The EU recovery plan envisages investing 30% of the huge budget in climate change, with the goal of zero gas emission by 2050. This ambitious plan will require (for now indefinitely) investment in research and innovation. The aim of the paper is to check and anatomize the existing and propose a new model of effective investment in eco-innovation, on the basis of which a contribution to effective long-term investment policy, climate change impact and mitigation of consequences will be given.
The Innovation Index is an established mechanism and tool for measuring global, national and regional innovation systems. As an indicator of measuring the increasing impact on environmental and social spheres, systematic financing the R&D as important part of EU Innovation Agenda and Recovery Plan for EU, as well as way to pull developing countries to structure their funds for financing R&D, following the best and most successful examples for financing structures and models. The eco-innovation scoreboard and the eco-innovation index complements other measurement approaches of innovativeness of EU countries and aims to promote a holistic view on economic, environmental and social performance.
The Eco-Innovation Scoreboard (Eco-IS) and the Eco-Innovation Index illustrate eco-innovation performance across the EU Member States. They aim at capturing the different aspects of eco-innovation by applying 16 indicators grouped into five dimensions: eco-innovation inputs, eco-innovation activities, eco-innovation outputs, resource efficiency and socio-economic outcomes. The Eco-Innovation Index shows how well individual Member States perform in different dimensions of eco-innovation compared to the EU average and presents their strengths and weaknesses. The Eco-IS and the Eco-Innovation Index complements other measurement approaches of innovativeness of EU countries and aims to promote a holistic view on economic, environmental and social performance.
Very important process for developing countries is identification of structural differences in financing the R&D between countries Innovation leaders, Strong Innovators, Moderate and Modest Innovators. Indicators which significantly directly or indirectly affect the level of innovation achieved of individual countries are precisely determined by Global Innovation Index, European Innovation Scoreboard, Eco-Innovation Scoreboard etc. This selection of indicators was undertaken pursuant to a particular economic theory and logical interpretation of the influence of financing from different institutions on the Country Performance according to European Innovation Scoreboard. The complementary objective of this work is to compare these dependencies between selected indicators and suggested contextual indicators value within Member states and selected third countries. Based on fact-based Reports which also explores the extent to which differences in the scores of a country in the European Innovation Scoreboard (EIS) can be explained by various socio-economic, demographic, cultural, etc. factors, this analysis find that Innovation leaders use more financing of R&D from business sector. Interesting results emerged when the sample was divided into two groups: group which is mostly financed from public sector and group which is mostly financed from business sector. The results show that structural differences in R&D financing influence on Countries Performance presented in European Innovation Scoreboard. Innovation Leaders have predominantly characteristics of R&D financed from business sector while Moderate and Modest Innovators are significantly lower in business and public funds for financing R&D investments.
Global innovation trends and the innovation performance of 131 economies are presented for more than a decade in Global innovation index 2020. In addition to significant data and fostering innovation debates and policies - a clear question of this year’s edition of Global innovation index 2020 is - Who Will Finance Innovation? This endevaour and striving to make the best ratio of investment and results in research and development are more than necessary, especially in terms of searching for sustainable products and services that will be less harmful to the natural environment.
The transition to a climate-neutral, climate-resilient and environmentally sustainable economy will require significant investment. Achieving existing climate and energy targets for 2030 requires additional investments of € 260 billion per year. This figure mainly includes investments related to energy, buildings and part of the transport sector (vehicles). Average investment needs by sector are greatest in the area of building renovation. It is necessary to maintain the continuity of these investment flows. Significant resources will also be needed in other sectors, notably agriculture, to address wider environmental challenges, including biodiversity loss and pollution, protection of natural capital and support for the circular and blue economy, and for human capital and transition-related social investment.
Digitization is a key driving force of the green plan. Significant investments in Europe's strategic digital capacities and in the development and extensive introduction of state-of-the-art digital technologies will create the preconditions for smart, innovative and tailor-made solutions to address climate issues.
Due to the planned increase in the EU's target for reducing greenhouse gas emissions by 2030, as announced in the European Green Plan, investment needs will increase further. A detailed analysis supporting the Commission's long-term strategic vision for the EU's climate-neutral economy has already suggested that the transformation to a low-carbon economy could require additional investment of up to 2% of GDP by 2040. This deadline may need to be shortened in order to a higher level of ambition was achieved by 2030. Under the Investment Plan for a Sustainable Europe, the investment components of the European Green Plan, sustainable investments of at least EUR 1 trillion will be mobilized in the next decade. This amount of funding for the green transition will come from allocations from the EU's long-term budget, a quarter of which for climate change and an estimated € 39 billion in environmental expenditure. In addition, the Plan will attract additional private investment thanks to the effect of the EU budget guarantee under the InvestEU program.
In addition to EU expenditure related to climate action and environmental policy, the Investment Plan for a Sustainable Europe also includes amounts for the Fair Transition Mechanism, which help transition regions most affected. The European Investment Bank will become the Climate Union Bank. She announced that she would gradually increase her share of funding for climate action and environmental sustainability to 50% of total operations in 2025. Cooperation with other financial institutions will also be crucial. While this contribution demonstrates the EU's commitment to funding the European Green Agenda, it alone will not be enough to mobilize the necessary investment. Significant contributions will be needed from both national budgets and the private sector.
