Innovate or die
'Innovative' is hardly the first adjective that comes to mind when considering the Polish business climate. There is a German joke that says that if the world ever ends, it's best to move to Poland, because everything happens here 10 years later.
Sadly, the numbers support the perception. From the level of research and development (R&D) taking place in public and private institutions, to the level of business activity in science and technology, Poland ranks at or near the bottom of many innovation indicators.
That bodes badly for Polish businesses, which have now entered the open and technologically advanced European market. With such a poor record, is Poland doomed to become a European backwater, where advances occur 10 years later than everywhere else?
Economists agree that in order to be innovative, a country must invest in R&D. The logic is easy: the more research businesses, universities and other organizations perform, the more they find new ways to use and make better technology.
Society of knowledge
The EU has made investment in R&D a priority. EU countries invest, on average, two percent of GDP in research, and the bloc has committed itself to increasing that number to three percent by 2010, as part of its Lisbon Strategy.
"My strong conviction, increasingly shared by others, is that we will achieve competitiveness and leadership for European enterprises on global markets only if we rapidly put Europe in the lead as an economy and a society of knowledge," Janez Potocnik, the European Commissioner for Science and Technology, told a conference in Brussels last week.
Nordic countries, such as Baltic competitors Finland and Sweden, are way ahead- they invest 3.4 percent and 4.3 percent of their GDP in R&D respectively. In comparison, Poland brings up the European rear, spending just 0.56 percent of its GDP on R&D.
Closing the gap
Krzysztof Krystowski, Undersercretary of State for the Ministry of Economic Affairs and Labor, sees the R&D gap as Poland's biggest hindrance to becoming a modern economy. He says Poland spends in the region of $60 (zł.187) per capita on R&D. In comparison, the EU average is $418 (zł.1,300) and in Finland it's around $1,000 (zł.3,111). "This is the size of the problem we have to tackle," Krystowski admits.
Efforts are being made to close the gap. Budget appropriations for R&D expenditures have grown by four percent over the last decade. That's better than most European countries, such as France (3.5 percent) and Germany (0.5 percent). Last week, Deputy Prime Minister Hausner pledged that the government would increase its budget expenditures for research in 2006 yet again, from the originally planned zł.2.8 billion to zł.4 billion. However, most argue that the government isn't making use of the funds efficiently.
"We are spending too carelessly," says Krystowski. Public R&D units (over 200 government-owned organizations performing independent research) aren't forced to compete, since "financing comes from the Ministry of Science. It gives money according to books and articles published," and not according to marketable results.
Mirosław Grudzień, vice-president of optoelectronics firm Vigo System, believes the government needs to change its strategy. "The government's role is to create the proper economic conditions and economic fundamentals useful for investment," he says, "not to provide direct aid, but aid connected with the ease of functioning in the market."
It seems the government may have finally gotten the message. It recently launched a series of measures it hopes will make investment in innovation easier. The centerpiece is the Bill on Supporting Innovation Activities which was approved by the government last September and is now being worked out in Parliament.
Tax turnaround
With this bill the government first hopes to encourage businesses to invest in innovation-something that hasn't happened up to now, due to a lack of big firms willing to spend large amounts on research.
"We do not have huge multinationals like in Germany and France," says Krzysztof Gulda, Director of the Department of Innovation in the Ministry of Economic Affairs and Labor. "The core business in Poland is around small- and medium-sized companies. Those companies are not able to perform or invest in their own R&D."
If the innovation bill passes, those companies would be able to declare up to 150 percent of their R&D budget as tax-deductible-a huge departure from the current system.
"The tax regime is a nightmare. It's completely unfair. Right now it's more advantageous for a business-owner to spend zł.1,000 on redecorating his office than zł.100,000 on research," Krystowski admits.
Private/public divide
>From the other side, the government wants to cure stubborn public researchers of their aversion to commercialization. "We propose the same tax incentives and the same legal framework for the private organizations performing R&D as the public organizations," says Krzysztof Gulda. He believes this would put public and private R&D organizations on a level playing field, forcing them to compete for business funds.
