European Trend Chart on Innovation Annual Innovation Policy for Iceland
Transcription
European Trend Chart on Innovation Annual Innovation Policy for Iceland
European Trend Chart on Innovation Annual Innovation Policy for Iceland Covering period: September 2003 – August 2004 European Commission Enterprise Directorate-General A publication from the Innovation/SMEs Programme European Trend Chart on Innovation Innovation is a priority of all Member States and of the European Commission. Throughout Europe, hundreds of policy measures and support schemes aimed at innovation have been implemented or are under preparation. The diversity of these measures and schemes reflects the diversity of the framework conditions, cultural preferences and political priorities in the Member States. The ‘First Action Plan for Innovation in Europe’, launched by the European Commission in 1996, provided for the first time a common analytical and political framework for innovation policy in Europe. Building upon the Action Plan, the Trend Chart on Innovation in Europe is a practical tool for innovation organisation and scheme managers in Europe. Run by the Innovation policy Unit of DG Enterprise, it pursues the collection, regular updating and analysis of information on innovation policies at national and European level. The Trend Chart serves the “open policy co-ordination approach” laid down by the Lisbon Council in March 2000. It supports organisation and scheme managers in Europe with summarised and concise information and statistics on innovation policies, performances and trends in the European Union (EU). It is also a European forum for benchmarking and the exchange of good practices in the area of innovation policy. The Trend Chart products The Trend Chart on Innovation has been running since January 2000. It now tracks innovation policy developments in all 25 EU Member States, plus Bulgaria, Iceland, Israel, Liechtenstein, Norway, Romania, Switzerland and Turkey. It also provides a policy monitoring service for three other nonEuropean zones: NAFTA/Brazil, Asia and the MEDA countries. The Trend Chart website (www.cordis.lu/trendchart) provides access to the following services and publications, as they become available: • • • • • • • a database of innovation policy measures across 33 European countries; a news service and related innovation policy information database; a “who is who” of agencies and government departments involved in innovation; annual policy monitoring reports for all countries and zones covered; all background material for four annual policy benchmarking workshops; the European Innovation Scoreboard and other statistical reports; an annual synthesis report bringing together key of the Trend Chart. The present report was prepared by Arnold Verbeek, Technopolis Brussels. The information contained in this report has not been validated in detail by either the Member States or the European Commission. Contact: [email protected] This document originates from the European Commission’s “European Trend Chart on Innovation” (Enterprise Directorate-General). Copyright of the document belongs to the European Commission. Neither the European Commission, nor any person acting on its behalf, may be held responsible for the use to which information contained in this document may be put, or for any errors which, despite careful preparation and checking, may appear. European Trend Chart on Innovation CONTENTS Executive Summary...................................................................................................................................i 1. National Innovation System in Iceland ....................................................................................... 1 1.1 Innovation performance.............................................................................................................. 1 1.2 Innovation governance system................................................................................................... 6 1.2.1 The national innovation system ......................................................................................... 6 1.2.3 Regional innovation systems and policies ....................................................................... 15 2. Innovation policy in Iceland ............................................................................................................... 16 2.1 Innovation policy framework ..................................................................................................... 16 2.2 Policy events & policy debates ................................................................................................. 18 2.3 Key developments in innovation policy measures ....................................................................... 19 3. Implementing innovation policy in Iceland......................................................................................... 21 3.1 Fostering an innovation culture ................................................................................................ 21 3.1.1. Education and initial and further training ......................................................................... 21 3.1.2. Mobility of students, research workers and teachers ...................................................... 21 3.1.3. Raising the awareness of the larger public and involving those concerned.................... 22 3.1.4. Fostering innovative organisational and management practices in enterprises.............. 23 3.1.5. Public authorities and support to innovation policy makers............................................. 23 3.1.6. Promotion of clustering and co-operation for innovation ................................................. 23 3.2. Establishing a framework conducive to innovation ..................................................................... 24 3.2.1. Competition...................................................................................................................... 24 3.2.2. Protection of intellectual and industrial property ..................................................................... 24 3.2.3. Administrative simplification............................................................................................. 25 3.2.4. Amelioration of legal and regulatory environments ......................................................... 25 3.2.5. Innovation financing ......................................................................................................... 25 3.2.6. Taxation ........................................................................................................................... 26 3.2 Gearing research to innovation ................................................................................................ 27 3.3.1. Strategic vision of research and development................................................................. 27 3.3.2. Strengthening research carried out by companies .......................................................... 27 3.3.3. Start-up of technology-based companies ........................................................................ 28 3.3.4. Intensified co-operation between research, universities and companies ........................ 29 3.3.5. Strengthening of the ability of companies, particularly SMEs, to absorb technologies and know-how…………............................................................................................................................ 29 4. List of TREND CHART measures ............................................................................................ 31 5. Bibliography and sources ......................................................................................................... 32 European Trend Chart on Innovation Executive Summary 1. Snapshot of innovation performance According to the OECD (Economic Survey, 2003) Iceland’s economic performance has improved significantly over the past decade. The per capita income exceeds the OECD average by around onefifth, as compared to one-tenth in 1995. Major imbalances and tensions were corrected in a short time span, highlighting the economy’s enhanced adjustment capacity. This favourable performance is to a large extent attributable to the shift in policy towards financial stability and market liberalisation during the 1990s. Average GDP growth has slightly fallen back from 5,7 percent in 2000 (average between 1995-2000 of 5,1 percent) to 4,3 percent in 2003. The average growth between 2004 and 2006 is expected to be about five percent, whereas over the period 2007-2010 a lower average growth of 2,75 percent per year is expected (Ministry of Finance (Ný þjóðhagsspá fyrir árin 2004-2010), 2004). Since 1955, Iceland has achieved an annual GDP growth of 3,8 percent. The most important economic sectors in terms of contribution to GDP are the services sector. The more traditional fishing and fish processing sectors accounted for almost ten percent of GDP formation in 2003. Part of the increased growth could be explained by openness in financial transactions as well as emerging of the stock exchange and participation in the EEA agreement. Whereas Icelandic industry has been quite aware about the role of innovation in building up competitiveness, resulting in extensive efforts towards increasing its innovation performance, on the science and technology policy level, innovation has only recently become an important issue. Iceland’s industrial innovation performance has been quite strong the last years. Based on the summary innovation index reported in the EIS in 2004 (EC, 2004), Iceland is strongly ‘moving ahead’ with an above EU-average change in the major trend indicators (almost 25 percent) and with an above EU-average summary innovation index (SII) of approximately 0,54 (EU-average is 0,44). For comparison, we find leading nations such as the Netherlands and France ‘loosing momentum’ with an SII of 0,45 and 0,46 respectively. In the 2002 EIS report (EC, 2002) Switzerland and Iceland are above the EU mean for 10 and 11 indicators respectively, comparable to the EU innovative leaders. It is generally accepted that economic performance in modern growth theory is to a large extent based on scientific and technological development turned into innovation. When looking at the relation between GDP per capita and the Summary Innovation Index (SII) - (see EC, 2004) for Iceland, a strong correlation between economic performance and innovation performance is reported, suggesting that Iceland, and more precisely Icelandic industry, is performing well in ‘directing’ its innovation efforts towards economic return. Already in 2001, Iceland had met the target agreed at the 2002 Barcelona Summit of the European Council of spending 3 percent of its GDP on R&D (3,09 percent), thereby recognising the importance of R&D for economic development. From an innovation policy perspective there are several challenges to be met, one of the biggest being the achievement of the objectives set out in the resolutions of the Science and Technology Policy Council in 2004. Moreover, developing a long-term innovation policy plan from a more ‘holistic’ perspective would be a significant step forwards. Strengths and opportunities need to be combined while weaknesses and threats need to be well anticipated. i European Trend Chart on Innovation National Innovation SWOT overview Strengths Highly (internationally) educated and skilled workforce with the possibility of lifelong learning 3 percent Barcelona target fulfilled in 2001 Close proximity between innovation system actors (short communication lines) Favourable (business) environment for science based industries (e.g. biotech, in future: nanotech) SME involvement in innovation Excellent ICT infrastructure and access to digital channels High impact/quality scientific output in biotech related research Strong performance in non-technical innovation Receptive to new and advanced technologies Weaknesses • Limited (financial) resources in absolute terms • Fragmentation of research efforts leading to a limited ‘overall’ research capacity • Limited interaction between the different actors in the innovation system leading to sub-optimisation • Multiple ‘funding’ channels (see innovation policy) and decision boards (budget-based) • Lack of ‘think tanks’ Opportunities • Further stimulate educational and scientific quality by conclusion of performance-related contracts (in progress) • Increasing importance of the ‘knowledge’ based economy • Consolidate and increase specialised knowledge available in e.g. medical technology • Increase visibility on innovation matters by being (more) active in international (Nordic and European) projects • Aims agreed upon at the at the Lisbon Council meeting in 2000 could provide a useful ‘starting point’ for further optimizing innovation performance Threats • Low share of companies being ‘strategic innovators’, but instead a large share of ‘technology adopters’ • Regional destabilisation in view of the ‘attractiveness’ of the capital area • Strong dependency on a limited number of sectors (i.e. companies) in the national innovation performance; skewed distribution • Uncertainty and fuzziness due to the introduction of the new STPC 2. National objectives for innovation The long-term goal of the science and technology strategy is to enhance the cultural and economic strength of Iceland in a competitive international environment, to ensure that Iceland’s economy and quality of life continue to rank at the forefront of nations. This will bring the nation new knowledge and competence useful for the following purposes: Increasing sustainable utilisation of resources, creation of wealth, and generation of attractive job-opportunities in a knowledge society. Improved health and social security and encouraging maturation of a civil society where freedom of enterprise and social equity reign. Reinforcing the economic and cultural independence and thus the foundations for living in Iceland. Enhancing the influence of Iceland in the international arena and facilitating the adaptation of Icelandic society to variable external conditions. 