According to Gsodam et al. [1], key resources comprise renewable energy plants, which are usually smaller than conventional power plants, but are quite similar to conventional power plants regarding value creation. The revenue model reflects costs that arise from planning, construction, operation and maintenance, and revenues that arise from charging the customer for the amount of electricity delivered. A new tariff for green electricity can increase the revenues.
In different periods, growth, stagnation or decline of economic development, even before, during or after the crisis, a range of new factors, such as venture capitalists, investment funds, biomedical research organisations, sovereign wealth funds, and not-for-profit organizations, are interested in supporting innovation. Innovative process is complex and uncertain even for the experienced and accomplished financial institutions and mechanisms, whether it is private or public funds. World Intellectual Property Organization (WIPO) asserts that even after the crisis mechanisms of innovation such as corporate venturing, intellectual property (IP) marketplaces, crowdfunding, and fintech solutions will not vanish. At the same time, public support schemes remain essential vehicles of innovation financing. Another important source of information related to innovation index at national and regional levels is European innovation scoreboard, which provides a comparative analysis of innovation performance in EU countries, other European countries, and regional neighbours. It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address. The latest European innovation scoreboard 2020 was released on 23 June 2020. Based on the previous period 2012–2019 and collected relevant data, main question in this analysis is the extent to which is financing of R&D from business sector has influenced the success of national Innovation index according to European Innovation Scoreboard (EIS). Also, what is the role of public investment in R&D in developed countries and developing countries. Competitiveness indices have been monitored for about 40 years and show the rankings of economies according to current factors that define competitiveness. A review of the relevant literature established the existence of a separate group of indices that measure the competitiveness of economic innovation [2].
According Conway [3], Demirel and Kesidou’s study [4] found that whilst regulation is effective in stimulating end-of-pipe solutions to eco-innovations (so-called ‘quick-fixes’ to environmental emissions, for example) and environmental R&D, internal drivers, such as efficiency, were more responsible for increased investment in cleaner production technologies through equipment upgrades. This is clearly a longer term view but one which requires more financial and organisational investment.
Innovation has received more and more attention in the European Union since adoption of the Lisbon Strategy in 2000. In 2010 the European Commission 2010; European Council adopted a new strategy, Europe 2020, which stressed again the importance of innovations. Therefore, it is important to evaluate the current level of the European Union Member States’ technological and economic development as well as its innovations impact on it. As author Okanovic [5] has also comprehensively described in her previous research, “These indices bring innovative changes to the environment and include factors such as: human resources, intellectual property, research systems, networking, sources of funding for innovation, etc. This group includes: The Global Innovation Index, published by the Confederation of Indian Industry along with INSEAD, since 2008; European Innovation Scoreboard, a study published by the European Commission since 2010; Comparison of EU and US Innovation and competitiveness, a study published by The Information Technology and Innovation Foundation since 2006; The Global Cleantech Innovation Index, published by the Cleantech Group and WWF, since 2012; The Global Innovation Policy Index, published by the Information Technology and Innovation Foundation and the Kauffman Foundation, since 2012; The Regional Innovation Scoreboard, a study published by the European Commission since 2010; The Global Innovation Cities Global Index, published by the Global Innovation Agency 2thinknow since 2007“. Furthermore, eco-innovations are at the heart of European policies. Every effort must be made to ensure that developing countries catch up and raise awareness of the necessity of investing and supporting eco-innovation programmes.
Innovation impact on economic development was analyzed by correlating various composite indices with GDP per capita indicator [6]. European Union Strategies remains strongly focused on fostering innovation. Open innovation, open science and open to the world are the 3 main policy goals for EU research and innovation. Strategy on research and innovation in EU is still very strong and it is based on many actual policy initiatives and practices in European research and innovation. To contribute to research and innovation strategy, European Commission set a new goal, through the Green deal, to become the world’s first climate-neutral continent by 2050 is a once in a lifetime opportunity to modernise the EU’s economy and society and re-orient them towards a just and sustainable future. The EU's next research and innovation programme starting in 2021. as a powerful instruments and innovative governance will drive the necessary systemic changes to reach climate neutrality and ensure an inclusive ecological and economic transition. Horizon Europe, in synergy with other EU programmes, will be key to leveraging national public and private investment. Through Green partnerships. There will be a new wave of research and innovation partnerships under Horizon Europe. Partnerships will help drive the huge transformations in environment, society and the economy that the European Green Deal calls for. The EU will work closely with industry and countries to support partnerships in critical areas such as transport - including batteries - clean hydrogen, low-carbon steel, circular biobased sectors, the built environment and biodiversity.
