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Sketching Ukrainian Innovation System: R&D Performance

Innovations, conceptualized by R&D activities, are largely supported by the government and foreign capital, and unfortunately scarcely by national business, in Ukraine. The issue of who performs these activities arises for the picture to be more complete.  

The second part of delineating Ukrainian innovation system starts with a disclaimer, just as the first part did. I will discuss the country’s R&D performance by main sectors like government, business, and education. But it is not the limit of possibilities. A more precise analysis requires consideration of institutions which regulate the mentioned sectors, as well as intersectoral activities. So, my focus below is on comparing Ukraine with other countries by macro indicators of sectoral innovation processes, and the result will be a snapshot from a bird’s-eye view that can be complemented further. The data from UNESCO is used.

Though being responsible for around one fourth of R&D investment only, business enterprises perform the largest part of Ukrainian innovation activities – 55,7% in 2011. This number looks even more impressive when compared with the situation in state-controlled Azerbaijan (17,8%) and in small post-Soviet states like Moldova (19%) and Latvia (27,8%). But when one casts a glance at Russia and Belarus, also quite state-controlled innovation environments, the evaluation changes – their businesses perform around 60,9% and 69,8% of national innovation practices respectively. The argument of state penetration in all business activities in these countries would be relevant here if, for instance, such young EU states like Hungary and the Czech Republic did not witness the same high numbers. Moreover, around 70% of innovative activities are done by business enterprises in Scandinavian states. Therefore, Ukraine clearly underperforms here.

In the light of the abovementioned, it is not surprising that the governmental share of innovation practice is boosted – 37,9% in 2011, with a positive trend taking place during previous years. Again, this number does not look that big when juxtaposed with Azerbaijani (72,4%) and Armenian (89,1%) shares. However, even in Poland, where innovations are a matter of state investment to a large extent, the state involvement is substantially lower – 34,5%. In general, both EU and non-EU Ukrainian neighbors like Russia and Slovakia exhibit the level around 30%. In most EU-states, it is around 10%, with Scandinavian states demonstrating the lowest numbers. For the sake of comparison, it is important to mention Norway, where all major industries like oil and gas and energy production are state-owned. The percentage of state-performed innovations in this Nordic country is only 16,5%, so the state involvement in case of Ukraine is unusually pervasive.

The performance of innovative activities by major sectors, %, 2011

If the desirable distribution of innovation responsibilities between state and businesses can be disputed, the situation with higher education is definitely deplorable in Ukraine – only 6,3% of R&D is performed there. This number is the lowest among all EU and Eastern Partnership countries for which the data are available. Thus, the post-Soviet countries with a strong state hand like Russia (9%), Belarus (9,5%) and Azerbaijan (9,8%) perform better. The EU countries with much more humble human resources in education like Bulgaria (10,2%) and Slovenia (11,8%) also outperform Ukraine. EU neighbors that are comparable to Ukraine are already far ahead – Romania with 22,8% and Poland with 35%. In this case, it needs to be acknowledged that the higher education sector in the country is not innovative at all.

Finally, I would also like to touch upon private non-profit realm. This sphere is usually responsible for around 0,5-1% of innovations in the EU states. In Ukraine, this sector is almost inexistent – 0,002%. Even Belarus (0,02%) and Russia (0,17%) look much better in this regard. So, it needs to be stated clearly that the situation here is not much better than with higher education.

Overall, Ukraine heavily relies on the state sector in terms of performing R&D activities. At the same time, all other major sectors in the country, that is business, higher education, and private non-profit ones, are responsible for less innovations than on average in both Eastern Partnership states and the EU. If business performance is at least comparable to the first bunch of states, two other sectors are in a worrying condition. Particularly, Ukrainian higher education is not involved in innovative activities. Such state of affairs raises long-term concerns, as the redistribution of state-business responsibilities is possible to be introduced relatively fast, but the higher education sector obviously requires new infrastructural, institutional, and human resources.

This situation is largely caused by an ineffectiveness of the state reforms that were done in innovations realm over more than 20 years of Ukrainian independence. Particularly, the state refused to abolish its steering function and supervision upon major innovative processes. Though being necessary in the industries with long investment returns like nuclear power, the role of the state must be limited to a facilitating one in the majority of innovative activities. Particularly, I mean that it is a high time to let the university work directly with businesses and private non-profits and reduce the state involvement to creating favourable infrastructural and institutional conditions for this work.