Innovation

“Innovation is the central issue in economic prosperity.” These are the words of Michael Porter, the Bishop William Lawrence University Professor at The Institute for Strategy and Competitiveness, based at the Harvard Business School, and a leading authority on competitive strategy, and the competitiveness and economic development of nations, states, and regions. But don’t take his word for it. Steve Jobs, another chap who knew a thing or two about innovation said “innovation has nothing to do with how many R & D dollars you have…….It’s not about money. It’s about the people you have, how you’re led and how much you get it.” So the question becomes, does Poland have the people; does it get it?

Well, up to a point, Lord Copper. Addressing a conference organized by the Lewiatan employers’ confederation to address the issue of effective public spending (one of life’s great unsolved mysteries, you might think) the Polish prime minister, Ewa Kopacz, said on Monday that “There are no better investments then those in modern and innovative technologies.” She emphasised the need to spend more on innovation in the Polish economy, as well as to draw on, surprise, surprise, EU funds for the purpose.

The prime minister wasted no time in pointing to the new EU budget as a source of funds for innovation, and the “record amount” which Poland has received in the new budget period which runs until 2020. Poland will have almost PLN 500 billion from the EU over this period which it would do well to spend on innovation and creating the conditions in which enterprise is able to thrive, rather than on seeking to stretch the rules for short term political fixes to support industries with limited futures such as coal mining.

Or, as Herbert Wirth, chief executive of KGHM, Poland’s largest miner and Europe’s second largest copper producer told the Financial Times last week, research and development must be Poland’s main focus for the future. With EU support Poland has five years to come up with innovative, technologically advanced market products. “We do not realise our advantage will be destroyed after 2020.”

Poland at present spends less than 0.9 per cent of GDP on R&D, which is the lowest figure of any major EU economy and less than half the EU average of 2 per cent. After all, the competitive advantage based on low manufacturing and low labour costs is disappearing as income levels rise and the danger is – as mentioned here in Forecast – that Poland ends up stuck in the middle-income sector, unable to make the transition to a high-income economy. This danger is all the greater where the economy has been over reliant on competing on the basis of cheap labour.

The support from Brussels (translation: the taxpayers of other EU member states) to the yearly tune of €14 billion which, with manufacturing exports to Germany, has underpinned Poland’s economic growth has also bred a certain degree of complacency which Polish companies will have to shake off if they are to compete effectively in the future with more innovative companies from elsewhere. Indeed, it will also be interesting to see what Polish politicians have to say for themselves when they can’t include the phrase “EU money” in every sentence, or offer it as the panacea to every problem.

Be that as it may, Kopacz does seem to understand what is required. She said that most of the EU funds must be used for innovative projects based on modern technologies. Equally importantly, she said that innovative businesses by nature involve risk and that not all inventions are brought to market and that not all start-ups will be successful. “We have to learn that the price of risk – and sometimes failure – cannot be stigmatised and [we should] not penalise innovators for taking risks, otherwise we will be bound to copying and the adoption of proven and safe solutions from real innovators.”

Quite. But it would also help if the burdens of the tax and social security system did not also fall so heavily on smaller businesses. Then, as I wrote here in What Matters, perhaps more of Poland’s budding innovators would not leave and take their ideas with them. For, as Tim Berners-Lee, the founder of the internet said, “Innovation is serendipity, so you don’t know what people will make.” All we do know is that, as things stand, far fewer will be making them in Poland.

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