Bringing Greece’s hidden innovation assets to life
By Alexander Kritikos *
Although Prime Minister Antonis Samaras has shuffled his cabinet – changing the ministers of development and education, among others – this is not the moment to take one’s eye off the ball. Greece is still facing the same problems, with a stagnating economy and unemployed citizens.
Six years of recession has made clear that enforcing austerity measures and pushing through desperately needed reforms in the regulatory environment is not enough to create both new growth and a better future.
Clearly a corner has been turned: The conversation in Berlin and Brussels now focuses on how Greece and other Southern European economies can grow out of the crisis through a comprehensive investment agenda.
But while the overarching conversation has changed, there are many other issues facing this country. When we compare the Greece of before the crisis with other similarly sized eurozone states, such as Finland, the Netherlands, Austria and Belgium, it is clear that the former faces not only institutional but also structural deficits.
Starting and running a business in Greece requires exceptional patience to navigate the Kafkaesque bureaucracy. The overregulated legal framework stops many entrepreneurs before they even get started. As a result Greece has thousands of relatively small businesses that cannot take advantage of economies of scale. Most firms are in low value-added sectors, such as tourism, beverages and the food industry. None requires serious investments in research and development.
Without changes, Greeks face a low-wage economy, with flocks of tourists wandering around the Parthenon and trucks carrying olive oil – at least hopefully bottled in small flacons – to distant shores.
The country can only become prosperous by using its comparative advantages and laying the groundwork for higher value-added goods production. R&D investments are critical because these investments yield innovative, exportable goods, while simultaneously creating jobs, prosperity and hope.
The institutional reforms under way are not enough: R&D needs an innovation-oriented industrial structure and a well-functioning innovation system.
This is going to be a considerable challenge. The other eurozone economies mentioned above invest around 3 percent of their gross domestic product in R&D. Greece invests 0.67 percent.
Another major difference elsewhere is that governments are committed to investing in R&D, no matter which party is in control. The budget is set and the scientists are given wide latitude to do their work.
As a result, their economies are driven by innovation and continual refinement, with new products and technologies regularly introduced.
The Greek economy does not.
The country’s ranking in the “innovation performance index” prepared by the European Commission reflects this: Greece is dead last among eurozone countries.
However, the news is not all bad. The country has hidden assets that can serve as the foundation of a modern innovation system, including excellent research institutes. Unfortunately Greek researchers have retreated into the world of fundamental research and have only little exchange with the world of business.
A second hidden asset is the huge number of top Greek researchers working outside the country. Greece is the only eurozone economy “exporting” more scientific brains to other European countries and the United States than it keeps at home.
Thirdly, it also has a few innovative companies that have remained in the country despite the high regulatory burden. These firms do sporadically work with the existing research institutes and are not clustered and co-located in the same area, despite the obvious potential for mutually beneficial cooperation.
Fourth, Greece has an impressive diaspora in research, finance and business, many of whom would be thrilled to help pull the country into the future.
Finally, Greece has an amazing climate and quality of life that makes it easy to convince people to move here. In an increasingly global race for the best talents, quality of life outside the lab is crucial.
Given the country’s strengths and weaknesses, there is a strong need for its ministers and MPs to push for a more innovation-driven economy and to design a coherent innovation policy that will close the gaps in the innovation chain, thus helping unlock its hidden assets. There are five strategic decisions that ought to be made.
First and foremost, Greece needs to cut the red tape, reducing bureaucratic hurdles, thus making its business environment open to innovation. Taking this decision is entirely of national self-interest and not a matter of following suggestions from the troika.
Secondly, it must invest in cutting-edge applied research centers, ensuring that high-quality science supports and serves entrepreneurs developing new technologies.
Thirdly, to unleash this potential, Greece also needs to encourage strong ties and knowledge transfer between its universities, research institutions and private companies. Building scientifically competitive research campuses, with co-located participants, will help close the gaps in the innovation chain and attract talent, both Greek and non-Greek.
This investment in people and research can be partly financed through the EU’s Horizon 2020 program, which is designed to strengthen both European and national research systems. Of particular importance for Greece are the programs to develop cutting-edge research centers. Horizon 2020 could be the foundation underlying an integrated and comprehensive Greek investment strategy for creating scientific excellence in the country if public expenditures are shifted from consumption to investments into research and development.
Fourth, this approach will only work if universities and research institutes are independent of political influence. Ministers and MPs need to step back, only providing an overall budget and then getting out of the way, leaving for instance the selection process of new researchers to internationally recognized scientists.
Finally, the Greek diaspora, although very strong, is currently not treated as a potential economic asset. Programs designed to target Greece’s talented diaspora could help fill gaps in its innovation chain.
Of course, whether or not Greece actually becomes an innovation hub depends not just on investments in R&D and research centers, but also on establishing a partnership between the spheres of research, business and entrepreneurship, where ideas can be freely exchanged.
Creating an environment that brings both top Greek and non-Greek researchers to Greece, and that also supports the local innovation chain, is critical for the country’s future.
The fruits of innovation policies will not appear overnight: It takes time to do research, to turn ideas into products, and to market the products – maybe even a decade.
Greek ministers and MPs, regardless of party, must commit to investing time and money, formulating a vision that inspires young Greek entrepreneurs, scientists and citizens. They must also take concrete actions that signal a serious commitment to innovation to the rest of the world. Combined, these efforts are key to creating trust in the Greek political system.
The sooner these reforms and investments are put into place, the sooner that Greece will start down the path toward sustainable economic growth.
* Alexander S. Kritikos is Research Director at the DIW Berlin, Professor of Economics at the University of Potsdam and Research Fellow of the IZA, Bonn. Jointly with Georges Siotis from the EU Task Force, he established the Hellenic Innovation Forum.