oil resources currently providing fiscal resources to promote innovation - Political will to support innovation, as measured by investments in existing programs and the Innovation Memorandum Enabling environment - Developed infrastructure - Good image for Russian investors - Good quality of life - Cultural openness Source: World Bank (2010) Advancing Innovation in the Republic of Tatarstan, A Framework for Competing and Thriving in the Global Economy. 7.2. Formulating a Strategy Once the baseline has been agreed upon and gaps have been identified, a strategy for future action can be developed. The innovation strategy sets a tactical direction with long-term viability for the region’s innovation system. Successful strategies clarify the vision and mission and define major goals and expected results. As such, strategy development requires a combination of objective analysis of the current state, a subjective evaluation of priorities, and some futuristic thinking about long-term goals. 83 THE WORLD BANK June 2011 Developing a strategy from a gaps analysis is a difficult step which requires inputs from experienced experts. It requires an understanding of which types of innovation policies have been successful in Russia and abroad, to address which types of gaps and in which context. A strategy is generally broad in scope, providing a high-level goal (with details developed in a subsequent action plan). A good strategy is developed with considerable input from stakeholders and is both comprehensive and realistic. It meets three overriding criteria: Compatibility with existing regional socio-economic priorities. Broad support from the main regional institutions and actors. Leverage of national support programs. Strategy formation is a fluid process in which insights gained during project implementation are continuously re-integrated into an updated plan. A innovation strategy can contain the following elements: Vision: An inspirational description of the ultimate goal. This can be a broader picture and does not need to be immediately achievable. Mission: Describes how the vision is to be achieved. Values: A set of principles governing beliefs about how to approach the problem. Current situation: A summary of regional innovation assessment and existing gaps. Goals: Major directive or directions in support of the mission. Goals should be quantifiable, consistent, and achievable. Objectives: Actions to achieve the strategic goals. Resources necessary to achieve agreed-upon results. Finances may come from national and regional programs, and transnational or trans-regional activities. In addition, private sector resources can be used in implementation. Performance Targets/Results: Desired measurable end-state/result against which to compare performance. Targets are often time-sensitive and begin with a benchmark that is defined by stakeholders during the situation assessment stage. Performance Measures: Data, variables and events used to track the progress toward targets. 84 THE WORLD BANK June 2011 A strategy planning matrix (Table 9) can be used to present the strategy and guide strategy formation, particularly when local policy-makers and practitioners are doubtful about the value- added strategies can deliver. The matrix consists of several columns and levels of detail which can be modified according to need. The matrix breaks down the goals of the innovation strategy from its highest level down to individual project goals. In addition, it documents the assumptions that are necessary for the goals to be achieved, as well as what activities will lead to these goals, what the results will look like and what indicators can be used to assess the results. Table 9: Example of a strategy planning matrix Strategy Assumptions Activities Results Indicators Main Goal Development Goal Project Goal One of the main outputs of strategic planning is the development of priority areas for action and project preparation. Table 10 provides examples of priority areas and corresponding policy measures. Table 10: Regional policy measures Types of Policy Measures 1. Governance & horizontal research and innovation policies 1.1.1 Strategy policy documents (official documents, policy consultation papers, green or white papers, Operational Programs of Structural Funds) 1.1.2 Activities of official advisory and consultative forum 1.1.3 Policy Advisory services (technology foresight, scoreboard type activities, cluster mapping, sectoral studies of innovation) 1.2.1 Strategic Research policies (long-term research agendas) 1.2.2 Innovation strategies 1.3.1 Cluster framework policies 1.3.2 Horizontal measures in support of financing 1.3.3 Other horizontal policies (ex. society-driven innovation) 2. Research and Technologies 2.1.1 Policy measures concerning excellence, relevance and management of research in Universities 2.1.2 Public Research Organizations 85 THE WORLD BANK June 2011 2.1.3 Research and Technology Organization (private non-profit) 2.1.4 Research Infrastructures 2.2.1 Support infrastructure (transfer offices, training of support staff) 2.2.2 Knowledge Transfer (contract research, licenses, research and IPR issues in public/academic/non- profit institutes) 2.2.3 R&D cooperation (joint projects, PPP with research institutes) 2.3.1 Direct support of business R&D (grants and loans) 2.3.2 Indirect support to business R&D (tax incentives and guarantees) 3. Human Resources (education and skills) 3.1.1 Awareness creation and science education 3.1.2 Relation between teaching and research 3.1.3 Stimulation of PhDs 3.2.1 Recruitment of researchers (e.g. fiscal incentives) 3.2.2 Career development (e.g. long-term contracts for university researchers) 3.2.3 Mobility of researchers (e.g. brain-gain, transferability of rights ) 3.3.1 Job training of researchers and other personnel involved in innovation 3.3.2 Recruitment of skilled personnel in enterprises 4. Promote and sustain the creation and growth of innovative enterprises 4.1.1 Support to sectoral innovation in manufacturing 4.1.2 Support to innovation in services 4.2.1 Support to innovation management and advisory services 4.2.2 Support to organizational innovation incl. e-business, new forms of work organizations, etc 4.2.3 Support to technology transfer between firms 4.3.1 Support to innovative start-ups incl. gazelles 4.3.2 Support to risk capital 5. Markets and innovation culture 5.1.1 Support to the creation of favorable innovation climate (ex. Road shows, awareness campaigns) 5.1.2 Innovation prizes incl. design prizes 5.2.1 Fiscal incentives in support of the diffusion of innovative technologies, products and services 5.2.2 Support and guidelines on innovative Green Public Procurement (GPP) 5.2.3 Impact assessments (on research and innovation issues) of new legislative or regulatory proposals in any policy field 5.3.1 Measures to raise awareness and provide general information on IPR 5.3.2 Consultancy and financial incentives to the use of IPR 5.3.3 Support to the innovative use of standards Note: The table uses the classification of the INNO-Trendchart European Inventory of Research and Innovation Policy Measures. With many vocal stakeholders, reaching consensus on priority areas may be a challenge. Scenario development can be used as a tool to determine priorities (Box 12). 86 THE WORLD BANK June 2011 Box 12: Using scenario development as a decision support tool Alternative scenarios for the region and policy option can be considered to determine the priorities of the strategic framework. The scenarios can consider alternative future economic trends and sectors’ orientations for the region. For example, one scenario might give emphasis to the retention of existing sectors. A second scenario could emphasize growth in sectors which are so far only small in scale in the region but where there is strong potential. The scenarios can then be considered in terms of both their likelihood and their desirability for the long-term development of the region. The definition of two or three scenarios will be sufficient to inform discussion, more than this and the exercise may become too complex. For each scenario the priorities and actions that would need to be adopted should be identified. This information will enable a consideration of the strategic choices. The priorities and actions can be considered in terms of their feasibility, the associated risks and likely impacts on realizing the (preferred) scenario. An advantage of this approach is that it is likely produce a clear, focused debate and the favored strategy will likely be apparent early on. Possible Strategy Priorities by Regional Profile Although each regional innovation taskforce will identify policies that are best suited to regional specificities, international experience suggest that regions of specific profiles and with different level of innovation policy capacity can benefit from different types of policies.28 Agricultural Regions: Overall Strategy: Upgrading and retaining human capital, creating critical mass and increasing quality of connectivity. Associated policy measures: Low /Medium innovation policy competency: - Innovation support programs, business development support, connection with trade and export agencies - Attracting national investments in vocational and tertiary education 28 OECD (2001) Regions and Innovation Policy - OECD Reviews of Regional Innovation 87 THE WORLD BANK June 2011 - Promoting national training, lifelong learning schemes for companies and individuals - Engaging regional stakeholders in