Innovation Europe > News > Innovation EU Vol2-1 > Innovation Estonia

Estonia has been hard hit by the recent economic crisis, leading to substantial budget cuts and reallocation of means between socio-economic fields. A temporary reallocation of innovation funding between policy measures is planned and should not affect extensively budgetary allocations for R&D and the innovation field until 2013.

There is a broad understanding in Estonian society for the importance of a well-functioning innovation system. Since 2007, indicators of innovation performance have pointed to a rapid pace of catching up to the EU-27 average.

Estonia displayed extraordinary progress over several years in increasing total expenditure on R&D in relation to GDP, reaching 1.14% at the onset of the crisis. With drops of 15% in GDP and a reduction in available finance for investments, such progress is unlikely to be sustained in the next few years.

Public support for innovation in Estonia has been focused and corresponded well with the main bottlenecks in its innovation system: belowaverage productivity of industry, the insufficient number of scientists and engineers and the difficulties in developing smooth co-operation between business and academia.

Main innovation challenges

• Increased productivity, especially in manufacturing industry.
• Develop national champions.
• Insufficient supply of highly educated employees, especially in science and technology.

Conclusions

Estonia has built a reasonably well-functioning innovation governance system in the last decade. Awareness of the role of a well-functioning innovation system is now commonplace – this must be seen as a significant success. The commitment to raise the share of R&D as a proportion of GDP has been maintained and the growth rate has been one of the highest in the EU – major improvement has been registered in many innovation policy indicators.

Increased awareness of innovation might be a trigger for actual innovations – if innovation activities (in particular R&D) are considered valuable for society as a whole, it is likely that enterprises will adjust and actually perform innovation activities, in turn producing new products and processes.

Given the strong support for several far-reaching reforms among the Estonian population, it is likely that important innovations will have a social component. The Estonian Development Fund has put forward a number of suggestions how to promote info-technology in Estonia.

The way ahead, it stresses, is not technology development in itself (for which Estonia does not have the resources) but the social applications. The Fund lists six areas: education, health services, industry, energy, finance and ICT security.