Well that’s a thought provoking headline? How can I say something about the problem that reflects so many countries and is such a big part of Europe? Do Eastern European countries really have a problem with innovation?
First, I must go back to my childhood to remember the times of communism in former Yugoslavia. The country had its own kind of this totalitarian system. Let’s say that there was a bit more freedom and openness that in Soviet-style communism, but that was just for a bit, not too much of course…
In the first grade we all get a to be a “Pioneer” – we were all dressed the same, got a Pioneer booklet and must swear an oath. In that oath we all pledged to be marvelous, worthwhile and honest comrades. In the whole elementary school the biggest punishment was if teacher asked you to bring back your Pioneer card.
That was the 80’s, times of inflation, power reductions and shortages of imported goods like coffee. We kids were waiting in line in shops to get more coffee for our parents as we could buy only one package per person. Our parents worked in big state-owned companies where you have the safety of your workplace, but there was no big differences in salaries and no stimulation for more efficient work. What also characterise this time is that government and public institutions were simply slow and inefficient.
Niall Ferguson in his book “The Great Degeneration” calls this effect extractive institutions, which is the opposite of the system of inclusive institutions existing in Western Europe and established more than a century ago. To summarize the feeling of that time I can say that everything was going in a step-by-step manner, with no disruptions, slowly and in dinosaur style (heavy effort to move and slow in changing direction).
The year is 2019. it is now almost 30 years from the transition to a new system, but the eastern part of Europe still lacks pace in following western countries. This problem couldn’t be shown clearer then by watching European Innovation Scoreboard where only one Eastern European country – Slovenia – is labeled a “Strong innovator”. All other countries are among “Moderate” or “Modest innovators” at the bottom of the list. Looking deeply inside the profiles of countries like Croatia (my country), it is visible that the worst results are in sections related to SMEs innovation, opportunity-driven entrepreneurship, public-private innovation linkages or patent applications. I must say that I see all these sections related to the 30 year old history I wrote about at the beginning of this article and could be considered as legacies of old system.
The number of patents also reflects the state of industry and R&D. Let’s say that Croatia had 37 patent filings to the EPO(European Patent Organisation) in 2017, Hungary had 186, Romania 68, Bulgaria 55. This might sound okay, until you learn that Austria had 2706 and Belgium 2664 patent filings to EPO in the same year . This could be connected to the time of 1990s when most old state-supported companies were left to die and many industries never recovered. To say this in political manner: companies didn’t survive the transformation to an international and open market.
But now we have youngsters coming out the universities who were born after the transition to the new system and they shouldn’t have the old state-of-mind, so what is still the problem?
Firstly, the educational system has not changed, it is still mostly formed in the way it was 30 years ago without the necessary adaptation to the trends of the present day, without even mentioning the future. There is certainly progress here, but it was done only in the last couple of years.
There is clearly a lack of entrepreneurs and a lack of creation of new companies that are started around the latest ideas. There are, of course, many good examples and many successful startups, but the numbers are not nearly on the same level as in the west.
The biggest leftover from the past is a shortage of connections of universities with industry and here there is a big space for improvement in the future. Universities also often don’t have incubators and tech students often don’t have enough or any business skills. Creativity is also not well supported or taught.
Next issue is the lack of any kind of innovation activities in most companies. Innovation Management as a discipline is just at the start here. Biggest starters of innovation activities are foreign companies. On the other hand, domestic companies are often without any trace of innovation activities and damned to be only market followers or copycats with no real chance for growth on international market.
Going back to the government and administration, the best path to inclusive institutions or to the better functioning of the state is integrating this part of the continent to European Union, an organization which forces implementation of many rules and laws. This is already done, but only partially as there are still countries waiting in the EU corridor.
At the end, most Eastern European countries have one other big problem, they will lose 15-25% of their population until the year 2050. This demographic catastrophe is a result of fertility rates, emigration to the West, and (still) no immigration politics for most of countries. This is a big problem, which has to be overturned in the next decade if these countries want to become prosperous and grow.
What’s the solution? Learn from the most successful countries like Slovenia or Czech Republic, make changes in the educational system and administration and introduce creativity and innovation methods as a part of everyday business life in all sectors. Focusing towards knowledge-based industries should reduce the gap towards the West in the future.