external production networks - Securing national infrastructure investments to enhance connectivity High innovation policy competency: - Regional agencies for business development - Training and lifelong learning courses - Student exchange programs and talent attraction schemes - Regional incentives for skills upgrading programs in companies - Creation of knowledge centers in traditional fields (agricutlrue0 branches of national research organizations - Innovation support programs of incremental innovations - Linkages o f business support organizations to wider networks - Financing experimental innovation projects in traditional sectors - Connection of regional actors in national and international production networks. - Improving the enabling environment for innovation. Tertiary Growth Potential Regions and Metropolitan Regions: Overall Strategy: Reinforcing excellence in knowledge creation and developing new high- tech industries Associated policy measures: Low innovation policy competency: - Lobbying national government for public investments in large S&T infrastructure linked to regional advantages - Participation in national competitiveness center programs - Attracting FDI of knowledge-intensive companies and MNCs (infrastructure, labor force) - Technology parks and incubators - Promoting national talent attraction schemes 88 THE WORLD BANK June 2011 - Knowledge vouchers - Platforms to define development visions for high-tech niches Medium innovation policy competency: - Complementing nation al investments in research infrastructure - Participation in national competitiveness pole/centre programs - Public-private partnerships to develop high-tech products - Technology parks, incubators - Entrepreneurship stimulation packages - Global talent attraction in targeted new sectors - Promotion of participation of public and private actors in international technology networks High innovation policy competency: - Co-funding of universities : institutional an competitive - Funding research and technology centers - Public-private partnerships for innovation - Targeted research funds, for public and private actors and cooperative projects - Research spin-off promotion schemes - Regional high-tech clusters, technology parks, incubators - Global talent attraction in targeted new sectors - Improving the enabling environment for innovation. Industrial Regions: Overall Strategy: Modernizing productive activities toward value-added niches: “innovation ecosystem strategy� Associated policy measures: Low innovation policy competency: - Concentration of regional action on non-traded sectors 89 THE WORLD BANK June 2011 - Supporting innovation in service or cultural industries - Small-scale cluster support with an orientation towards connection to global networks - Innovation vouchers, targeting, “innovation beginners� Medium innovation policy competency: - Technology platforms (linking technical schools and SMEs) - Technology transfer centers in relevant sectors co-funded by national government - Regional advisory network; networks fostering synergies and complementarily between national agencies in the region and regional agencies - Innovation vouchers for SMEs - Support for young graduate recruitment in firms High innovation policy competency: - Support science-industry linkages - Regional agencies for innovation promotion, combining technology transfer with other services - Promoting innovation start-ups (business angel networks, mentoring schemes, regional seed and venture capital funds) - Densification and internationalization of regional production clusters - Regional public procurement oriented towards innovation - Improving the enabling environment for innovation. Declining Industry Regions: Overall Strategy: Stimulating knowledge absorption and entrepreneurial dynamism Associated policy measures: Low innovation policy competency: - Developing latent demand for innovation (innovation vouchers, placement of students in SMEs) 90 THE WORLD BANK June 2011 - Orienting polytechnics to new qualifications - Training for low skilled and unemployed - Support to clusters with innovation potential - Supporting inclusion of region in international production networks Medium innovation policy competency: - Supply-chain management initiatives to reduce fragmentation - Innovation-oriented public procurement - Redefinition of programs for regional technical schools - Innovation awareness raising, entrepreneurial promotion events High innovation policy competency: - Local knowledge centers, branches of national knowledge hubs - Education and training activities in firms - Supporting connection to international production networks - Regional for a to identify growth prospects in niches with value-added - Innovation and entrepreneurship culture promotion - Improving the enabling environment for innovation. Setting Strategic Priority Timelines Each strategic priority should be associated with a realistic timeline. This is particularly important for regions with limited innovation policy capacity. Three planning horizons can be used: The short term horizon can include micro reforms; for example improved SME support programs, improved training programs, improved M&E in existing programs. The medium term can include measures that will result in a critical mass of changes, such as new or reformed innovation funding agencies, new entrepreneurship and start-up support programs, technology transfer offices, FDI attraction strategies, entrepreneurship and diaspora networks 91 THE WORLD BANK June 2011 The long term can include major improvement that can be difficult to make, such as, foc example. business environment reforms, restructuring of regional research institutes, 7.3. Building Regional Consensus In light of the regional environment and its political culture, the following steps can be taken in the process of consensus building: Start with an inter-ministerial seminar. The goals of such an event will be to disseminate the urgency of becoming an innovative region and to work under the format of an inter-ministerial Task Force under the direct authority of the region’s governor, president or prime minister. Implement a consensus-building action plan over a period of six to nine months for the following target groups: - Rectors of universities with their counterparts from R&D organizations. - Heads of large corporations. - Representatives of the SME sector. - Heads of the different agencies and organizations dealing with innovation. - A mix of all these types of stakeholders every three months leading to the creation of a Steering Committee. Agree on a series of actions (to be undertaken individually or collectively). Attract regions from both within and outside the Russian Federation that have managed to achieve such a consensus to deliver “real-life� testimonies. Communicate the overall ambition and the consensus building process to civil society (this is important as many individuals have a negative perception of the role and influence of public initiatives). Seek external expertise to manage the process. This external player must be seen as an “honest broker� and capable of speaking with and understanding all types of actors (high ranking policy-makers, directors of small firms, scientists, bureaucrats, etc.). One way to gain regional consensus is to hold panel discussions to tease out the major issues which have been considered a regional priority. Such panels can be dedicated to particular subjects, such as financing, clusters, or sectors for support, and can play a role in identifying 92 THE WORLD BANK June 2011 priorities and turning analysis into actions. Feedback and ideas from these discussions which are deemed viable can be shared with a large number of regional actors including companies, institutions, universities and decision makers for comment and validation prior to being incorporated into a strategic plan. The establishment of Working Groups to discuss specific issues can also be useful (Box 13). Box 13: RIS Aragon (Spain) Working Groups “The RIS Aragon team set up 8 working groups to analyze the results from interviews and firms survey. Five of them were sectoral groups (the automotive sector; services, agrofood, electronics and traditional sectors) combined with other three to discuss more horizontal issues like financing, innovation within public administration and in rural areas. Their reflections set the basis for the final document.� Source: IRE – Methodological Guide - Management of a RIS project : lessons from 7 years’ experience International consultants and experts may be useful participants during panel discussion and working groups, as they can apply knowledge from best practices and international experiences to the discussion. They can help confirm the priorities for the region or articulate new or alternative priorities based on their experiences. In addition, experts can provide new ideas for realistic, potential programs and projects which can be pursued by the region to meet set priorities. An expert panel can be convened at critical points of the strategy development exercise; for example at the start, to explain the regional innovation strategy methodology and problems to avoid, or following strategy development to help determine specific actions for strategy implementation. Box 14 provides a framework which can be used for the expert panel. 93 THE WORLD BANK June 2011 Box 14: An example of an expert panel Convening an expert panel of either international or domestic background can provide useful feed back to develop the strategy. Such a panel could be developed as follows: Up to 8 experts drawn from different backgrounds and international perspectives. 