3. Appraisal of the policy process The major turnaround in innovation policy in Iceland has been inspired by Finnish practice, and is an example of a ‘good practice’ to Iceland. The policy process is to a large extent a combination of a ‘bottom up’ and a ‘top down’ approach. The two commissions of the Science and Technology Policy ii European Trend Chart on Innovation Council (STPC), representing different actors of the innovation system, are the instruments to this approach. Iceland’s policy making seems to be ‘evidence based’, meaning that many policy actions are based on monitoring the evolution of different indicators (provided by international and national organisations), even though further improvement could take place. The resolutions of the STPC are the foundation for the new innovation policy in Iceland. Major steps have already been taken towards implementation, but many remain to be taken. Innovation policy seems to be in touch with scientific, technologic and economic reality through the short communication lines with relevant actors in the innovation system. Regardless of the seemingly good fit between several policy measures and objectives, the intensity at which different objectives are dealt with in the innovation policy varies, i.e. choices have to be made. On the one hand, the development of an overall view on innovation policy as well as a long-term perspective may be useful for all parties involved. On the other hand, on a short notice, a further prioritisation among the measures together with a realisation and evaluation plan would help in the roll out and control of the proposed measures. 4. Implementing innovation policy – what’s new ! Since the last innovation Trend Chart report a number of significant developments have taken place. First of all, the new STPC Council has formally been installed, and the technology and science commissions within the council have been put in place. Secondly, two STPC resolutions have highlighted Iceland’s ambitions towards innovation. Concrete actions are proposed and financial means (budgets) for the coming years have already been allocated. Different ministries have taken initiatives to merge institutions in order to increase economies of scale and innovation potential by stimulating intense collaboration and interdisciplinarity in research. Some of the planned mergers have already been realised or are in an advanced stage. Iceland is also more active in international collaborative projects, especially in the Nordic region. Several seminars have taken place in Iceland on new and challenging topics such as technology foresight and technology development. Protection of intellectual property rights in universities, research institutes and companies has been a major issue leading to the entrance of Iceland to the (PCT) Patent Cooperation Treaty in November 2004. Slowly but surely, awareness of the necessity of evaluation of performance in innovation is increasing. In 2004, Iceland has been chairing the Nordic Council of Ministers. Several propositions and actions have been initiated by the Icelandic chair. In relation to innovation, ways will be sought to narrow the gap between scientific research and innovation in business and industry. Emphasis will be placed on increasing the co-operation of Nordic institutions working to improve the Nordic and international industrial environment. Efforts will be made to further co-operation between Nordic universities and centres of excellences, with the aim of improving the quality of research training. iii European Trend Chart on Innovation 1. National Innovation System in Iceland 1.1 Innovation performance Iceland’s innovation policy framework and national innovation system, were significantly restructured by the beginning of the 1990s as a result of several external and internal developments (e.g. OECD evaluation of S&T policy early 1980s; evaluation of the environment for innovation and entrepreneurship early 1990s) a process that continued in 2003 when the new S&T Policy Council, based on new laws, was created. The long process of rethinking S&T policy in Iceland, which is ongoing, seems to be resulting in a more effective national innovation performance, to a large extent due to industry’s commitment to innovation. As a result of the latter, economic development has also been strong over the last decade bringing Iceland and its citizens at the top of the list of countries with the highest living standard. That it is the innovation performance that plays an important role in this achievement is also confirmed when we look at the relation between GDP per capita and the Summary Innovation Index (SII) - (see EC, 2004). For Iceland a strong correlation between economic performance and innovation performance has been found, suggesting that Iceland is performing well in ‘directing’ its innovation efforts towards economic return. Already in 2001, Iceland had met the Barcelona target of spending 3 percent of its GDP on R&D (3,09 percent) thereby recognising the importance of R&D in economic development. However, in 2001, we find that the share of industry in national R&D expenditure is lower that the EU average (46,16 percent of total R&D by industry; 55 percent EU-average), while government spending on R&D is the highest within the OECD. Iceland’s innovation performance has been impressive over the past years (the 2002 European Innovation Scoreboard points out that Iceland performs well above the EU mean for most of the innovation indicators). Based on the summary innovation index reported in the EIS in 2004 (EC, 2004), Iceland is strongly ‘moving ahead’ with an above EU-average change in the major trend indicators (almost 25 percent) and with an above EU-15 average summary innovation index (SII) of approximately 0,54 (EU-average is 0,44). For comparison, we find leading nations such as the Netherlands and France ‘loosing momentum’ with an SII of 0,45 and 0,46 respectively. The underlying innovation parameters and related indicators that have lead to this strong performance relate to an ongoing strong evolution in the ‘business and public R&D spending’ (see also the policy measures in this area), the growth in ‘employment in high tech sectors’, the policy and implementation of measures on ‘lifelong learning’, and finally the measures and the results with respect to ‘tertiary education’. More in detail, in the area of ‘human resources’ we find a strong trend (index of 267; average being 100 for EU-25) in ‘lifelong learning’. In the 2002 EIS report (EC, 2002) Switzerland and Iceland are above the EU mean for 10 and 11 indicators respectively, comparable to the EU ‘innovative leaders’. An above EU-15 average performance can also be found with respect to ‘USPTO/EPO hi-tech patents’ (index of 228/164) and public and private R&D spending in relation to ‘knowledge creation’1. With respect to ‘transmission and application of knowledge’ we find a strong trend in ‘SMEs innovation co-operation’ (index of 176), which possibly points towards the effect of the measures taken to stimulate SME involvement in innovation (12,5 percent of manufacturing and service SMEs are involved in innovation co-operation). Despite the strong performance, there is also space for further improvement. One of the areas requiring further attention is the level of innovation expenditure by enterprises when looking at the full range of possible innovation activities (index 0,79). Similarly, accounts for the level of hi-tech venture capital available which based on the latest available figures, has an index of 69 - see also the policy measures taken on this subject). 1 In a recent study carried out by Verbeek & Finnbjörnsson (2004) it was shown that based on USPTO patent data Iceland’s technological output (based on patents) is concentrated around telecommunication (due to the role and presence of the U.S. company ‘Conexant Systems’ in this area), medical technology, and pharmaceuticals. Based on the EPO data, we find the areas of pharmaceuticals, medical technology and agricultural and food processing. 1 European Trend Chart on Innovation Another important aspect in innovation performance is the quantity and quality of scientific research, the science base. According to ISI Essential Science Indicators (Thomson-ISI), among the 149 topperforming countries in all fields, Iceland ranked 53rd for citations, 75th for the number of papers, and 8th for citations per paper (worldwide). Iceland has recently been named ‘most-improved’ in the field of Engineering and a new entrant in the multidisciplinary fields. The most intensive research fields are clinical medicine, geosciences, molecular biology and genetics, as well as pharmacology and toxicology. The most innovative sectors for Iceland are machinery and equipment, and electrical and optical engineering. In terms of manufacturing specialisation, Iceland is specialised in medium-hightech and medium-low-tech. Furthermore, business services are the most innovative service sector. Least innovative are non-metallic mineral products, transport equipment and fabricated metal products2. In the food and beverages sector we find 52 percent of all firms innovating in-house, the highest share among the benchmark countries. The same applies for textiles and textile products (59 percent), chemicals (89 percent), basic metals (62 percent), machinery and equipment (73 percent), and business services (76 percent). Not all approaches to innovate rely on R&D as the most important innovation driver. Firms can for example buy in critical know-how or adopt new technologies developed by other firms, the latter calling upon a specific capacity, the ‘absorptive’ capacity, which is the potential that a sector or a country has for absorbing scientific and technological findings developed elsewhere. Looking at the importance of the different types of innovation modes for Iceland, we find ‘technology adopters’ playing an important role in the innovation landscape (over 35 percent), followed by ‘intermittent innovators’ where innovation is not regarded as a core activity; innovation is a core activity for less than five percent of all innovative firms, the so-called ‘strategic innovators’. Furthermore, in relation to non-technical innovation, which is an important pre-condition to successful innovation, Iceland is performing well in comparison to the main EU and Nordic countries. Looking at the percentage non-technical change within SMEs we find Iceland to be ranked fifth with 54 percent (compared to Germany 65 percent) of its SMEs to have realised non-technical change; 36 percent of all SMEs have changed their organisational structures (Iceland is ranked seventh). Concerning the implementation of advanced managerial techniques we find a share of 24 percent, and finally, with regards to implementation of significant changes in aesthetic appearance (also important for product commercialisation) we find Iceland in fourth place with 32 percent of its SMEs having paid attention to this aspect of non-technical innovation. Finally, by looking at the percentage of enterprises with access to the Internet, in 2003 Iceland had the third highest penetration rate after Denmark and Finland. The relation to economic performance How does Iceland’s innovation performance translate into economic performance? According to the OECD (Economic Survey, 2003), economic performance has improved significantly over the past decade. The per capita income exceeds the OECD average by around one-fifth, as compared to onetenth in 1995. Major imbalances and tensions were corrected in a short time span, highlighting the economy’s enhanced adjustment capacity. This favourable performance is to a large extent attributable to the shift in policy towards financial stability and market liberalisation during the 1990s. Average GDP-growth has slightly fallen back from 5,7 percent in 2000 (average between 1995-2000 of 5,1 percent) to 4,3 percent in 2003 (see table 1). On average, since 1955 Iceland has realised an annual GDP growth of 3,8 percent. The average growth between 2004 and 2006 is expected to around five percent, whereas over the period 2007-2010 a lower average growth of 2,75 percent per year is expected (Ministry of Finance (Ný þjóðhagsspá fyrir árin 2004-2010), 2004). The most important industries in terms of contribution to GDP are private services with 25,6 percent in 2003, 2 In the EIS 2004, it is mentioned that due to a lack of data the results of the analysis of the sectoral innovation performance should be interpreted with care. 2 European Trend Chart on Innovation also a strongly innovative sector as discussed previously, followed by producers of government services with 22,0 percent contribution to GDP in 2003, indicating the strong presence of the services industry in Iceland’s economic landscape. The more traditional fishing and fish processing sector accounted for almost ten percent of GDP formation in 2003 (source: Statistics Iceland). Foreign Direct Investment (FDI) is a generator of technology and knowledge transfer between countries and as such contributes to increasing competition and economic growth. The Government has actively encouraged foreign direct investment in power-intensive industries. Iceland is also known for its net outward FDI, especially in sectors such as food processing, the fishing industry, chemicals industry - mainly pharmaceuticals - banking, retail and properties. Measured in terms of Foreign Direct Investment Intensity (average value of inward and outward investment divided by GDP) a value of 1,7 percent is found for Iceland in 2003, whereas the EU-15 average amounts to 1,2 percent. In comparison to the year 2000 this means a decline of 1,6 percent for Iceland compared to an average decline of 2,1 percent in the EU-15 (see table 1). This is the result of a worldwide economic recession. As the preliminary statistics indicate, outward FDI increased strongly in 2004. In 2003, export of goods from Iceland amounts to 182,600 million ISK3 and import about 199,500 million ISK. Thus there was a trade deficit of 16,900 million ISK, compared with a surplus of 13,100 million ISK in 2002. Exports decreased by 11 percent at current prices while imports increased by four percent. Marine products constituted 62 percent of all exports, decreasing in value by 12 percent from the year before, at current prices. Manufacturing products amounted to 34 percent of total exports, decreasing in value by eight percent. The largest import categories were industrial supplies accounting for 27 percent of total imports, capital goods (except for transport) with 23 percent of total imports and consumer goods with a 20 percent share. Measured in ISK, the increase in imports was largest in the area of capital goods. The share of the EEA countries was 77 percent in exports and 64 percent in imports. The United Kingdom was the largest trading partner buying Icelandic exports in 2003, or 18 percent of total, while the largest share of imports to the country came from Germany with 12 percent. Table 1: Comparable indicators of economic performance Indicator National performance in percent EU 15(25) average - in percent 2000 5,7 2003* 4,3 2000 3,6 (3,6) 2003* 0,8 (0,9) Public Balance ( percent of GDP) Export (annual volume growth - constant prices 2003) GERD (Gross domestic expenditure on R&D as a percent of GDP) Graduates in S&T (total) per 1000 of population aged 2029 Foreign Direct Investment intensity (avg. value of inward and outward investment divided by GDP) Inflation rate 2,5 -1,4 1,9 -2,7 3 11 11,8 (12,1 ) 0,5 (1,0) EC Economic data Pocket book (3, 