European Trend Chart on Innovation Annual Innovation Policy for Portugal Covering period: September 2003 – August 2004 European Commission Enterprise Directorate-General A publication from the Innovation/SMEs Programme European Trend Chart on Innovation Innovation is a priority of all Member States and of the European Commission. Throughout Europe, hundreds of policy measures and support schemes aimed at innovation have been implemented or are under preparation. The diversity of these measures and schemes reflects the diversity of the framework conditions, cultural preferences and political priorities in the Member States. The ‘First Action Plan for Innovation in Europe’, launched by the European Commission in 1996, provided for the first time a common analytical and political framework for innovation policy in Europe. Building upon the Action Plan, the Trend Chart on Innovation in Europe is a practical tool for innovation organisation and scheme managers in Europe. Run by the Innovation policy Unit of DG Enterprise, it pursues the collection, regular updating and analysis of information on innovation policies at national and European level. The Trend Chart serves the “open policy co-ordination approach” laid down by the Lisbon Council in March 2000. It supports organisation and scheme managers in Europe with summarised and concise information and statistics on innovation policies, performances and trends in the European Union (EU). It is also a European forum for benchmarking and the exchange of good practices in the area of innovation policy. The Trend Chart products The Trend Chart on Innovation has been running since January 2000. It now tracks innovation policy developments in all 25 EU Member States, plus Bulgaria, Iceland, Israel, Liechtenstein, Norway, Romania, Switzerland and Turkey. It also provides a policy monitoring service for three other non- European zones: NAFTA/Brazil, Asia and the MEDA countries. The Trend Chart website (www.cordis.lu/trendchart) provides access to the following services and publications, as they become available: • a database of innovation policy measures across 33 European countries; • a news service and related innovation policy information database; • a “who is who” of agencies and government departments involved in innovation; • annual policy monitoring reports for all countries and zones covered; • all background material for four annual policy benchmarking workshops; • the European Innovation Scoreboard and other statistical reports; • an annual synthesis report bringing together key of the Trend Chart. The present report was prepared by Vitor Corado Simões (CEDE – Centro de Estudos e Documentação Europeia, ISEG). The information contained in this report has not been validated in detail by either the Member States or the European Commission. Contact: entr-trendchart@cec.eu.int This document originates from the European Commission’s “European Trend Chart on Innovation” (Enterprise Directorate-General). Copyright of the document belongs to the European Commission. Neither the European Commission, nor any person acting on its behalf, may be held responsible for the use to which information contained in this document may be put, or for any errors which, despite careful preparation and checking, may appear. European Trend Chart on Innovation CONTENTS Executive Summary.................................................................................................................................. i 1. National Innovation System in Portugal ..................................................................................... 1 1.1 Innovation performance.............................................................................................................. 1 1.2 Innovation governance system................................................................................................... 7 1.2.1 The national innovation system ......................................................................................... 7 1.2.2 Innovation policy making and delivery structures .............................................................. 9 1.2.3 Regional innovation systems and policies....................................................................... 13 2. Innovation policy in Portugal..................................................................................................... 14 2.1 Innovation policy framework..................................................................................................... 14 2.2 Policy events & policy debates................................................................................................. 15 2.3 Key developments in innovation policy measures.................................................................... 16 3. Implementing innovation policy in Portugal .............................................................................. 18 3.1 Fostering an innovation culture ................................................................................................ 18 3.1.1. Education and initial and further training. ........................................................................ 18 3.1.2. Mobility of students, research workers and teachers ...................................................... 19 3.1.3. Raising the awareness of the larger public and involving those concerned.................... 20 3.1.4. Fostering innovative organisational and management practices in enterprises.............. 22 3.1.5. Public authorities and support to innovation policy makers............................................. 23 3.1.6. Promotion of clustering and co-operation for innovation ................................................. 24 3.2 Establishing a framework conducive to innovation................................................................... 25 3.2.1 Competition..................................................................................................................... 