2 to 3 day session held consecutively. Presentation of the analysis and draft strategic framework. Questions and clarifications. Experts meet in closed session with a chairman and “rapporteur� drawn from the panel. Conclusions presented to the team in verbal and later written form. Conclusions discussed. In addition, opportunities for public feedback which provide companies with the opportunity to outline their service needs for innovation can be useful. These will help assess the match and mismatch between companies’ demand and the supply capabilities of intermediaries. In addition, this can provide insight on whether the proposed strategy offers an adequate solution to firm-level needs. Several approaches to soliciting public feedback are possible: Circulation of a consultative draft report including the Strategic Framework launched with high-level profile possibly via a conference. Presentation of the report at seminars around the region. A formal consultation period during which the report is widely circulated and written comments requested. 94 THE WORLD BANK June 2011 8. Stage 4: Action Plan Development This chapter describes the development of a series of concrete actions to facilitate the achievement of the overall innovation goals developed in the strategy. 8.1. Elements of an Action Plan Following strategy development, the next step is to turn the list of priorities into a detailed plan. The plan serves as a guide to achieve pre-determined goals and lays out the specific actions that are necessary to achieve these. Action plans address the following topics in relation to each chosen priority:29 Goals and objectives Method Process and responsibilities Funding sources Pilot testing Monitoring plan Box 15 provides an example of a list of actions to achieve four broader strategic goals. As the example indicates, developing an action plan consists primarily of breaking down each priority goal into small tasks that can be placed on a timeline and delegated to specific actors to accomplish. Actions and related tasks should be specific, manageable and assignable. Box 15: Example of a Regional Innovation Action Plan – East Midlands The East Midlands Regional Innovation Strategy consisted of four ‘strategic themes’ which are, in effect, the RIS’s intermediate objectives. These themes were then expanded upon in twelve specific actions to accomplish the larger themes. THE EXCHANGE: Building innovation networks for knowledge exchange, in order to ‘increase the number and quality of knowledge exchanges between the region’s businesses and research organizations’; THE SUPPORT: Delivering high quality innovation support to businesses, in order to ‘ensure better access, awareness and demand for innovation support from companies in the region’; THE NETWORK: Creating an effective environment for innovation, through establishing an 29 MERIPA: Methodology for European Regional Innovation Policy Assessment, European Commission Directorate General Enterprise and Industry 95 THE WORLD BANK June 2011 ‘integrated network of innovation facilities, organizations and individuals’ in order to develop a ‘supportive environment where innovation success is recognized and celebrated’; and, THE FUTURE: Fostering enabling and emerging technologies, by identifying and supporting such technologies and prioritizing medium- and long-term investment accordingly. 4 STRATEGIC THEMES Building innovation Delivering high quality Creating an effective Fostering enabling and networks for innovation support to environment for emerging technologies knowledge exchange businesses innovation 1) Establish business 10) Identify emerging 7) Ensure iNets are focused innovation 4) Stimulate demand technologies where the appropriately integrated networks (iNets) to from businesses for East Midlands can into investment plans increase knowledge innovation support establish a leading for innovation facilities exchange position 5) Stimulate demand 8) Develop and maintain 2) Establish innovation 11) Provide support for from businesses for a regional innovation hubs (iHubs) R&D programmes innovation finance portal 9) Encourage a culture 12) Promote the 6) Stimulate demand 3) Establish iNet teams of and a positive benefits of enabling from businesses for in each iHub attitude towards technologies and innovation skills innovation processes 12 ACTIONS Source: Charles, D., Nauwelaers, C., Mouton, B. and Bradley, D. (2000) Assessment Of The Regional Innovation And Technology Transfer Strategies And Infrastructures (RITTS) Scheme - Final Evaluation report. The action plan can be thought of as a work schedule identifying the dependant single steps, time restrictions, and where possible, which actors are responsible for each action and how the actions will be funded (Box 16). The plan is a flexible instrument where changes can be made based on feedback from prior activities. Building and revising an action plan is a collective undertaking but the regional innovation action plan management team makes the ultimate decision on activities to launch and methods to follow. It is important to discuss this in a small team of dedicated persons and make use of the know-how of the actors involved, especially intermediary organizations. Box 16: Example of Action Plan Elements as developed in the Tartu RIS The Estonian region of Tartu has a strong network of universities and knowledge centers, making it a region with development potential for knowledge intensive production. The 96 THE WORLD BANK June 2011 University of Tartu, Estonia’s biggest university and the Estonian Agriculture University are important actors in innovation and R&D in the region. In addition, two research centers, the Estonian Biocenter and the Institute of Physics, have been selected as European Centers of Excellence under the European Commission’s Fifth Framework Program for R&D. The region’s workforce is heavily concentrated in the services sector with 65 percent in services, 27 percent employed in industry and 8 percent in agriculture. Given this regional profile, the regional leaders focused on economic and social development through increase of the knowledge input into production and services. The Innovation Strategy of the Tartu Region 2004 -2008 is grounded in the National Development Plan and the Research Development Strategy of Estonia, “Knowledge-based Estonia.� The greater strategic objective outlined in the Tartu RIS is to increase the competitiveness of companies in the region. To achieve this, the document outlines four strategic priorities and associated tasks required to achieve the strategic priorities. These are: Development of Human Capital - Relating the curricula of vocational education to the needs of the region - Improvement of the quality of management of the companies of the region - Improvement of the quality of labor - Alleviation of the lack of engineers in enterprises of the Tartu region - Popularization of technological specialties and the schools that are offering them Development of key sectors - Strengthening the wood-processing, timber and furniture sector - Development of the IT sector and strengthening of its competence base - Development of the biotechnology sector Support to networking - Support to the export and marking activities of companies - Activities for the creation of networks and support to professional associations - Promotion of the possibilities of the University of Tartu and the Estonian Agricultural University and initiation of potential cooperation projects with entrepreneurs. - Raising the awareness of business activities among students and the academic staff and making them more active - Development of state support measures Improvement of Infrastructure - Development of the Institute of Technology of the University of Tartu - Development of the Tartu Science Park - Development of industrial parks and industrial areas - Creation of experimental and pilot-scale laboratories - Increasing the availability of venture capital and seed capital for the entrepreneurs of the region 97 THE WORLD BANK June 2011 The tasks were then further elaborated on in the action plan, breaking each task down into specific activities, responsible party, timetable, estimated budget and indicator to judge achievement of the activity. Below is the breakdown for one of the tasks of the Tartu Region Innovation Strategy, “Improvement of quality management of the companies of the region� under the strategic priority area development of human capital. This level of detailed breakdown was outlined in the RIS for each of the tasks under the priority areas. Improvement of the quality of management of the companies of the region Time schedule and budget for Responsible Activities Performance indicators attainment of implementers results Introduction of innovative 2004-2007 Local - Number of seminar courses, management methods training and semi- governments, - Number of participating and best management nars 250 000 per universities, individuals and enterprises practice, advocation of year Estonian Quality - Number of companies of the management awards Association Tartu region who participate In total 1 000 000 in national competitions Consultations on the imp- 2004-2008 Estonian Quality - Number of ISO 9000 lementation of quality, 400 000 per year Association certified companies environment and - Number of ISO 14000 integrated management In total 2 000 000 certified companies systems Issue of business awards 2004-2007 Local - Number of regional business for the Tartu city and Public relations governments competitions Target the county and South Estonia costs 100 000 per drivers of national growth. year In total 400 000 Total activities 3 400 000 EEK The activities detailed in the innovation strategy and action plan were initially executed through a series of six pilot studies in 2004. The six studies explored the current situation in three of the four key sectors – wood processing and furniture, mechanical engineering and biotechnology – as well as three “horizontal issues.