According to Krystowski, publicly funded scientists "have a mental problem to understand that their mission is very different now. Their mission is cooperation with business."
The reason is simple. "When innovation funding is done predominantly by private companies, this creates a great incentive for results," says Antti Joensuu from the Technology Department of Finland's Ministry of Trade and Industry. There, businesses represent nearly 70 percent of R&D expenditure. While some might argue that it's unfair to compare Poland to one of the most innovative economies on the planet, our neighbors to the south, the Czech Republic and Slovakia, each boast that companies provide 52 percent of their R&D financing. In Poland, businesses fund just 30 percent of all research.
Tech trouble
Compounding the problem even further is the lack of work in advanced technologies to be found in the Polish market.
"In Poland, there are not many firms which really engage in advanced technology," says Grudzień. "Those companies that we could really call ultra-modern simply don't exist here."
The new innovation bill would allow for the Bank Gospodarstwa Krajowego (BGK) to grant firms special technology loans, which Krystowski hopes will jumpstart investment in new technologies.
"Companies who would like to invest in R&D related to new technology will not have to pay back up to 50 percent of the loan. The amount repayable will depend on the value of the sale of the new product," he explains.
Jump-starting innovation
But some question whether these measures can turn the technology tide in Poland.
"It's impossible to change the situation," says Grudzień. "Many years of an inefficient economy means that unfortunately, the majority of our industry has become technologically backward."
In the end, perhaps the best method of jump-starting innovation in Poland is through the dissemination of the proper information.
"The most important thing is awareness," according to Irma Pęciak, the director of the innovation and technology team of the Polish Agency for Enterprise Development. She says that most business-owners simply don't know their options. "People have to know that they can make such investments."
"I think it's a long process," says Gulda. "It must take some time, but I think that more and more people are beginning to understand this issue. The only way to compete on the global market is through innovation." Krystowski agrees. "We must be patient. Changing the system and perceptions is difficult and complicated, but we should be active, and not only wait."
Sadly, the numbers support the perception. From the level of research and development (R&D) taking place in public and private institutions, to the level of business activity in science and technology, Poland ranks at or near the bottom of many innovation indicators.
That bodes badly for Polish businesses, which have now entered the open and technologically advanced European market. With such a poor record, is Poland doomed to become a European backwater, where advances occur 10 years later than everywhere else?
Economists agree that in order to be innovative, a country must invest in R&D. The logic is easy: the more research businesses, universities and other organizations perform, the more they find new ways to use and make better technology.
Society of knowledge
The EU has made investment in R&D a priority. EU countries invest, on average, two percent of GDP in research, and the bloc has committed itself to increasing that number to three percent by 2010, as part of its Lisbon Strategy.
"My strong conviction, increasingly shared by others, is that we will achieve competitiveness and leadership for European enterprises on global markets only if we rapidly put Europe in the lead as an economy and a society of knowledge," Janez Potocnik, the European Commissioner for Science and Technology, told a conference in Brussels last week.
Nordic countries, such as Baltic competitors Finland and Sweden, are way ahead- they invest 3.4 percent and 4.3 percent of their GDP in R&D respectively. In comparison, Poland brings up the European rear, spending just 0.56 percent of its GDP on R&D.
Closing the gap
Krzysztof Krystowski, Undersercretary of State for the Ministry of Economic Affairs and Labor, sees the R&D gap as Poland's biggest hindrance to becoming a modern economy. He says Poland spends in the region of $60 (zł.187) per capita on R&D. In comparison, the EU average is $418 (zł.1,300) and in Finland it's around $1,000 (zł.3,111). "This is the size of the problem we have to tackle," Krystowski admits.
