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Journal of Baltic Studies
Vol. 42, No. 4, December 2011, pp. 511–536
THE EVOLUTION OF INNOVATION POLICY
GOVERNANCE SYSTEMS AND POLICY
CAPACITIES IN THE BALTIC STATES
Erkki Karo
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This paper analyzes the evolution of innovation policy (IP) governance systems
in the Baltic States and discusses how this progression has influenced the
development of long-term IP capacities. The Baltics must attend to their longterm policy capacities as they are going through a ‘catch-up’ process while being
influenced by both historical socioeconomic legacies and pressures of the global
political economy. At the same time, they have delegated key policy activities
away from centers of policy making and moved toward increasingly fragmented
IP governance models, which provide narrow feedback and policy learning
mechanisms that complicate the creation of long-term policy capacities.
Keywords: innovation policy; public administration; public management;
policy capacity; Baltic States; Estonia; Latvia; Lithuania
Introduction
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By joining the European Union (EU) in 2004, the Baltic States – Estonia, Latvia, and
Lithuania – signaled a successful transformation from communist to modern market
economies. The years immediately before and after 2004 gave the impression that the
Baltic States were rather quickly converging with the rest of the EU. However, the
financial and economic crisis starting in 2008 brought about an economic downfall on
a scale that surprised both local and international communities. It also challenged
recent knowledge about growth and development processes in the Baltic States and
made assessment and evaluation of the short- and long-term performances of
economic policies increasingly difficult. In overcoming the crisis, the Baltic States face
similar macro- and techno-economic policy challenges. These include over-reliance on
Correspondence to: Erkki Karo, Department of Public Administration, Tallinn University of Technology, Akadeemia tee 3,
12618 Tallinn, Estonia. Email: erkki.karo@ttu.ee
ISSN 0162-9778 (print)/ISSN 1751-7877 (online) ß 2011 Journal of Baltic Studies
http://dx.doi.org/10.1080/01629778.2011.621739
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external technology transfer and foreign direct investment as sources of economic
growth and learning, low labor productivity, low technological absorption capacity of
firms, and weak synergies between the innovative activities of firms and science and
technology efforts of the public research and development (R&D) infrastructure
(Drahokoupil 2007; Kattel 2010; Myant & Drahokoupil 2010; Tiits et al. 2008).
These analyses also suggest that the Baltic States form a distinct analytical subset of the
Central Eastern European (CEE) countries that joined the EU in 2004 because they
have been the most reliant on external sources of economic growth and technological
development.
This paper’s main focus is on the similarities and differences between the
Baltic States’ innovation policies (IPs) and IP governance systems and how these
systems support the potential for technological restructuring and development. A
recent European Innovation Progress Report (EIPR 2009, pp. 6–9) highlights that
the Baltic States are unable to provide fast policy responses to crisis situations.
The report argues that Latvia and Lithuania have developed ‘inadequate’ IP
responses (for example, radical R&D budget cuts in Latvia reduced state financing
of R&D by about 29% in 2009). It also argues that Estonia has taken an overly
‘defensive’ position showing delayed reactions and no comprehensive strategy or
measures to support structural reforms toward knowledge and an innovation-based
economy.
The popular rhetoric of knowledge-based economic restructuring usually
foresees reforms of both private sector governance systems (arguing that companies
need to become more innovative and to focus on science, R&D, and high-tech
exports) and public sector governance systems (arguing that governments need to
increase efficiency, effectiveness, coordination, and cooperation capacity to provide
policies that support the changes in the private sector governance systems). The
latter governance challenge is a question of developing proper policy capacities. In
this paper, policy capacity refers to the ability of the political system to decide or
compromise on the best approach (what is contextually ‘desirable’ and what is
‘feasible’) to innovation and development. The latter is also conditioned, but not
solely dependent, on administrative capacity as the ability to provide efficient and
effective policy implementation systems (Karo & Kattel 2010b; Painter & Pierre
2005).
This paper analyzes the evolution of IP governance systems in the Baltic States and
discusses how these developments have contributed to the development of long-term
IP capacities. The first section provides a brief review of recent innovation literature
to highlight the main techno-economic challenges that affect IP making. The second
section discusses utilizing a simplified framework of the public policy cycle to analyze
the impact of these ‘IP challenges’ on the evolution of the different phases of the IP
cycles in Estonia, Latvia, and Lithuania during the last decade. While IP in the Baltic
States has become more complex and extensive, the ability to develop contextual
policy capacity has been reduced and narrowed. The Baltic States have increasingly
relied on IP governance models, which have fragmented and delegated away from the
policy-making center most activities that are crucial for the development of policy
capacity. The conclusions discuss the implications of these findings for the Baltic States
IP makers and IP research.
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Global and Regional Challenges to IP
Global IP challenges
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Before the 1980s and 1990s, the prevalent heterodox recipe for creating policy
capacities for catching-up development in the capitalist system was rather
straightforward. Scholars argued that catching-up countries (i.e. countries lagging
behind the technological frontier – see Abramowitz 1986) could create sustainable
public sector policy capacities that supported the emergence of private sector
capacities and capabilities through the creation of Weberian bureaucratic structures
that could provide institutional memory, long time spans for policy making, and
reduction of information and transaction costs for the private sector (Amsden 1989;
Evans 1995; Wade 1990; for historical arguments, see Reinert 2007, 2009; for
empirical analysis, see Evans & Rauch 1999). This would provide contextually suitable
policies, public–private interactions, and learning mechanisms. These ideas and
perspectives were labeled as ‘developmental state’, ‘embedded autonomy’, ‘governing
the market’, and the like.1
More recently these same scholars (Evans 2008; Wade 2003) have argued that the
dominance of neo-classical perspectives in economic policy discourses (i.e. the
Washington Consensus (WC) policies) and the spread of information and communication technologies (ICT)-based economic growth and development (modularity,
outsourcing, and global production and innovation networks) have made the basic
recipe more complex (Benkler 2006; Ernst 2009; Perez 2002). Indeed, policy makers
are faced with more constrained policy spaces and more complex pressures created by
both national and external socio-institutional interests (for an overview of different
arguments, see Karo & Kattel 2010a). This also creates pressure to rethink the
structure and functions of the bureaucracy and the state. There is also a consensus that
the WC-inspired ‘one-size-fits all’ policies (see Williamson 2000, 2002) fail to take
into account contextual differences between developed and developing regions and
within developing regions (Cassiolato & Vitorino 2009; Cimoli et al. 2009; Lundvall
et al. 2009; Radosevic 2009; Rodrik 2007; Serra & Stiglitz 2008; Varblane et al.
2007). Scholars of government studies argue that the WC-based policies, while
rhetorically emphasizing administrative capacity (‘good governance’), have actually
been downsizing, reducing, and ‘marketizing’ bureaucracies and their capacities
(Brinkerhoff 2008; Castellacci 2006; Drechsler 2004; Manning 2001).
The post-WC policy discourses are increasingly seeking to enhance IP capacities
through so-called public–private partnership (PPP, or network, or stakeholder)-based
IP models that would in theory create a more systemic view of innovation and higher
legitimacy of IP activities (EIPR 2009; OECD 2005, 2010; Radosevic 2009). In short,
the approach departs from the perception that technological development is
increasingly an uncertain process and, therefore, all stakeholder perspectives on this
process are likely to remain partial. Thus, different mechanisms of networking and
partnerships should bring together the better-performing parts of the innovation
systems to arrive at correct problem definitions and suitable policy solutions. At the
same time, the critical approaches emphasize that adoption of these models may lead
to further fragmentation of the IP arena as the catching-up economies face difficulties
in coordinating and steering policy arenas, regardless of the types and modes of
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public–private interactions (Brinkerhoff 2008; Kattel & Primi 2010; Manning 2001).