� Among the horizontal issues, a pilot study was conducted on best management practices. The cross-sector pilot study offered information about improving management through lectures and visits to Estonian companies already using ISO quality management systems. More than 200 companies from all industry sectors participate in these events. As a result of the pilot, the Tartu government’s business development department and other partners are running seminars and internal consultation on ISO 9001 for six months, to 98 THE WORLD BANK June 2011 prepare companies for external audit and certification. Source: Innovation Strategy of the Tartu Region, 2004-2008 and Innovating Regions in Europe: Tartu and South Estonia Region 8.2. Methodological Framework for Action Plan Development An action plan can be created using the following steps: Brainstorming sessions with decision makers and relevant stakeholders can be used to generate a variety of proposals to be evaluated based on international benchmarks. Proposals can be grouped as follows: o Immediately feasible. o Possible implementation with modest changes. o Implying a paradigm shift. Workshops can be carried out in the region to test a portfolio of proposals. At this stage proposals will be in a draft form. Local stakeholders will be mobilized to select project proposals. External experts can conduct a final critical evaluation of the proposed measures. Selected proposals will be developed in the form of full-fledged action plans, detailing steps, monitoring systems, resources needed, time frame, etc. There are a number of techniques and exercises that can be utilized to develop action plan proposals. 8.2.1. Brainstorming Brainstorming is a structured process which enables individuals to be free-thinking in an atmosphere where ideas are shared and developed. Brainstorming serves three goals: To activate prior knowledge about a topic. To foster sharing and cooperative learning. To provide material for further exploration. 99 THE WORLD BANK June 2011 When conducting brainstorming sessions, some rules or guidelines can help to keep brainstorming on track. In addition, comfort often generates free thinking, so location matters. It is also helpful to have a specific purpose for the brainstorming session in mind, to know what you want to get out of it, and what you will do with that information. Having a facilitator who has experience in guiding conversation can enhance the experience. Some examples of brainstorming activities which you could be useful are: What is the opposite of what we want: Get the group to describe in detail the opposite of what you want to happen. Then, at the peak of momentum, shift discussion to discussing how to achieve what you want. Roadblock Removal: Eliminate assumed constraints. Tell the group there is no limit on costs, time or other resources. They can think as big or expensive as their minds allow. Roadblock Introduction: Come up with ridiculous new constrains to the problem and push people to work with the problem. This can often bring people to action, challenged by the lunacy of the problem, and protected by the feeling that since it is a ridiculous situation, there are no bad answers. This may lead to new ways of thinking about the issue.30 During brainstorming sessions, the moderator should write down all ideas that arise – no idea is too foolish. Later, the ideas which were deemed feasible or worth further consideration can be narrowed down into a smaller list, to be refined at a later meeting or brainstorming session. Ideas can also be grouped together to capture the main themes that were discussed. If a session did not provide useful input, it may be necessary to refine the problem and try again. 8.2.2. How-how Diagrams Most actions plans consist of tasks that are accomplished through a series of cascading smaller operations. These small tasks in themselves can seem insignificant and yet in practice they often decide the fate of larger projects. A how-how diagram is a useful technique to ensure that all small tasks are identified and documented. A how-how diagram is created by first clearly stating a problem. The problem is written as a “need�, so that the question “how can this be done� can answer it. This question can result in several possible solutions. For each of the solutions, the question “how can this be done� is then posed again and repeated until the smallest tasks have been identified. Figure 12 provides an example of how a how-how diagram can look. Note that there can be 30 http://www.scottberkun.com/essays/34-how-to-run-a-brainstorming-meeting/ 100 THE WORLD BANK June 2011 relationships between some of the “how� solutions. Some may be alternatives or may need to happen in addition to another solution. These can be displayed using either different colors, writing “and� or “or� or drawing connecting lines.31 Figure 12: Example of a how-how diagram 8.2.3. Goal-Oriented Project Planning (GOPP) Goal-Oriented Project Planning is a commonly used project planning and management instrument that can help streamline the complexity of projects which involve a large number of individuals and organizations with their own agenda and expectations. GOPP can be used to facilitate agreement on common action. 31 http://creatingminds.org/tools/how_how.htm 101 THE WORLD BANK June 2011 Under GOPP, the steps of analysis and planning of the regional innovation action plan are decided upon in a participatory workshop with representatives of the main stakeholders. In this workshop, the activities and performances that are necessary to reach the targeted objective are defined. This allows for the different needs and interests of the parties concerned to be addressed and can lead to the creation of a shared agreement on the objectives and strategies to be pursued. Through avoiding biased or partial analyses and excessive influence of vested interests, a GOPP workshop can foster both consensus building and ownership among particular stakeholders. 102 THE WORLD BANK June 2011 9. Stages 5 and 6: Implementation, Monitoring and Evaluation This chapter describes the implementation, monitoring and evaluation processes of regional innovation strategies. 9.1. Implementing Action Plans Pilot projects are the main vehicle by which to carry out the developed action plans and implement the regional innovation strategy. Pilot projects can be used in two different ways: As test-bed for larger projects/programs to be included in the regional innovation action plan. Before launching new programs or national initiatives, a regional innovation action plan framework can make use of smaller pilot projects and/or feasibility studies to determine the viability of the plan. As flagship project to demonstrate the effectiveness of a RIS project and to maintain the momentum. Each plan should be aligned with regional endowments and capabilities. In addition, regional stakeholder consensus, both among public and private sector players, will maximize the likelihood of successful action plan implementation. Finally, in order to capitalize on experience gained in the action plan implementation, the regional administration should guarantee sufficient recognition and stability to the administrative team. If regions do not have sufficient resources for permanent management of these strategies, the implementation of the actions is sometimes entrusted to contractors with a precarious status. 9.2. Keeping on Course and Learning from Policies at the Regional Level 9.2.1. Monitoring An innovation strategy will have little impact without a proper monitoring and evaluation system. The purpose of monitoring is to ensure that activities defined in the action plan are managed according to their original objectives, timelines and budgets. It is a tool for 103 THE WORLD BANK June 2011 ensuring that measures are meeting their technical and financial objectives. Monitoring system design should be the result of the consensus building process. The monitoring activity relates to the entire action plan implementation, including monitoring of pilot actions. The following aspects need to be covered: Definition of monitoring indicators (input and output indicators). It is advisable to start determining indicators already when planning the activities, measures and projects defined in the strategy. Definition of monitoring methodology. Definition of team responsible for monitoring. Monitoring of regional innovation action plan project activities and projects (operational goals). Monitoring of fulfillment of milestones. The Asturias example (Table 11) shows operational monitoring indicators directly linked to concrete actions, which can be measured relatively easy and largely influenced by the project management. 