1. The Hungarian Innovation System Adam Tichy-Racs CPR Hungary

2. Transition Period in Hungary From politically (ideologically) determined system to market economy –1968 New Economic Mechanism transition to „simulated market” (simulation by centrally regulated prices) –1989-90 political transition –2004 EU Accession Today Hungary is in the market economy - together with its pains

3. Intervention in Innovation Innovation is one of the main driving forces of economic development Demand for competition neutrality of government Limitations on intervention in innovation –The closer to the market the smaller percentage of public money

4. Measures to enhance innovation process Strengthening the financial and legal background of research and development and innovation –Research and Technology Innovation Fund (2003) –Act on Research, Development and Technological Innovation (2004) Appointing government stakeholders of innovation policy –Science and Technology Policy Council (TTPK) –Science and Technology Policy Advisory Committee (4T). Strengthening regional innovation Exploitation of results –Further improvement of programme management –Steps to further improve competitiveness of the economy

5. Lisbon Strategy GERD should be 3% of GDP –But just one third of it from public sources! –Hungarian Public part of GERD is about 0.7 % Where is the other two third? –Can state stimulate innovation from private money? –How can statistics detect private expenditure on innovation? Is there another two third? –Private firms are not interested in producing „innovation indicators” like expenditure on research and development –They are interested in wealth creation if it can be achieved by innovation, they will innovate! –Are there successful companies with innovative technologies? If thy exist, they do innovate.

6. Could Hungary spend more? What public money is spent for? Social expenditure is increasing due to higher life expectancy in Hungary Higher education expenditure is increasing with increasing level of education Health expenditure is increasing with more specific medical technologies National debt, and debt service, is still high –As a heritage of pre-transition period –As a consequence of delayed and insufficient reform measures National matching fund to EU sources is an extra cost Growth of GDP is one of the lowest in the EU There are no free public resources. Anyhow, several economic indicators are not that bad!

7. Demographic structure in 2006 Decreasing birth rate Delay in first birth – longer learning period Baby booms and drops

8. Demographic changes between 2001 and 2007 Increasing life expectancy Less labour force, more retired people

9. State innovation organizations The status of the main government organization is always changing –Maybe radically todayMaybe radically today –Today there is a minister without portfolio No apparatus No budget No clear programme –The average time between changes is shorter than the duration of a R&D programme Only verbally (ideologically) important (?)

10. Public R&D institutes Hungarian Academy of Sciences with –51 research institutes –40 academic research groups at other knowledge intensive institutes Bay Zoltan Institutes –3 R&D institutes of advanced technologies –special financial scheme, higher sensitivity for market demands Universities –thousands of researchers and research topics –better focusing needed

11. R&D financing Hungarian Scientific Research Fund –contracting 400 project per year – mostly in basic research Health Scientific Council –supporting some 200 projects per year Social Studies of National Focus –supporting some 50 projects annually Environmental Fund Targeted Support –supporting some 50 projects per year Agricultural Development Fund Targeted Support –supporting some 50 projects per year National Labour Fund –supporting dozens of short term studies every year National Office for Space Research –supporting Hungarian participation in international space research programmes

12. Understanding real knowledge flow Theoretic innovation models with no experimental basis –„The whole begins with an idea” –„Linear model of innovation” Real case studies –Event logging/mapping –Financial analysis