Can Public Support to Clusters Be Efficient in Promoting Innovation in Lithuania? Conference on “Cloning Silicon Valley – Will It Work for Sunrise Valley?” Vilnius, November 28, 2002 Severin Kodderitzsch, World Bank

Overview  Knowledge Economy Assessment  Can Clusters Be Replicated?  Are Clusters (Sunrise Valley) an Efficient Instrument for Promoting Innovation in Lithuania?

I. Knowledge-based Economy  Educated, creative and skilled people  Effective national innovation system  Dynamic information infrastructure  Economic & institutional regime that is conducive to the efficient use of existing and new knowledge and the flourishing of entrepreneurship

Why bother? Why Now? Lithuania’s Competitiveness

Current Competitiveness (WEF)

Future Competitiveness (WEF)

Human Resources, Education & Training Life Long Learning:  Learner Perspective  Economic and Labor Market Perspective  Across Life Stages and Learning Systems  Issues: –Defining and Assessing Key Competencies –Governance and Management Challenges –Financing Education –Opening Pathways –Equity, Access and Motivation

Information Society  Policies and Institutions  Telecommunication Regulations (Universal Service vs. Universal Access)  Information Infrastructure  Knowledge Management, e-Government  K and Digital Divide

The Economic & Institutional Framework  Macroeconomic stability remains fundamental  Business Environment  Labor Market Flexibility  Social Protection Policies  Effective Government Services

Innovation Systems: Issues  Relevance of public R&D  Funding of R&D  Governance of R&D  Implementation of R&D  Financing of Innovations

II. Can Clusters (Silicon Valley) Be Replicated?  Two schools (Brian Arthur): –High Tech is a local phenomenon and cannot be easily replicated (culture, resides in people) –High Tech is mere knowledge and is easy to transfer to other regions and countries (can be packaged, can start with a few people)  Culture of Collaboration and Competition  Organic Development (e.g. Ceramic Cluster, Italy) –but how to get there, quickly? No short cuts.  Public Support to Clusters in many OECD Countries; however, judgment still out.

III. Are Clusters (Sunrise Valley) an Efficient Instrument for Promoting Innovation in Lithuania? 1. What is the objective of the Sunrise Valley Concept? What underlying innovation problem does it aim to address? 2. Can Sunrise Valley be effective (i.e. can it work)? (see above, replication of Silicon Valley) –Establishing Network of Producers, Suppliers, Researchers, Financial Institutions and more? –Competitive Output and Sustainable Job Creation?

Are Clusters (Sunrise Valley) an Efficient Instrument for Promoting Innovation in Lithuania? (II) 3.How would Sunrise Valley contribute to addressing fundamental problems in Lithuania’s National Innovation System –Relevance, Technology Generation & Transfer, Application, R&D Funding, Financing of Innovations, Competition

Are Clusters (Sunrise Valley) an Efficient Instrument for Promoting Innovation in Lithuania? (III) 4. Would Sunrise Valley be Cost Effective? –Vilnius Region de facto already a cluster? Incremental Benefit? –Are there more cost effective ways to support innovations in the region (e.g. IPRs for publicly funded research institutions)? –How would Sunrise Valley meet minimum market criteria? Long-term financial sustainability? How much and how long will public support be required?