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Challenges and approaches of planning of methodologies of RIS3


The Hungarian case on the national S3 planning process

Written by Antal Nikodemus

 

The concept

How to implement it?

Steps in the RIS process

What can be expected?

 

The concept


The member states of the European Union are in need of research and innovation strategies serving smart specialisation in order to make the utilisation of the EU Structural funds more efficient, and strengthen the synergies among the specialised policies of the EU (particularly the H2020, ERA and other ICT, as well as energy-related programmes), national and regional levels, as well as investments financed from public and private funds. 

The mission of planning activities is to provide political decision-makers with such methods that – by establishing a new system of R&D&I-based funding programmes and based on a specific vertical policy of prioritisation – supports the adoption of optimal developmental–political decisions resulting in the largest possible influence on the transformation of structures, as well as the identification of targeted and focused interventions. It means that in the preferred spaces of the innovation system a knowledge and technological ecosytem builds up, which leads to the renewal of the industrial structure.  This long-term, structural evolution based on a sectoral, entrepreneurial discovery system, interactive learning process roots from and develops as a result of rational and smart specialisation. Nevertheless, this process can be kept moving only by a clearly defined and well-structured governance and coordination system.

In line with the guidance of the strategic framework of the Community that serve the implementation of the cohesion policy relating to the EU's financial period of 2014–2020, it is the Ministry for National Economy that is to prepare the strategy. From a governance perspective, the key governmental duty of the entire process has been the preparation of the so-called White Paper with a focus on the professional, programming, legal and financial correlations of RIS3 and OP.

 

How to implement it?


Key background documents of planning

The core of the government's document is formed by the elaborated R&D&I strategy. The scope of RIS3 encompasses all such operative programmes that involve innovation intervention. As useful background documents of the fact finding process, the Hungarian National Innovation Office has compiled the sectoral R&D white papers, whereas the regional innovation agencies have worked out the regional S3 strategies for the domestic NUTS-2 regions.

Definition of the Hungarian fields of specialisation

Fields and orientations of specialisation resulting from the structure of the innovation system

When looking at the sectors, it is apparent that even on the EU's scale the processing industry has an outstanding share (its GDP-related share considerably exceeds the EU average), while the driving force behind economic growth is the industries building on major large corporate performances, such as the automobile industry, electronics, pharmaceuticals and certain fields of ICT. In some of the high-tech areas belonging to these sectors (especially in pharmaceutical developments, manufacturing of medical devices and certain ICT segments), the evolution and consistent strengthening of the technological ecosystem are notable. R&D FDI has a key role in the domestic system of innovation. (Similarly to Ireland, its ratio to the BERD indicator is one of the largest within the EU.)

In the accomplishment of the evolvement of both knowledge and the high-tech ecosystem, start-up companies have considerable potentials in Hungary. The domestic evolution of the start-up ecosystem has started in recent years, particularly in association with IT, the Internet, as well as certain software development and mobile technology platforms. However, it can be effectively exploited only by rolling out programmes for the development of innovation management (accelerator / technological incubation) programmes that feature appropriate growth prospects, catalyze the tighter combination of the knowledge bases and high-tech sectors, and build dynamic entrepreneurial potentials only on conscious risk sharing and enhanced investor interests. The application of capital-funding opportunities call for special attention in the field of innovation, and similarly in important areas of reorganisation (restructuring and turnaround) with respect to changing industrial structures and attracting FDI.

At the same time, in the typically domestic SME sector as a whole R&D&I activities represent just a slowly growing share in both the reinforcement of the in-house research capacities and sourced R&D&I services. Therefore, the SME sector with its generally poor corporate performance (e.g. export growth and international presence) is not a too encouraging environment for the development of domestic knowledge bases. On the other hand, one of the cornerstones of the RIS3 process is that SMEs taking an essential role in the employment scene should become integrated in the evolution of the technological (but not necessarily high-tech) ecosystem with gradually strengthening positions along global and macro-regional supplier relations, innovation processes or streams. Therefore, in the Hungarian system of innovation it is regarded to be important to reinforce the capacities providing industrial public utilities from industrial parks through the development of integrated business site systems supported with regional cluster organisations to technological and scientific parks, as well as from the network of industrial research institutes through the development of open laboratories and university-based industrial campuses to the introduction of state-of-the-art technologies backing adaptive innovation demands.