25 3.2.2 Protection of intellectual and industrial property.............................................................. 25 3.2.3 Administrative simplification............................................................................................. 26 3.2.4 Amelioration of legal and regulatory environments ......................................................... 26 3.2.5 Innovation financing......................................................................................................... 27 3.2.6 Taxation ........................................................................................................................... 28 3.3 Gearing research to innovation ................................................................................................ 29 3.3.1 Strategic vision of research and development................................................................. 29 3.3.2 Strengthening research carried out by companies .......................................................... 30 3.3.3 Start-up of technology-based companies ........................................................................ 31 3.3.4 Intensified co-operation between research, universities and companies ........................ 31 3.3.5 Strengthening of the ability of companies, particularly SMEs, to absorb technologies and know-how ...................................................................................................................................... 32 4. List of TREND CHART measures ............................................................................................ 33 5. Bibliography and sources ......................................................................................................... 35 European Trend Chart on Innovation Executive Summary Snapshot of innovation performance The departure of Mr. José Barroso, former Prime Minister, for the Presidency of the European Commission, generated a short period of political instability. After one week, the President of the Republic decided to nominate Mr. Pedro Santana Lopes, the leader of PPD/PSD, as Prime Minister. The new Government took office on the 17 July 2004. Ms. Graça Carvalho continues as Minister for science and higher education affairs (the Ministry was relabelled as Ministry of Science, Innovation and Higher Education). Economic and Labour affairs were merged in the new Ministry of Economic Activities and Work1. Meanwhile, Portugal’s innovation policy has been constrained by both macroeconomic policy and weak economic growth. In fact, after a GDP growth rates around or above 3.5 percent in 1995-2000, there was a steady decline to a negative change (around -1.2 percent) in 2003. Although the latest data disclosed by the Portuguese Statistical Office (INE) indicate signs of recovery in early 2004, such signs are still weak, and according to EUROSTAT forecasts for GDP growth will not exceed 1 percent for 2004. The concern with curbing the budget deficit below 3 percent of GDP, as defined by the Stability and Growth Pact, has been by far the main economic objective of the Government which emerged from the anticipated elections of March 2002. In January 2004, the then Prime Minister announced the intention to launch a ‘strategic initiative’ on knowledge and innovation to stimulate a more sustainable, productive and competitive economy. Two new programmes will provide the operational support for this initiative: the Operational Programme on Science and Innovation – POCI (the ‘successor’ of POCTI) and the Operational Programme on Knowledge Society – POSC (the ‘successor’ of POSI). The revision of Operational Programmes has taken into account some of the recommendations of the mid-term evaluation of the Community Support Framework (CSF). It is still to be seen how this initiative will be materialised. From the analysis of the European Innovation Scoreboard (EIS) indicators, two main results emerge. First, a weak overall performance with regard to innovation, with most indicators falling below the EU15 average. Weaknesses are especially marked in areas of education and skilled human resources. Furthermore, a comparison with the new member countries shows that there is not a single indicator where Portugal would take the lead. However, Portugal is better ranked with regards to public R&D expenditure to GDP. Second, there are signs of recovery, but at a pace too slow to enable a fast catching-up. The fields where trends are most positive concern business R&D expenditure to GDP, the seemingly increase in the number of young science and engineering graduates, and patenting (where, however, trends are very much influenced by the extremely weak basis). It is consensual that the limited innovation commitment of the Portuguese society as a whole (and in particular of Portuguese companies) as well as the shortage of entrepreneurial initiative are strong barriers to strengthen competitiveness. The President of the Republic has ‘crusaded’ to wake society to the challenges of innovation. A new organisation (COTEC) was created with the mission to promote the competitiveness of firms located in Portugal through the development and diffusion of an innovative culture and practice. At least in word, there is a growing awareness of the need for a more innovation-orientated attitude from all stakeholders. In practice, however, things have changed too slowly, and the negative economic climate further stressed short-term company strategies instead of longer term approaches. Most SWOT analyses converge in the identification of the main challenges faced by Portugal. To overcome the double challenge raised by more developed economies and the growing competition Since, the new Government has just taken office, for the sake of clarity the old designation of Ministry for Science and Higher Education, and Ministry for the Economy will be used throughout this report. European Trend Chart on Innovation from new members states, Portugal needs a committed and systemic innovation policy. There is namely a need for: . Fostering linkages and