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is Denmark, which, thanks to the high innovation activity and networking level of its small enterprises, is better positioned in the ranking based on the European Commission’s method than in the innovation index based on the WEF’s method, which focuses more on the measurement of the preconditions for the technological innovation. 4.5.2 Innovation capacity in various country groups Below, we examine the development and implementation of the state’s innovation potential in Estonia and the reference states used in this report, adding to them Israel and Canada. We divided the countries under observation into four groups, which differ as to their economic development and geographical location. The need and opportunities for innovation arise from the level of existing economic development of the country; on the other hand, the success in realisation of innovation potential is one of the main factors that ensures that the state’s economic level will increase in the future. The first group of the comparison could be called the countries with developed economies. This group is comprised of Finland, Denmark, Netherlands, Switzerland, Austria and Ireland, as well as New Zealand and Canada, of the states located outside of Europe. As a whole, this group could be called the group of old rich countries, in which Ireland, and sometimes also Finland, are considered to be the ones that started their rise most recently, with upward trajectories starting roughly in the 1960s. Except for New Zealand, the GDP per capita of this group of countries is about twice as high as that of Estonia. The pace of GDP growth during the last 15 years Table 4.5.1 Ranking of the innovation capability of states based on the WEF methodology Rank Country 1. Switzerland 2. Finland 3. Israel 4. Sweden 5. Japan 6. USA 7. Germany 8. Singapore 9. Netherlands 10. Great Britain 12. Denmark 13. Austria 14. Taiwan 16. South Korea 21. Republic of Ireland 22. Canada Rank Country 24. New Zealand 30. Estonia 32. Slovenia 33. China 34. Czech Republic 37. Hungary 38. Costa Rica 41. India 43. Lithuania 44. Chile 51. Russia 63. Poland 64. Latvia 69. Uruguay 89. Slovakia Source: K. Schwab (ed.). The Global Competitiveness Report 2012-2013, Geneva 2012 has been significantly lower than in Estonia, or generally, in the best of the CEE countries, which is quite natural, when starting from a higher level. In this context, the pace of growth in Ireland and Finland must be considered as truly exceptional for developed economies. Despite strong competition from the countries of East Asia, based on the competitiveness ranking, the countries that belong to this group can still be regarded as the world’s “elite.” Only New Zealand is left out of the top 20, and just barely. Switzerland and Finland are the best in the world, when it comes to competitiveness. In this group of states with developed economies, their position in the innovation capacity ranking is nearly in all cases practically the same as in the competitiveness ranking. It is only slightly worse for Austria. It seems that innovation is so important for very highly developed economies that a position at the top of the competitiveness ranking cannot be maintained without it. It is also apparent that the so-called old wealthy states in our sample have made great investments into their innovation potential, and do not intend to concede their excellent positions among the developmental leaders. However, since the innovation capacity ranking is not significantly higher in these countries than the competitiveness ranking, we cannot presume that the conversion of the former into the latter would result in a great leap in their economic development in the upcoming period (which could be possible in some East Asian countries). In practically all the states in the given group, the innovation pattern is uniformly good, without any special weak elements. The engine is usually a combination of four factors: the level of the universities and research institutions, existence of scientists and engineers, collaboration between universities and companies, and the ability to create new technologies, not just adopt them. Somewhat less frequently, high R&D investments by companies and their patents are included among the stronger elements of the innovation pattern. The Netherlands and Switzerland stand out, primarily, for their strong universities, along with Denmark, Canada and New Zealand. Finland is somewhat concerned about the level of its universities. A strong element in the innovation pictures of Finland, Ireland and Canada is the existence of scientists and engineers, while at the same time, in the Netherlands, Austria, New Zealand and also Denmark, they are more concerned about the dearth of scientists and engineers than about any other elements of innovation potential. The collaboration between companies and universities is very good in Finland, Switzerland, Denmark, Ireland, Canada and New Zealand. This element is not among the weakest innovation potential elements in any of the states of this group. In the same group, patents are among the strongest elements of innovation potential only in Austria (however, this indicator is also very good in Switzerland); the R&D investments of companies are strongest in Austria and Switzerland; but these indicators are not markedly weak in any of the countries in this group. It can be said about the innovation pattern of the countries in the developed economies group that although, as rule, we are dealing with strong and often international companies; the innovation potential of these countries depends, to a great extent, on the collaboration between the private and pub- 182 Estonian Human Development Report 2012/2013
