1. Europe and Central Asia Region, World Bank
Post-Transition Technology Absorption – What Can ECA Learn from Germany?
Itzhak Goldberg,
Europe and Central Asia Region, World Bank
Knowledge Economy Forum, Berlin, May 5, 2010

2. What is an innovative SME – Inventing or Absorbing?
Absorption = incremental = new-to-country but not new-to-world
Absorption ►►► key to Japan, China and India
R&D = pre-requisite for Absorption, not only for innovation
Restructuring – post-transition technology absorption ►►► discontinued production line, upgrading lines (see below)
Itzhak Goldberg, Europe and Central Asia Region, World Bank

3. Post-crisis Growth – Whence?
In ECA, capital is scarce and labor costly, relative to Asia; no cost-based competitiveness ►►► Need technology absorption to help export-oriented diversification.
Technology Absorption Channels in SMEs:
(i) Participate in world R&D and support firms getting into global markets
(ii) Encourage spin offs and R&D collaboration (portability, researchers’ IPRs)
Itzhak Goldberg, Europe and Central Asia Region, World Bank

4. Itzhak Goldberg, Europe and Central Asia Region, World Bank
Enterprise Perceptions: Investment Climate in Germany, Poland and Czech R.
Subset of Enterprise
Survey 2005, including
1260 firms with less
than 250 employees
Poland
East Germany
West Germany
Czech Rep.
Spain
South Korea
906
354
718
316
550
536
Firms claiming major obstacle in… [%]
Country
Factor
Poland
East Germany
West Germany
Czech Rep.
Tax rates
59.0
35.8
26.6
60.7
Regulatory uncertainty
43.1
8.5
5.0
21.4
Cost of financing
45.8
29.8
13.2
18.4
Macroeconomic instability
39.9
21.9
11.6
Tax administration
38.3
30.1
20.1
52.9
Access to financing
35.3
28.6
10.3
18.8
Functioning of judiciary
6.2 .6
25.2
Source: WB Enterprise Surveys
Itzhak Goldberg, Europe and Central Asia Region, World Bank

5. % of firms that have undertaken the initiative within country
Technology Absorption – Enterprise Surveys Indicators – Germany, Poland and Czech R.
Initiatives of company over the last 36 months [%]
% of firms that have undertaken the initiative within country
Poland
East Germany
West Germany
Czech Rep.
Added new product
34.7
11.0
18.2
18.0
Upgraded existing product
49.0
29.1
49.3
29.7
Discontinued product line
11.5
5.4
14.6
9.8
Obtained ISO
12.4
8.2
3.3
9.5
Source: WB Enterprise Surveys
Itzhak Goldberg, Europe and Central Asia Region, World Bank

6. Do we know how to support absorption rather than innovation?
In principle, we know why/how to subsidize innovation. But…
Why subsidize technology absorption?
Matching grants: OK for licensing, export promotion, consultancy. But…
Most absorption is via new machinery and equipment – do we subsidize capital assets?
or the R&D / skills needed to properly adapt technology and workforce to new tech?
Itzhak Goldberg, Europe and Central Asia Region, World Bank

7. Public Support for Innovation – and what can ECA learn from Germany?
Matching Grants for R&D in enterprises and support for Venture Capital (VC) -- successful in the US (SBIR, ...), Finland (TEKES, …), Israel (OCS/Yozma)
And today we will hear from High-Tech Gründerfonds in Germany whether this model is working
Grants
State support for VC
mixed results in Poland,
successful in Croatia
successful but miniscule in Russia (Bortnik)
problematic in Russia (RVK – no pipeline)
problematic in Croatia (VC no pipeline)
problematic in Poland (only large)
Itzhak Goldberg, Europe and Central Asia Region, World Bank

8. What can ECA learn from Germany – Questions to Panelists
How did the investment climate in East Germany change post-unification?
How do you support new firm creation in E. Germany?
Do you manage to attract W. German firms to set up operations and/or R&D. And if not why not?
What is your innovation strategy e.g. did you improve cooperation between research and industry Innovation Assistant Program to promote in-house firm R&D?
What financial instruments do you use: loans or grants? Do you believe that loans encourage risk-taking in innovation?
Itzhak Goldberg, Europe and Central Asia Region, World Bank