104 THE WORLD BANK June 2011 Table 11: Monitoring indicators of the regional innovation strategy of Asturias, Spain Key priority Proposed Actions Monitoring Indicators Business R&D +I Supporting the - Number of project proposals received and analysed development of new high - Numbers of projects approved value-added products and processes Support of recruitment of - Number of applications for aid innovation-related - Number of realized projects advanced services - Number of contracts with companies Introduction of new - Number of subsidized actions technologies in traditional - Sectors covered sectors - Number of beneficiary companies - Technologies introduced Business Creation of sector clusters - Number of clusters created cooperation - Number of technology committee created - Number of cooperation projects on R&D+I between companies in each cluster Formalisztion of protocols - Number of protocols signed between Government of the with tractor firms Principality and tractor firms in the region - Number of cooperation actions - Number of cooperation actions per type of support actions - Amount of financing mobilized Creation of Integral support for the - Number of companies supported in first, second and third technology- creation of technology- phase based firms based firms - Number of companies created - Amount of start-up funds assigned - Number of jobs created - Technological areas developed - Degree of diversification in the activity with respect to the regions production sector as a whole Source: IRE Secretariat (2007) Innovating Regions in Europe. RIS Methodological Guide Stage 2. Box 5 presents an example of indicators utilized by the Castilla y León region of Spain in their Regional Technology Plan. The indicators used are a combination of program and impact indicators. 105 THE WORLD BANK June 2011 Box 17: Example of assessment indicators used in the Castilla y León region. As part of the development of their Regional Technology Plan 2002-2006, the region’s leaders outlined nine strategic areas of focus: Areas of Research Area of Innovation  Research projects  Innovative businesses  Intellectual capital  Scientific-technological competitive supply  Research supporting tools  Developing new sectors  Improving the connection with the  People’s training to generate and transform environment new knowledge  Results’ exploitation The program used a number of indicators to evaluate the success of the Regional Technology Program. Indicators were broken down into direct and indirect indicators and correspond to the priority areas outlined in the strategy. 2000 2006 2006 Indicator Benchmark Target Result Direct Indicators Technology Centers turnover (Million €) 21.5 40 44.5 No. of innovative companies 1395 2500 1339 No. of collaborative R&D and innovation projects - 100 36 No. of new technology-based companies - 250 445 Public investment in S&T (% of Regional Administration’s Budget) 1.2 2.4 2.53 Indirect Indicators R&D and Innovation effort (% of GDP) 1.76 2.4 1.45 R&D effort (GERD) as % of GDP .64 1.2 .97 % of R&D expenditure by companies and private non-profit 41.7 50 56.1 bodies % of R&D expenditure by Universities 49.8 43 35.6 % of R&D expenditure by public Administration 8.5 7 8.1 R&D effort (GERD) as % of non-agricultural GDP .8 1.2 1.18 R&D personnel (FTE)/Active population (%) 5 6 8.1 R&D personnel (FTE) in companies (% of total R&D personnel) 23.8 28 37.6 Patent applications 14 18 26 Participation of Castilla y Leon in the Spanish return from R&D 2.2 5 2.1 European Programs (%) Additional contribution of public resources (National Plan, 39.4 117.5 77 Framework Programme, etc.) (Million €) Private mobilized resources (Million €) 83.5 321.5 509.3 Source: Castilla y León: evaolution from RTP 1997-2002 to RTDI Strategy 2007-2013. IRE Workshop “New generation of RIS� Gothenburg, November 24-25, 2008. 106 THE WORLD BANK June 2011 9.2.2. Regional innovation strategy objectives useful for monitoring (and evaluation) The definition of regional innovation strategy objectives must be undertaken with monitoring in mind. In order for objectives to be useful they must be: Specific: should be precise and concrete enough to avoid being open to varying interpretation. Measurable: should refer to a desired future state (as compared to the baseline situation). So that it is possible at some later date to see whether the objective has been achieved or not. Accepted: If objectives and target levels are intended to influence behavior, they must be accepted, understood and interpreted similarly by all of those who are expected to take responsibility for achieving them. Realistic: Objectives and target levels should be ambitious – setting an objective that only reflects the current level of achievement is not useful – but they should also be realistic so that those responsible see them as meaningful. Time-dependent: Objectives and target levels remain vague if they are not related to a fixed date or time period. In this context, the setting of milestones for the partial achievement of objectives is useful.8 9.2.3. Evaluation Evaluation has a much broader role than monitoring. Its purpose is to analyze the impact of the regional innovation strategy. It allows the strategy or its defined actions to be modified to maximize their impact. It also allows the strategy to be adapted continuously to changing conditions and new challenges. It is recognized that there is no unique “correct� set of innovation policies. Innovation policy-making is a learning process. The evaluation methodology for regional innovation strategies should consider the following elements: Establishment of evaluation tool/s (e.g. statistical data, survey, interviews). Selection of appropriate indicators and data to be collected and evaluated. Selection of the evaluation team. Decision on the frequency of evaluations. 107 THE WORLD BANK June 2011 The evaluation mechanism needs to be designed at the same time as the strategy, not afterwards. Conversely, the strategy needs to be designed with evaluation in mind. Progress towards results should be measurable through statistical data, surveys and interviews. It should be performed every three to five years using a predetermined standardized methodology in order to allow for comparisons. The evaluation should not only focus on immediate concrete results of the strategy. Many of these are difficult to measure, occur only in the long term and it is difficult to ascribe causal relations with specific policies (e.g. job creation, increased profits). Many outcomes linked to processes can also be used to measure the impact of the strategy (e.g. increased collaboration between industry and research institutions). While monitoring can be performed by project management teams, evaluation is most credible when assigned to an independent institution. Even better, relying on evaluators from other regions or countries can help introduce external viewpoints and new practices. Evaluation is a constant learning process to act effectively and meet new challenges. It encompasses a variety of different tools, policies and programs that must constantly be adapted to new framework conditions. Moreover, evaluation can assist learning in three major ways32: Operational learning: evaluation is used as a management feedback tool to improve the effectiveness, efficiency and quality of policy intervention by the organization responsible for the implementation of the program. Policy feedback: determines the outcome and impacts of policy measures and programs. This type of use is aimed at checking whether, and the extent to which, programs have achieved their objectives. System impact: serves to improve the efficiency and effectiveness of national innovation systems through guiding the design and formulation of intervention policies and programs. Table 12 illustrates examples of ways in which the more modest goals of innovation programs could be evaluated, and how these can be linked to longer-term, more ambitious, impacts. 32 Source: Adapted from VINNOVA, 2004 in SMART INNOVATION: A Practical Guide to Evaluating Innovation Programs. A Study for DG Enterprise and Industry (2006) 108 THE WORLD BANK June 2011 Table 12: Examples of Innovation Programs and Innovation Issues Objectives of Evaluation Objectives Immediate Impacts Medium-Term Impacts Longer-Term Impacts Increase awareness of a Attending meetings, Adoption of technologies Improved business set of new technologies uptake of literature, hits performance; continuing on websites awareness and adoption of related technologies Improve the skill basis of Training sessions, staff Improved technical Improved innovation a set of industries exchanges competencies of staff, performance, increased increase effectiveness of technological absorptive in-house R&D capacity; greater technical awareness Increase science-industry Student placements, Introduction of new Improved skill, technical links intensified academic- knowledge and skills competence and industry dialogue knowledge base Stimulate the start-up of Finance and information Creation of new high- Long-term growth and new technology-based for future entrepreneurs tech companies sustained development companies of new high-tech industrial sectors Source: SMART INNOVATION: A Practical Guide to Evaluating Innovation Programs. A Study for DG Enterprise and Industry (2006) 9.2.4. Types of evaluation Evaluations differ in many ways – in the methods used, scale, scope, and in the extent to which results are disseminated and used. There are four fundamental types of evaluation with regard to the timing: Ex-ante evaluation, conducted before the implementation of a program, and focusing on what its objectives are and how (and how far) they should be achieved. Intermediate evaluation, reviewing the progress of the program, or its achievements at some point into the program – usually reserved for long-lasting programs. Real-time evaluation, following the program in detail through its operation. Ex-post evaluation, examining the results of the program after it has been completed (and possibly more than once). The practice of evaluation during a program through real-time evaluation or frequent intermediate evaluations can ensure the success of a pilot. These forms of “diagnostic monitoring�, whereby a portfolio of projects or programs is systematically evaluated to detect errors and correct for problems as the program evolves, can help to improve the program and fine-tune it based on new developments. This practice also allows for the 109 THE WORLD BANK June 2011 filtering out of projects that have proven to be inefficient in light of implementation experiences. Pilot programs should be analyzed in specific stages, whereby each stage of the program is benchmarked against internal and external alternatives. The transparency inherent in the broad and continual benchmarking of projects at every stage functions as an effective governance mechanism, assuring that public funds are directed towards public purposes, as best these can be defined at any moment. 