collaboration among the main players of the National Innovation System (NIS); . Strengthening human resources skills, at different levels, and encouraging lifelong learning; . Reducing bureaucratic burdens hindering private entrepreneurship and innovation initiatives at different levels; . Improving companies, namely SMEs, in-house capabilities in the fields of general management, marketing and technology management; . Providing better technological support services for SMEs; . Improving public administration productivity as well as its capabilities to act as a catalyser for generating innovation-orientated coalitions, involving different types of players; and . Promoting entrepreneurship and initiative. A synthesis of the main strengths and weakness, as well as opportunities and threats, characterising the Portuguese innovation system is presented below. National Innovation SWOT Overview STRENGTHS WEAKNESSES • Increased awareness of the relevance of innovation • Improved innovative behaviour by firms according to CIS III data • Propensity for technology adoption • Level of ICT expenditure • Existence of the most relevant nodes in NIS • Current R&D business expenditures • Employment in high-tech activities • Labour productivity • Commitment to, performance on lifelong learning • Overall education level, and particularly secondary education • High tech manufacturing value added and exports • Patenting • Insufficient technology support to SMEs • Scale of venture capital business • Lack of a culture of rigour, exigency and professionalism • Lack of a service culture in Public Administration • Managerial capabilities • Organisational innovation • Low co-operative behaviour • Insufficient links among NIS players • Lack of leveraging capabilities in technology and international marketing OPPORTUNITIES THREATS • Development of existing clusters with some innovative content • Introduction of new technologies to vitalise traditional industries • International leveraging of innovative SME through links with international players • Strengthening co-operative relationships with existing MNE Centres of Excellence located in Portugal • Initiative for reforming Public Administration • Double challenge raised by more developed countries and by new EU members • Increased difficulty to attract new foreign investments • Fading out of traditional location advantages • Increased knowledge content of business requires more managerial capabilities • Increased reliance on collaborative arrangements to innovate and compete Worldwide • Increased competition in traditional markets, namely in European markets • Difficulty to mobilise high skilled resources when compared to main competitors European Trend Chart on Innovation National objectives for innovation Although there is a relatively widespread agreement on what the main challenges are, there is no synthesis or policy-orientated document clearly stating such challenges and devising a coherent strategy to respond to them. The Programme for Productivity and Economic Growth (PPCE), launched in July 2002, included one axis addressed to supporting innovation, research and development. This should be achieved namely by rationalising and re-orientating public laboratories’ activities towards technological support services to firms, promoting public-private partnerships and applied research consortia aimed at generating new products (IDEIA programme) and providing support to the creation of new technology-based firms though venture capital mechanisms (NEST programme). The preliminary version of the Action Plan on Innovation, drafted by UMIC (the Innovation and Knowledge Mission Unit) included four main areas: high skilled human resources; knowledge access and diffusion; dynamising innovation networks; and promoting new market- orientated products and services. The Ministry of Science and Higher Education is preparing a new Action Plan (‘Investing in R&D – An Action Plan for Portugal until 2010’), to pursue the Barcelona target of 3 percent R&D of GDP, and announced a target of 1.17 percent for Portugal by 2006. The Action Plan has four strands: increasing public investment in R&D; promoting a facilitating environment for private investment in R&D; increasing the availability of high skilled human resources in scientific and technological fields; and encouraging scientific employment. Finally, the strategic initiative on knowledge and innovation, mentioned above, also defined four areas: (1) innovation, (2) information and knowledge society, (3) modernisation of public administration, and (4) development of science and training in the higher education sector. Appraisal of the policy process A systemic and transversal approach to innovation policy is still lacking. As the above synthesis of relevant policy documents clearly shows, there is no general, encompassing perspective of the main tenets of an innovation policy. The only systemic approach in this regard – PROINOV – was short- lived. It should be acknowledged, however, that the co-ordination between the Ministries of Economy and the of Science and Higher Education was significantly improved under Mr. José Barroso government. Such a co-ordination was expressed at both design and implementation levels. Where policy design is concerned, the common launching of the IDEIA programme, aimed at promoting R&D consortia, is a good example. Policies are often designed en petit comité, by the Minister concerned, his (her) advisors and Operational Programme managers, sometimes consulting the managers of the main agencies and some wise persons. There is an increased recourse to external business consultants to help in defining policies. Key stakeholders, namely employers’ associations and Universities, are heard for the definition of very relevant measures. In some instances, periods for public hearings are defined. The creation of the High Council on Direct Foreign Investment and the dynamisation of the High Council on Science, Technology and Innovation are good news in this