Poland: transitioning towards more intensive innovation

Poland’s recent past has seen the emergence of an entrepreneurial generation over a period of 25 years of reforms and 10 years in the European Union. Poland is now considered one of the most dynamic economies of the EU. Paradoxically, Poland’s position in innovation rankings does not reflect its recent economic success. Although the government has sustained commitments to invest in public sector research and in higher education, there are still a number of issues to address to create an ecosystem that would further support innovation and start-up creation.

The country has demonstrated resilience to the economic downturn. It has achieved over 20% GDP growth over the period 2008–2013—with a peaked at 4.5% growth in the middle of the recession in 2011, according to Eurostat. The reasons why Poland has been coping well with the financial crisis are multi-fold. They reside in the fundamental health of the economic system and in the synergistic relation between social, political and cultural factors, including its entrepreneurial culture.

In parallel, the country has demonstrated its ability to attract EU funds, with a total of €101.5 billion in structural and framework programme funds allocated to the country between 2007 and 2013—a number forecasted to grow to €105.8 billion between 2014 and 2020. The allocation of these funds was subject to the adoption of new regulations, the improvement of governance, and an increase in transparency and anti-corruption measures, particularly in relation to public procurement. All these systemic changes have created a solid grounding to support the country’s rising innovation scene.

Innovation performance lagging

Even though the country has developed at a fast pace, its innovation rankings have not been comparable. Only this year has some progress been recorded in the assessments of international organisations such as the World Economic Forum’s Global Competitiveness Report, the World Bank Economic Report, as well as the European Innovation Scoreboard. The trouble is that the innovation system remains fragmented. And it requires further investment and institutional changes.

However, there are some encouraging signs. Data from these international organisations shows the growing number of clusters, patents filled, graduates and jobs in science and technology as well as indigenous innovative companies gone global. And it also demonstrates an increasing public and private R&D investment.

Investment in R&D activities has increased most prominently in the public sector. There, the Gross Expenditure on Research and Development (GERD) in the higher education sector increased from €364 million to €1.181 billion, between 2004 and 2012, according to Eurostat data.

Private sector dynamics

Meanwhile, the level of private sector R&D investment in Poland is strong, according to a report by consultancy firm KPMG. The report notes that 57% of medium and large enterprises in the country declare that they invest in R&D. Among them, 70% have in-house research facilities, and 30% commission research and development projects outside. In 98% of the cases, the main source for this R&D investment comes from accumulated capital. Large companies invest between 1% and 5% of their income in this activity, and 48% of firms use public grants.

The innovation gap remains most evident in the small business sector, which faces problems in accessing finance and entrepreneurial know-how. This is reflected in 2010 Eurostat data, which shows that Poland lagged behind European average with only 28% of innovative companies—the lowest score in the Visegrad Group—compared to 53% among EU-27 firms.

Some small and medium-size companies have nevertheless demonstrated great potential. For example, in the 2014 ranking of the fastest growing Central European technology companies, published in a report by consultancy firm Deloitte, almost half, 22 companies, were from Poland.

Qualified work force

What makes Poland attractive to innovation companies, is the availability of university graduates, of scientists and engineers as well as skilled technicians. The country’s expenditure on education has increased by approximately 75% between 2004 and 2013. Eurostat data available for 2013 shows that, while the EU-28 average was 36% graduates in the age group of 25 and 35 years old, Poland scored 42%.

Having a high percentage of university graduates is important , but can only be fully beneficial to the country if these graduates are able to find good employment opportunities. Over the past decade, the number of persons with a tertiary education employed in science and technology in Poland increased by over 1.3 million. In addition, graduates display critical communication skills; the use of English as a second language, is very high and the English Proficiency Index published in 2014, ranked Poland at number 8 among the 60 countries surveyed.

Now that the trend towards innovation in Poland has been initiated, the next stage of development of innovation capacity requires to focus on further increasing investment in R&D–both public and private–building academia-industry partnerships, providing capital to high-growth companies and integrating innovation ecosystems within countries and with most innovative economies worldwide. While all countries of the Visegrad Group progress towards these goals, numerous studies show that the impact of changes is most noticeable in Poland.

Daria Tataj

Founder and CEO Tataj Innovation, an international innovation policy consultancy, based in Warsaw Poland, former member of the executive committee of the European Institute of Innovation and Technology (EIT) funding agency, based in Budapest, Hungary

This article is adapted from an original publication called ‘Poland: Emerging Innovation Leader of the Visegrad Group’, CEED Institute, Polish Ministry of Foreign Affairs, November 2014.

Featured image credit: Daria Tataj

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