2004) 2,75 3,09 (in 2001) 1,93 (1,88) 1,99 Eurostat (Structural Indicators) 8,4 9,2 (in 2002) 11(10,2) 10,9(11,9) Eurostat (Structural Indicators) 3.3 1.7 3.3 1.2 Eurostat (Structural Indicators) 4,4 1,4 1,9 (2,4) 2,0 (1,9) General Government Debt (GDP as denominator) 42 44,1 64,1 (62,9) 62,7 (61,6) Eurostat (Structural Indicators) Eurostat (Structural Indicators) Real GDP growth rate (constant prices 1995) 3 Source Statistics Iceland (www.hagstofa.is), Eurostat (Structural Indicators) Eurostat (Structural Indicators) 1 Mio ISK amounts up to approximately € 12.000 (source: http://www.xe.com/ucc/) 3 European Trend Chart on Innovation Venture Capital Investment (early stage) as a percent of GDP Venture Capital Investment (expansion and replacement) as a percent of GDP * 2003 or latest available year 0,40 0,024 0,075 0,021 Eurostat Indicators) (Structural 0,749 0,118 0,154 0,088 Eurostat Indicators) (Structural The general government debt of Iceland is far below the EU-15 and EU-25 average (GDP used as a denominator). Whereas the EU-15 average amounts to 62,7 percent of GDP in 2003, Iceland’s government debt in 2003 amounts to 44,1 percent. Iceland reports above-average performance in the public sector (relation between public sector performance and efficiency), but this is achieved at a disproportionately high cost in terms of public expenditure (European Competitiveness Report, 2004). It is expected that there will be a significant expansion in power-intensity industry, which, together with the associated investments, will have an enormous economic impact. Official estimates indicate that economic growth could reach five to seven percent in 2005-2006 and that the unemployment rate could drop to below one percent (OECD, 2003). Based on the previous discussion it is clear that, although Iceland has booked significant successes by reorganising and by re-emphasising it’s innovation policy, there is still space for improvement by either considering new opportunities or thoroughly examining the existing weaknesses or imperfections in the system. Table 2 provides insight into the major strengths and weaknesses of the innovation system in Iceland, without intending to be exhaustive. Table 2: National Innovation SWOT overview Strengths Highly (internationally) educated and skilled workforce with the possibility of lifelong learning 3 percent Barcelona target fulfilled in 2001 Close proximity between innovation system actors (short communication lines) Favourable (business) environment for science based industries (e.g. biotech, in future: nanotech) SME involvement in innovation Excellent ICT infrastructure and access to digital channels High impact/quality scientific output in biotech related research Strong performance in non-technical innovation Receptive to new and advanced technologies Weaknesses • Limited (financial) resources in absolute terms • Fragmentation of research efforts leading to a limited ‘overall’ research capacity • Limited interaction between the different actors in the innovation system leading to sub-optimisation • Multiple ‘funding’ channels (see innovation policy) and decision boards (budget-based) • Lack of ‘think tanks’ Opportunities • Further stimulate educational and scientific quality by conclusion of performance-related contracts (in progress) • Increasing importance of the ‘knowledge’ based economy • Consolidate and increase specialised knowledge available in e.g. medical technology • Increase visibility on innovation matters by being (more) active in international (Nordic and European) projects • Aims agreed upon at the at the Lisbon Council meeting in 2000 could provide a useful ‘starting point’ for further optimizing innovation performance Threats • Low share of companies being ‘strategic innovators’, but instead a large share of ‘technology adopters’ • Regional destabilisation in view of the ‘attractiveness’ of the capital area • Strong dependency on a limited number of sectors (i.e. companies) in the national innovation performance; skewed distribution • Uncertainty and fuzziness due to the introduction of the new STPC 4 European Trend Chart on Innovation As highlighted in table 2, Iceland has several strengths in innovation and innovation policy, something that could contribute to further (economic) growth. At the same time there are several issues that need to be addressed, issues which policy makers should and probably are aware of. One of them is the fragmentation of research funds which affects the capacity of carrying out large high-impact research projects. At the same time, Iceland’s innovation system consists of many actors, which call upon effective communication channels to avoid duplication of R&D efforts, but also to stimulate (interdisciplinary) collaboration and generation of new knowledge. Considerable efforts have been undertaken to stimulate research and technology development in several biotechnology areas, and this has been done with success. In view of these strengths, there are a number of opportunities for Iceland to increase its innovation performance. One of them is to consolidate on and to increase specialised knowledge available in several science intensive fields, like biotechnology, in which Iceland already has a strong position. Looking at the threats to Icelandic innovation and further economic development, we find a strong dependence on a limited number of (inter-)national companies and their innovation potential; a further spread of innovation activity is needed. Furthermore, in the long run, the ability to internalise and adopt existing technology may affect the true technological and scientific innovation capacity, also in view of the limited available research budgets in absolute terms. Another potential threat to short term innovation policy is the newly installed STPC, which needs its time to find the best possible way to function as well as create visibility and trust in industry and research institutes. A final weakness or threat that should be pointed out is that Iceland lacks innovation policy research institutions or ‘think tanks’ like the public ones in Sweden, Finland and Denmark (Vinnova, VTT and Fora), or private ones in Sweden and Norway (IKED and STEP). Although RANNÍS has now established a permanent working group on innovation policy studies consisting of twelve people from relevant universities and institutes, this remains an issue of concern and attention. 5 European Trend Chart on Innovation 1.2 Innovation governance system 1.2.1 The national innovation system The concept of national innovation systems rests on the premise that understanding the linkages among the actors involved in innovation is central to improving technology performance. The innovative performance of a country depends to a large extent on how these actors relate to each other as elements of a collective system of knowledge creation and use as well as the technologies they use. These actors are primarily private enterprises, universities, public research institutes and the people within them. Important is the web of interaction or the system. R&D institutions in Iceland are organised by sectors under various ministries (Ministry of Fisheries, Ministry of Agriculture, Ministry of Industry and Commerce, Ministry of Health, Ministry of Environment and Ministry of Education, Science and Culture). Currently, the following organisations play an important role in the national innovation system in Iceland. Universities Research Institutions Other (related) institutions University of Iceland University of Akureyri Reykjavík University Hólar College Iceland University of Education Hvanneyri Agricultural University Iceland Academy of Arts Icelandic Horticultural College Bifrost School of Business Technical University of Iceland IceTec IceTec-IMPRA Marine Research Institute Icelandic Institute of Natural History Institute of Regional Development Nordvulk National Energy Authority Iceland GeoSurvey Icelandic Building Research Institute Icelandic Fisheries Laboratories Agricultural Research Institute Icelandic Forest Research Station Icelandic Meteorological Office Institute of Freshwater Fisheries Directorate of Freshwater Fisheries National Land Survey of Iceland National Gallery of Iceland Myvatn Research Station Educational Testing Institute Environment and Food Agency Occupational Safety and Health National Museum of Iceland National University Hospital Key: bold=institutes will be fully or partially merged in 2004/2005 Source: www.rannìs.is The institutions in bold are or will in due course be part of a merger. To be precise, the following combinations will be formed: 1. Technical University of Iceland - University of Reykjavik 2. IceTec - Agricultural and food part of the Environment and Food Agency, scheduled for 2005 to form the Food Research Institute 3. Holar College - Hvaneyri Agricultural University - Icelandic Horticulture College - Agricultural Research Institute, to form the Agricultural University 4. Nordvulk - University of Iceland (Geology and Geophysics department), to form the Institute of Earth Sciences 5. Building Research Institute and part of IceTec into Technology research institute Their position within the national innovation system and the relation between each other can be visualised in figure 1, followed by a more detail description of the actors involved (focus will be on research institutes). The innovation policy-making process as well as the way the policy is implemented in practice is described in section 1.2.2. In the remainder of this section we will discuss the main research institutions of Iceland. 6 European Trend Chart on Innovation Figure 1. Organisation of the innovation system in Iceland Source: RANNÍS (2003) The Technological Institute – ICE TEC (www.iti.is) IceTec is an Icelandic research and technological institution. Its primary function is to transfer technology and expertise to business and industry, and to assist companies in innovation, productivity and research and development. The main services IceTec offers to the industries pertain to the fields of materials technology, production engineering, biotechnology, food technology, education and training, consultation, environmental technology and chemical analysis. Entrepreneurs and SMEs are provided with qualified information and guidance. IceTec is an independent institute, operating under the Ministry of Industry. In recent years IceTec's non-grant income increased considerably. Today 75 percent of overall revenues are privately derived. IceTec employs around 75 people and emphasises continuous education. To further maintain its competence and to be able to service a wide range of technologies, IceTec maintains a wide range of co-operative networks locally as well as internationally. IceTec has an undertaking to stimulate the participation of Icelandic companies in international technological co-operation. Foreign companies can also turn to IceTec for technological assistance in fields such as research, technological development, measurement and testing. In co-operation with the University of Iceland and the Icelandic Research Council, IceTec runs a Biotechnology science Park. 7 European Trend Chart on Innovation ICETEC - IMPRA (Service Centre for Entrepeneurs and SMEs) (www.impra.is) IMPRA (Service Centre for Entrepreneurs and SMEs), part of the Icelandic Technological Institute, assists entrepreneurs in evaluating business ideas and provides counselling for the start-up, growth and management of companies. Its role is to intermediate between individuals, companies and public agencies. IMPRA co-operates with the New Business Venture Fund (see below), managing numerous support projects intended to encourage innovation among entrepreneurs and SMEs. It also operates an Incubator for innovative business ideas, and can house up to nine companies based on innovation and new business ideas. Furthermore, IMPRA operates an Innovation Relay Centre established to encourage co-operation between Icelandic and European companies concerning technology transfer. The centre is part of a co-operative network of sixty centres under the auspices of the European Commission. The Building Research Institute – IBRI (www.rabygg.is) The Building Research Institute is an independent institution responding to the Ministry of Industry and Commerce and operating since 1965 according to statutes on research in the interests of industry and commerce. It is divided into a number of departments. The role of the institute is to provide assistance and advice on construction matters. To this end wide-ranging theoretical and applied research is conducted in various fields of construction. The main emphasis is on technical areas, but work is also done in the areas of financing and planning. Besides research material testing, quality control, certification of products and dissemination of technical information play an important role in IBRI's activities. IBRI currently has 42 employees, 27 holding a university degree. The institute is financed partly by the State but its own income has been increasing in recent years and is now approximately 67 percent of the budget. IBRI takes an active part in European co-operation in its field. Iceland represents the extreme in Europe as to harsh climatic conditions and the geology is different from that of most European countries. This fact heavily influences research priorities where durability, performance criteria and utilisation of domestic materials are of prime concern. The main research fields are in concrete, building technology, including an acoustic laboratory and road construction. The National Energy Authority (www.os.is) Orkustofnun, The National Energy Authority, was formally established in 1967 with the passing of the Energy Act. The institute has the following main areas of responsibility to advise the Government on energy issues and related topics, to carry out energy research, and provide consulting and services relating to energy development and energy utilisation. Orkustofnun consists of two main organisational units; one in charge of energy information, advice and management and the other responsible for research. The Energy Management Unit contracts and supervises energy research projects financed under the national budget. It also monitors the energy consumption in Iceland and publishes forecasts for the energy market. The Unit operates in two departments, one for resources research management, the other for statistics and analysis. The United Nations University Geothermal Training Programme is operated as an independent entity within the unit. The Energy Research Unit carries out research on a contract basis, either with the Resources Division, with power companies, or with others. The Unit is divided into the GeoScience Divison and the Hydrological Service. 