9.2.5. Characteristic of the evaluation indicators General guidelines for the selection of indicators are that they should be: Relevant to what the regional innovation strategy is aiming to achieve. Attributable – the outputs / outcomes measured must be capable of being influenced by actions (as defined by the theory of change) which can be attributed to the RIS and for which there is clear accountability. Well-defined - with a clear, unambiguous definition so that data will be collected consistently, and the measure is easy to understand and use. Timely, producing data regularly enough to track progress, and quickly enough for the data to still be useful. Reliable - accurate enough for its intended use, and responsive to change. Comparable with either past periods or similar programs elsewhere. Verifiable, with clear documentation behind it, so that the processes which produce the measure can be validated. Avoid perverse incentives - not encourage unwanted or wasteful behavior 9.2.6. Choosing and using methodologies for evaluation There does not exist a single best evaluation methodology. In general, an evaluation study requires a combination of various evaluation methods. Thus, for instance, various methods may be used at different levels of data aggregation, or to capture immediate and longer- term impacts. Specific techniques and approaches that are widely used, may be grouped according to the functions that they play and the specific information that they contribute: Methods for accessing and generating data – techniques of data production that are used in primary and secondary research. 110 THE WORLD BANK June 2011 Methods for structuring and exploring interventions – ranging from “traditional� approaches using experiments and control groups to more action and participatory approaches. Methods for analysis of data – ways of processing and drawing conclusions from statistics and qualitative material, and more elaborate modeling and simulation approaches. Methods for drawing conclusions, including impact assessments and the like. There are various guides to social research methodology, to evaluation methodology, and to research evaluation methodology, which policy-makers can draw upon. Considering R&D/RTD programs evaluation, sources such as the ePUB RTD Evaluation Toolbox (2002) are particularly useful (Box 18). 111 THE WORLD BANK June 2011 Box 18: The ePUB Research and Technological Development (RTD) Evaluation Toolbox This “toolbox� of evaluation methods provides a good starting point for finding out about the main instruments applied in science and technology policy evaluation and the current methods and practices used in the evaluation of public RTD policies. Based on the efforts of a network of evaluation experts, it discusses some of the political issues concerning methodologies, as well as the more practical ones. Most ePUB Toolbox methods focus on the capture of data relevant to RTD programs. At the micro-econometric level, this includes methods for evaluating the existence of an additionality effect in public support on private R&D and estimating the private rate of return on R&D. More macroeconomic methods are better fitted to capture the generated R&D spillovers and longer term and wider effects of the policy intervention on productivity and economic welfare. Specific tools discussed include cost-benefit analysis, network analysis, case studies, and the like. The ePUB Toolbox groups methods according to their use in ex ante, real time and post hoc evaluations. Methods employed in the ex-ante evaluation of programs and policies include: - Foresight studies - Modeling and simulation - Cost-efficiency techniques - Cost-benefit techniques Quantitative Methods employed in Monitoring and ex-post evaluation include: - Statistical data analysis: Innovation Surveys and Benchmarking - Modeling methodologies: Macroeconomic modeling and simulation approaches; Microeconometric modeling; Productivity analysis; and - Control group approaches Qualitative and semi-quantitative methodologies employed in Monitoring and ex- post evaluation include: - Interviews and case studies - Cost-benefit analysis - Expert Panels/Peer Review - Network Analysis - Foresight/ Technology Source: European Commission Joint Research Centre Institute for Prospective Technological Studies (IPTS) (2002) RTD Evaluation Toolbox - Assessing the Socio-Economic Impact of RTD-Policies -Strata Project HPV 1 CT 1999 – 00005. 112 THE WORLD BANK June 2011 9.3. Policy Learning at the National Level through an Innovation Observatory Ongoing policy review allows regions to ensure that regional innovation action plans translate into real outcomes. In Russia, almost all types of policy instruments and measures have been made available to stakeholders but their efficiency is yet to be demonstrated. Outcome measurements and plan comparisons can help to better understand what works, and what does not, especially if this is done with the participation of the responsible stakeholders. This may highlight the need for strengthening successful activities, taking corrective actions if there are problems on the way or, if needed, to re-allocate program budgets. The pooling of the measurements of the outcomes in a centralized “national innovation observatory� also enables to assess the relevance, efficiency and effectiveness of policies, provide federal and regional policy-makers with a better understanding of results and effects, and improve the transparency and accountability of the policy-making process. A national innovation observatory has two main functions: first, to create evidence that policies bring the desired results and second, to act as an “eye opener� regarding issues to be addressed by the policies. Monitoring and evaluation process can target national and regional innovation systems. National evaluation includes analyzing the performance of actors and their interaction and at the same time assessing the overall impact of the national policy. These objectives require convergence of methodology and data collection at the regional level – but also allow regional scale analysis: An analysis over time with the region’s position in relation to the average trends in the reference regions (by regional profile), An overall positioning in relation to the Russian regions. The database will also enable the region to be identified in Russia as a whole for each indicator, insofar as there are harmonized statistics for all of Russia. A positioning of the modernization and competiveness of Russia against other global economies. Figure 13 illustrates a possible role of a national innovation observatory in optimizing national innovation policy. 113 THE WORLD BANK June 2011 Figure 13: Policy optimization through a national innovation observatory Note: RIS = Regional innovation strategy. The observatory is also an efficient communication support tool. When regional innovation strategy results are available, policy makers can present expected results as well as outcomes, which hopefully are positive. Communicating results is more tangible and easier for the public to understand. Communication helps to raise public awareness of what public policy has achieved and more generally of innovation matters. Finally, efficient observatory mechanisms allow the federal authorities to design new initiatives based on both existing and proven needs as well as on the forecast of future opportunities for the country. 