DEVELOPMENT

4.5
Innovation
Erik Terk, Katrin Männik, Silja Lassur
The innovation capability of economies, societies and states,
and the realisation of this capability become extremely
important, especially at certain stages of development.
Literature has traditionally dealt, primarily, with how the
enterprises in a par¬ticular country are able to update their
products and technologies, to move up in the value chain
thereby enabling them to demand higher prices and how
countries succeed in establishing new cutting-edge industrial
sectors. However, in addition to product and technology
innovations, attention has recently increasingly been
directed at innovations in marketing, organisation, companies’
foreign contacts and other non-technological innovations.
In the broader context, innovations in governance,
lifestyles, i.e. social innovation in general, has become a
special topic for research. All these aspects of innovation
are interconnected, and together they form a complicated
innovation pattern in a specific country. In order to support
innovation, states develop innovation policies and improve
national systems for innovation. The latter is understood
to mean the networks of public and private sector organisations
that initiate, import, adapt and disseminate new
technologies and other innovative solutions. Attention is
focused on the knowledge, technology and information
flows between companies and other organisations (universities,
research institutions, etc.), but also between the
companies themselves (Freeman 1995; Rothwell 2002). It
is the quality of the functioning of complex cooperation
networks that creates the bases for the rising innovativeness
of the country.
We observe the necessary preconditions for innovation
process, how the innovation potential emerging in
the country due to the preconditions raises the country’s
competitiveness, which in its turn will be realised in
economic growth and other development indicators. We
shall describe how different countries attempt to make
the aforementioned chain function properly by using
innovation and economic policy measures.
Firstly, we examine the innovation-related rankings
of states and ascertain the positions of Estonia and its
reference states. We describe the specifics of innovation
potential in the states, the situation related to the individual
elements, and generalise these results at the level
of regional groups of countries. This allows us to better
understand the context in which innovation capability
develops and is realised. We compare Estonia’s “innovation
pattern” with the innovation patterns of the other
Central and Eastern European (CEE) countries, as well
as states in other regions of the world, and ascertain how
innovation capability is linked to a state’s competiveness.
Thereafter, we examine the most important changes in
the states’ innovation policies during the last few years,
as well as describe and generalise them, and try to draw
some conclusions for Estonia.
4.5.1
The innovation rankings of states
Measuring innovation potential of the country or results
of innovation is quite complicated. Different methods
have been developed for this, and their results diverge
somewhat. In the current case, we rely primarily on two
methodologies; the first was developed by the World Economic
Forum (WEF), and is used to measure the general
competiveness of states. The second, the methodology
of the European Innovation Scoreboard, is used by the
European Commission. Unfortunately, the latter has been
used in non-EU countries only in rare cases.
The European Commission’s (EC) use more than
40 parameters to measure the state of innovation. The
parameters are not limited to ones related to innovation
potential (the scientific potential of the country, investments
in research and development [hereinafter R&D],
in-house research in companies, access to venture capital,
etc.), but also reflect the use of innovation potential
and the achieved results. The number of different types
of innovations implemented by the companies in the
period under observation is measured; the percentage
of the population working in knowledge-based fields of
activity, etc. Labour’s education-related indicators are also
dealt with as a precondition for innovation. The World
Economic Forum’s (WEF’s) index of innovation is comprised
of seven relevant yardsticks of innovation, which
are directed at the measurement of innovation potential.
However, the index deals with it in a relatively restricted
manner, by focusing primarily on the technological and
financing aspects of innovation, and the relations of
companies with universities and research organisations.
However, since the WEF method examines innovation in
the context of competitiveness as a whole (see sub-chapter
4.1), this method enables the innovation index and
its components to be compared to other, closely related
indicators of competitiveness. Often, the innovation indicators
obtained by using the WEF’s method are examined
together with the indicators for business sophistication.
In the ranking of innovation capacity, based on the
WEF’s methodology, Estonia, along with the more capable
Central and Eastern European states, is positioned at
the beginning of the 40s in the World. According to this
assessment, we are ranked somewhat ahead of Slovenia
and the Czech Republic. But closer analysis shows that
the difference is marginal, and is probably based on the
technical nuances of the methodology. The gap between
Estonia and the top ten in the World is relatively large.
In the following comparison of the innovation- related
rankings of the EU Member States, based on the two aforementioned
methods, no great differences can be found in
regard to Estonia or most of the other states. The exception
Estonian Human Development Report 2012/2013
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