P OTENTIAL OF F AB L ABS IN ADVANCING INNOVATION AND COMPETITIVENESS IN DEVELOPING ECONOMIES Iwona Borowik Innovation Policy Specialist World Bank Group LED Forum 2015 London School of Economics and Political Science March 7, 2015

SELECTED INNOVATION PROJECTS LED BY THE WORLD BANK IN EUROPE AND CENTRAL ASIA ( ECA )  Georgia: Competitive Industries & Innovation Program : review of the innovation system and advice on innovation strategy, establishment of the Georgian Innovation and Technology Agency and its mandate  Montenegro: Higher Education and Research for Innovation and Competitiveness project: support for funding of pilot Center of Excellence and innovation grant program promoting international collaboration and research excellence  Western Balkan Countries: Facilitation of efforts in reaching agreement on the Regional R&D Strategy for Innovation in the Western Balkan Countries, 2012  Bulgaria: review of the innovation system and advice on innovation strategy, innovation instruments, legal framework, innovation system governance,  Poland: Enterprise Innovation Support Review, 2013: advice on the innovation policy, programs and innovation strategy for  Romania: Research, Development and Innovation Sector Functional Review,

WHAT ARE THE UNDERLYING BOTTLENECKS HINDERING INNOVATION IN ECA? 3

LOW LEVELS OF R & D EXPENDITURE Source: Author’s calculation based on UNESCO data for 2011  Average R&D/GDP in ECA 0.7% compared to EU27 average of 2%

HIGH PROPORTION OF GOVERNMENT SPENDING VS. PRIVATE R & D Source: Author’s calculation based on Eurostat, data for 2011  Low business spending on research and innovations  Low business sophistication (prevailing export of low-tech goods)  The public and businesses do not adequately perceive importance of innovation (resulting in poor innovative and entrepreneurial culture)

MOST RESEARCH NOT RESULTING IN INNOVATION  Decline in scientific productivity and particularly research quality  Research system oriented towards basic research with poor results in applied research  Limited research-industry collaboration  Underinvested proof of concept labs/innovation infrastructure for quality research and inventions  Limited participation in international research programs (e.g. EU FP7, Horizon 2020) Source: Author’s calculation based on UNESCO and USPTO data for Scientific productivity is measured by amount of public spending per one patent; high expenditure per patent demonstrate poor quality of research (i.e. most of research do not produce patents);

HOW CAN FAB LABS STIMULATE INNOVATION ?  Provide opportunities for researchers, inventors, entrepreneurs, students, society (towards knowledge-driven society) being an “open-source innovation”  Generate new sphere of possibilities at the local level to stimulate innovations, inventions and applied research (towards knowledge-driven economy)  May be used across industries promoting cluster development (specialization) at an affordable cost  Enable access to global knowledge/networks (Fab Lab Network)  Create a deal flow for high impact start-ups - essential for the attraction of risk capital 7

FAB LABS ’ MULTIPLIER EFFECT IN RAISING COMPETITIVENESS Education, Human CapitalInnovation Innovation- and Technology-based Business Development Economy, Exports, Competitiveness Job Creation and Social Development Attract students to Science, Technology, Engineering and Mathematics (STEM ) Education Attract more citizens (students, entrepreneurs, professionals) into STEM professions Shift from low-skill intensity to medium/high Mitigate ‘brain drain’ of STEM-focused researchers, graduates and professionals Attract diaspora Educate the community Teaching skills in computing (CAD/CAM), digital fabrication, engineering, electronics, programming, design, creative thinking Product innovation Disruptive and design thinking Rapid prototyping Igniting early technology adoption Collaborative and distributive innovation Multi-disciplinary and applied R&D National, region, city innovation Innovation output (e.g., patents) Tap into global knowledge Increasing the stock of useful knowledge Active catalyst to creativity Capacity building to execute ideas commercially Generating a critical mass of enterprises (SMEs) that combine engineering and entrepreneurship modalities Networks formation and multi-disciplinary collaboration (researchers, engineers, entrepreneurs, etc.) Incubation of business ideas Creative entrepreneurship Creation of new businesses, enterprises or firms Commercialization Creation of high impact start-ups International integration Engaging broader public in innovation, stimulates new economic development Increase of manufacturing Shift from low- skill to medium- and high- technology intensity products Export diversity Puts a country on par with more developed nations in digital fabrication potential Strengthen competitive advantage Job Creation Relevance of skills training New opportunities for employment Improving income stability New skill sets to use latest most advanced ‘disruptive technologies’ such as 3D printers and related equipment in new ways Social development Community building in the underserved or remote areas Skills building Platform for jobs and expanded employment opportunities across sectors  Knowledge Hub, Knowledge generation and diffusion   Technology adaptation, penetration   Cross-sector (Manufacturing, ICT, Cultural and Creative Industries, Agriculture, etc.)  Fab Labs as bridges (public-private-academia partnership) Source: The World Bank (2013): “Innovation Infrastructure Flagship Projects: Pre-feasibility Study”. BULGARIA Reimbursable Advisory Services Program on Innovation 8

F AB L AB AS AN I NNOVATION S YSTEM C ONNECTOR Source: The World Bank (2013) “Innovation Infrastructure Flagship Projects: Pre-feasibility Study”. BULGARIA Reimbursable Advisory Services Program on Innovation Partnerships Academia Demand for Fab Labs 9

Y ET, TO LEVERAGE ON F AB L ABS …  Need for business access to early stage financing for innovation (business angels, crowdfunding, VC, grants programs) vital issue across ECA (Georgia, Croatia, Serbia, Montenegro, etc.) good example of addressing this challenge is Bulgaria’s approach: JEREMIE program of EUR 348m until 2016 (joint initiative of EIF and the European Commission) providing 5 equity and debt products for SME lifecycle  Essential role of entrepreneurs’ connection with business incubators/accelerators (including pre-incubation services): assistance in business mentoring starting from idea development and business plan development  Effective Intellectual Property and technology transfer policies and their deployment  Commitment of the government: proof of concept labs/Fab Labs, incubators, community centers, etc. most likely will not be self-sustainable over a longer period of time 10

Thank you Disclaimer: The views expressed in this presentation are solely of the author and may not be regarded as representing official views of the World Bank Group 11