8 European Trend Chart on Innovation The principal objectives of Orkustofnun are: • Acquiring and collate basic information on the country’s energy resources and have the necessary research carried out; • Energy administration and advice on energy affairs; • Dissemination of information on energy issues; • Collecting and maintain statistical data on the country’s energy utilisation; • Making energy consumption forecasts and prepare plans for further utilisation of the energy resources; • Assisting in development by operating the United Nations University Geothermal Training Programme; • Making Icelandic experience and expertise in geothermal utilisation and development available to other countries; • Providing research services to Icelandic energy utilities, municipalities and the private sector in areas of Orkustofnun’s expertise. Orkustofnun employs about 90 people, including around 65 experts in geology, geophysics, hydrology and geochemistry; moreover it has close ties with numerous international science institutes and societies in the field of earth sciences, energy research and administration. The Agricultural Research Institute (www.rala.is) The Agricultural Research Institute is an independent institution founded according to statutes from 1965 and responsible to the Ministry of Agriculture. The institute is departmentalised and operates several experimental stations throughout the country, both on its own and in co-operation with other institutions. The Agricultural Research Institute is responsible for all governmentally sponsored research in the following areas: • Research and experimentation for the expansion of theoretical and practical knowledge and experience in the fundamentals of land cultivation and animal husbandry. • Research into the reasons for the deterioration and decreased productivity of land and into methods to reverse such developments. • Research aimed at the optimal utilisation of agricultural products. • Services to agriculture through research. • The publication of the results of projects and other work of the institute in scientific journals. The main aims of the institute are to enhance the quality of agricultural production while reducing costs, to increase the use of local material and products, and to encourage the correct use of the land's resources and to facilitate the work of the farmer. Icelandic Forest Research Station (www.skogur.is) The Forestry Research Station is the research branch of the Iceland Forest Service, with its own governing board and operating under regulations set by the Ministry of Agriculture. Its headquarters are located at the base of Mount Esja, north of Reykjavík, but an office is also operated in Akureyri. Furthermore, it maintains many series of long and short-term field experiments that are distributed throughout Iceland. The main focus and mission of Icelandic Forest Research is to conduct applied and basic research and to accumulate knowledge pertaining to deforestation, forest management, forest protection and carbon sequestration in forests and forest soils in Iceland. The Forestry Research Station employs 20 people, 12 of whom have a university degree. Currently, the main research fields are in silviculture, land reclamation, forest genetics (including genecology and tree breeding), forest site research, forest ecology, carbon sequestration and entomology. 9 European Trend Chart on Innovation The Marine Research Institute (www.hafro.is) The Marine Research Institute in Reykjavík was established in 1965, when it took over the duties of the Fisheries Department of the University Research Institute dating from 1937. Institutional marine research in Iceland has thus been around for over half a century. The Marine Research Institute is a governmental institute responding to the Ministry of Fisheries and is financed through the national budget. The primary objective of the Marine Research Institute is to obtain knowledge of the sea around Iceland and its living resources. Research is carried out in most disciplines of modern oceanography, namely the physical and chemical properties of the sea, morphology and nature of the sea floor, environmental conditions and life history of algae, zooplankton, benthos and fish. Furthermore, studies in mariculture have recently been initiated. The greatest effort, however, is put into research pertaining to the exploitation of marine resources, including analysis of stock abundance and recommendations of catch quotas, fishing gear research and study of species as yet unexploited. The Icelandic Fisheries Laboratories (www.rfisk.is) The Icelandic Fisheries Laboratories is an independent research institute under the Ministry of Fisheries. It was founded by law in 1965 but has operated since 1934. The board of directors represents the Ministry of Fisheries and fish industry associations. The institute has no official quality control function. The mission of the institute is to stimulate progress in the fish industry through research and development. About half of staff time is devoted to R&D projects, including some basic research areas: fish meal and fish feed, shelf life of fresh fish, distribution of pathogens in processing environments, ripening of salted herring, sensors for on-line measurement of fish quality, sensory parameters of sea foods, toxic chemicals in fishery products, utilisation of fish-by-products and new processing methods. About 60 scientists, in chemistry, microbiology, food science, engineering and aquaculture science and office staff are employed at the institute of Reykjavík and in the four branch laboratories in different parts of Iceland. Institute of Freshwater Fisheries Research (www.veidimal.is) Institute of Freshwater Fisheries (IFF) is a research institute. The researches are conducted on rivers and lakes and their biota. Furthermore it does research on freshwater fisheries. It also does consulting works regarding fisheries management and environmental assessments for construction projects affecting freshwater ecosystems. The main research field is salmonid ecology both in freshwater and at sea. There are also research activities in the field of aquaculture and salmon ranching. The Institute is financed through governmental funds; research grants and projects sold to rivers associations, hydropower companies and municipalities and so on. In addition to the headquarters in Reykjavik the Institute maintains three branches in the rural areas of Iceland. The Institute of Regional Development (http://byggdastofnun.is) The Institute of Regional Development is a public body under the Ministry of Industry and Commerce, with the aim of contributing to the regional development of Iceland. The Institute co-finances investments, gives grants and assists the local authorities in planning. Two types of loans are available to commercial companies: investment loans on ordinary market terms, and high-risk loans to highly innovative projects. 10 European Trend Chart on Innovation Icelandic Institute of Natural History (http://www.ni.is/english/about.phtml) Founded in 1889 by Hið Íslenzka Náttúrufræðifélag (The Icelandic Natural History Society) and managed by the Society until 1947 when acquired by the State. The Institute conducts basic and applied research on the nature of Iceland in the fields of botany, geology and zoology with an emphasis on biology, taxonomy and ecology; maintains scientific specimen collections; holds data banks on Icelandic nature; assembles literature on the natural history of Iceland; operates the Icelandic Bird-Ringing Scheme, prepares distribution, vegetation and geological maps; assists in environmental impact assessments; advises on sustainable use of natural resources and land use, and assesses the conservation value of species, habitats and ecosystems. Nordvulk (www.norvol.hi.is) The Nordic Volcanological Institute was established in 1974. The initiative, which eventually led to the inter-Nordic political decision came from a group of Nordic geoscientists including Professors Gunnar Hoppe and Franz Eric Wickman in Sweden, Professor Tom Barth in Norway, Professor Arne Noe Nygaard in Denmark and Professor Sigurður Þórarinsson in Iceland. The basic idea behind the proposal was to strengthen the already well-established earth science community in the Nordic countries by jointly exploiting the research opportunities evident in the active volcanism and tectonics of Iceland. The institute is a non-profit organisation, with a Board of Directors appointed by the governments of the respective Nordic countries. Day to day administration is in the hands of a director who is selected by the Board of Directors. The basic annual funding is provided by the Nordic Council of Ministers in the amount of about US$ one million. Additional funding comes from national and international science funding organisations. In addition to a permanent scientific and technical staff the institute has five positions for young visiting scientists from the Nordic countries. These positions are given for a period of one year with a possible renewal of contract for two additional years. Candidates for these positions are graduate students working towards a Ph. D. degree or postdoctoral fellows. Around 70 Nordic scientists have held these rotating positions. Iceland GeoSurvey (www.isor.is/page/profile) ÍSOR, Iceland GeoSurvey, was established on 1 of July 2003. ÍSOR is a service and research institute providing specialist services to the Icelandic power industry, the Icelandic Government and foreign companies, in particular in the field of geothermal sciences and utilisation. When it was established ÍSOR took over all responsibilities of the former GeoScience Division of Orkustofnun, the National Energy Authority of Iceland. Research on Iceland’s indigenous energy resources goes back to the eighteenth century. Systematic energy research by Icelandic government institutes started in 1944 and has been carried out continuously ever since. ÍSOR and its predecessor have from the start played a key role in this work. This research and the activities of the Icelandic power industry have resulted in over 50 percent of the primary energy use in Iceland at present having its source in geothermal energy. New Business Venture Fund In 1998 the New Business Venture Fund began its operations. It is an independent company owned by the Icelandic Government. Overall supervision of the Fund is under the Minister of Industry and Commerce. The Fund is the outcome of a more thorough reorganisation of the banking sector in 1997 where four sectoral credit funds were merged into the Icelandic Investment Bank and New Business Venture Fund. (In April 2000 the Icelandic Investment Bank merged with the private bank Islandsbanki.). The purpose of the Fund is to strengthen the Icelandic economy and further its internationalisation. This is to be achieved through participation in innovation-orientated investment projects and support for development and marketing projects. The Fund provides start-up capital and invests in early stage and expanding companies. Also grants and loans are given. 11 European Trend Chart on Innovation The activities of the Fund are divided into four: • The Core Fund invests in new business ventures, supports research and development projects and awards venture capital loans for specific projects. The capital base of the Core Fund is ISK four billion (approximately EUR 50 million). • The Product Development and Marketing Department offers funding for product development and marketing projects. • The Information Technology Fund supports new business ventures and job creation in the fields of information technology and high technology, focusing on rural regions. The capital base is ISK one billion (approximately EUR 13 million). The Export Credit Guarantee Department guarantees loans, investments and so on related to exports and activities by Icelandic parties overseas. • 1.2.2 Innovation policy making and delivery structures Research policy in Iceland has a long history. Government funded research in support of economic development was first started with the establishment of the University Laboratories in 1937. A policy body – the National Research Council (NRC) – was established in 1940. Up until the early 1980s the overwhelming preoccupation of the R&D effort was the study and exploitation of natural resources on land and in the sea. In 1981 the NRC started to formulate policies which were more technology and human capital orientated. At the same time the essential role of business enterprise involvement in R&D was recognised. The result of these policies in the late 1980s and 1990s has been rapidly increasing interest and a growing industrial share in the national R&D effort. In 1994 the Icelandic Research Council was established to replace the previous Council of Science (basic research) and National Research Council (applied R&D). The Icelandic Research Council advised Government and Parliament on all aspects of science, technology and innovation. It also had a funding function. The Icelandic Research Council reported to the Minister of Education, Science and Culture. A new legislation on the organisation of science and technology policy and the funding of research and technological development in Iceland was enacted by Parliament (Althing) at the end of January 2003. The legislation is composed of three separate laws: Law on the Science and Technology Policy Council under the Office of the Prime Minister. Law on Public Support to Scientific Research under the Ministry of Education, Science and Culture. Law on Public Support to Technology Development and Innovation in the Economy under the Ministry of Industry and Commerce. This resulted in the new Science and Technology Policy Council (SPTC) headed by the Prime Minister replacing the Icelandic Research Council (from 1994). The Council provides for the permanent seat of three other ministers, the Minster for Education and Science, the Minister for Industry and Commerce and the Minister for Finance. Two other ministers with research in their portfolio can be added to the council at the discretion of the Prime Minister. Fourteen other members are appointed to the Council through nominations from higher education institutions (four members), labour market organisations (two representing Employers and two representing Employees) and other resort ministries (six members). 