Efforts are being made to close the gap. Budget appropriations for R&D expenditures have grown by four percent over the last decade. That's better than most European countries, such as France (3.5 percent) and Germany (0.5 percent). Last week, Deputy Prime Minister Hausner pledged that the government would increase its budget expenditures for research in 2006 yet again, from the originally planned zł.2.8 billion to zł.4 billion. However, most argue that the government isn't making use of the funds efficiently.
"We are spending too carelessly," says Krystowski. Public R&D units (over 200 government-owned organizations performing independent research) aren't forced to compete, since "financing comes from the Ministry of Science. It gives money according to books and articles published," and not according to marketable results.
Mirosław Grudzień, vice-president of optoelectronics firm Vigo System, believes the government needs to change its strategy. "The government's role is to create the proper economic conditions and economic fundamentals useful for investment," he says, "not to provide direct aid, but aid connected with the ease of functioning in the market."
It seems the government may have finally gotten the message. It recently launched a series of measures it hopes will make investment in innovation easier. The centerpiece is the Bill on Supporting Innovation Activities which was approved by the government last September and is now being worked out in Parliament.
Tax turnaround
With this bill the government first hopes to encourage businesses to invest in innovation-something that hasn't happened up to now, due to a lack of big firms willing to spend large amounts on research.
"We do not have huge multinationals like in Germany and France," says Krzysztof Gulda, Director of the Department of Innovation in the Ministry of Economic Affairs and Labor. "The core business in Poland is around small- and medium-sized companies. Those companies are not able to perform or invest in their own R&D."
If the innovation bill passes, those companies would be able to declare up to 150 percent of their R&D budget as tax-deductible-a huge departure from the current system.
"The tax regime is a nightmare. It's completely unfair. Right now it's more advantageous for a business-owner to spend zł.1,000 on redecorating his office than zł.100,000 on research," Krystowski admits.
Private/public divide
>From the other side, the government wants to cure stubborn public researchers of their aversion to commercialization. "We propose the same tax incentives and the same legal framework for the private organizations performing R&D as the public organizations," says Krzysztof Gulda. He believes this would put public and private R&D organizations on a level playing field, forcing them to compete for business funds.
According to Krystowski, publicly funded scientists "have a mental problem to understand that their mission is very different now. Their mission is cooperation with business."
The reason is simple. "When innovation funding is done predominantly by private companies, this creates a great incentive for results," says Antti Joensuu from the Technology Department of Finland's Ministry of Trade and Industry. There, businesses represent nearly 70 percent of R&D expenditure. While some might argue that it's unfair to compare Poland to one of the most innovative economies on the planet, our neighbors to the south, the Czech Republic and Slovakia, each boast that companies provide 52 percent of their R&D financing. In Poland, businesses fund just 30 percent of all research.
Tech trouble
Compounding the problem even further is the lack of work in advanced technologies to be found in the Polish market.
"In Poland, there are not many firms which really engage in advanced technology," says Grudzień. "Those companies that we could really call ultra-modern simply don't exist here."
The new innovation bill would allow for the Bank Gospodarstwa Krajowego (BGK) to grant firms special technology loans, which Krystowski hopes will jumpstart investment in new technologies.
"Companies who would like to invest in R&D related to new technology will not have to pay back up to 50 percent of the loan. The amount repayable will depend on the value of the sale of the new product," he explains.
Jump-starting innovation
But some question whether these measures can turn the technology tide in Poland.
"It's impossible to change the situation," says Grudzień. "Many years of an inefficient economy means that unfortunately, the majority of our industry has become technologically backward."
In the end, perhaps the best method of jump-starting innovation in Poland is through the dissemination of the proper information.
"The most important thing is awareness," according to Irma Pęciak, the director of the innovation and technology team of the Polish Agency for Enterprise Development. She says that most business-owners simply don't know their options. "People have to know that they can make such investments."
"I think it's a long process," says Gulda. "It must take some time, but I think that more and more people are beginning to understand this issue. The only way to compete on the global market is through innovation." Krystowski agrees. "We must be patient. Changing the system and perceptions is difficult and complicated, but we should be active, and not only wait."