In essence, while the pre-WC approaches assumed that countries could choose their
own policy mix and, further, that the process of choosing constituted a key element in
creating state capacities (also embedding state and business), the WC and post-WC
policy models turn this around: certain levels of suitable state policy and
administrative capacities are assumed to exist.
Regional IP challenges
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The ex-Soviet economies have gone through the initial stages of economic and
industrial restructuring under pressures created by the combined effect of the WCbased policies and ‘Europeanization’ of IP arenas (Radosevic 2009; Suurna & Kattel
2010; Varblane et al. 2007). These processes, despite many significant positive
spillovers, have created a rather complicated mix of pressures to adopt predefined
policy models and transfer policy knowledge from more developed peer groups (the
EU and OECD countries). In this context there is increasing IP convergence with the
EU (between the ‘old’ EU and CEE countries) but paradoxically also divergence from
intended policy outcomes (Karo & Kattel 2010b). Thus, these combined effects have
led to de-contextualized policy and limited learning capacities.
Based on Radosevic (1998, 1999, 2004, 2006; also Suurna & Kattel 2010), there
are two key challenges to development of IP in these former Soviet economies. First,
the majority of WC-based IP thinking (before significant EU influence and funding of
IP emerged during the end of the 1990s) was based on misguided evaluations of the
legacy of Soviet industrial policies. The Soviet industrial structure had more potential
and higher value adding capacity than the WC-based analysis had presumed. Thus,
placing priority on different state policies and state capacities in the early 1990s could,
in theory, have prevented the erosion of the past structural capabilities that CEE
economies have since sought to rebuild through market- and network-based IPs (Tiits
et al. 2008). Second, IP thinking of the WC period has led to a narrow understanding
of IP in Central Eastern Europe, which relies on formal science and technology
policies leaving aside (or dislocated from the IP discourse) broad IP concerns related
to education, entrepreneurship, and labor market policies (Freeman 2006; Lundvall
et al. 2002, 2009; Piech & Radosevic 2006; Radosevic 2004). This has further led to
dislocated policy capacities with extremely difficult coordination challenges (both
structural and normative) to integrate both science policies with IP (Karo 2010) and
science and innovation policies with upcoming new policy challenges that technological progress brings about. This also implies that IP is overly concentrated on
developing highly complex scientific codified knowledge (as opposed to balanced
development of codified and tacit knowledge) while the innovation and economic
systems lack absorptive capacities and tacit knowledge to absorb and apply the codified
knowledge. This also creates obstacles to emulation and learning through imitation
and adaption (Nelson & Winter 1982; see also Jensen et al. 2007, who discuss the
different modes of innovation).
In sum, the global challenges to IP capacities are reflected in the regional context
of the Baltic States through complex inter-linkages between past legacies (i.e.
structural characteristics of the economy, policy, and administrative legacies) and
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current and future challenges (i.e. integration with changing global policy,
production, and innovation networks). This creates a complex context for IP
making where the Baltic States have their own peculiar historical problems and
legacies to deal with. Further, the Baltic States are subject to the spread of
international policy ideas (e.g. PPP-based IP making, competitiveness strategies of the
EU) and these new policy ideas are in turn often derived from specific contexts or
based on certain perceptions of the future policy needs while at the same time there is
a lack of consensus on the very same future development trajectories. Thus,
understanding the dynamics of state capacity development and its links to IP in
catching-up economies in general and Central Eastern Europe in particular has
become less emphasized than in the pre-WC heterodox perspectives. Yet, the critical
perspectives, both from IP and governance studies, argue that this is a crucial
weakness of the existing IP discourses.
Evolution of IP Governance Systems in the Baltic States
IP properly emerged in the Baltic States in the early 2000s mainly through the impact
of EU policy recommendations, conditionalities, cohesion, and structural funding.2 At
the same time, it is also quite evident that the EU has influenced all CEE countries in
developing their IP systems. The impact of the EU may be seen as one of the key
variables affecting IP evolutions in all of Central Eastern Europe (Piech & Radosevic
2006; Suurna & Kattel 2010). On one hand, the impact of the EU has created
isomorphic pressures for the Baltic States to adopt certain EU-wide principles and
governance models; on the other hand, the pre-2000 legacies have had a unique
impact on the governance system as well.
Thus, the dynamics found in the cases of the Baltic States may not be easily
transferred to the other CEE cases. For example, it has been argued that Hungary had
a more mature IP system than the Baltic States during its pre-accession to the EU
(European Commission 2001, 2003). It might also be plausible that the impact of the
EU played out somewhat differently for Hungary. Also, in the early 1990s Estonia and
Slovenia chose quite opposite models for economic restructuring (Feldmann 2006).
Estonia has relied on a liberal market-based economic coordination system, while
Slovenia has followed a more state-driven and socially embedded economic
coordination model. In this, Estonia and Slovenia represent the extremes in CEE,
and it is also plausible that these economic policy legacies have steered the EU
pressures on IP in different trajectories. The impact of these differences has not been
thoroughly studied in CEE, but it should become clear that in all cases there might be
a unique interplay between the common EU influence and distinct national legacies. In
this paper I look specifically at the dynamics of the Baltic States’ economies as a first
step toward creating a better analytical picture of all CEE countries.
The analysis is based on secondary sources, existing academic research, and
material gathered (in periodical national reports) through the ProInno Europe and
Erawatch policy databases.3 A comparison of key events in the emergence of IP and IP
governance systems in the Baltic States is presented. The aim is to provide a two-level
analysis: first, to track and compare key events and reforms at the different stages of
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JOURNAL OF BALTIC STUDIES
the policy cycle, which have led to the emergence of current governance systems in
the Baltic States; second, to analyze the emergence of the governance system and
current policy cycle as a whole in order to assess the tools and options for the Baltic
States’ governments to maintain or develop IP capacities. This paper applies a
simplified analytical framework of the policy cycle as used by the IP research
communities (EIPR 2008, 2009; OECD 2005), which distinguishes three stages in the
policy cycle (but also recognizes the importance of historical legacies, feedback, and
learning mechanisms):
.
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Policy design – priority setting, stakeholder involvement and coordination,
decision making;
Policy implementation, or delivery – structure of policy implementation, modes of
policy delivery;
Evaluation – systems and methods of information gathering, and analysis of policy
effectiveness.
Past Legacies and the Emergence of IP in the Baltic States
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The period from re-independence (early 1990s) to pre-accession preparations to the
EU (late 1990s) represented a ‘no-policy’ IP period in the Baltic States. That is, policy
concerns relevant to modern IP were limited to macroeconomic policies (creating
stable market systems and solving basic ‘market failures’, reliance on markets as the
key ‘decision maker’ in establishing the path of technological development, etc.) and
reforms of science and research policies, which were influenced by strong Soviet
legacies (Karo & Kattel 2010b). Thus, this period should be seen more through the
perspective of science and research policy reforms. The key stylized changes of the
period are summarized in Table 1.
Radosevic (1998) argued that the key reforms of the Soviet R&D system, which
have influenced IP until the present time, were related to the broader reforms of the
system of research institutions. These reforms resulted in a significant transformation
of the entire production systems of CEE economies. The research institutes of the
academies of sciences (mainly specialized in basic science) together with separately
standing branch industrial institutes (mainly specialized in applied science) played a
pivotal role in the industrial structure because Soviet industrial companies had limited
R&D capabilities. Overall, the Soviet production system was characterized by a
complex system of planning and cooperation between different institutions where
industrial corporations retained limited R&D capabilities and different institutes
provided R&D for industry.