114 THE WORLD BANK June 2011 10. Potential Challenges This chapter describes challenges in innovation policy development, implementation and evaluation due to its complexity. Innovation is compound. Simply agreeing on a definition of innovation, and deciding what encourages innovation is a challenge. However, this complexity does not prevent meaningful measures being applied to aspects of innovation. The fact that innovation can be stimulated in numerous ways involved tailored made regional strategies. All policies are linked and impact the regional and national context. Hence, it is extremely difficult to determine the cause and effect linked to innovation inputs and outputs, excluded from impact due to economic policies for instance. An important difficulty dealing with regional innovation strategy and action plan impact assessment, and observatory output, is the time-lag between implementing a policy and the impact following that action. Regional innovation action plans are demanding in terms of resources. Not only do they require time, but to succeed they require a thorough understanding of objectives, actions and data to collect. Moreover all of this can be compounded by the associated issues of lack of data. That is why the definition of indicators for data gathering is central to the success of the regional innovation strategy. Potential barriers to RIS implementation Anticipating and handling potential barriers to the success of regional innovation strategy exercise is an important component in the implementation process. A number of factors may influence the direction and/or success of the strategy. Table 13 includes a list of possible implications for regional innovation strategy implementation. 115 THE WORLD BANK June 2011 Table 13: Potential barriers to regional innovation strategy implementation Category Relevant questions ORGANIZATIONAL Is there support for the RIS? From whom? Are there opponents? Who are they? POLITICS: PROJECT Who has control over the RIS project (formally/informally)? LEADERSHIP: What goals do they have for the project’s future? How does RIS fit the goals of the major stakeholders? PROFESSIONAL Are professional groups interested with innovation matters? Who are they? INFLUENCES: Are they supportive of a RIS exercise? HISTORY: How secure or stable is the region? What has been the tradition or history of self-appraisal or evaluation? Have Regional innovation strategy been conducted before? What information already exists? What can be learned from past RIS exercises? ECONOMICS: Is public / private funding support for the RIS secure? Have funds been allocated for the RIS Action plan / pilot projects? Will a written commitment be needed? Is this commitment possible? LEGAL Will legal restrictions (rights, eg. Sensitiveness of fiscal information) limit GUIDELINES: collection of desired information? Will professional or institutional rulings affect the evaluation procedures? Will the project be affected by pending legislation? RESOURCES: Are resources (human, financial, time, etc.) available to support the RIS ? How will future changes in resource allocations affect the project? Are the project personnel skilled at conducting a RIS ? Can RIS support services be accessed by the project personnel? Is there enough time to properly conduct the RIS? Will some part of the RIS require facilities that are not available? The EU experience highlighted opportunities to address several limitations of the strategy process in less developed regions. These limitations included difficulties in mobilizing stakeholders due to lack of expertise and experience, and a lack of understanding of the mechanisms of innovation.33 Challenges also included the limited development and 33 Innovative strategies and actions: Results from 15 Years of Regional Experimentation, European Commission, Directorate- General Regional Policy, 30 June 2006. 116 THE WORLD BANK June 2011 implementation of monitoring and evaluation systems, limited follow up on detailed work programs, difficulties in maintaining political and financial commitments to the strategies, and difficulties in retaining the body of knowledge generated by pilot strategies to inform future activities.34 Similar challenges can be expected in many Russian regions. Effective regional innovation strategy development processes in Russia will need to respond to the needs of regional and national stakeholders and be implementable by those same stakeholders. 34 Ex-post evaluation of the RIS, RTTs and RISI ERDF innovative actions for the period 1994-99, Socintec and Inno-Group, 2004. 117 THE WORLD BANK June 2011 Appendix Global Business Environment Surveys: Business Environment and Enterprise Performance Survey (BEEPS): Developed jointly by the World Bank and the European Bank for Reconstruction and Development, this survey was carried out in 1999, 2002, 2005, and 2008 covering countries in Central and Eastern Europe and Central Asia. The BEEPS examines a wide range of interactions between firms and the state that affect the business environment. The Surveys capture firms’ experience in a range of areas, including regulation, tax policy, labor relations, infrastructure services, technology, and training. The surveys attempt to identify and, whenever possible, quantify firms’ obstacles in the investment climate. Since the basic methodology is consistent across countries, many areas of the surveys allow international comparisons. In 2005, BEEPS was also conducted in Portugal, Spain, Greece, Germany, Ireland, and South Korea to allow comparison outside the region. Doing Business Benchmarking Since 2004, Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening up access to credit and enforcing contracts by measuring their impact on 10 indicator sets. These indicators include: Starting a business; Dealing with construction permits; Registering property; Getting credit; Protecting investors; Paying taxes; Trading across borders; Enforcing contracts; and Closing a business. While the rankings do not tell the whole story of the business environment, improvement in an economy’s ranking generally indicates that its government is creating a regulatory environment more conducive to operating a business. Global Competitiveness Index The global competitiveness index, conducted by the World Economic Forum is based on over 100 indicators which describe 12 major pillars of competitiveness. These 12 pillars include: Institution, Infrastructure, Macro-economy, Goods market efficiency, Labor market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation. The 12 pillars taken into account are described by a variety of observable qualitative and/or quantitative variables (indicators). Each pillar is described from a minimum of 2 variables (Market size) to a maximum of 18 variables (Institutions). 118 THE WORLD BANK June 2011 Possible Benchmarking Indicators and Data Sources 1. Industry Demand for Innovation 1.1. Business dynamism and entrepreneurship (by sector and aggregate) o Gazelle companies: firms with annual sales revenue that has grown 20 percent35 or more for four straight years per 1 million nonfarm establishments [ratio]. (11) o Gazelle jobs: jobs firms with annual sales revenue that has grown 20 percent or more for four straight years as a share of total employment [%]. (11) 1.2. Start-ups and entrepreneurship o Entry rate: Number of newly registered corporations divided by the number of total registered corporations [ratio] (1) o New business density: Number of newly registered corporations divided by total working age population [enterprises / population] (1) o Perceived capabilities: Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded) who believe they have the required skills and knowledge to start a business. [%] (4) o Fear of failure rate: Percentage of 18-64 population with positive perceived opportunities (individuals involved in any stage of entrepreneurial activity excluded) who indicate that fear of failure would prevent them from setting up a business. [%](4) o Entrepreneurship as desirable career choice: Percentage of 18-64 population who agree with the statement that in their country, most people consider starting a business as a desirable career choice [%](4) 1.3. Manufacturing sectors o Manufacturing value-added: Manufacturing value-added per worker, by sector and aggregate [RUB/worker] (5) o Local supplier quality: “How would you assess the quality of local suppliers in your country?� *1 = very poor; 7 = very good+ (by sector and aggregate) (10) 1.4. High-technology sectors o Value-added in high-tech sectors as a share of GRP: High tech sectors are as defined by the OECD (http://epp.eurostat.ec.europa.eu/cache/ITY_SDDS/Annexes/htec_esms_an5. pdf) [%] o High-tech employment: Share of workers employed in high tech sectors. High tech sectors are as defined by the OECD (http://epp.eurostat.ec.europa.eu/cache/ITY_SDDS/Annexes/htec_esms_an5. pdf ) [%]. 35 This could be changed to a 10 percent growth rate to be more adapted to the regional context. However, the indicator would no longer be comparable to international benchmarks. 119 THE WORLD BANK June 2011 o Exports of high technology products as a share of total exports: High tech sectors are as defined by the OECD (http://epp.eurostat.ec.europa.eu/cache/ITY_SDDS/Annexes/htec_esms_an5. pdf ) [%].(5)(8) 1.5. Business Globalization o Export focus of manufacturing and services: the value of exports per manufacturing and service worker [RUB/worker]. o Export intensity in manufacturing and services: exports as a share of total output in manufacturing and services [%]. o Foreign direct investment (FDI): FDI as a share of regional GRP [%].(5) o Foreign direct investment jobs: the percentage of the workforce employed by foreign companies [%]. 