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SMEs, and especially, on supporting their marketing activities. These measures include supporting market analyses, patent searches, packaging-related solutions, the development of marketing concepts and providing of grants for entry into new markets. The corresponding grants for small companies are approximately €10,000 per company. Several top technological universities and leader firms, operating in the forefront of technological progress (especially in the pharmaceutical industry), are located in Switzerland. A large part of the economy and employment is high-tech. Although the public sector investments in innovation are not small, the lion’s share of R&D investments is made by large (primarily international) technology-based companies. The role of the state is seen in the financing of general scientific research. The longterm and carefully-thought-out collaboration between business enterprises and the public sector (incl. the universities) is often mentioned in the case of Switzerland. (For example, private companies are often represented on the boards of universities that finance R&D, etc.). At the same time, criticism is increasing that the state is not able to utilise its extremely strong knowledge potential and convert it into economic output. However, as a whole, the innovation system is considered to be well-functioning, and no great changes are planned. The possibilities for improvement include the following: improving the connections between SMEs and the existing knowledge system; creating a suitable venture capital system for SMEs; and improving the higher education system, in order to produce more high-tech specialists and entrepreneurs. It is interesting that in Finland we can see a withdrawal from the idea of regional universities, but in Switzerland, a course has been set to establish new (technological universities) in the cantons, in order to better utilise regional human potential. At the junction between enterprise and innovation policy, there are various measures for start-up enterprises, especially for helping technology-based companies. In Switzerland, the reaction to the international economic crisis was an “anti-cyclical” financial policy, which also affected R&D&I expenditures that were increased, rather than reduced, during the crisis. Foreign investors play a dominant role in Ireland’s economy. The question of progress of local businesses and their ties with foreign companies has shifted to the background and the situation has worsened. Unfortunately, clusters have not achieved conspicuous strength. Such an economy is very vulnerable to the changes in foreign markets. Currently, Ireland has directed all of its resources to increasing the added value and volume of exports, of which 85% is generated by foreign-owned companies. The objectives of the policy are explicit. Ireland’s strategy, which is called Trading and Investing in a Smart Economy: A Strategy and Action Plan for Irish Trade, Tourism and Investment to 2015, is directed primarily at the creation of new jobs in exporting companies (150,000 new jobs in five years), and direct investments (780 projects), primarily in new and nascent economies. A “personal” approach to multinational enterprises is employed – beneficial “personalised” packages (IDA Ireland) are prepared for them. Irish hopes are primarily associated with two sectors of the economy: ICT and medical technologies. Nine of the 10 top pharmaceutical companies (e.g. GSK, Merck, Pfizer) are represented in Ireland, as are eight of the 10 IT companies. Having entered the market as manufacturers, today, important R&D centres have been established in collaboration with local universities. Since the budgetary situation was strained, starting in 2010, the R&D expenditures made by the state have been reduced somewhat. Currently, more emphasis is being placed on “close-to-market” research, as well as on collaboration between research and business. Recently, fourteen research areas were chosen to be prioritised over the next few years (National Research Prioritisation Exercise). The last few years have seen a reduction in investments in R&D human resources, which are connected to institutions of higher education. The money has been proportionally redirected to R&D resources that are more directly connected to the market, by supporting the creation of high-end jobs, etc. Strong universities and high-quality local suppliers are characteristic of New Zealand. Moreover, the collaboration between companies and universities is quite close. At the same time, considering the generally good level of the state, the export structure is a bit primitive; companies are not in key positions in the international value chain; and clustering is weak. The companies have few engineers; the volume of high-tech products that are exported is small; and the skills for entering international markets with complex products are poor. Therefore, in the last few years, great emphasis, in the innovation policy, has been placed on increasing the commercialisation of innovations, and the capability to enter international markets (expansion capability). In 2011, The Kiwi Innovation Network was established, which is a consortium of universities and state research institutions, with the aim of combining forces, experiences and resources related to the development of commercialisation. Also, a