Focal points of development arising from the spatial structure of the innovation system

The 1.8 percent rise of the level of research and development expenditures in relation to the gross domestic product is one of Hungary's undertaking in connection with the EU 2020 programme. On the basis of the earlier trends and the current processes (in 2012 the GERD indicator reached up to 1.3%), it seems to be feasible.

Within research and development activities, corporate R&D activities have a dynamically growing share. It is the highest in the case of the Central Hungarian Region (around 60%), approx. two-thirds of all the corporate R&D expenditures are realised here, indicating that only this region has the corporate potential that can function as the driving force behind research.

The dominance of the Budapest agglomeration in the R&D&I human capacities are a factor of macro-regional weight for FDI R&D attraction. With respect to FDI R&D, the competitive R&D&I headcount available in relatively large numbers means a necessary precondition. On the basis, development-oriented support can be deemed as a sufficient condition of sustaining our comparative advantage in the sharp global competition for intellectual capital (including the ability to retain such resources, which remains strongly doubtful in case any large-scale emigration started due to the lack of investments). Therefore, the possibility to support large companies is a key issue, and not only in view of Budapest's position, but also the other central, relatively developed regions of the Visegrád Four (V4), because even in the short term the absence or limited nature of adequate means of support would  add to the competitive advantages and strengthen the investment positions of competitor countries outside the EU in certain innovative service areas and knowledge-demanding sectors attracting high-qualified labour (ICT).

Any deceleration in the R&D&I support to the institutional background of R&D – higher education, basic research – would result in further tensions, because the transformation and reforms of these institutions have been launched just in recent years (e.g. in the institutional network of the Hungarian Academy of Sciences), and therefore adaptation to the restructured and diminishing budgetary funding – without targeted and concentrated, excellence-based grant schemes – would mean a serious, hardly resolvable problem even for the best-functioning institutions. The process may lead to the intensified migration of young, talented researchers to other countries, the under-utilisation of the created infrastructure.

At the same time, due to the prevailing balance problems in the spatial structure the R&D&I performance of the other regions – even with an innovation development policy that is more purposeful than before in terms of regional and cohesion aspects – is not able to counter-balance, even on the long run, the losses arising from any weakening of the Central Hungarian Region. Consequently, the evident target is to preserve the volume of the developments in the Central Hungarian Region, which seems to be a fundamental condition of the accomplishment of the agreed 1.8 % target.

During the consultation of the R&D&I strategy with the partners (especially in the opinion of the managers of corporate research sites), our hypothesis was confirmed that (for the time being) research facilities can be operated more effectively in the Central Hungarian Region than in the convergence region, because in the capital region, in certain areas of research and industrial innovation the outcomes of building the knowledge and technological ecosystem have already surfaced. It makes likely that along properly structured RIS3 programmes and owing to the spill-over R&D&I effects the emerging and further strengthening potential will have a substantial role in gradually making up the innovation gap of non-Budapest regions, especially with respect to large academic centres, because in these latter places the knowledge base required for excellent research performances (research institutions, universities, etc.) are readily available.

The other cornerstone of the implementation of the priorities and programmes arising from the RIS3 processes is whether the Central Hungarian Region concentrating the largest pool of R&D activities and actors will be given a chance, or able to induce, strengthen the generation of networks starting from the central regions. In other words: whether they can take a real role in building the knowledge and technological ecosystems in the convergence regions.