1.6. Knowledge Economy o Managerial, professional, and technical jobs: managers, professionals, and technicians as a share of the total workforce [%]. o Scientists and engineers per workforce: scientists and engineers as a percentage of the labour force [%] (by sector) (2) o Scientists and engineers in industry: number of scientists and engineers employed in industry as a share of total number of scientists and engineers [%](2) 1.7. Appetite for innovation o FASIE projects: Number of projects supported by the FASIE per 1,000 workers [awards/worker] (6) o Industry R&D intensity: industry investments in research and development as a percentage of industry output [%] (5) o Share R&D performed by industry: research and development performed in enterprises as a share of total R&D [%]. (2)(3) 1.8. Innovation activities o Product innovation: Share of enterprises having introduced a product innovation during the past 3 years. A product innovation is the market introduction of a new good or service or a significantly improved good or service with respect to its capabilities, such as improved software, user friendliness, components or sub-systems. The innovation (new or improved) must be new to the enterprise, but it does not need to be new to the sector or market. It does not matter if the innovation was originally developed by the enterprise or by other enterprises. [%] (8) o Organizational innovation: Share of enterprises having introduced an organizational innovation during the past 3 years. An organizational innovation is the implementation of new or significant changes in firm structure or management methods that are intended to improve the firm’s use of knowledge, the quality of the goods and services or the efficiency of work flows. [%](8) 120 THE WORLD BANK June 2011 o Process innovation: Share of enterprises having introduced process innovations during the past 3 years. A process innovation is the implementation of a new or significantly improved production process, distribution method or support activity for your goods or services. The innovation (new or improved) must be new to the enterprise, but it does not need to be new to the sector or market. It does not matter if the innovation was originally developed by the enterprise or by other enterprises. Exclude purely organizational innovations. [%](8) o Number of enterprises with product, organizational or process innovations in the past three years as a share of total number of enterprises [%](8) o Factors hampering innovation: During the 3 years, how important were the following factors in hampering firms’ innovation activities or projects or influencing a decision not to innovate? * “High� “Medium� “Low� “Factor not experienced�+:  Lack of funds within the enterprise or group  Lack of finance from sources outside the enterprise  Innovation costs too high  Lack of qualified personnel  Lack of information on technology  Lack of information on markets and competitors  Difficulty in finding cooperation partners for innovation  Market dominated by established enterprises acting as monopoles  Uncertain demand for innovative goods or services  Need to meet Government regulations  Excessive perceived economic risks  No need due to prior innovations  No need because of no demand for innovations  Difficulties understanding which types of innovations would best serve the growth of the company  Lack of desire to grow the company 2. Knowledge Providers in the region (universities, R&D organizations) 2.1. Evolution of the transfer systems 2.2. Competence mapping in institutions depending from the RT 2.3. Competence mapping in institutions not depending from the RT 2.4. Overall R&D Activity Indicator o Total R&D expenditures as share of GRP [%] (5)(3)(8) o Russian patents per worker: the number of Russian patents issued per 1,000 workers [patents/1,000 worker](7) 121 THE WORLD BANK June 2011 o US or European patents per worker: the number of US patents issued per 1,000 workers [patents/1,000 worker] (13) o Russian patents per R&D performed: the number of Russian patents issued per total investments in R&D [patent/RUB]. o US or European patents per R&D performed: the number of US patents issued per total investments in R&D [patents/RUB] o Publications: Academic articles in international peer-reviewed journals per 1,000 researchers [articles/1,000 researchers]. (14) 2.5. Human Capital o University attainment: Percent of population over 25 years of age with at least a university degree [%]. (2) o Doctoral attainment: Percent of population over 25 years of age with a doctorate [%].(2) o Science and engineering graduate students: Science and engineering graduate students per 1 million people [students/million people]. (2) 2.6. Academic R&D performance o Academic patents: Number of university and research institute patents per total academic investment in R&D [patents/RUB]. (9)(12) 2.7. Research Commercialization o Academic start-ups: Number of university and research institute start-ups formed per total academic investment in R&D. [start-ups/RUB] (9)(12) o Percentage of academic start-ups receiving external seed or venture financing o Academic industry funding: share of university research funded by industry [%]. o International academic funding: share of university research funded by foreign public or private organizations.[%] o Industry contracts: Number of contracts with industrial companies at scientific and educational organizations per 1,000 researchers [contracts/researchers] (6) o Extra-regional contracts: Number of contracts with industrial companies from other Russian regions at scientific and educational organizations per 1,000 researchers [contracts/researchers] (6) o Foreign contracts: Number of contracts with foreign industrial companies at scientific and educational organizations per 1,000 researchers [contracts/researchers] (6) o Academic licenses: Number of licenses per 1,000 researchers.[licenses/researcher] (9)(12) o International academic licenses: Number of licenses to foreign-owned companies per 1,000 researchers.[licenses/researcher] 2.8. Revenues generated thanks to technology transfer (to be measured by independent auditors) 122 THE WORLD BANK June 2011 3. Support Structures in the region (innovation support infrastructure, funds, consultancy services, etc.) 3.1. Description of existing support programs 3.2. Programs results growth 3.2.1. Number of companies having resided in the technopark or incubator in the past two years 3.2.2. Selection o Gazelle tenant: Share of tenants with annual revenue growth of more than 20% for each of the past four years or since formation [%] o Globalization tenants: Median share of tenant revenues obtained from exports [%] o Innovation appetite: Share of tenants fulfilling at least 3 of the following 5 criteria: Examples of questions to define together with other stakeholders:  Internal or outsourced R&D accounts for more than 10% of annual company turnover.  The company is regularly carrying out market intelligence (every 3 months).  The company is using tools to regularly check the latest innovations in their field of activity.  The company is regularly participating in exchange of ideas with other tenants organized by the technopark or informally.  The company is regularly analyzing market trends leading to being an innovation follower or a pre-emptive innovator. 3.2.3. Reputation assessment of support programs (technoparks, incubators, IVF) among stakeholders – companies, universities, start-ups. A five-question survey can be carried out by an independent party from outside the region. Examples of questions to define together with other stakeholders:  Have you collaborated with the following support program [list programs]? [yes/no]  If yes, have you been satisfied [list programs]? [1-5]  Have you ever recommended to one of your contacts to work with these programs [list programs]? [yes/no]  If yes, did the support respond to their needs [list programs]? [1-5]  How to you perceive the effectiveness of these programs at promoting innovation [list programs]? [1-5] 3.2.4. An independent evaluation of each program should be carried out every 4 years. 3.3. Investments made by the RT to facilitate the transformation into a knowledge-based economy 3.3.1. Example of traditional programs supported by regional government: 123 THE WORLD BANK June 2011  Entrepreneurship appraisal [yes – how much/no]  Micro-business setting [yes – how much/no]  Small industries from the supply chain [yes – how much/no]  Business development [yes – how much/no]  Export development [yes – how much/no]  Business centres [yes – how much/no]  Innovation experts [yes – how much/no]  Growth analysis [yes – how much/no]  Competence mapping [yes – how much/no]  In HEI to support innovation [yes – how much/no]  Innovation competition [yes – how much/no]  Etc. 3.4. Investments made through the channel of federal support programmes; the goal being to make sure the region and its stakeholders do develop a coherent approach towards the many programmes implemented at the federal levels (including the different agencies). 3.5. Investments made by other parties (Russia, international organizations, inward investors) in tenant firms and in infrastructure. Data Sources for Benchmarks The sources below contain a hyperlink to the relevant websites. 1) World Bank Group Entrepreneurship Survey 2) UNESCO Science & Technology statistics 3) OECD Science & Technology statistics 4) Global Entrepreneurship Monitor 5) World Bank World Development Indicators 6) Tomsk Administration regional indicators 7) ROSSTAT 8) Eurostat Science & Technology Statistics, including the Community Innovation Survey (EU) 9) Association of European Science and Technology Transfer Professionals (EU) 124 THE WORLD BANK June 2011 10) Global Competitiveness Report 11) Kauffman Foundation State New Economy Index (US) 12) Association of University Technology Transfer Managers (US) 13) United States Patent and Trademark Office (US) 14) ISI Web of Science 125