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Developing the Sectorial Innovation System of Estonian Biotechnology

Author(s): Tõnis Mets

Journal: Engineering Economics
ISSN 1392-2785

Volume: 5;
Start page: 73;
Date: 2006;
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Keywords: innovation models | biotechnology | R&D expenditures | sectorial innovation system.

All the main innovation processes in the biotech sectorfrom basic research to commercialisation on the marketare represented in Estonia. There is no real data about thedivision of R&D expenses between the public sector (university)and industry in governmental policy documents.This indicates both a lack of relevant information and ofinnovation policy based on it. The aim of this article is toevaluate the structure of innovation expenditures in theEstonian biotech public sector and private SMEs, and toshape supportive measures for knowledge transfer andentrepreneurship in the biotechnology sector. Empiricalresearch in the business sector was carried out in twosample groups, Estonian research based biotech companieswith an independent strategy, and subsidiaries of foreigncompanies mediating imported goods or just carryingout services (clinical trials) for their foreign owners, andthus not working with Estonian research results. Productivityper employee in the first group of firms was nearlythree times lower than in the foreign owned companies.The gross funding structure proportion of basic and appliedresearch, and product or service development in theEstonian biotechnology sector was deduced according tothe R&D ratio formula as 11:5:1, which demonstrated thestrong imbalance of the sectorial innovation processes.The private sector value for the same indicator was 1:2:2.The research-based companies were poorly financed, andthe main public support was channelled into universitybasic research. One of the results of the small local marketand poor funding is that the Estonian biotech businessesare much smaller in size than American and Europeancompanies – one-tenth to one-hundredth of the size. A fewsuggestions for improving the sectorial innovation system(SIS) are made. The process of balancing the R&D ratio isseen as an iterative process.
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