few dozen high-tech companies, with great potential, were selected, which are being provided with support for growth and expansion, in order to make them truly global. Support is being provided to improve the companies’ skills, so as to enable them to enter foreign markets with more complex products, and to find the necessary capital to expand. Some organisational changes have also been made to increase the state’s capability to manage the R&D&I policy. Against the background of the other CEE countries, the Czech Republic is characterised by the great relative importance of high technology, high-level exact sciences, and strong technical universities, etc. Sectors like machine building and the chemical industry have traditionally been strong. As a whole, the companies’ level of innovation is quite high, although it tends to be characterised by less radical innovations. The R&D investments are also quite high, and the connection between science and industry functions. However, upon closer examination, it turns out that two different systems are behind these generally middling indicators. The large foreign firms develop in-house research in their branches that are located in the Czech Republic, but this is mostly based on the research strategies that come from their headquarters, whereas the Czech universities and institutions have little to do with this. The latter do communicate with Czech SMEs, but their volume of production knowledge is quite modest. One of the main goals of the state’s innovation policy is to overcome this contradiction. 188 Estonian Human Development Report 2012/2013
It is characteristic of the South Korea, that research and development activities and innovation policy (R&D&I policy) are connected, to a great extent, to the state’s large companies – the former monopolies known as chaebols. Two-thirds of the state’s R&D expenditures come from the large companies, and they also make a noteworthy contribution to financing higher education. Six courses are established in the science and tech nology policy, which form the basis for the future economic growth of the state. These include information and communications technology (ICT), life sciences and medical technology, nanotechnology, energy technology and aerospace technology. The state has also announced a “green growth” strategy. Singapore is characterised by a very strong and focused state R&D and innovation policy, with a strategy that extends to 2015. A large portion of the research financing moves through state programmes, not university programmes. Three broad R&D courses have been chosen: environmental and water technologies, biomedical sciences and the interactive and digital media. Starting in the 2000s, and especially in the second half of the decade, the state has vigorously invested in improving the level of the universities and the quality of the research institutions. As a result, they have top-level laboratories and research work, as well as patents. This policy has most likely been the reason that foreign investors continue to be interested in Singapore, which is characterised by a high participation of foreign capital; along with a good position in the value chain, and the appropriation of complex production functions. The principle is to import the top brains, because there are not enough of them in Singapore, in any case. The last few years have added another focus to the innovation policy – in 2011, the National Innovation Challenge programme was initiated, in which energy will be the focus for the next five years: energy efficiency, reduction of CO 2 emissions, and the diversification of energy sources. Israel is characterised by the very high relative importance of R&D&I expenditures, this primarily in regard to public funds. The state is famous for its high technology, especially ICT, start-up support to high-tech and venture capital. Another distinctive feature of the innovation policy is the conversion of ideas and solutions coming from the military sphere into civilian production (the take-off base of many high-tech companies is related to the service of young students and engineers in the high-tech Israeli Army), as well as the brains that have immigrated to Israel from abroad, especially from the former Soviet Union. It was for the latter that Israel established high-tech incubators at one time. The financial support provided for innovative business ideas is strongly based on the profit motive, whereas it is assumed that the turnover and resulting profits will come mostly from global markets. To cover the R&D costs, discount credits are provided, which must be repaid if success is achieved. Similarly to Estonia, mechanisms based on technology and development centres (the creation of consortiums of research institutions and companies) are also employed. However, the state covers a much higher percentage of the costs than in Estonia. Officially, there are no preferential areas of innovation, but in reality, they exist (especially ICT, but also high technologies for agriculture). Costa Rica has been quite successful in attracting industrial production based on foreign companies. It has been said that, in this regard, the state has repeated the economic policy that was successful for the Republic of Ireland in the past. The branches of industry that dominate are also similar to those in Ireland – production of electronics and medical instruments. As