Outside observers have long accused the Baltic States of not looking ahead and not preparing well enough for the inevitable economic downturn. One of the main ways to stabilize the economy is to invest in research and development and promote the move toward a knowledge based economy. In this week's Industry Insider, we take a look at just what the Baltics are doing in terms of research and development, and explore a few of the region's top inventions.
VILNIUS - Baltic innovation levels are behind European averages, but experts are encouraged by advances and think that with hard work, the region can become a leader in the field.
Experts say that for that to happen, however, funding, communication and sustained support for innovators needs to improve.
Recent German research lambasted Lithuania for lagging, saying that while it has an above average university student per thousand ratios, it doesn't produce.
"Vilnius has serious problems in terms of its innovation and knowledge level 's many of the indicators describing such characteristics are well below the European Union level," the research done by the Hamburg Institute of International Economics and PriceWaterhouseCoopers said.
MONEY MATTERS
Scandinavian countries lead the Baltic region in innovation. This perhaps is due to funding in the industry, which the Baltic states lack.
"Speaking about innovation, the amount of spending [Lithuania] does for research and technological development [0.76 percent of GDP] is less than one half of the EU average of 1.9 percent of GDP."
Experts defend government spending on innovation, insisting that there are other problems that need to be addressed.
"The government does a lot. There are several schemes that subsidize company projects," Kastytis Gecas, director of the Lithuanian Innovation Institute said.
Gecas thinks the researchers don't understand the complex problems or the history of innovation in Lithuania.
"The statistical view shows that we are behind, but if you look at the dynamic view of the statistics, it shows that we are catching up very fast."
His opposite number in the Ministry of Economy, the government's innovation arm, agrees that the industry has blossomed since independence.
"It [Lithuania] is listed as the fastest catching up state of all the new member states. We are expected to be at EU standards within 10 years," Rima Putkiene, head of the Innovation and Technology department at the ME said.
Startups can be hard for companies who do not have funding to put their products to the test.
Janis Stabulnieks, managing director of the Latvian Technological Center thinks it's too hard for newcomers to enter the market because their ideas may be considered risky.
"There is a lack of instruments for businesses at start up. The EU structured funds are only for mature companies. You would have to have about 1.5 million euros before you could get funding and this funding takes time," he said.
LACK OF UNDERSTANDING
While money talks, experts believe lack of funding is a symptom, not the root cause of problems.
"The main problem in all the Baltic countries is that politicians and decision makers do not understand what innovation means. We are not talking about innovation in the wider sense. We are talking about new things in companies," Stabulnieks said.
"It is senseless to say 'innovative science' because we are using the words in the wrong way," Stabulnieks added, saying that these two ideas are opposites.
"I have heard a lot of definitions of innovation, but my favorite is this 's Innovation is making money out of knowledge whereas science is making knowledge out of money," he said.
Gecas explained that buying new machinery and teaching staff to use it is not innovation, but merely an upgrade.
"When people think about innovation they usually think about technological innovation, but this is usually simple modernization and it is not innovation. Innovation has to be new products and new added value for the client," Gecas said.
Innovation is usually associated with technological breakthroughs, but these are often less important than non-technological advances such as management techniques, marketing ideas and quality standards.
"For economic growth, technological innovation is important, but non-technological is more important. If they [companies] want to compete in the global arena, they need new marketing ideas, new management skills," Putkiene said.
This lack of understanding has hindered progess in years past in Latvia and Lithuania. Estonia has done slightly better, however, probably because it has learned business know-how from Scandanavia.
THE SOLUTION
The solution lies in communication. Businesses need to communicate with each other to achieve common goals.
"Innovation is a business process and this is where we need to do work," Gecas said.
Gecas said without guidance and communication too many ideas end up wasted.
"If you look at all ideas like babies, they all start the same and some will go bad and some good. We are contributing to better understanding and management processes and capacity."
Small countries need to take an international approach to communication.
"We need internationalization. Finland and Ireland have better examples of innovation because they are international. There are also good examples from larger countries where the idea of partnership is imbedded," he added.
Stabulnieks agreed, saying people are often left clueless to the next step in the process because no one is available to guide them.
"The older countries are ahead because they have an established system. We have the ideas, but we lack a detailed action plan of how to use these ideas," Stabulnieks said.
