Knowledge Economy Forum III Government of Hungary & World Bank Budapest 23 rd -26 th March 2004 Stephen Wright Projects Directorate Breakout Group B “Financing of Innovation”
Players Tertiary institutions Universities Research institutes Corporates SME Midcap Large domestic TNC/FDI Financing Family Equity Seed/startup/VC BO/IPO Exit Stock market Client downpayment Grants EU (FP6, Structural) National Tax relief Debt Factoring IFI National development bank Commercial bank Project Basic research Applied R&D Techno development Product development Pilot project Market entry Commercialisation …no single answer!
Our country case studies: Many obvious similarities between national programmes – aimed at international competitiveness of product/process for the country fostering university-industry relationships build “R&D infrastructure” supporting commercialisation in industrial companies co-financing with the private sector But differences too – extent of support available for pre-commercial research the driver: university research ideas or the market grants versus debt/guarantees of various kinds scale – from $1.5 to $500 million
Significant barriers to attracting Innovation finance: Limited absorptive capacity (human capital, managerial and organisational capability) Missing firm-firm and firm-university networks Poor government R&D finance allocation mechanisms Lack of innovative SMEs Limited R&D in FDI sector Poor IPR systems Shortage of risk finance (seed/startup/VC/exit) & inappropriateness of bank finance to handle risk Many of these factors limiting access to finance are NOT in the finance sector as such…
Some solutions to the barriers: Build a supportive greater innovation system environment Use training/consultancy funds alongside R&D finance Use access to government finance to encourage concentration of research in clusters and networks Specific financial support linked to young researchers (brain drain) International peer groups to vet government R&D finance allocation process Continuous re-evaluation of all government support programmes (“what is working and what is not?”) These all still need good execution…
Uncertain areas (no good answers from our group apart from aspirations!): Encourage FDI to be more than “screwdriver” plants Development of business angels, VC Fostering of IPO or other exit markets Sort out IPR systems to be fully supportive of innovation and give confidence to financiers Just like most of the EU! And an agenda for the next KBE Forum…