12 European Trend Chart on Innovation To be precise, the nomination of the STPC members is as follows: a. Four nominated by the coordinating committee of higher education institutions (representing 8 higher education establishments). b. Two nominated by the Icelandic Association of Labour. c. Two nominated by the Association of Icelandic Industries (Employers). d. One nominated by the Minister of Education and Science. e. One nominated by the Minister of Industry. f. One nominated by the Minister of Fisheries. g. One nominated by the Minister of Agriculture. h. One nominated by the Minister of Health and Social Security Affairs. i. One nominated by the Minister for the Environment. The mission of the STPC is to strengthen scientific research, scientific training and technology development in the country in support of Icelandic cultural development and increased economic competitiveness (see also the innovation specific measures further on in this report). The SPTC issues periodic guidelines (declarations) for public policies on science and technology. The policy declarations will be prepared by the Science Board and the Technology Board respectively. The Law on Support to Scientific Research establishes the Research Fund through fusion of the previous Science Fund and the Technology fund of the Icelandic Research Council. The Research Fund is governed by a board whose chairman is also the chairman of the Science Board. Linked to the same board is also the Instrument Fund financed by 20 percent annual levies on the University Lottery net income. Similarly the Law on the Support to Technology Development and Innovation has lead to the establishment of a Technology Development Fund which is governed by a board chaired by the Chairman of the Technology Board. Thus the link between policy and implementation through funding is achieved. This law also provided for the establishment of an Innovation Centre, IceTec (see previous section). The chief responsibility for assistance in preparing policy-orientated papers is to be provided by the Ministry of Education, Science and Culture and the Ministry of Industry and Commerce for the two respective boards. Overall co-ordination is provided by a secretary to the Science and Technology Policy Council to be placed within the Ministry of Education and Science. The administrative services to the operational level of the whole structure are provided by the Icelandic Centre for Research – RANNÍS which is the secretariat of the previous Icelandic Research Council. Its mission is to give administrative and operational support to the boards and funding bodies, to manage the international connections, monitor the effects and impacts of policies and to provide intelligence and informed advice to the STPC and its boards and sub-committees. Thus RANNÍS administers all the funding bodies set up by the new legislation including the Research Fund, the Technology Development Fund, the Instrument Fund, the Graduate Training Fund and other funding bodies for science that the Government may want to assign to it. It maintains the National Contact Point Coordination and support network to the EU Framework Programme, the Nordic NOS - organisations and other international bodies in science and technology. RANNÍS functions as the operational arm of the new council structure. The current structure can be visualised in figure 2. 13 European Trend Chart on Innovation Figure 2. Current STI policy structure in Iceland PARLIAMENT GOVERNMENT Science and Technology Policy Council (Four ministers and 14 members from ministries, research community and industry - PM Chair) Ministry of Education, Science and Culture Science Committee Ministry of Industry and Commerce Technology Committee Technological Development Fund Research Fund The Icelandic Centre for R&D RANNÍS Fund for Equipment Centre for Technological Innovation IceTec Fund for Research Training and Graduate Education Source: RANNÍS (2004) 14 European Trend Chart on Innovation 1.2.3 Regional innovation systems and policies An area that generates much policy concern in Iceland is the depopulation of rural areas, which is occurring at a high and increasing rate. The migration has its roots in a very uniform occupational structure outside the Capital area. One of the main targets of the Institute of Regional Development is to focus on this issue, and to be instrumental in dealing with this problem. As an answer to this concern, a RITTS-project has been carried out in Iceland led by the Institute for Regional Development (http://www.innovating-regions.org/download/Iceland.pdf). As a result of the previously mentioned new laws, the Institute for Regional Development was moved to the Ministry of Industry and Commerce to increase synergies with the Regional Development Agencies and the Technological Institute IceTec. Furthermore, the Regional Development Agencies have been strengthened (from two persons to six) to better fulfil their tasks. One of the innovation policy measures that is partly directed towards this problem is the Act on the New Business Venture Fund that specifies that special emphasis shall be put on rural development when the Technology Fund invests in innovative projects within IT technologies. Apart from this, there are ten regional development organisations which assist corporations and municipalities by infusion of capital for further development, and provide consultation in terms of finance, technology and management. Industrial investment funding also comes from the Fisheries Fund, the Agricultural Fund, local banks, New Business Venture Funds, holding companies, and investment funds. On a transnational ‘regional’ level, Iceland has also been a member of the SAIL thematic network (Strengthening Academic and Industrial Links), which had 15 members from across Europe and the Associated States and was directly funded by the EC (see http://www.innovatingregions.org/download/SAIL percent20final percent20report.pdf). The objective was to facilitate the transnational exchange of knowledge and experience on academic and industrial co-operation between regions. Iceland is also involved in several projects within the framework of the Northern Periphery Programme. The Northern Periphery Programme falls under a Community Initiative which aims to stimulate interregional cooperation in the European Union between 2000-2006. It is financed through the European Commission’s European Regional Development Fund (ERDF). The Northern Periphery Programme is one of thirteen programmes aimed at encouraging and supporting transnational cooperation between the regions of Europe. It provides the opportunity for organisations from the programme area to work together on joint projects concerning common issues and problems. 15 European Trend Chart on Innovation 2. Innovation policy in Iceland 2.1 Innovation policy framework Research policy in Iceland has a long history, but innovation policy from a more overall perspective is a recent phenomenon. With the installation of the new STPC and the first resolutions, a major building block for a well developed and targeted innovation policy in Iceland has been created. During the last 12 months, two major policy documents containing the vision of Iceland on innovation and innovation related issues for the next years have appeared. The first one is the result of a meeting by the STPC held on December 18, 2003, the second, a resolution, by the STPC dated 8 June 2004. The underlying ambitions with S&T policy have been formulated as follows: ‘The principal function of scientific and technological policy is to express the priorities set by the Government and inform of the improvements to be made in the support structure for research and development. It also serves to guide those who participate in implementing the policy in selecting appropriate strategies towards established goals. It is important to provide appropriate framework for cooperation among the public actors in science, technology and innovation and to strengthen their links to business life and society at large, which benefit from their activities. These actors can either be in a state of competition, co-operation, or both at the same time.’ (STPC, 2004a) The long-term goal of the science and technology strategy is to enhance the cultural and economic strength of Iceland in a competitive international environment, and to ensure that Iceland’s economy and quality of life continue to rank at the forefront of nations. This will bring the nation new knowledge and competence useful for the following purposes (STPC, 2004a): Increasing sustainable utilisation of resources, creation of wealth, and generation of attractive job-opportunities in a knowledge society. Improving health and social security and encouraging maturation of a civil society where freedom of enterprise and social equity reign. Reinforcing the economic and cultural independence and thus the foundations for living in Iceland. Enhancing the influence of Iceland in the international arena and facilitating the adaptation of Icelandic society to variable external conditions. So as to provide even more favourable grounds for such development, in co-operation with stakeholders in this arena the Icelandic Government intends to take the following actions during its term of office: 1. Increase the public resources intended for allocation from competitive funds and co-ordinate their operation to insure their optimum use for scientific and technical research and support to innovation in the Icelandic economy. 2. Strengthen the role of universities as research institutions by building and encouraging diversity in research at Icelandic universities through competition between individuals and research teams for research grants from competitive funds. 3. Review the organisation and work-methods of public research institutes, with the objective of uniting their strengths and co-ordinating their activities more closely with the universities and business sector. 16 European Trend Chart on Innovation Furthermore, the Government will introduce a variety of supporting measures aimed at strengthening the infrastructure for science and technology in the country and the status of Iceland as a leading knowledge based society. More specifically the objective is to: Establish strong research teams for working in an international environment by giving priority to the most competent individuals, institutions and firms. Increase the co-operation between research institutes, universities and business enterprises in forming knowledge clusters capable of attaining a strong international competitive position. Make research and development attractive to business enterprises, supporting the emergence of high-technology firms which to a large extent rely on research for their growth. Give increased weight to research training of young scientists in an internationally competitive research environment. Assure open public access to the results of publicly financed research, databases and other scientific and scholarly information, promoting the utilisation of these for added value to society. Pass laws encouraging scientists to protect their intellectual property rights through patents, and institutions and firms to introduce measures to properly manage the intellectual property of their employees. The Government has decided that Iceland will accede to the European Patent Convention, expecting accession to take place in November 2004. A resolution has also been agreed by the Icelandic Parliament to confirm the EEA Joint Committee decision to make the European Parliament Council's directive no 98/44/EC part of the EEA agreement. To fulfil these obligations some changes to the Icelandic Patent Act will be made. Regularly assess the quality of research conducted by universities and research institutes, by subject areas or fields of employment or knowledge clusters, and take the results of these into account when deciding on appropriations and priorities. Subsequent initiatives and measures on innovation policy will be deployed within this framework set out by the STPC. A more elaborated discussion on each of the above-mentioned objectives can be found in the Resolution text of the Icelandic STPC (2004a). A description of the formal policy framework can be found in section 1.2.2. Table 3: main policy documents since 2000 Title of document Date Organisation responsible Science and 18 December Prime Minister’s Technology Policy 2003 (published Office, The Science Iceland 2004) and Technology Policy Council Resolution of the 8 June 2003 Science and Science and Technology Policy Technology Policy Council Council Legal status Strategy paper Resolution Resolution Main issues / Innovation strategy/policy for the next years Follow-up on innovation strategy/policy for the next years (refinement) The above-mentioned key documents discussing innovation policy in Iceland can be found under the section ‘innovation policy information’ on the Cordis Innovation Policy Trendchart website (at: http://trendchart.cordis.lu/tc_policy_information_overview2.cfm), as well as on the website of the Icelandic Ministry of Education, Science and Culture (http://eng.menntamalaraduneyti.is/publications/). 17 European Trend Chart on Innovation 2.2 Policy events & policy debates In 2004 Iceland leads the Nordic collaboration with the theme ‘Nordic Resources’. The theme is broad in scope and includes measures such as the structure of society, cultural heritage as well as natural and human resources. The Ministry of Industry in Iceland focuses on improving the environment for business development within a borderless Nordic region. For this purpose it has stressed the importance of harmonising Nordic policy emphases within the fields of science and innovation. The objective is to obtain a greater synergy between these two main contributors to the competitiveness of the region and the social well-being of the Nordic citizens. (http://www.norden.org/naering/sk/summary_conference_innovation.pdf). ‘The Nordic region as a frontrunner in research and innovation’ was the theme of the conference hosted by the Nordic Council of Ministers, Iceland (its chair) and the Nordic Innovation Centre on 10 June 2004. Delegates included decision and policy makers in the Nordic innovation system. An important aim of the conference was to discuss and generate feedback to the newly presented policy document: ‘Proposals for a collaborative Nordic programme on innovation policy 2005-2010’. Of particular importance and influence to future policy making in the Nordic area, and thus also to Iceland, are the following force lines: The need for strong political commitment and involvement in developing the innovation and research policies of tomorrow. The need for a horizontal innovation and research policy – nationally and at Nordic level. Priority for targeted interventions in areas where the Nordic countries have achieved global excellence. Underlying the above-mentioned force lines and the above-mentioned conference is the White Paper on Nordic research and innovation, which will affect Iceland’s future innovation policy. Some background on this White paper (http://www.norden.org): ‘In June 2002, the Nordic Council of Ministers for Education and Research (MR-U) presented a White Paper proposing measures for promoting development of the Nordic region as a world-class research and innovation player at global level. The proposals cover organisation, funding, incentives and other aspects of Nordic cooperation on research. The White Paper also identifies ways of encouraging closer collaboration between universities, research institutions, businesses, national ministries and other official bodies.’ A major effort will be made to follow up on the conclusions of the White Paper on the Nordic countries as a region of excellence for research and innovation. The most prominent of these are proposals to develop effective links between universities, research institutes and funds supporting research, technological development and innovation. Efforts will be made to co-ordinate actions and strengthen the co-operation between Councils of Ministers and institutes working in these fields. Innovation in Nordic business and industry ways will be sought to narrow the gap between scientific research and innovation in business and industry. 18 European Trend Chart on Innovation 2.3 Key developments in innovation policy measures In comparison to the last Trend Chart report a significant number of measures have been announced through the publication of the STPC resolution of December 2003 (see section 2.1). In this section, an overview will be provided of the concrete announced measures and/or revisions that either have been implemented in the period under review, or will be implemented after August 2004 (will be discussed in detail in the next Trend Chart report). Table 4: New and revised Innovation Policy measures over last 12 months N° Title Main Action plan Secondary action category addressed category addressed IS 4 The New Business Venture Fund IMPRA - extension II.5. Financing of Innovation I.6. Promotion of clustering and cooperation for innovation II.5. Financing of Innovation II.5. Financing of Innovation IS 15 IS 16 IS 17 Enlarging the Competitive Funds Research Fund IS 18 Technical Development Fund IS 19 Fund for Equipment IS 20 Fund for Graduate Research Training Added Value from Seafood (AVS) IS 21 plan Degree novelty Medium - High II.1. Competition Medium Ministry of Industry & Trade Ministry of Industry and Trade RANNÍS Medium/High RANNÍS Medium/High RANNÍS Medium/High RANNÍS Medium/High RANNÍS High Ministry of Fisheries High Ministry of Education, Science and Culture Ministry of Education, Science and Culture Ministry of Education, Science and Culture Minister for Education, Science and Culture Minister for Education, Science and Culture I.6 Promotion of clustering and co-operation for innovation; III.4 Intensified cooperation between research, universities and companies II.5. Financing of III.3. Start-up of technology Innovation based companies III.5. Strengthening the ability of SMEs to absorb technologies and know-how II.5. Financing of I.6 Promotion of clustering and Innovation co-operation for innovation; III.4 Intensified cooperation between research, universities and companies I.1. Education and initial and further training III.2. Strengthening III.5. Strengthening the ability of research carried out by SMEs to absorb technologies companies and know-how I.6. Promotion of clustering and cooperation for innovation IS 22 Strengthening University research: clustering IS 23 Evaluation of universities II.1. Competition IS 24 Public Access to research and innovation results I.3. Raising public awareness and involving those concerned High IS 25 Installation of a national Committee on Equality IV. Other objectives High IS 26 Increasing the number of students in Science and Engineering programmes EDUCATE Iceland I.3. Raising public I.1. Education and initial and High awareness and involving further training those concerned IS 27 of Agency administering I.1. Education and initial and High further training I.1. I.1. Education and I.6. Promotion of clustering and Medium initial and further training co-operation for innovation - Key: bold = new measure, italic = revised existing measure, underlined: existing measure but omitted in the previous TrendChart reports 19 European Trend Chart on Innovation The new and revised measures directly respond to the ongoing innovation debate in Iceland as presented in section 2.1. A large proportion of these measures, IS 16 to IS 19, concern the introduction of funds in order to stimulate innovation. IS 20 is also a financial impulse but now specifically related to graduate training. Direct budget appropriations for universities and research institutes create the general framework enabling them to obtain additional funding for their research by competing for grants from domestic and foreign funds and by contracts with those who use the results of their research. The policy adopted by the Science and Technology Policy Council is that public support of research, technological development and innovation should increasingly rely on competition for grants from public funds, based on good ideas, well-defined projects and competent applicants, who might be individuals, firms or institutions. In this context, the availability of additional research funds is accompanied by a fundamental change in appropriation policy, namely a shift from the ‘budget’ thinking to a more ‘competitive’ approach towards fund allocation. Quality and ambition of the proposals prevail. Iceland continues to allocate financial means for research purposes and acts in line with the strategy it stipulated in its long term S&T policy. A specific programme (IS 21) has been set up around one of Iceland’s main economic sectors: fishery. The target of the programme is to increase the value of marine harvest (AVS-plan). The first stage will last for five years. The programme has been prepared in co-operation with professionals and stakeholders both in fisheries and fish processing industry. The Icelandic Government is fully aware of the importance of ‘scale’ for carrying out breakthrough, high quality research. As the current fragmentation of research activities and thus funding does not contribute to the creation of this necessary scale, a number of steps have been taken to change this situation (IS 22). Several mergers among research organisation have been initiated lately, like the recent merger of the Nordic Vulcanological Institute and the Geology and Geophysics Department of the University of Iceland Science Institute to form the Institute of Earth Sciences, which occurred with the support of the Minister of Education, Science and Culture. The Minister for Agriculture has initiated the reorganisation of agricultural research within the new agricultural university formed by the merger of the Agricultural University, Hvanneyri, RALA and the Icelandic Horticultural College. Moreover, the merger between the Reykjavik University and the Technical University of Iceland (Tækniháskóla Íslands) is currently in progress. In 2005, IceTec and the Agricultural and food part of the Environment and Food Agency will form the Food Research Institute. Not only the ‘economies of scale’ objective has lead to these mergers but also the awareness that multidisciplinarity, interdisciplinarity, close collaboration and spillovers play an important role nowadays in innovation process. Iceland also increases its efforts in maintaining and even improving the quality of human potential. One of these new measures is related to the introduction of the Fund for Graduate Research Training (IS 20). Another measure concerns the awareness creation aiming at increasing the number of students in Science and Engineering programmes (IS 26), which has not risen much over the year just like in many other European countries. Another important measure is the evaluation of universities (IS 23), starting with the evaluation of the University of Iceland, aiming at increasing research efficiency but moreover quality of scientific and educational results. Two other measures (IS 24 and IS 25) ‘public access to innovation results’ and ‘installation of a national committee on equality’ have been introduced. The first aims at involving the broader public in research by providing them access to scientific and technologic information, while the second aims at stimulating and increasing the involvement of women in science by ensuring equal opportunities. 20 European Trend Chart on Innovation 3. Implementing innovation policy in Iceland 3.1 Fostering an innovation culture 3.1.1. Education and initial and further training Three measures have been introduced in the period under review, IS 20, The Fund for Graduate Research Training, which is a measure directly related to this area, and the measures IS 23 and IS 26 that also have an effect on this subject. The Fund for Graduate Research Training (IS 20) has the purpose of disbursing grants to research linked graduate education. Above all, this Fund has supported university graduates engaged in research studies in Iceland toward the master's degree and fulfilled a significant function in the recent rapid expansion of research-based graduate education. Nonetheless, the number of doctoral students has increased over the past years. Since they play an especially important role in research, whether in the public or private sector, the Science and Technology Policy Council emphasises that they ought to be offered educational opportunities in Iceland comparable to those offered elsewhere. Already in 2004 the resources of the Fund will be increased by 25 percent, thus amounting to ISK 50 million. Another measure, already introduced in 1998, but not mentioned in the previous TrendChart reports, is ‘EDUCATE Iceland’ (IS 27). EDUCATE - Iceland is a co-operation forum between the educational sector, the social partners, local authorities and others interested in education and training. The main focus of the work of EDUCATE is to gather and disseminate information and to facilitate transference of knowledge and competences. EDUCATE furthermore carries out projects related to education and training and acts as a venue for discussion between the educational and employment sectors and policy makers. Among the other objectives is to build trust between the various sectors involved in education and training, ensuring their active involvement, the importance of co-operation, and strengthening schooling, especially secondary-level vocational training. University education will be strengthened too, putting greater emphasis on research and science. Distance learning will be increased. Effects of these measures become visible when looking at Iceland’s performance in ‘lifelong learning’. Another action line influenced by this measure is I.6, ‘Promotion of clustering and co-operation for innovation’. See also https://www.mennt.is/mennt/. Education expenditure in Iceland has moved from well below average in the 1980s to the highest among the OECD countries (OECD, 2003). According to the OECD (2003) the recent conclusion of performance-related contracts with all higher education institutions should be helpful in stimulating and strengthening educational output. 3.1.2. Mobility of students, research workers and teachers No new specific measures have been introduced under this heading within the period under review. An existing measure is the 'Out of drawers' programme (IS 9), which is a cooperative project between the Research Liaison Office of University of Iceland and the New Business Venture Fund. The main objective of the project is to encourage personnel from higher education and public research institutions to bring forward their R&D results for further exploitation by industry. The project has been in operation since 1998. 21 European Trend Chart on Innovation 3.1.3. Raising the awareness of the larger public and involving those concerned Two new measures have been introduced. The first measure under this action line is IS 24, Public access to research and innovation results. The public sector fulfils an important role by funding studies on Icelandic nature and the monitoring of the environment, resource exploitation, health and care for public welfare. The expenses for these investigations are mainly paid via direct budget appropriations. In the long term, data gathered during such research can become a valuable resource to be exploited by institutions as well as private parties or through their co-operation. As a resource exploitable by scientific research and co-operation among universities, research institutes and firms or among countries, such databases must be managed in accordance with international standards and their utilisation should provide fair returns to society. The Prime Minister has appointed a working group to prepare legislation to facilitate the freest possible access by the public and by users to research documentation and results from work funded by government appropriations. The goal is to ensure that the public has as much freedom as possible in accessing this information, against fair service charges. The work in this area, which now proceeding under the auspices of the OECD and the EU, will be taken into account in further determining Government policy in this area. The second measure is IS 26 aiming at increasing the number of students in Science and Engineering programmes. The Science and Technology Policy Council’s policy notes that education and achievement in the field of scientific research and innovation weigh heavily in the evaluation of a country’s competitive standing. The number of man-years spent on research in Iceland is proportionally high compared to other countries and that number is growing. In order to maintain the trend, it is essential to ensure that industry always has access to a well-educated workforce with an adequate level of specialist knowledge to conduct research of world-class quality. To this end, it is crucial to increase young people’s interest in pursuing courses and careers in engineering, science and technology. The Minister for Education, Science and Culture has therefore decided to appoint a working group whose role will include proposing ways to stimulate interest among primary and secondary school students in university courses that involve research; looking for ways to increase the diversity and quality of science teaching material in primary and secondary schools; and evaluating the quality of curricula, teaching methods and facilities for science teaching in primary and secondary schools. Already on this subject is measure IS 6. In co-operation with the Icelandic Trade Council, the Research Council has been organising an annual Innovation Conference since 1994. In connection with the conference an Innovation Award (IS 6) is awarded to a young innovative company having demonstrated outstanding success based on technological development and marketing effort. ‘The Nordic region as a frontrunner in research and innovation’ was the theme of the conference hosted by the Nordic Council of Ministers, Iceland (its chair) and the Nordic Innovation Centre on 10 June 2004. Delegates included decision and policy makers from the Nordic innovation system. An important aim of the conference was to discuss and generate feedback to the newly presented policy document: ‘Proposals for a collaborative Nordic programme on innovation policy 2005-2010’ (see also section 2.2. 