The effects of consolidating institutes of academies of sciences and ‘marketization’
(privatization or deregulation) of the R&D system resulted in the erosion of the
previous core links between academia and industry. Also, governments placed
emphasis on ‘pure science’ and on funding basic science. More applicable ‘bridging
sciences’ and technological problems were left for the weak market to steer and fund.
In Estonia and Latvia, most academic institutes were consolidated into universities
between 1997 and 1998. In Lithuania, the academic institutes were more
closely involved in teaching at the universities and these reforms took place only in
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TABLE 1
Key R&D reforms in the Baltic States during the 1990s
Key reform areas
Ideological changes
Legislative reforms
Structural reforms
in governance
Structural reforms
in research
performers
Key reforms in the Baltic States
Compared to the rest of Central Eastern Europe, the Baltic States
followed a distinctly radical reform of the R&D systems. The Baltic
States managed to ‘Europeanize’ their R&D systems in the early 1990s
through existing historical links to Scandinavian and German systems
(e.g. important effects were provided by the national unions of
scientists, academies of sciences, and external science evaluations by
the Royal Swedish Academy of Science in Estonia in 1991, by the
Danish Research Council in Latvia in 1992, and the Norwegian
Research Council in Lithuania in 1995).
Lithuania was the first of the Baltic States to introduce the Science and
Studies Act (1991), which institutionalized academic freedom,
responsibilities of the scientific community, and a system of research
and funding. Latvia adopted the Scientific Activity Act in 1992, which
institutionalized similar aspects as the Lithuania legislation (e.g.
academic freedom, responsibilities, etc.). Estonia adopted the
Research Organizations Act in 1994 (refined into the R&D
Organizations Act in 1997), which institutionalized a more prominent
role for the state in steering and regulating the system (no academic
freedom was mentioned, although this became prominently emphasized through later reforms). These Acts consolidated several fragmented legislative acts that had regulated the field. At the same time
the Acts were clearly research and science biased, leaving the
business sector out of their scope.
Latvia showed the most radical approach by being the first to introduce
(in 1990) the Science Council (in charge of design of science policy
and providing competitive grants) and carried out radical financing
reform to adopt wide-scale peer review-based grant and project
funding with no institutional funding (until 1996 funding was characterized as project-based bottom-up funding; in 1996 the first targeted
joint collaborative projects emerged). Estonia introduced a somewhat
more gradual reform trajectory by establishing the Science Council in
1990 (reorganized into the R&D Council in 1994, acting as the main
decision-making body of science and IP) and gradually institutionalizing the competitive peer review-based grant system from 1991 (since
1993 the share of grant funding has been gradually increased; since
1995 foreign peer-review experts have been systematically used). This
system has been implemented through the Estonian Science
Foundation (ESF) (1991) and the Council of Scientific Competences
(CSC) (1998). ESF funding is provided as individual grants to
researchers (3 years) and CSC funding is provided for research groups
for longer periods (5 years). Lithuania established the Science Council
in 1993 (advisor to the Parliament and Government on research and
higher education policies) while retaining the institutional funding
system through the Lithuanian Foundation for Research and Studies
(1993) that had a marginal budget (around 4% of total budget) for grant
funding.
One of the critical reform issues of the research system that has had clear
bridging links to IP has been the reform of the Soviet R&D system
(academies of science and linked institutions that formed the science
and R&D framework). In the early 1990s the Baltic States adopted the
most radical approach to reforming the academies of science in
Central Eastern Europe by abolishing the existing network of research
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TABLE 1
Continued
Key reform areas
Key reforms in the Baltic States
institutes (the network divided basic research and education between
institutes of the academy and universities and distinguished separate
applied research institutes) and reducing policy and financial capacities of academies by turning them into associations of scholarly elite
(institutionally regulated in Lithuania in 1991, Latvia in 1992, Estonia in
1995).
Source: Author’s elaboration based on Kristapsons et al. (2004).
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2001–2002, when a minority of the institutes were reformed and the majority
retained their status as research institutes (although institutional funding was changed
into market-based performance and contractual funding).
Reform and management of ‘industrial institutes’ were a much lower priority in
all three countries. Nevertheless, eventually the first ad hoc steps to develop IP and
support applied R&D were taken. All of the Baltic States began to launch different
support structures in the 1990s. Estonia established the Innovation Foundation in
1990, and Latvia started support institutions for technology parks and business
incubators and small-scale financing of market-oriented research in 1993. Still, most
of these attempts remained rather low-key on the formal policy agendas and financing
schemes (Kristapsons et al. 2004).
In sum, the 1990s were characterized by radical reforms of R&D systems without
any coherent emphasis on IP per se. R&D policy was confined to respective ministries
of education and research and reforms were limited to science and research policy
cycles. Thus, the common characteristic was a narrow approach to R&D (and
innovation), which led to increasing fragmentation of the overall innovation system.
At the same time, the Baltic States also differed in several regards. Latvia showed the
most radical approach to policy reform by leading many structural reforms. Estonia
was the most open in terms of taking over international reform models – for example,
adopting a model that relied on external peer review, competition, and introducing
policy cycles where policy making and implementation were clearly separated (for
critical accounts, see Karo 2010; Masso & Ukrainski 2009). Lithuania followed the
most incremental reform trajectory and its structural reforms lagged behind Estonia
and Latvia, both in timing and extent. These trajectories brought about specific
problems and challenges (degrees and directions of fragmentation), which carried over
to the period of conscious IP making in the Baltic States.
Policy Design Systems
275
The Baltic States have had to pursue parallel reforms of both organizational setup and
priority setting in IP making and this has made IP development a complex challenge.
Table 2 summarizes these trajectories.
