Estonian eVikings: The role of ICT related FDI in small catching-up economies

Rationale for the study The need for strengthening the capabilities for policy analysis and formulation From Lisbon Strategy, and rethinking European development strategy at the political level … … to contribution to the actual development of national development strategies: Estonian R&D and Innovation Policy 2007-2013 Estonian National Development Plan 2007-2013

Small countries riding the wave Historic context, and the lessons from earlier catching-up experiences of small countries From the U.S., Germany and Sweden in 19th century to the Finnish and Japanese/East Asian catching-up Catching-up in small countries: Finland, Ireland, Singapore Special role of the ICTs in economic development nowadays, bio- and nanotechnology in the future In OECD countries, more than the half of the productivity increase induced by take-up of ICTs, and related innovation

“Double diamond” model Radical technological breakthroughs largely exogenous to the economic development in small countries The dominance of MNCs in global R&D and technology markets FDI not only major source for long term capital investment, but even more importantly provides access to new proprietary technologies, markets, managerial skills, etc. Yet, at the risk of losing independence in formulating economic policy?! Successful catching-up experiences in small countries Targeting foreign investments… … while ensuring the availability of required qualified labour, and upgrading capabilities of the domestic enterprises

Conclusions Radical increase of R&D investment (e.g. to 3% of GDP) not possible without radical change of the structure of the Estonian economy. NB! Not only in Estonia, but the same applies for large part of the EU NMS-10 R&DI policy focusing on commercialisation of domestic research results via support to private R&D and establishment spin-off companies is not in small countries a viable approach for inducing the required structural change Three critical success factors: FDI targeting, and upgrading domestic capabilities Implies for a strong and very professional policy co-ordination

Deliverables: formal and informal eVikings WP7 report: The role of ICT related foreign direct investment in economic development in small catching-up economies: implications for Estonian competitiveness strategy Participation in policy discourse: Government working party for preparation of the next R&D strategy Article in the Journal of the Estonian Parliament (RiTo) Consultations with EC DG JRC / IPTS in Sevilla Presentation at the expert meeting in preparation of the UNCTAD World Investment Report 2005, with special focus on the internationalisation of research and development.