Analyzing the current impact of research and development funding from private and public funds, comparing with the results the goals and trends of developed countries, we could suggest how to construct future R&D investment in developing countries. Differences in economic structures are important. In particular, differences in the share of manufacturing industry in GDP, and in the so-called high-tech activities in manufacturing and services, are important factors that explain why countries can perform better or worse on indicators like business R&D expenditures, PCT patents, and innovative enterprises. Medium-high and high-tech industries have higher technological intensities than other industries. These industries, on average, will have higher R&D expenditures, more patent applications, and higher shares of innovating enterprises. Countries with above average shares of these industries are expected to perform better on several EIS indicators. For example, for the EU27 on average, 85% of R&D expenditures in manufacturing are accounted for by medium-high and high-technology manufacturing industries. Also, the share of enterprises that introduced a product and/or process innovation is higher in medium-high and high-technology manufacturing industries compared to all core industries covered in the Community Innovation Survey [7, p. 10].
The term ‘structural indicators’ is used (e.g. by Eurostat) to refer to statistical indicators used for a quantitative comparison of performances of territories in selected fields. Furceri and Mourougane [8] point out that such indicators can be both ‘perception-based’ and ‘fact-based’. Both types of indicators have specific advantages and disadvantages. For the purposes of this report, we define structural indicators as independent variables that may influence or determine the behaviour (current values or trends) of innovation indicators used in the EIS (or RIS). These indicators can be thought of as parameters that may influence the medium-to-long run performance of all or parts of a national or regional innovation system. The annual European Innovation Scoreboard (EIS) provides a comparative assessment of the research and innovation performance of EU Member States and selected third countries, and the relative strengths and weaknesses of their research and innovation systems. It helps countries assess areas in which they need to concentrate their efforts in order to boost their innovation performance [7, p.8]. A great number of indicators for monitoring the model of competitiveness, i.e. competitiveness indices, have appeared to monitor the degree of achievement the objectives of these strategies, the level of market development, and the level of competitiveness of national and regional economies at the end of the 20th Century. However, while strategies define clear objectives, the basic problem is the selection of appropriate indicators, which should show the degree of achievement of the set strategies, as well as monitoring and controlling the set objectives [9].
In the previous studies [10] many highlighted problems related to regional disparities and existing research were pointed out, although the European Union has set ambitious goals regarding innovation policies and R&D, there are still problems in achieving the set goal of R&D representing 3% of GDP. Regional disparities have increased over time as well. An objective analysis of achievements and shortfalls is needed so that the required policy changes within a country can be made on time and to the best quality. The existing research has some shortfalls, including static analysis being used in the majority of cases, peculiar results being found in some of the research (namely, findings in which some of the worst-ranked countries in many international rankings have been found to be among the best-performers), and usage of aggregated R&D data without the separation of the sources of (in)efficiencies for individual countries.
In the last century, most of the economic growth theories have been based on innovation-generating processes focusing on the role of productivity, technology change and knowledge, as well as on the role of the actors contributing to them. In the Neoclassical Growth Theory, as developed by Solow [11] and his followers, economic growth in the long-run is the result, within the industrial sphere, of the combination of capital, labour and technological progress (accounted as an exogenous element). Years later, the so-called New or Endogenous Growth Theory proposed by Romer [12] and Lucas [13] introduced the “shift from a resource-based economy to a knowledge-based economy. It underscores the point that the economic processes which create and diffuse new knowledge are critical to shaping the growth of nations, communities and individual firms” [14]. According to Romer [12], “under the new system, firms will increasingly take advantage of each person's innate curiosity and willingness to experiment…every worker in an organization, from top to bottom, can become a "knowledge" worker if given the opportunity to do so”.
Cavallini et al. [15] emphasize that both the Triple Helix (TH) concept and the Quadruple Helix (QH) approach are grounded on the idea that innovation is the outcome of an interactive process involving different spheres of actors, each contributing according to its ‘institutional’ function in society. Traditional protagonists of the TH are University (UNI), Industry (IND), and Government (GOV). Civil society (CIV) is the additional sphere included in the QH. Contribution to innovation is envisaged in terms of sharing of knowledge and transfer of know-how, with the helices models assigning and formalising a precise role to each sphere in supporting economic growth through innovation.
Author Ilina [16] asked if we could expect more of qualitative factors in fostering Innovation competitiveness of Moderate and Modest Countries. The problem of competitive sustainability ensuring in case of R&D sector is multidimensional. On the one hand there is the lack of public funding and support of R&D, on the other hand, there is the lack of effective communication between science and the real sector of economy, ensuring the effectiveness in usage of R&D in practice.
The state’s role is complementary to the private sector, but yet fundamental due to its capacity to mobilise national resources and its capability to stimulate innovations or whole new sectors when market fails to do so [17]. Lundvall et al. [18, p.227] underline the need to coordinate various policy areas to support development strategies at the national level. As is the case with some post-socialist economies, governance capacities may not be supportive enough of smart specialisation strategies to really stimulate growth through innovations [19, p.169].
With this research, we want to examine the impact of business and public funding on Innovation index positioning in EU and selected third countries, how much available resources are well distributed, which countries had a better investment and result ratio. Also, we are discussing and concluding with the results which impact has led to better results of certain countries.