The Baltic States have had to build IP through integrating science, technology, and
economic policies. This has been a highly complex task because these distinct policy
Formal priority setting
1998 – Government Program on Innovation
adopted (designed in 1995) together with
Green paper on ‘Knowledge-centered
Estonia’
1998 – The Fundamentals of Innovation Policy
approved by the Parliament
1999 – First drafts of National Development
Plan 2000–2002 (linked to EU accession and
cohesion funds) designed; these have been
followed by Single Programming
Organizational setup
2000 – Sunrise Commission created to increase
government efforts toward business and
economy
2001 – Council on Business Development
created as an intermediary advisory council
(industrial policy, export policy, SME policy;
chaired by minister of economy)
2002 – Commission on Science and
Technologies established by the prime
minister
2004 – Innovation and Technology Division
created at the Ministry of Economy,
Department of Business; ministry has been
in charge of IP since 2001 (before the
Ministry of Education and Science directed
the field through the Department of
Science and Studies created in 1998)
2005 – Merger of Science and Technology
Commission and Education and Science
Commission of the Government into
Science, Technology and Innovation
Commission
2006 – Department of Investments and
Innovations created at the Ministry of
Economics to integrate the Innovation and
Technology Division and the Division of
Investments
2007 – Research and Higher Education
Monitoring and Analysis Center created as
Organizational setup
2003 – Innovation Division created at the
Ministry of Economics; prior to this the
Ministry of Education and Science was in
charge of market-oriented research, the
Ministry of Economics became more active
from 1997 through the Department of
Industry
2003 – Steering Council for the National
Program on Innovation (headed by the
minister of economics)
2004 – Creation of the Strategic Analysis
Commission under the President (included
the Education, Science and Technological
Development and Innovation Working
Group; its latest input was the Guidelines
for Development of Science and
Technology 2009–2013)
2006 – Department of Science Technology and
Innovations created at the Ministry of
Education and Science
2005 – Ministry of Regional Development and
Local Government given new tasks in the
context of IP (coordination of the NSRF for
2007–2013)
2007 – National Development Council to oversee implementation of the EU SF 2007–2013
replaced Steering Council for the National
Program on Innovation (administered by the
Ministry of Regional Development and
(continued )
Lithuania
Latvia
Evolution of policy design systems in the Baltic States during the 2000s
Organizational setup
1999 – Technology and Innovation Division
established at the Ministry of Economic
Affairs and Communications
2002 – Reform of the R&D Council: headed by
prime minister, including minister of economics, minister of education and research,
minister of finance. Reform created two
committees: Research Policy Council
chaired by minister of economics;
Innovation Policy Council chaired by minister of education and research
2007 – Investment and foresight agency, the
Estonian Development Fund, created by the
Parliament
2007 – Creation of the coordination committee
for implementation of the strategy
‘Knowledge-based Estonia’
Estonia
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Documents (SPD)/National Strategic
Reference Framework (NSRF) documents
for SF periods 2004–2006 and 2007–2013
2000 – First steps toward a document on
industrial policy taken (influenced by EU
conditionalities, but not resulting in real
policy by accession in 2004 or later)
2001 – Strategy for ‘Knowledge-based Estonia’
2002–2006 approved by the Parliament
(drafting from 1998 by the R&D Council); the
following priority technologies were named
– ICT, biomedicine, material technologies)
2005 – Action Plan for Growth and Jobs 2005–
2007 adopted (for implementation of the
Lisbon Agenda); this has been followed by
action plan for 2008–2011 in 2008
2006 – Strategy for ‘Knowledge-based Estonia’
2007–2013 adopted; the strategy re-confirmed priority technologies and has been
complemented with financial schemes of
the SPD 2007–2013 (while the strategy
includes the 3% GERD/GDP target, it has
not been included in the EU SF strategies)
Estonia
Continued
Lithuania
an advisory agency to the Ministry of
Education and Science on R&D policy
2007 – Lithuanian Science Council given the
status of permanently functioning agency
responsible for the competitive funding of
research programs (so far advisor to the
government and parliament)
2008 – Formal decision by the government to
implement governance reform of the R&D
policy system
2009 – Decision made to establish an
Innovation and Knowledge Society
Department at the Ministry of Economics
Formal priority setting
1998 – SME development, FDI development,
and export development programs
launched
1999 – Strategic Guidelines 2000 for the
Development of Research and Higher
Education adopted (Science Council)
2000 – Medium-term industrial development
policy initiated
2000 – Ministry of Economics approved funding allocations for raising business competitiveness, innovation and new
technologies – linked to the EU SF; followed
by NDP/NSRF for 2004–2006 and 2007–2013
2000 – Draft White Paper on Science and
Technology (2002–2006) prepared by
Ministry of Education and government
Latvia
Local Government and acting as temporary
higher coordination body; as of 2009 plans
for creating a formal Council of Science and
Technology have been postponed)
2009 – Innovation Division (of Department of
Industry) at the Ministry of Economics consolidated into Division of Industry and
Innovation at the Department of Business
Competitiveness
2009 – Reorganization of the Latvian Council of
Science: the council was relieved of
administrative tasks and also economic
specialists were included in the council
Formal priority setting
1997 – National Program for Development of
SMEs 1997–2001; first document on issues of
‘innovation activities’ (also designed for
2002–2006)
1998 – Draft of National Concept on R&D
proposed by Science Council (taken into
consideration by the Government)
2001 – First drafts of National Development
Plan (EU accession and cohesion funds)
designed; followed by NDP/NSRF 2004–2006
and 2007–2013
2001 – Planning document for National
Concept of Innovation (first draft in 1998)
that also led to a National Innovation
Program being proposed to Government in
2002
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2000 – Government program ‘Innovation in
Business’ adopted
2002 – National Agreement to Promote
Economic and Social Progress and Longterm Development Plan of the State (2015)
adopted
2003 – ‘Innovation in Business’ renewed and
sectoral perspective (i.e. clusters) emphasized
2004 – High Technologies Development
Program adopted (initially for 2004–2006;
later renewed for 2007–2013); implemented
by Science and State Studies Foundation;
symbolic of conscious move toward hightechnology development; tool for inter-ministerial coordination; priority technologies
named: biotechnology, mechatronics, laser
technologies, IT, nanotechnologies, electronics)
2004 – Program for Lithuanian Research and
Experimental Development Priorities 2004–
2006 adopted; implemented by Science and
State Studies Foundation; priority areas
identified in more detail than in the High
Technologies Development Program
2005 – National Lisbon Strategy
Implementation Program 2005–2008 adopted
(commitment of 2% of GERD/GDP by 2010
taken); in 2008 replaced by plan for 2008–
2010
2007 – Industrial Biotechnology Development
Program 2006–2010 (joint program between
ministries of economics and education to
finance strategic research program)
EVOLUTION OF IP GOVERNANCE SYSTEMS IN THE BALTIC STATES
reports for the period 2000–2009) and Erawatch (analysis covers existing reports for the period 2008–2009).
Source: Compiled by the author; based on annual national reports of Estonia, Latvia, Lithuania prepared in the framework of ProInno Europe (analysis covers
2001 – Long-term Economic Strategy of Latvia
adopted, became the basis for IP
2001 – Industrial Policy Guidelines of Latvia
adopted by the Government stipulating
target industries and policy targets, in 2004
extended for 2004–2013 period
2003 – Guidelines for the Development of
Higher Education, Science and Technology
for 2002–2010 adopted
2003 – National Innovation Program 2003–2006
approved by Government (based on the
National Concept of Innovation)
2004 – Adoption of Latvian Innovation System:
Strategy and Action Plan for 2005–2010
(ideological guide and basis for new program on innovation)
2005 – New Law on Research Activity: stated
an annual increase (at least 0.15% of GDP)
of government R&D funding (until it
reaches 1% of GDP) and defined main types
of research funding (base funding, multiannual state research programs, funding
for basic, applied and market-oriented
research projects)
2005 – National Lisbon Program for Latvia
2005–2008 adopted and Guidelines for
Development of S&T for 2009–2013 prepared
by the Ministry of Education and Science
(adoption postponed as of 2009)
2007 – Program for Promotion of Business
Competitiveness and Innovation for 2007–
2013 adopted (clear division of tasks and
responsibilities between ministries of economics and education stipulated)
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areas have also been going through evolutions that have partly contradicted the needs
of the broader IP (that is, economic policies have been based on WC ideas that reduce
the role of the state; science and research policy reforms have developed systems that
rely on international peer-review and academic excellence, as opposed to industrial
needs).
Over the last decade the Baltic States have been moving toward a structurally
fragmented policy governance model where tasks of IP are divided between ministries
of economy and education/research. This two-ministry model is the dominant
European IP governance model (EIPR 2009). The chosen model has created dual
dynamics in the evolution of IP-making structures. Fragmentation of the policymaking cycle has become a key characteristic of the Baltic States, and this has created
an almost automatic need for higher coordination mechanisms (i.e. the establishment
of R&D and innovation councils and other bodies to support coordination, priority
setting, and decision making). The importance of the EU structural funding has, in
principle, extended the IP governance system into an even wider and more
fragmented ministry model. In all cases, at least the respective ministries of finance
have important coordination and legitimization roles as they supervise policy making
from the perspective of EU financial rules and interest. In the case of Latvia, the
governance model has been even more fragmented as the Ministry of Regional
Development and Local Government has been both politically and structurally
involved in IP making through the EU funds.
