1. Utilization of knowledge for economic growth in the Czech Republic Karel Klusacek Technology Centre AS CR klusacek@tc.cas.cz Knowledge Economy Forum V Innovation and Technology Absorption for Growth Prague, March 28 – 30, 2006

2. 2 Basic remarks This presentation brings some examples of main features of recently completed analysis titled „Barriers to the growth of competitiveness of the Czech Republic“ with a special regard to the sector of innovative SMEs Presented results are a part of a complex analysis ordered by the Czech Government in 2004-2005 through Ministry of Regional Development, Ministry of Industry and Trade and Ministry of Education The results are being used for formulation of a national strategy of the growth of competitiveness of the Czech Republic and for structuring and formulation of new Operational Programs (EU Structural Funds 2007-2013) focused on the support of innovation and development of „a knowledge-based economy“

3. 3 Structure of this presentation Survey (interviews) conducted in Czech innovation SMEs Main barriers to innovation and technology absorption – sector of SMEs There is something to build on... Utilization of results - strategic policy documents

4. 4 Survey in innovative SMEs - interviews Top managers of 140 SMEs* responsible for R&D and innovation strategy were interviewed to identify particular barriers hampering companies in being more competitive Nine blocks of questions: 1.Target markets, trade and marketing 2.Human resources 3.Financing 4.Innovation activities 5.Intellectual property rights 6.Cooperation with research institutes and universities 7.Science and technology parks, incubators 8.Cause of obstacles in innovation activities 9.Possibilities of public support to innovation * Detailed interviews were performed in 40 SMEs

5. 5 Interviewed companies – the prevailing field of activity Field of activity Number of SMEs Information and communication technology 21 Electrical engineering and electronics18 Materials and nanotechnology14 Machines and equipment14 Power engineering and mineral resources11 Pharmacology11 Chemical products and processes11 Building industry and urbanism11 Environment11 Biotechnology11 Agriculture and food industry7 Transport4 Total140

6. 6 Main barriers identified in the SMEs survey

7. 7 The opinion of the SMEs’ managers The most important measures that should be taken by the government to support innovation in SMEs Targeted tax relieves for innovative SMEs - depreciation of investments in R&D, extended deduction of expenses on R&D and innovation (83%) Systemic measures motivating mutual cooperation of SMEs and academia (65%) Establishing new programs supporting R&D and innovation in SMEs and the cooperation between SMEs and research and educational institutions (63%) Improved infrastructure for technology transfer and business incubation(55%)

8. 8 There is something to build on... Some examples: Legislation (tax relieves) Specific programs for SMEs Infrastructure for business incubation and technology transfer Foreign direct investments......

9. 9 Tax relieves for Research and Develoment Czech Government approved (2005) tax relieves available for spending by business on R&D Businesses can deduct up to 100 % current spending on R&D when they compute their taxable profits

10. 10 Specific programs for SMEs Mostly programs operated by the Ministry of Industry and Trade (MIT) through the implementation agency CzechInvest MIT distributed about 4.2 bln CZK in 2005 About 3,000 SMEs supported The biggest program of the MIT is the Operational Program Industry and Enterprise with more than 3.6 bln CZK allocated to projects of SMEs in 2005 Source: Ministry of Industry and Trade, CzechInvest

11. 11 Science Parks and Incubators existing existing and expanding – support from the Program PROSPERITA new projects – support from the Program PROSPERITA Source: CzechInvest

12. 12 Czech Innovation Relay Centre Main business - technology transfer, commercialization of knowledge, IPR services Consortium of three organisations covering Czech regions with a dynamic sector of innovative SMEs and strong research base Member of an international network of 71 IRCs in 33 (mostly European) countries for success stories visit http://irc.cordis.lu

13. 13 Foreign Direct Investment Source: Czech National Bank cumulated value: US$ 43 bln GDP PPP: US$ 187.5 bln in 2004

14. 14 Foreign Direct Investment Intensive promotion of the inward FDI since the 2 nd half of the 90’s direct subsidies, land and infrastructure preparation, tax allowances large political support Positive: capital, know-how, managerial quality, market... consequently... wealth creation, jobs creation, development of supply chains Questionable: using of local R&D capacities, development of own research capacity in the Czech Republic, investment into human resources Good example: Skoda Volkswagen – Czech research capacities anounced to develop (1,500 researchers), project of own regional university Issue to be solved: Minimal threshold for state support (100 M CZK) is too high for smaller companies (> SMEs) Consequently „if you are neither SME or big investor there is no support for your projects“

15. 15 Utilization of results Formulation of the Economic Growth Strategy of the Czech Republic - section Research, Development and Innovation (completed and approved by the Government of the Czech Republic in November 2005), http://www.hospodarskastrategie.orghttp://www.hospodarskastrategie.org Results used (at least) by three Ministries - Ministry of Industry and Trade, Ministry of Regional Development, Ministry of Education for preparation of new Operational Programs (EU Structural Funds) for 2007-2013 (underway) Operational programs– focus on research, development, innovation, SMEs and related human resources - distribution of 160 bln CZK over a period of 7 years

16. 16 Thank you for your attention