 

Steps in the RIS process


Towards this end, it is necessary to renew the formerly followed regional innovation policy. In the strategy of the previous programming period, the pole programme was the key factor of the elimination of the disproportions in the spatial structure and the creation of regional counter-balances. From a professional point of view, it proved to be a serious mistake that the programme announced in 2007 failed to recognise the evident driving force of and give clear priority to regional innovation in industry, and thus insufficiently built on the industrial R&D&I infrastructure in spite of its significance. In fact, the associated delays caused competitive disadvantages at all our major industrial centres. The rectification of this situation continuous to be an indispensable governmental duty, and therefore in the upcoming period – towards the reinforcement of the role of industrial public utilities – a separate pillar will be planned in RIS3. In its axis, distinctly and as focal points, those newly emerging, dynamic industrial zones will be presented where in some of the key sectors and R&D&I activity streams the large companies interested in the comprehensive and complex renewal of the regions are expected to take initiative and governing–coordinating roles in further structural changes.

Beside the ill-selected thematic focal points and specialisation orientations that ignore the needs of industrial competitiveness and feature ambiguous priorities, the other weighty problem of the pole strategy was – presumably due to the inadequate system of governance – the lack of the systemic and strategic approach. The pole programmes, large projects were typically determined with reliance on consensus that was not subordinated to the priorities of development policy, while on the other hand responsibilities for enforcement remained unclear, and therefore they were either not implemented, or just with considerable delays. Some of the otherwise successful R&D&I infrastructure projects were realised just by themselves, and not as subordinated to the need to build the knowledge and/or technological ecosystem. Even the created, state-of-the-art capacities could be described with the traits of provincialism and prestige (disproportions between construction investments and instrumental, laboratory developments, projects insufficiently coordinated with the regional and international systems of the network).

Finally, they have not added to building the knowledge ecosystem (not even in the regions where it could have been dominant due to the excellence potentials of the knowledge basis), building the technological ecosystem (on industrial bases) or the local implementation of "triple helix" models as a consequence of the problems in the governance systems.

 

What can be expected?


Other factors and spatial categories driving specialisation

In the process of strategic prioritisation, those innovative enterprises, market actors operating near industrial innovations take the leading role and provide the driving force that are able to renew the characteristic subsystems of economic activities – by building, engaging and applying R&D&I capacities – with reliance on the bottom-up method of self-corrective trials and errors.

As soon as the scope of horizontally based R&D&I strategies has come in alignment with the expanse of the innovation system – in either nation-wide, or regional interventions –, in addition to the innovation system characteristics a very important contextual factor for S3 is the national entrepreneurial system. Its structure and quality features exercise a massive influence on the identification of priorities based on vertical logics. It is because the need to keep market forces moving is essential in view of the emergence of competition and the technological ecosystem. The regional framework of the selection mechanism of appropriate projects, the various categories on the spatial scale are determined by the intensity, dimensions of the transforming force of the structure generated by the innovation and entrepreneurial system, as well as the scope of the knowledge and technological transfer.

Therefore, in the strategy, primarily the following spatial levels are distinguished:

  • regional (not necessarily in line with the NUTS-2 regions) specialisations
  • innovation spaces of the Central Region and the agglomeration of Budapest
  • agglomerations of cities with regional effect areas (former pole cities)
  • priority zones of industrial growth
  • specialisations in smaller regions (counties, town-centred regions)
  • "cross-border" specialisations
  • macro-regional cooperation (programmes implemented primarily in the Danube macro-region and in the framework of V4)

 

Mr Antal Nikodemus


Antal Nikodemus PhD (senior advisor) had been working for Ministry for National Economy, department for competitiveness and economic development planning. Antal Nikodemus is an economist and he was the heading the department for R&D&I in Hungarian Ministry for the National Economy from 2010-2014. During this period his task was to develop different supporting schemes for innovation in particularly focusing High Growth Innovative Enterprises including Start-ups. During this time he was the responsible for the preparation of governmental strategy of R&D&I and related action plans that focus on the development of knowledge, technology intensive sectors with high added value in particularly introducing larger cooperation programs participating the big companies and SME-s collaborated with the academy sector. Between 2010 and 2014 he was Hungarian delegate in the ERAC. Antal Nikodemus has also long term experience with innovation support measures at the Community level as a member of the European Commission’s Contact Network (Inno-Partnering Forum set by six European innovation management agencies).

antal.nikodemus@ngm.gov.hu

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