The influence of the EU on IP making has been even more explicit in the case
of formal priority setting. As mentioned above, all Baltic States started developing
IP strategies toward the end of the 1990s. Still, most national reviews and analyses
emphasize that IP proper was kick-started through planning and implementing the
EU structural funding policy mechanisms (and through Lisbon Agenda policy
documents). These mechanisms had more direct links to financial commitments
and accountability mechanisms than the initial national policy strategies. Indeed,
the influence of the EU and the tendency of the Baltic States to substitute national
IP funding with EU funding have in principle transformed the center of IP in the
Baltic States, as the strategic plans for EU structural funding (and, to some extent,
Lisbon Agenda policies and national reform plans) have become more important
tools for providing substantive IP priorities than national IP and budgetary
strategies.4
Estonia was the first of the Baltic States to get a formal organizational and
strategic system in place. Estonia has outpaced both Latvia and Lithuania in creating
coordinating councils and policy units at respective ministries and has established a
clear division of tasks. It is also ahead on comprehensive strategies and setting policy
priorities. Estonia had a stable and close to the ideal-type policy design model and
strategies formally installed by 2002. At the same time, Lithuania and especially Latvia
have been facing both organizational (coordination, division of tasks, and the like) and
strategy-level reform challenges up to the present (this does not imply that
coordination problems do not also exist in Estonia). The prospect of joining the EU
helped Latvia and Lithuania speed up reform efforts and to a certain extent catch up
with Estonian governance reforms from the mid-2000s onward. While Estonia
developed certain complex policy measures beginning in the early 2000s
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335
340
345
(e.g. competence centers and support for spin-off activities), Latvia and Lithuania did
not begin to implement similar policy mixes until after 2004.
It is also possible to distinguish some differences in the dynamics of formal
priority setting. Lithuania and, to some extent, Latvia have formally emphasized or
added sectoral perspectives to IP since the mid-2000s (and in a few earlier attempts),
while Estonia has mostly followed horizontal IP logic. Estonia has prioritized (similar
to many European countries) rather generic technology fields (ICT, biotechnology,
material technologies) that can be interpreted as horizontal technologies affecting the
productivity of different sectors. This has been reinforced by the failure to actually
adopt (until 2008) the comprehensive national R&D/technology programs that were
highlighted in its national strategies in the early 2000s. Latvia and Lithuania have
prioritized, or intended to follow, more specific technological priorities often linked
to potential production and development capacities and applications. Also, from
Table 2 it can be seen that Latvia and Lithuania have carried out more intense efforts
to design industrial policies to complement IP. At the same time, Estonia has rather
consciously disregarded the value of more interventionist and selective industrial
policy ideas. This sectoral and industrial approach is considerably harder to govern and
coordinate both formally and politically than the horizontal approach. The conscious
choice to adopt a more simple IP approach from the start may explain why Estonia is
perceived as a success story of IP making and governance (as opposed to Latvia and
Lithuania).
Policy Implementation and Delivery Systems
350
355
360
365
European IP benchmarking exercises highlight policy implementation as a key area for
creating efficient and effective IP. Table 3 summarizes key developments in the Baltic
States.
The prevalent understanding of IP implementation holds that IP effectiveness can
be enhanced through policy–administration split as it can increase transparency
(through specialization), accountability, stakeholder participation, policy legitimacy,
and so on (EIPR 2009; OECD 2005). As most IP measures either directly (via grants,
subsidies) or indirectly (via regulations, tax systems) influence the R&D activities of
public and private R&D performers, the implementation of IP measures is put into
action on the borders of public and private sector competencies. Policy–administration split allows, theoretically, the government to stretch (delegate) certain policyrelevant decisions (or ‘fine-tuning’ of IP) closer to those borders to foster better
stakeholder involvement, satisfaction, and policy legitimacy.
As in the case of policy design, the Baltic States have been highly influenced in this
respect by EU conditionalities and rules. EU structural funds are implemented
through accredited agencies granted rights to manage and implement these funds
(Suurna & Kattel 2010). Here the Baltic States are converging on a similar
implementation structure whereby policy making and implementation are clearly
separated; also, they have all moved toward substituting national IP measures with the
EU funds. As a result, national and EU-funded IPs have been merged into joint
523
Delivery principles
2001 – National Development Plan for 2000–
2002 launched first comprehensive policy
measures for spin-off activities (competence centers program planned, not initiated until 2004)
2004 – Major revision of existing IP measures
(revision of decision making, implementation, evaluation according to EU SF
reforms); most existing support measures
(grants and subsidies) linked with the EU
SF
Organizational setup
2000 – Establishment of Estonian Technology
Agency (reform of Estonian Innovation
Foundation founded in 1998) under
Enterprise Estonia (five agencies for technology and business support, trade promotion, tourism, regional development, etc.);
separate agency KREDEX created for business and export guarantee schemes (both
agencies under Ministry of Economics)
2003 – Reform of Enterprise Estonia into ‘onestop shop’ (agencies consolidated);
reformed again in 2007
2007 – Archimedes Foundation (under Ministry
of Education and Research) tasked and
accredited to implement EU SF R&D policy
measures 2007–2013
Estonia
Organizational setup
1997 – SMEDA (Lithuanian Development
Agency for SMEs) restructured as public
authority under the Ministry of Economy
2002 – Creation of the Agency for International
Science and Technology Programs by the
Ministry of Education and Science (reorganized from the ‘Eureka Information Centre’
created in 1999)
2003 – Lithuanian Business Support Agency
created (for administration of EU SF and
business development)
2009/10 – Establishment of Agency for
Science, Innovation and Technology
(MITA), reorganized from Agency for
International Science and Technology
Programs to lead implementation of R&D
and IP (joint effort by the Ministries of
Education and Economics)
2010 – Reform of Lithuanian Science and State
Studies Foundation into State Studies
Foundation
Organizational setup
2003 – Internal reforms of Latvian Investment
and Development Agency (LIDA, established in 1993 as Latvian Development
Agency; in charge of export and FDI promotion, administration of state support
programs, attraction of EU SF and implementation of IP measures) and of the
Latvian Guarantee Agency (managed by
Ministry of Economics and LIDA)
2006 – Knowledge and Innovation System
Department formed at LIDA (foreseen as
the future Technology Agency for Foresight
etc.)