Table 4.5.2 Comparison of innovation rankings of EU Member States based on two methodologies Innovation ranking of EU Member States based on the EC Scoreboard (2011 data) Ranking of the innovation capacity of the EU Member States based on WEF methodology (2011 data) Sweden 1 Finland 1 Denmark 2 Sweden 2 Germany 3 Germany 3 Finland 4 Netherlands 4 Belgium 5 Great Britain 5 Great Britain 6 Belgium 6 Netherlands 7 Denmark 7 Austria 8 Austria 8 Luxembourg 9 France 9 Ireland 10 Luxembourg 10 France 11 Ireland 11 Slovenia 12 Estonia 12 Estonia 14 Slovenia 14 Czech Republic 17 Czech Republic 15 Hungary 19 Hungary 18 Slovakia 22 Slovakia 25 lic sectors. It seems that the existence of strong (even very strong) universities is a key element here. The countries in this group are not only implementers of new technologies, but also the creators of new technologies. During the last 15 years, rapid economic growth has been typical of the Central and Eastern European (CEE) countries; whereas Slovenia and the Czech Republic are somewhat wealthier than Estonia and the others. In the general index of innovation capability, the countries in this group lag behind all the countries in the previous group. The innovation picture in these countries is also uneven, and as a rule, includes some weak elements. Against an international background, the innovation indices of the Czech Republic and Slovenia are still sufficiently good, and upon closer analysis, one can state that they are structurally better than the corresponding index for Estonia. Slovakia’s innovation index is considerably worse than the indices of the other group members, and is more similar to those of the South and Central American states. An analysis of the innovation picture of the countries in the CEE group shows that in all of them, besides Slovakia, the quality of their universities and other research institutions is relatively good, but not outstanding (none of the top universities of the CEE states in our selection are among the 200 strongest universities in the world). In these countries, this component is usually among the strongest. The synthetic innovation indices in the states of this group are either worse than the higher education and training indicators or more or less on the same level (Czech Republic). Collaboration between universities and companies is one of the strongest components of innovation potential only in the case of Estonia. Can we speak about the countries in this group as creators of new technologies, not only as the adopters of these technologies? In this regard, positive assessments have been given in the case of Slovenia and the Czech Republic. As far as the companies’ R&D investments, one can speak positively only about Slovenia, and as far as patents are concerned, about Slovenia and Hungary. In the Czech Republic and Estonia, compared to the other innovation components, the sufficiency of scientists and engineers is in a weaker position; as are patents in Estonia. The government procurement of advanced technology is not among the stronger elements in any of the given countries. The Czech Republic is better positioned in the ranking of innovation capacity than in the ranking of general competitiveness; in the other states in the group the situation is reversed. From this we can conclude that there is a danger that, following the rise in the cost of the economy and the exhaustion of less sophisticated development reserves, insufficient innovation capability may become an obstacle, for the majority of countries in this group, in achieving an economic growth similar to that of previous periods. As a whole, it can be said that, during the 2000s, the economic development in the reference states of South and Central America (three countries) lagged behind the leaders of Central and Eastern Europe. If, in the late 1990s, these three countries, with their per capita GDP of approximately US$10,000, were at, approximately, the same level as the previous group (except for Slovenia), during the decade before the last economic crisis they, nevertheless, did not achieve strong economic growth. If the CEE leaders at least doubled the size of their economies during this period, the GDP in the countries in the Americas under observation increased only 1.3 to 1.7 times. And currently, the GDP per capita is clearly lower than in the top CEE countries. Costa Rica’s and Chile’s innovation capability indices, and most of the component indicators, are both at a strong middling level, and lag only slightly behind Estonia. Based on these indicators, Uruguay is clearly in a weaker position. The innovation capability rankings of all the South and Central American states under observation are worse than their positions based on higher education and training. The picture is about the same as for the CEE countries. However, what stands out about the American reference states is that the majority deal only with the adoption of technology, and not its creation. Although Costa Rica and Chile seem to be relatively similar, based on the traits examined above, the general competitiveness of Chile’s economy was significantly better than its innovation capability. This means that problems may develop when the economy arrives at the next, so-called innovation-based, stage of development. It is just the opposite in the case of Costa Rica – a relatively high innovation potential is underutilised because of inadequate economic policies, or for some other reasons. All of the four reference states in Asia are wealthier than Estonia, based on GDP per capita – Singapore very substantially, and the remainder (Israel, Taiwan and South Korea) by approximately one-third. It can be said that these all are economies, which have been successfully created during the last half century under very difficult circumstances. If we start to examine economic Estonian Human Development Report 2012/2013 183
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ESTONIAN HUMAN DEVELOPMENT REPORT 2
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Table of Contents 1 Human Capital /
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Dear Reader Since the moment when E
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1Human Capital Estonian Human Devel
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the HDI’s content has also been h
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Figure 1.1.1 The human development
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Figure 1.1.7 The income sub-index:
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The results of the Princeton Projec