a result, the relative importance of the export of high-tech products is higher than in many developed industrial states. However, the success is not based on high productivity, but simply on the availability of labour and other production factors. As wages increase, the sustainability of a model of this kind is questionable. Competition from the Asian states is also feared. There is reason to believe that, if the foreign firms start to import innovation to maintain their competitiveness, it will probably reduce the number of jobs in Costa Rica. The impact of the foreign firms on the local SMEs was minimal. Therefore, a course was taken, in the new research, technology and innovation strategy for 2011- 2014, to support innovation at the company level. A goal was established to take the country on a path to an innovation-based and knowledge-based economy. However, many analysts are sceptical of the possibility of achieving this goal during a realistic period, because, although the relative importance of higher education and the level of the universities is normal, compared to the average in the other Latin American countries, it is significantly lower than in Ireland (even in Ireland a few decades ago). Studying engineering is not popular. A number of measures, that are familiar from Estonia, have been planned for the realisation of the strategy, such as the establishment of research parks and enterprise incubators, innovation grants for SMEs, and the development of their collaboration with universities. Middle-level technical schools have been established, as well as a university of technology as a joint project with the national universities. Both weaknesses and strengths have been pointed out in Chile’s innovation policy. The weaknesses include the low level of R&D investments, and the convergence of knowledge potential in the capital of Santiago, while many of the key branches of industry (mining, fisheries) are located in other parts of the state. As a whole, one of the problems in the state is economic diversification, and the reducing of dependence on an industry requiring supplies and upon agriculture. In search of a consensus, long consultations with interest groups have been held regarding the question of whether innovation policy should be the fundamental path for developing the state’s economy, and who should finance it and how. A significant step forward was the establishment of a fund, in 2006, to deal with the reorganisation of the state’s economy, which was financed by the profits from copper production. In 2007, eight promising economic clusters were selected to be prioritised. These were based on both old (copper production, agriculture) as well as new sectors (e.g. international financial services). The official rhetoric states that the principle involved is not the selecting of winners, but the backing of winners. A good example is the start up of effective fish farming (salmon farming) in Chile as a new field of activity. Although some companies had started to deal with this sphere of activity earlier, the state played quite an important role in launching this new branch of Estonian Human Development Report 2012/2013 189
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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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a uniform composite indicator has n
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3.4.6 The components of life qualit
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Figure 3.4.4c Perceived quality of
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Page 141 and 142: 3.5 Environment dimension of well-b
Page 143 and 144: Figure 3.5.1.b Estonia’s position
Page 145 and 146: 3.5.4 Energy intensity The energy i
Page 147 and 148: productivity, which is defined as t
Page 149 and 150: perceive themselves as worse off th
Page 151 and 152: 4The Economy Estonian Human Develop
Page 153 and 154: vide a valuable connection for maki
Page 155 and 156: Figure 4.1.3 Components of economic
Page 157 and 158: ule of law, the sub-indicators for
Page 159 and 160: References 1. Acemoglu, D.; Robinso
Page 161 and 162: Development Report employs generali
Page 163 and 164: and pasture land, and this was capi
Page 165 and 166: Basing the total and net savings re
Page 167 and 168: 4.3 Labour market Reelika Leetmaa,
Page 169 and 170: The problems include the very limit
Page 171 and 172: • Expenditures for active labour
Page 173 and 174: who lose their jobs. These ensure i
Page 175 and 176: 4.4 Productivity and the economic s
Page 177 and 178: labour costs at the company level r
Page 179 and 180: Table 4.4.4 Comparison of the produ
Page 181 and 182: Figure 4.4.1 Annual average increas
Page 183 and 184: 4.5 Innovation Erik Terk, Katrin M
Page 185 and 186: Table 4.5.2 Comparison of innovatio
Page 187 and 188: Table 4.5.4 Comparison of the indic
Page 189: in order to make the R&D potential
Page 193 and 194: mechanisms for increasing their sta
Page 195 and 196: Globalisation and Policy Patterns 5
Page 197 and 198: When Estonia regained its independe
Page 199 and 200: 5.2 The impacts of globalisation an
Page 201 and 202: Table 5.2.2 Support of the differen
Page 203 and 204: 5.3 Development policies Erik Terk,
Page 205 and 206: • C -the “Estonia-centred” su
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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