2008 – European Investment Fund contracted
for partial administration of EU SF policy
measures for high-risk investments and
venture capital
2009 – Reform of LIDA: Knowledge and
Innovation Systems Department formally
closed, competencies partly consolidated
into new Department of Investment
Projects; also structural changes for implementation of EU SF
2009 – Administration of Studies and Research
(formerly the Study Fund) allocated administrative tasks of the Science Council
(coordination of activities of EU and international R&D programs, administration and
supervision of state funding schemes and
Delivery principles
1998 – Law to support SMEs adopted
2002 – Ministry of Economics sets rules for
funding allocations to raise business competitiveness and for introduction of innovation and new technologies (in line with EU
SF priorities)
Lithuania
Latvia
Evolution of policy implementation systems in the Baltic States during the 2000s
524
TABLE 3
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Delivery principles
2000 – Industrial Cluster Restructuring project
launched by Ministry of Economics supported by the EU PHARE funding
2002 – Council of Science introduces cooperative funding mechanisms (next to traditional research programs)
2002 – Plans to reduce income tax launched
2004 – Major increase in business support
measures in the form of grants and subsidies financed through the EU SF (implemented and partly designed by LIDA –
policy and administration closely interlinked at the agency level)
2005 – National Research Programs launched
(2005–2008; 2006–2009) in nine priority areas
based on competitive funding: ICT, biomedicine and pharmacy, material sciences,
agro-biotechnology, energy, Latvian studies, forestry and wood sciences, medical
sciences, environmental research (programs revised in 2009)
state research programs)
2002 – System of profit tax streamlined (possibilities for tax exemptions reduced)
2004 – EU SF introduces direct support measures for innovation development in business (as of 2009, 90% delivered via grants,
with limited resources for subsidized loans,
guarantees, venture capital)
2006/07 – Initiation of Lithuanian Technology
Platforms to integrate business and public
R&D institutions for technological development
2007 – Introduction of comprehensive competitive R&D funding (Science Council
reform); main responsibility for corporate
R&D funding stays at the Ministry of
Economics
2007 – Investment Promotion Program 2008–
2013 foresaw tax incentives (deductions) for
business R&D, technology acquisition, and
education investments
2007 – Initiation of Integrated Science, Study,
and Business Centers
reports for the period 2000–2009) and Erawatch (analysis covers existing reports for the period 2008–2009).
Source: Compiled by the author; based on annual national reports of Estonia, Latvia, Lithuania prepared in the framework of ProInno Europe (analysis covers
2004 – State research programs mainly in
humanities (managed by Ministry of
Education and Research) and agriculture
(managed by sectoral ministry)
2005 – Introduction of competitive state baseline funding for R&D projects by the
Ministry of Education and Research;
Centers of Excellence program initiated
2008 – Adoption of the Cluster Program (symbolic change toward more sectoral IP) and
initiation of first Technology Programs
foreseen in energy-technology, ICT, biotechnology, material technology
2009 – Formal adoption of performance contacts between state and public universities
(funding – baseline funding – linked to
performance contracts)
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administrative structures where a mix of national practices and EU standards
determine implementation rules.
To offer a more detailed comparison, Estonia has been the first to create a formal
implementation structure while Lithuania in particular but also Latvia have to date
been dealing with finalizing the policy–administration split and creating horizontally
and vertically coherent implementation structures. The recent administrative reforms
in Lithuania have differed from the trajectories of Estonia and Latvia because these
reforms have been directed toward consolidation and reorganization of the
implementation system (establishment and reorganization of the Agency for
Science, Innovation and Technology jointly by two ministries). In contrast, the
recent reform of the Latvian Council of Science divided tasks more clearly between
different institutions, reinforcing both the two-ministry governance model and
policy–administration split.
The second aspect of policy implementation – delivery of policy – is analyzed
here in generic terms by distinguishing the key principles. During the last decade,
there have been dual developments in the Baltic States: diversification of policy
measures (from institutional capacity building to financing private R&D activities to
comprehensive efforts like R&D and technology programs that coordinate and steer
different R&D fields) and diversification of delivery principles (from generic
regulations and infrastructure investments to more selective subsidies/grants to more
complex tax policy measures) toward a broad and increasingly complex mix of
policies where the state plays increasingly selective roles.
It is also important to note that the accession to the EU in 2004 kick-started
policies directed toward business R&D, especially in Lithuania and Latvia (in Estonia
these first resulted in the revision of existing measures and thereafter the proliferation
of new measures). At the same time, several differences can be highlighted. By the
time of EU accession, Estonia had developed the most complex policy mix. Accession
to the EU was used to intensify policy efforts as the majority of existing IP measures
were transferred to the EU structural funds. This increased the stability of IP
financing. At the same time, the Estonian IP system remained mostly horizontal.
Sectoral coordination mechanisms, such as technology programs and cluster
principles, were initiated only in 2008, although they were foreseen in 2002. Also,
the policy delivery system has remained, to date, largely horizontal because targeted
financing is limited and most measures for financing both science and R&D in public
and private institutions have either remained horizontal or have been based on open
competitive funding (Karo 2010; Masso & Ukrainski 2009). Lithuania has differed
from Estonia and Latvia by having relatively more sectoral perspective to IP
represented by detailed national technology priorities, technology platforms, and an
early emphasis on the cluster approach. In 2007, Lithuania introduced tax incentives
for R&D and innovative firms creating new policy tools (next to subsidies and grants)
to pursue more selective IP. Estonia has so far disregarded tax policy as a tool for IP,
and Latvia has had varying success in similar attempts.
In all three countries significant changes have taken place in R&D funding schemes
that were initially reformed and institutionalized during the 1990s. In 2007, Lithuania
introduced a comprehensive competitive funding system of R&D to replace its
institutional funding system (this reform lagged significantly behind similar reforms in
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425
430
435
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445
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Estonia and Latvia). Estonia has further institutionalized its competitive financing
system by introducing performance contracts between the state and public research
universities. Latvia has moved back from its initially extreme position on projectbased competitive funding toward a more balanced model by institutionalizing multiannual research programs (in 2005) where government has greater steering and
selectivity capacities.5
Policy Evaluation and Learning Systems
The start of IP making in the Baltic States took place in a paradoxical context. IP
makers needed significant input from evaluations of existing public and private sector
capacities and capabilities, but evaluation of these capabilities and pre-existing policy
measures was highly difficult because the system lacked proper evaluation tools and
the lifespan of policies up to that time had been too short for explicit, measurable
impact.
This challenge and the increasing importance of the EU in IP making made the
Baltic States reliant on international policy learning exercises and the transfer of
evaluation methods. Thus, evaluation and policy learning systems in the Baltic States
consist of two sides. On one side, evaluation systems have relied on internal
evaluations by respective state audit offices, expert groups, and scientists, but these
have not been systematic and comprehensive or targeted explicitly to IP or IP
governance.6 The seemingly more important side has been the spread of external
evaluation and analysis methods (including national evaluations). Indeed, all the Baltic
States reformed their statistics system in the early 2000s in order to participate in the
EU’s Community Innovation Studies that have become the key source of assessing
innovation and effectiveness of IP measures on the business level. The Baltic States
have participated in the EU-wide ProInno Europe initiative (from 2000), CEE-wide IP
evaluations funded by the EU (European Commission 2001, 2003), the Erawatch
benchmarking initiative (from 2008), and others, which all analyze IP and R&D policy
performance. In the last few years, the Baltic States have been commonly subjected to
peer reviews in the context of Lisbon Agenda goals and strategic evaluations for
implementation of the EU structural funding. Table 4 summarizes the key evolutions
of policy evaluation and learning.