22 European Trend Chart on Innovation 3.1.4. Fostering innovative organisational and management practices in enterprises No new specific measures have been introduced under this heading within the period under review. Already in force is the Step Ahead project (IS 11) that is intended to facilitate leaders of small firms (micro and spin-off) in seeking guidance on marketing, finance, environmental product management and organisational matters in order to increase profitability of companies. The project started in 1998 and is expected to last at least until 2003. The overall budget is ISK 4 million (EUR 50,000). 3.1.5. Public authorities and support to innovation policy makers No new specific measures have been introduced under this heading within the period under review. However, re-examination of the existing actions on this topic learns that first of all RANNÍS, the research institute of Iceland, itself fulfils the role of ‘think tank’ and as such provides support to innovation policy makers with quantitatively and qualitatively based advices and opinions. Moreover, a so-called high-level R&D group consisting of members of universities, research institutes and industry, headed by an official of RANNÍS, has been put in place. 3.1.6. Promotion of clustering and co-operation for innovation One new specific measure has been introduced under this heading within the period under review, namely IS 22 ‘Strengthening university research: clustering’ (see also section 2.3). Measure IS 19 also has an effect on this action line through the explicit statement that those applications to the Fund for Equipment involving co-operation among research bodies on financing and the use of the equipment shall have priority. Measure IS 27 ‘EDUCATE Iceland’ also has a positive effect on this action line. Strengthening university research (IS 22) is by its mere nature a long-term undertaking. It involves decisions about contributions to research and equally important decisions about strengthening infrastructure and improving communication both internally and with other research institutions and companies. The recent merger of the Nordic Vulcanological Institute and the Geology and Geophysics Department of the University of Iceland Science Institute to form the Institute of Earth Sciences, which occurred with the support of the Minister for Education, Science and Culture, has set a precedent. It demonstrates how joining forces presents new opportunities. It is natural to look for further areas for structural rationalisation, such as through the reorganisation and redefinition of work practices of research institutions according to the proposals of the working group appointed by the Prime Minister. The Minister for Agriculture has initiated the reorganisation of agricultural research within the new agricultural university formed by the merger of the Agricultural University, Hvanneyri, RALA and the Icelandic Horticultural College. In this context, the new university is seeking closer cooperation and collaboration with the University of Iceland regarding foundation courses in biology. The Minister for Agriculture should investigate possibilities for further integration or mergers of other research work that would benefit the agricultural sector and improve contact with other university-level educational establishments. In full preparation is the merger between the University of Reykjavik and the Technical University of Iceland. As an extension or confirmation of the existing measure IS 15 (IMPRA) is the appointment of IMPRA (see section 3.3.3) as an initiator of contacts among the different actors involved in funding for research and innovation, Research Fund, the Technical Development Fund, the AVS Fund, the New Business Venture Fund and other funds in the same field. Steps in this direction have already been made with formal consultancy meetings involving the New Business Venture Fund, the Regional 23 European Trend Chart on Innovation Development Agency, the Agricultural Productivity Fund, the Agricultural Loan Fund and the Campaign for the Creation of Employment. Previously announced and discussed measures (see TrendChart 2003) are IS 7, IS 10 and IS 14. A brief summary is provided. The mission of the Fisheries Technology Forum (IS 7) is to encourage co-operation between fisheries and industry in order to reinforce the development of equipment that increases the production values of fisheries. The Forum focuses on development of equipment in the entire value chain from catching and processing to marketing. The Forum provides professional and financial support. The annual budget is ISK 11 million (EUR 140,000). The intention of the 'Support to entrepreneurs and SMEs' programme (IS 10) is to provide information and guidance on possibilities for international cooperation for investors. The project was launched in 1998 and ended in 2000. The Health Technology Forum (IS 14) was established in 2001 as an initiative of RANNÍS. The objective of the Forum is to encourage firms, institutions and individuals to increase domestic and foreign cooperation for development and marketing in the field of health technology. Besides RANNÍS, Ministry of Health and Social Security, Ministry of Industry and Commerce, Federation of Icelandic Industries, the New Business Venture Fund and the Icelandic Society for Biomedical Engineering is involved in the project. The Forum evaluates and finances projects. The annual budget is ISK 38 million (EUR 475,000). 3.2. Establishing a framework conducive to innovation 3.2.1. Competition There is one new measure related to this line of action, IS 23 ‘Evaluation of Universities’. The Ministry of Education, Science and Culture has decided to evaluate the status of research at the University of Iceland. At the same time, in consultation with the Science Committee, the Ministry will make an effort to define and select benchmarks both for the quality and output of research and for broader contributions by the universities to the development of Icelandic society. The Science and Technology Policy Council stresses that at all universities where research is conducted must undergo evaluations in order to increase the quality of research and to stimulate competition. Another measure having an indirect effect on this line of action is IS 16, the enlargement of the competitive funds. The Government will create a general framework enabling universities to obtain additional funding for their research by competing for grants from domestic and foreign funds and by closing contracts with those who use the results of their research. 3.2.2. Protection of intellectual and industrial property No new specific measures have been introduced under this heading within the period under review. The Government has decided that Iceland will accede to the European Patent Convention, expecting accession to take place in 2004. Also a resolution has been agreed by the Icelandic Parliament to confirm the EEA Joint Committee decision to make the European Parliament Council's directive no 98/44/EC part of the EEA agreement. To fulfil these obligations some changes to the Icelandic Patent Act will have to be made. During Iceland's current Parliament session, the Government intends to present a bill to amend laws regarding the inventions of employees, expecting the coming legislation to induce the further use of knowledge to economic advantage and also to encourage universities and research institutes to register patents more frequently. These institutions need to acquire the capacity to assess the patentability of research findings and to market the patents obtained along with the knowledge lying behind them. 24 European Trend Chart on Innovation 3.2.3. Administrative simplification No new specific measures have been introduced under this heading within the period under review. 3.2.4. Amelioration of legal and regulatory environments No new specific measures have been introduced under this heading within the period under review. In the past a great deal of effort has been put into the field of privatisation of former public companies. The banking sector has been through a period of restructuring and is now in private hands. The privatisation of the State's remaining shares in Landsbanki was brought to a conclusion in December 2002. The privatisation has been implemented in stages and the State now holds a 2.5 percent stake in the bank. Sales of shares in Icelandic Telecom also started quite recently. More generally a ministerial committee has been established to determine privatisation strategies and an Executive Committee on Privatisation has been put in charge of the implementation of the privatisation programme (for more information see http://brunnur.stjr.is/interpro/for/for.nsf/pages/wpp0050). 3.2.5. Innovation financing A series of interrelated measures have been taken in the period under review (IS 16 to IS 19). All of the measures are the result of the new innovation system in Iceland and the way innovation policy is related to research and technology funding. The Government intends to more than double the budget of public competitive funds by 2007. Two new funds have been brought into operation. The Research Fund has assumed the roles of the earlier Science Fund and Technical Fund. The Technical Development Fund, however, has no predecessor in the old system; its role is the advancement of technological development, innovation and related research in the interests of the nation’s economic and competitive capabilities. The inception of these funds and the work of the New Business Venture Fund have brought about continuity in the financing of innovation, which is a prerequisite for economic regeneration and growth. In addition, a new programme of action has been created to increase the value of marine harvests: the so-called AVS Plan (see IS 21) IS 16, enlarging the Competitive Funds, is the result of the Government’s decision to increase the importance of competitive funds in financing research. Appropriations to public funds for science and technology sponsored by the Ministry of Education, Science and Culture, the Ministry of Fisheries, and the Ministry of Industry, as well as appropriations for their administration, amounted to around ISK 800 (EUR 10) million of the national budgets for 2003. This includes about ISK 700 (EUR 8.75) million to funds within the Ministry of Education, Science and Culture. The Government of Iceland has made efforts to raise appropriations for these funds and their administration in the 2004 budget by about ISK 400 (EUR 5) million, of which approximately ISK 200 (EUR 2.5) million would be for funds within the Ministry of Industry and ISK 100 (EUR 1.25) million to a programme, under the auspices of the Ministry of Fisheries, for increasing the value added the fishing industry (AVS - IS 21). The Government intends appropriations to public funds for the sciences and technology sponsored by the above-mentioned Ministries to rise by around ISK 250 (EUR 3.125) million in 2005, about ISK 200 (EUR 2.5) million in 2006 and approximately ISK 100 (EUR 1.25) million in 2007. Thus appropriations for competitive funds and their administration will be about ISK 1,750 (EUR 21.875) million at the end of this Government's term of office, i.e., around ISK 950 (EUR 11.875) million higher than at the beginning of the term thus more than doubling the appropriations. 25 European Trend Chart on Innovation Regarding measure IS 17 the enlargement of the Research Fund, which offers grants in accordance with the priorities set by the Science and Technology Policy Council and the grants strategy defined by the Science Board based on a peer review evaluation of research project quality, the target is to raise the available resources of the Fund from ISK 420 (EUR 5.25) million in 2003 to ISK 600 (EUR 7.5) million at the end of the current Government term of office. The introduction of the Technical Development Fund (measure IS 18) and the improved financial standing of the New Business Venture Fund have improved the opportunities for financing innovation and related research. The Fund is intended to give support to spin-off ventures and innovative firms in order to secure that economic benefits accrue to society from the scientific and technical knowledge and the innovation arising from these new ventures. The available resources of this Fund are to be ISK 200 (EUR 2.5) million in 2004, rising to ISK 500 (EUR 6.25) million towards the end of present Government term. Two other action lines are affected by this measure, III.3 ‘Start-up of technology based companies’ and III.5 ‘Strengthening the ability of SMEs to absorb technologies and know-how’. The role of the Fund for Equipment (measure IS 19) is providing grants to universities and other public research institutions for the purchase of expensive and specialised equipment for research. The regulations for applying for a grant also have an effect on two other lines of action, namely I.6 ‘Promotion of clustering and co-operation for innovation’, and III.4 ‘Intensified cooperation between research, universities and companies’. Applications involving co-operation among research bodies on financing and the use of equipment purchases shall have priority. In this manner the Fund for Equipment can deeply influence the economic returns and impact of investments, on the one hand by a faster improvement of facilities and on the other hand by a reduction of unnecessary duplication in the purchase of scientific apparatus. One of the previous measures from the Trend Chart is directed to the establishment of the New Business Venture Fund (IS 4). The Fund is the result of a merger between four public sector credit funds. The aim is to promote innovation through better access to start-up capital for businesses. Instead of having four separate funds specialised in their separate economic sectors, the new fund can better allocate the financial means available not only between ‘old’ economic sectors but also new ones. For more information on the NBVF please take a look at http://www.nsa.is. 3.2.6. Taxation No new specific measures have been introduced under this heading within the period under review. The Government has decided to present a bill to the Althingi that proposes a four percent reduction in the personal income tax, the abolition of the net wealth tax on individuals and companies, and an increase in child benefit payments by nearly half. This decision is in accordance with the Government’s Policy Statement of June 2003. These changes will be implemented in phases during the years 2005-2007. 