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the hypothetical generation. The to
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Figure 1.2.3 Life expectancy. Eston
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Table 1.2.2 also presents the most
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The new trends that are appearing i
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Figure 1.2.8 Components of populati
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New features were introduced into E
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Initiation of Voluntary Birth Contr
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Table 1.3.1 Best-known educational
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(OECD 2012b). Therefore a certain r
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The reciprocal dependence of the pr
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Figure 1.3.8 Percentage of students
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Table 1.3.4 The quality of educatio
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1.4 Health Raul-Allan Kiivet Change
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Table 1.4.1 Usage of prescription m
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allude to the fact that approximate
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promote healthy lifestyles among th
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Figure 1.5.1 The World Values Surve
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Table 1.5.2 Estonia’s participati
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Figure 1.5.3 The percentage of the
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Figure 1.5.5 Percentage of the Esto
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The fact that Estonia’s position
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Summary Mati Heidmets The global vi
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2People and Society Estonian Human
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Table 2.1.1 Structure of the Bertel
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tioning market economies (15 states
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2.2 Freedom and democracy Martin M
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Table 2.2.1 Democracy indicators Po
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Figure 2.2.2 The distribution of th
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would be something that none of the
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political participation are general
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strongest, while a very small perce
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is concerned, Estonia is one of the
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Figure 2.4.2 Average circulation of
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2.5 Corruption Jüri Saar In accord
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Lithuania, 61%; and in Russia, 69%.
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2.6.2 Intentional homicides in Esto
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crime. And thirdly, there was a wis
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References 1. Ahven, A. & Tabur, L.
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states included in the EU Kids Onli
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2.8 Public assessments of the state
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Figure 2.8.4 Changes releated to tr
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of the state’s development are en
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Table 2.9.1 The positions of Estoni
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3. IEP (2011). Structures of Peace.
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3Welfare and the Quality of Life Es
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choices made, not what people say t
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Figure 3.1.5 Public social spending
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tion agreed upon the social contrac
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References 1. Aidukaite, J. (2006).
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hand, to the “inequality of acces
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and explanations of the extent of i
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5- much more than I deserve. Some d
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people in Estonia consider the inco
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Table 3.3.1 Experienced Well-Being
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at about 70%. In Latvia and Lithuan
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sign. It seems that the usual view
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3.4 Quality of life Anu Toots 3.4.1
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Page 151 and 152: 4The Economy Estonian Human Develop
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Page 155 and 156: Figure 4.1.3 Components of economic
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Page 159 and 160: References 1. Acemoglu, D.; Robinso
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Page 167 and 168: 4.3 Labour market Reelika Leetmaa,
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Page 183: 4.5 Innovation Erik Terk, Katrin M
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Page 201 and 202: Table 5.2.2 Support of the differen
Page 203 and 204: 5.3 Development policies Erik Terk,
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Page 207 and 208: Figure 5.4.1 Support for the possib
Page 209: Summary Erik Terk Estonia is part o
Page 212 and 213: ehavioural patterns. Therefore, it
Page 214 and 215: EDR 2012/2013 authors Clemens Buche
Page 216 and 217: EDR 2012/2013 authors Alari Purju i
Page 218: Editor-in-Chief: Mati Heidmets Prod
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