A notable characteristic of all of the evaluations is the homogeneity of the
analytical approaches taken. Almost all evaluations depart from theoretical or
analytical perspectives that analyze IP systems from ‘market failures’ or ‘systems
failures’ perspectives (Arnold, 2004; EIPR 2008). The analyses mostly highlight either
the weaknesses of actors in the IP system (innovative and absorptive capacities of
firms; R&D content and structure of research institutes) or the linkages of the actors
(valorization of public research through firms and other modes of cooperation) and
propose new policy mixes or changes within existing. Thus, different analyses provide
mostly temporal descriptive differences and the variations in the content tend to be
incremental. An additional similarity is the lack of conscious analytical perspective on
IP governance structures. Most evaluations define policy coordination, organizational
setup of the innovation system, broader inclusion of stakeholders into policy
527
Lithuania
2003 – Evaluation of knowledge economy by
World Bank
2003 – Comparative study examining key
challenges for SMEs, NIS, and policy
makers in Estonia, Latvia, Lithuania, and
Poland
2003 – Evaluation of IP in seven candidate
countries (commissioned by the EU)
2004 – LIT cluster analysis (PHARE supported
study)
2005 – Evaluation of IP systems (to increase
coordination capacity and benchmarking)
2006 – Strategic Evaluation on Innovation and
the Knowledge-based Economy in relation
to the Structural and Cohesion Funds, for
2007–2013 (evaluation for DG Regional
Policy)
2007 – Evaluation of Latvian RTDI Policy Mix
(OMC peer review report; Lisbon goals)
2007 – Foresight for the Lithuanian Economy in
light of regional and global tendencies
2007 – Ex-ante evaluation of LIT SF program for
2007–2013 (also ex-post evaluations becoming more prevalent – evaluation of the
Innovation in Business Program)
Latvia
2002 – Scientific background study for the
National Innovation Program
2003 – Evaluation of knowledge economy by
World Bank
2003 – Comparative study examining key
challenges for SMEs, NIS, and policy
makers in Estonia, Latvia, Lithuania, and
Poland
2003 – Evaluation of IP in seven candidate
countries (commissioned by the EU)
2004 – Ex-ante evaluation by independent
experts for drafting the NDP/SPD 2004–2006
2006 – Strategic Evaluation on Innovation and
the Knowledge-based Economy in relation
to the Structural and Cohesion Funds, for
2007–2013 (evaluation for DG Regional
Policy)
2007/08 – Ex-post evaluation of the absorption
of financing under EU SF entrepreneurship
and innovation activities in 2004–2006; exante evaluation of the upcoming new IP
measures for 2007–2013 (considered as
landmark systematic evaluations)
2010 – Evaluation of the Latvian RTDI Policy
Mix (OMC peer review report; Lisbon goals)
reports for the period 2000–2009) and Erawatch (analysis covers existing reports for the period 2008–2009).
Source: Compiled by the author; based on annual national reports of Estonia, Latvia, Lithuania prepared in the framework of ProInno Europe (analysis covers
2000 – Evaluation of the Estonian Innovation
System by Finnish expert (a landmark study)
2001 – Evaluation of IP in six candidate countries
(commissioned by the EU)
2002 – First foreign-expert conducted feasibility
study of IP measures (Competence Centers
Programs; extended to mid-term and final
evaluations)
2003 – Comparative study examining key challenges for SMEs, NIS, and policy makers in
Estonia, Latvia, Lithuania, and Poland
2003 – Assessment of the Estonian Research
Development Technology and Innovation
Funding System by UK experts
2005 – Evaluation of RTD policy making and
planning by UK/Belgium experts
2006 – Strategic Evaluation on Innovation and the
Knowledge-based Economy in relation to the
Structural and Cohesion Funds, for 2007–2013
(evaluation for DG Regional Policy)
2007 – Evaluation of the Estonian RTDI Policy Mix
(OMC peer review in the context of Lisbon
goals)
2008 – Systemic technology and cluster-related
foresight activities started by the Estonian
Development Fund
Estonia
Evolution of policy evaluation and learning systems in the Baltic States during the 2000s
528
TABLE 4
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processes, and the need for better policy evaluation and learning mechanisms as key
and constantly emphasized challenges, but limit the discussion to examples of best
practices and do not provide any ‘catching-up’-specific discussions on IP governance.
To summarize, all of the Baltic States initially relied on external evaluations and
assessments. This was followed by the spread of ex-ante and ex-post evaluations of IP
measures. The latest stage has been the use of foresight exercises. Estonia has been the
path maker as almost all of its evaluation initiatives took place years before similar
evaluations were launched in Lithuania and Latvia. Also, Estonia has used several
evaluations, which explicitly analyze innovation systems or IP delivery systems, while
Lithuania and Latvia have been subject to more generic international evaluations that
have analyzed IP governance as a side activity. Also, in Lithuania and Latvia evaluations
by foreign experts (such as the World Bank and the EU) have been carried out on
evaluators’ initiatives (or conditionalities), while in Estonia some of the key
evaluations have taken place on national initiatives. However, Estonia has almost
exclusively relied on foreign independent experts (even to the extent that ex-ante and
ex-post evaluations of policy measures have been procured exclusively from foreign
experts), while Lithuania and Latvia have followed a more mixed strategy in which
national expertise has been included more systematically.
Summary: Toward a Governance System Creating IP Capacity?
The foregoing analysis indicates that in nearly all aspects of the policy cycle the Baltic
States are following a similar trajectory or path toward a common ‘European’ type of
IP governance model. The national differences can be mostly interpreted as
incremental differences within the general reform trajectory, which can be linked to
particular national legacies that have affected the evolutions of different countries
along the general trajectory.
The Estonian IP discussions and structural and policy reforms have been more
straightforward than in Latvia and Lithuania. Estonia has pursued rather uncomplicated
IP governance reforms and there have been fewer changes and fewer problems with
planned reforms than in Latvia and Lithuania. Estonia has consciously left out of IP
discussions several topics that can be found in the policy discourses of Latvia and
Lithuania (e.g. the role of industrial policy, explicitly selective tax policy in support of
IP), which give the state a more active role in the respective IP mixes. This may indicate
that in Estonia the spread of the WC-based policy ideas of the 1990s (macroeconomic
policies, the role of the state in the economy, and preferred governance models) went
in a more radical direction and covered a significantly broader policy space (not just
macroeconomic policy, but also the emerging IP arena and public administration) than
in Latvia and Lithuania. In Latvia and Lithuania the IP discourse was more fragmented
between different alternatives and directions. In recent years, Estonia has also started
to slowly move into more diversified and selective IP, but the lack of experience with
similar efforts is becoming a hindrance to reforms.
The following wider generalizations can be made. First, all of the Baltic States
have moved from rather rudimentary IP systems toward increasingly complex ones.
The complexity is represented at the level of both policy design and policy
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implementation. Over the years, the IP priorities and policies have become more
complex and the role of the state has become more active. Also, organizational
structures, strategic policy-making practices, and delivery systems have become
increasingly complex and fragmented. Second, while IP systems have become
increasingly complex, the evaluation, policy learning, and feedback models have not
followed similar trajectories, but have remained narrow and increasingly one-sided. At
the same time, the spread and dominance of the EU-level policy learning initiatives
overlook many contextual catching-up characteristics. Third, the combined effect is
the overall fragmentation of the policy cycle. As a result of the fragmentation of the
governance system and ‘foreignization’ of the evaluation system, the IP systems in the
Baltic States seem to lack a substantive policy-making center. A majority of the key
activities of the policy cycle have been delegated away from the traditional hierarchical
policy cycle (to councils of R&D, to subordinate organizations like agencies and R&D
institutions, and to external stakeholders like interest groups, foreign experts, and the
like). The inability of Estonia to adopt technology programs (from 2002 to 2008),
which would have indicated a conceptual shift in IP making toward more activist state
and participatory IP, and the negative evaluations of the EU IP community in
developing responses to the financial crisis are probably the best illustrations that the
highly fragmented IP model threatens to become increasingly rigid and pathdependent with limited potential for developing and renewing policy capacities. In a
way, the speed of the evolution and increasing complexity of the IP systems in the
Baltic States have to some extent compromised the potential for creating policy
learning capacities. In all cases the external pressures and incentives created by the EU
have been the major source of this development. In Estonia this has been further
enhanced by the national choices and legacies.