26 European Trend Chart on Innovation In view of the present economic prospects and the timing of power project construction, the main phase of the personal income tax cut will take place in 2007. Tight fiscal policy is an important precondition for these measures, since the preservation of economic stability is considered of great importance. It is expected that the tax cut will have a major effect in retaining the domicile of successful high-tech companies in Iceland and possibly attracting foreign investment in technologybased industries. The first phase of the personal income tax cut will be implemented in 2005 when the personal income tax will be cut by one percent, from 25.75 percent to 24.75 percent. All reference sums in the personal income tax structure, as well as for the net wealth tax and child benefits, will be increased by three percent. The second phase of the personal income tax cut will take effect in 2006 when the tax will be cut by another one percent, to 23.75 percent. The first half of the increase in child benefits will also take effect at that time and will consist of a 25 percent increase in income thresholds and in child benefits that are unrelated to income, and a ten percent increase in income-related benefits. The net wealth tax of individuals and companies will be abolished as of the year 2005 which will be implemented with the tax assessment in 2006. For more information see http://eng.forsaetisraduneyti.is/. 3.2 Gearing research to innovation 3.3.1. Strategic vision of research and development No new specific measures have been introduced under this heading within the period under review. 3.3.2. Strengthening research carried out by companies One new specific measure (IS 21) has been introduced under this heading within the period under review: Added Value from Seafood program (AVS). The objective of this programme is to increase the value added of Icelandic fishery and fish processing industry by calling upon new ideas and research lines on the subject. At the same time this measure has an effect on action line III.5, the ability of SMEs to absorb technologies and know-how. In 1999 The Ministry of Education, Science and Culture initiated an Information and Environment Research Programme (IS 5) to increase progress within information technology and environmental technology, and to create synergies between the two areas. The programme is expected to continue until 2006. Researchers and consortia can apply for grants for up to three years for projects within the two areas. Applications are evaluated by experts from both public research and private companies. The total amount allocated to the programme is ISK 580 million (EUR 7,3 million). Annual budgets for 2003 and 2004 will be EUR 1,2 million per year. The programme also intends to intensify co-operation between research, universities and companies (III.4). 27 European Trend Chart on Innovation 3.3.3. Start-up of technology-based companies Although no explicit new measures could be identified on the subject, there is one new measure that also influences that line of action, being IS 18 (see action line II.5). Several measures however are still in place (see also TrendChart Report 2003). IMPRA Innovation Centre (IS 15), established in 2003 under new legislation on support for technological development and innovation is to replace IMPRA Incubator Centre (IS 13), provide support services to entrepreneurs and SMEs, as well as initiate and support regional development agencies and local business advisers. A central goal is to coordinate national actions and initiate cooperation between support agencies. Young people and women have been identified as special target groups. The overall budget is ISK 100 million (EUR 1.25). The IMPRA innovation centre has also been assigned the task of establishing cooperation between organisations which support economic development in Iceland, and linking them to the public support system for scientific research, technological development and innovation (STPC, 2004b). Under the IMPRA innovation centre we find several initiatives aiming at stimulating innovation in Iceland. An example of such a programme is the ‘Innovation Competition’, which is aimed at increasing knowledge about making business plans as well as bringing out interesting ideas and projects. The measure includes seminars about how to make a business plan. Another action under the IMPRA umbrella is the ‘Action for Innovation and employment’. The objective of the action is to support SMEs and entrepreneurs in Iceland. The initiative is aimed at increasing initiative, employment and production, and at improving the competitiveness of Icelandic SMEs and entrepreneurs. The aim is also to obtain an effective use of public funds for support initiatives on behalf of the Ministry of Industry and Commerce. The 'Out of drawers' programme (IS 9) is a cooperative project between the Research Liaison Office of University of Iceland and the New Business Venture Fund. The main objective of the project is to encourage personnel from higher education and public research institutions to bring forward their R&D results for further exploitation by industry. The project has been in operation since 1998. The intention of the 'Support to entrepreneurs and SMEs' programme (IS 10) is to provide information and guidance on possibilities for international cooperation for investors. The project was launched in 1998 and ended in 2000. The Step Ahead project (IS 11) is intended to facilitate leaders of small firms (micro and spin-off) in seeking guidance on marketing, finance, environmental product management and organisational matters in order to increase profitability of companies. The project started in 1998 and is expected to last at least until 2003. The overall budget is ISK 4 million (EUR 50,000). The IMPRA Incubator Centre (IS 13), established in 1999, has a capacity to host simultaneously up to nine companies. The companies must be founded on an innovative idea. IMPRA supports the companies in the form of low rent housing and equipment, and other services. The overall budget is ISK 7 million (EUR 87,500). Main indicator for success is the number of new jobs created by the incubator companies. In connection with the new legislation on support for technological development and innovation passed in 2003, the Incubator Centre measure was replaced by the IMPRA Innovation Centre (see IS 15). 28 European Trend Chart on Innovation 3.3.4. Intensified co-operation between research, universities and companies No new specific measures have been introduced under this heading within the period under review. However, measure IS 19, and specifically its implementation in practice is expected to have an effect on the co-operation intensity between innovation actors (see IS 19). Current measures within the context of this action line are: The mission of the Fisheries Technology Forum (IS 7) is to encourage co-operation between fisheries and industry in order to reinforce the development of equipment that increases the production values of fisheries. The Forum focuses on the development of equipment in the entire value chain from catching and processing to marketing. The Forum provides professional and financial support. The annual budget is ISK 11 million (EUR 140,000). The 'Out of Drawers' programme (IS 9) also has a stimulating effect on intensifying cooperation between actors of the innovation system. The Health Technology Forum (IS 14) was established in 2001 as an initiative of RANNÍS. The objective of the Forum is to encourage firms, institutions and individuals to increase domestic and foreign co-operation for development and marketing in the field of health technology. Besides RANNÍS, the Ministry of Health and Social Security, the Federation of Icelandic Industries, the New Business Venture Fund, the Icelandic Society for Biomedical Engineering and the Ministry of Industry and Commerce is involved in the project. The Forum evaluates and finances projects. The annual budget is ISK 38 million (EUR 475,000). 3.3.5. Strengthening of the ability of companies, particularly SMEs, to absorb technologies and know-how No new specific measures have been introduced under this heading within the period under review. However, measure IS 21 (action line III.2) is expected to have an effect on this topic too (see section 3.3.2). Value adding in the fishing and fish processing industry also focuses on the capability of companies to absorb technologies and know-how. Ongoing measures are the following: Fisheries Technology Forum (IS 7) is to encourage co-operation between fisheries and industry in order to reinforce the development of equipment that increases the production values of fisheries. The Forum focuses on the development of equipment in the entire value chain from catching and processing to marketing. The Forum provides professional and financial support. The annual budget is ISK 11 million (EUR 140,000). The 'Out of Drawers' programme (IS 9) also has an effect on this action line. 29 European Trend Chart on Innovation IV. Other Objectives Besides the straightforward innovation related measures, the Government of Iceland also considers other measures that in the long run will have a positive impact on innovation performance and new knowledge creation. When building a robust scientific community, it is vital to ensure that women play an active role in research work. Iceland aims to develop a social structure in which human resources are the driving force behind economic advancement. The development of a research environment in which gender equality is of high importance serves both justice and science. The Helsinki Group is an EU standing committee concerned with women in science. Committee members are appointed by EU member countries and other countries that take part in the scientific and technological Framework Programmes. The committee’s objective is to work towards the increased involvement of women in science and to act in an advisory capacity concerning the position of women in research and scientific services. Member countries also have national committees responsible for applying the conclusions of the Helsinki Group in their respective countries and collecting statistical data about women in science. The Minister for Education, Science and Culture has decided to appoint a national committee for Iceland. In addition to the normal work of a national committee, the work of Iceland’s national committee will include the implementation of the Women in Science project, which is part of the government’s Equal Opportunities Strategy 2004-2008; the collection of internationally comparable statistical information for Iceland; and its inclusion in the EU report ‘Women in Industrial Research’, which proposes the objective to double the number of women in industrial research before the year 2010. The committee will also oversee the analysis of statistical data among other duties. A previous programme on this subject was ‘AUDUR Creating Wealth with Women’s Vitality’. The mission of the project AUDUR, which is both an Icelandic woman’s first name and a noun in Icelandic meaning wealth, is to better utilise women’s resources by increasing their participation in enterprise creation. The goal is to increase the number and growth of companies owned by women. The programme ended in 2002. 30 European Trend Chart on Innovation 4. List of TREND CHART measures Code Title IS 3 The Icelandic Current Research Information System (ICERIS) The New Business Venture Fund The Information and Environment Research Programme Innovation Award Fisheries Technology Forum Innovative Ideas Out of Drawers Support to Entrepreneurs and SMEs Step Ahead Regional Development Institute IMPRA Incubator Centre IS 4 IS 5 IS 6 IS 7 IS 8 IS 9 IS 10 IS 11 IS 12 IS 13 Start/end dates 1998 Action area(s) I.3 1998 1999 II.5 III.2, III.4 1994 1994 1996/2003 1998 1998/2000 1998/2003 1998 1999 I.3 I.6, III.4, III.5 III.3 I.2, III.3, III.4 I.6, III.3 I.4, III.3 III.3 plan Old/new/modi fied/extended Modified Ended Ended, replaced IS 15 by IS 14 IS 15 Health Technology Centre IMPRA Innovation Centre 2000/2003 2003 I.6, III.4, III.5 III.3 Modified IS 16 IS 17 IS 18 IS 19 IS 20 IS 21 IS 22 IS 23 IS 24 IS 25 IS 26 Enlarging the Competitive Funds Research Fund Technical Development Fund Fund for Equipment Fund for Graduate Research Training Added Value from Seafood (AVS) Strengthening University research: clustering Evaluation of universities Public Access to research and innovation results Installation of a national Committee on Equality Increasing the number of students in Science and Engineering programmes EDUCATE Iceland 2004 2004 2004 2004 2004 2004 2004 2004 2004 2004 2004 II.5, II.1 II.5, I.6, III.4 II.5, III.3, III.5 II.5, I.6, III.4 I.6 III.2, III.5 I.6 II.1, I.1 I.3 IV * I.3, I.1 New measure New measure New measure New measure New measure New measure New measure New measure New measure New measure New measure 1998 I.1., I.6 Old (omitted previously) IS 27 * IV = other objectives related to innovation 31 European Trend Chart on Innovation 5. Bibliography and sources Selection of websites consulted: RANNÍS Icelandic Government IceTec Central Bank of Iceland New Business Venture Fund Statistics Iceland EDUCATE Iceland (Mennt) IMPRA Nordic council of Ministers www.rannis.is http://brunnur.stjr.is or www.government.is www.iti.is http://www.sedlabanki.is http://www.nsa.is http://www.hagstofa.is http://www.mennt.is http://www.IMPRA.is http://www.norden.org Documents consulted: European Commission (2004), ‘European Innovation Scoreboard 2004 - Comparative Analysis of Innovation Performance’, Commission staff working paper (http://trendchart.cordis.lu/) European Commission (2002), ‘European Innovation Scoreboard 2002’, Commission staff working paper (http://trendchart.cordis.lu/) Verbeek, A. and T. Finnbjörnsson (2004), ‘Iceland’s technology base: strengths, weaknesses and opportunites, RANNÍS, paper presented at a seminar at the Reykjavik University, 11-12 november 2004 (www.rannis.is/files/1604841437Arnold percent20- percent20pappír.doc) OECD (2003), ‘Economic Survey of Iceland’, OECD Observer, www.oecdobserver.org Ministry of Finance (2004), ‘Ný þjóðhagsspá fyrir árin 2004 - 2010’, http://www.fjarmalaraduneyti.is/media/Thjodarbuskapurinn/Urthjodarbuskapnum011004.pdf Nr. 6, Science and Technology Policy Council (2004a), ‘Science and Technology Policy, Agreed at a meeting of the STPC on December 18, 2003’, Prime Minister’s Office, Iceland Science and Technology Policy Council (2004b), ‘Resolution of the Science and Technology Policy Council’, Iceland Statistics Iceland (2004), ‘External Trade’, Statistical series, http://www.statice.is/series EC (2004), ‘Innovation in Europe - Results for the EU, Iceland, and Norway’, Eurostat, theme 9: Science and Technology 32