The EU IP discourse takes the network- and stakeholder-based governance
models as the main tool for increasing policy capacities through reformulated policy
design, coordination, and implementation mechanisms. The model is derived from the
experiences of developed economies and is geared toward reducing the perceived
state-centrism in IP that is inherited from the ‘industrial policy’ paradigm (Sharif
2006; Soete 2007). At the same time, catching-up economies (like the Baltic States)
have only recently moved away from market-based IP toward more state-led or stateinvolved IP models. Therefore, the problems are significantly different – IP is an
emerging policy field where the state has been creating only basic institutions. Thus,
while the goals and ideas of IP are becoming relatively more state-centered,
governance models are in fact moving in different directions. Because the Baltic States
lack historical experiences with IP and the current IP models pursued by these
economies tend to be externally imposed, this contradiction between policy ideas and
governance trajectories, and the negative impact on policy capacity creation, has gone
unnoticed.
Conclusion
In this paper, I have studied both the emergence of the general IP governance
trajectory and within-the-path changes in the Baltic States. I have highlighted several
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research and policy relevant issues that are usually unnoticed in IP debates. First, I
have argued that the emergence of a common IP governance trajectory has been the
result of the influence of the EU and, thus, the governance model is externally
imposed and de-contextualized. The spread of the EU-wide approach to IP is not a
negative phenomenon per se, as it has in principle kick-started conscious IP in the
Baltic States. Rather, the negative side of the ‘Europeanization’ of IP stems from the
tendency to substitute national perspectives with the EU-based models, which
currently tend to reinforce the de-contextualized logic of IP of the WC period (not
taking into account national legacies) and limit the capacities and capabilities of the
Baltic States to transform policy cycles and governance systems to enhance structural
transformation of the economies through IP.
Second, the ‘within-the-path’ changes of the IP trajectories of the Baltic States
indicate that national historical legacies still affect the IP trajectories, although in less
pronounced ways than the EU and external pressures, and may be overlooked by
internationally spreading analytical and policy learning approaches. These national
legacies are important variables that affect the ability to create policy capacities within
the general IP governance trajectory. The EU-wide policy learning approaches tend to
overlook these differences, especially in the case of governance structures, and
propose generic models.
Third, the Baltic States and Central Eastern Europe have not been subject to
historical studies of ‘development capacities’ as a whole. Such studies which have been
conducted in other catching-up regions (such as East Asia) combine economic,
administrative, sociological, and political perspectives. The analysis of IP developments in the Baltic States shows that IP governance reforms are dependent on a
synergy between IP content and IP governance context. The current IP paradigms
seem to overlook this and provide policy ideas and governance models that seem to be
contradictory. Thus, a more interdisciplinary approach to IP studies is needed (see
Karo & Kattel 2010a for a proposed model). Interestingly, problems of IP making and
governance identified in this paper are also persistently recognized as key challenges in
the case of Slovenia (Bucar & Stare 2002, 2006; Trendchart 2009), which should
represent a different model of capitalist development. Thus, the influence of the EU
and developments of the IP policy discourses may have broader impacts that need to
be studied further.
Fourth, in terms of policy lessons, I argue that the Baltic States are moving on an
IP trajectory where new policies and new governance models seem to be, in the long
run, out of sync and challenge long-term capacities to design and implement dynamic
IP. In order to make a turn on this path, the Baltic States have two strategies at hand:
an ‘idealistic’ and a ‘realistic’ reform strategy.
Ideally, the Baltic States could pursue reforms of IP by agreeing on or reaching a
broad-scale consensus on new national policy goals and priorities. The spread of
foresight activities (sectoral foresight studies and national foresight exercises) is an
example of such a strategy. Yet, coordination and consensus building in highly
fragmented and delegated governance systems is extremely difficult. Thus, in order to
reach a broad consensus, the Baltic States would need to create political commitment
at the highest levels and policy commitment by the whole policy cycle and by all
stakeholders. Given the macroeconomic policies pursued in the Baltic States and the
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lack of an authoritative policy-making center, without complementary governance
reforms these commitments and the ability to see them through are rather unlikely.
Accounting for the influence of the EU structural funding and the implementation
criteria that sustain the current governance model, it becomes even clearer that
broad-scale national commitments and consensus supported by politically and
administratively capable governance systems remain an idealistic perspective.
Realistically, the Baltic States are likely to continue in the medium term (which
may be measured by the length of the EU funding support, as the termination of the
latter is likely to create the first real windows of opportunity for substantive changes
of IP) to follow IP ideas, best practices, and benchmarks that have been adopted by
more developed countries. The realistic strategy for the Baltic States to create
contextual IP capacities seems to be to first create alternative sources of feedback and
learning mechanisms to gather contextually embedded lessons and information. Given
the medium-term realities of the IP governance systems, the Baltic States could rely
on ‘below the political radar’ attempts to create or reinforce existing bureaucratic and
technocratic capacities found in the policy cycle. For example, the Baltic States could
separate nationally funded IP measures from the existing IP system and develop new
policy initiatives that provide alternative policy cycles (e.g. more integrated or
differently fragmented design and delivery), which could lead to more diverse
feedback and learning mechanisms or better customized links between the
bureaucratic policy-making system and external stakeholders.
Acknowledgements
Research for this paper was partially supported by the Estonian Science Foundation
grant nos. 7441 and 8418.
Notes
1
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620
2
625
630
3
CEE and especially the Baltic States have usually been left out of these types of
capacity analyses, which focus on catching-up countries (with one slight exception,
see Ahrens 2002). The current crisis indicates that the Baltic States’ economies act
pro-cyclically and hover between the catching-up and more developed economies.
Although the Baltic States are usually compared with the EU and developed
regions, this paper assumes that comparisons with catching-up economies (and
literature) may be equally as informative and suitable.
The Estonian State Innovation Program was adopted in 1998, the National
Concept of the Republic of Latvia on National Innovation System was first
discussed in 1998, and the Program on Innovations in Business was designed in
Lithuania during 2000.
Unless otherwise noted, most of the factual information represented in the
following sections is gathered from ProInno Europe national progress reports
covering 2000–2009 (see respective country pages and reports for Estonia, Latvia,
Lithuania: http://www.proinno-europe.eu) and EraWatch national progress
reports covering 2008–2009 (see respective country pages and reports for
Estonia, Latvia, Lithuania: http://cordis.europa.eu/erawatch).
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In addition to the strategic documents highlighted in Table 2 (that also include
implementation plans), all of the Baltic States have adopted several mid- and longterm strategies for general development (visions for 2020 or 2030) or other
sectoral strategies (for higher education, entrepreneurship, etc.). In Table 2 the
emphasis is on key strategies that highlight or center on IP priorities and link
rhetorical priorities with financial capabilities. Thus, the list of strategies is not
intended to be complete and comprehensive.
Note that the technology programs, which Estonia has been initiating since 2008,
differ from national research programs (in Latvia) as these programs lack separate
budgets and autonomous funding. Technology programs act as coordinating
mechanisms, which enable policy makers to create some priorities across the
horizontal policy measures (through agreeing in principle on earmarked funds).
These national evaluation practices are left out of this analysis because analyzed
reviews and reports of policy reforms give limited attention and relevance to these
sources – partly because these activities have been rather sporadic and of limited
scope for developing IP system in general.
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Erkki Karo is a Research Fellow at the Department of Public Administration, Tallinn
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