regard. The latter has been relatively often consulted by the MCES. In figuring out and designing policy measures, innovation- related indicators are taken into account; in particular, EIS became very popular, being often used as a case for the need to launch new policies to reduce the gap vis-à-vis EU partners. Implementing innovation policy – what’s new ! During the period under analysis, several initiatives were announced or launched with a bearing on innovation policy. As indicated above, the Prime Minister announced in January 2004 a ‘strategic initiative’ on knowledge and innovation. This corresponds to a large extent to the redefinition of the European Trend Chart on Innovation ‘old’ operational programmes POCTI, on science, knowledge and innovation (now labelled POCI – Operational Programme on Science and Innovation), and POSI, on the information society (relabelled POSC – Operational Programme on the Knowledge Society). POCI will be assigned EUR 419 million and POSC EUR 634 million. The money comes from three main sources: the budgetary allocation for 2004-2006 under the ‘old’ POCTI and POSI; the reserve of efficiency already contemplated in the negotiation of those programmes with the European Commission; and a reallocation of money from other operational programmes. The ‘new’ POCI and POSC are still being defined, and these programmes have not really started so far. They seem to take into account some of the recommendations stemming from evaluation exercises. The Minister for Science and Higher Education disclosed a new model for funding research units, included under the above-mentioned ‘Investing in R&D – An Action Plan for Portugal until 2010’. The new funding model, which generated a lively public discussion, is aimed inter alias at promoting the attainment of a critical mass in science and technology activities, the transfer of technology towards companies, the stimulation of scientific employment and the consolidation of intellectual capital, and the strengthening of the institutions which are part of the Portuguese scientific, technological and innovation system. Focussing more specifically on policy measures, the following initiatives were particularly relevant: . SIME Inovação (PT 40): this corresponds to the autonomisation of innovation support from the broad-range SIME programme (PT 16). It is aimed at providing support to company in-house R&D projects leading to the creation of new products, processes or systems or to the introduction of significant improvements in those already existing. Projects should involve a minimum amount of EUR 50,000 or EUR 200,000 (for SMEs and non SMEs respectively), a maximum length of two years, be supported by a sound strategic analysis and involve skilled human resources. . SICE – Incentive System on Firm Cooperation (PT 41): this system promotes the building up of company networks as well as the consolidation and dynamisation of already existing networks. It is the successor of early initiatives on co-operation, which started under PEDIP I. Support is provided to two main types of co-operative projects: (1) dynamisation of co-operation in activities along the value chain, as well as concerning product design and development, logistics, marketing and distribution (including the creation of trademarks); and (2) dynamisation of “regional or sectoral innovation systems”. The beneficiaries of support are the networks themselves; this means that they should be formalised as legally independent organisations. . Doctoral Grants in Companies (PT 43): this is a new programme to encourage the carrying out of doctoral research projects in an industrial environment. Such projects should focus on issues relevant for the company concerned, and their development assumes the co-operation, and close contacts, between the University and the company. The two main general systems of incentives – SIPIE, on small company initiatives (PT 15) and SIME, on company modernisation (PT 16) – underwent significant revisions, to make them more in accordance with the guidelines defined in PPCE. In the context of SIPIE, a specific budgetary allowance was assigned to projects launched by technology based firms. European Trend Chart on Innovation 1. National Innovation System in Portugal 1.1 Innovation performance This section will be divided into three sub-sections. First, a broad picture of the general behaviour of the Portuguese economy for the period 2000-03 will be provided. Then, in the second part, the focus will switch towards innovation, and a brief revision of the 2003 European Innovation Scoreboard (EIS) will be undertaken. In the last part, a broad overview of the relationships between Portugal’s innovation performance and competitiveness will be presented. To make reading easier, sub-titles will be used for each sub-section. General Economic Performance The so-called Lisbon strategy was defined when Portugal had the Presidency of the E.U. It was aimed at transforming the European Union, in just one decade, into the most competitive and dynamic knowledge-based economy in the World. Ironically, after 2000 Portugal entered a period of sluggish economic growth, if any, and the shape of the Portuguese economy deteriorated considerably. From GDP growth rates of around or above 3.5 percent in 1995-2000, there was a steady decline to a negative change (around -1.2 percent) in 2003. The latest data published by the Portuguese Statistical Office (INE) indicate signs of recovery in early 2004, but those signs are still weak, and Eurostat forecasts for 2004 point towards a GDP increase below 1 percent. The concern with curbing the budget deficit below 3 percent of GDP was by far the main economic objective of the right wing government which emerged from the anticipated elections of March 20022. In a period of sluggish growth throughout Europe, Portugal exhibited a below average performance in terms of GDP increase. The main indicators of Portugal’s economic performance between 2000 and 2003 are summarised in Table 1. A look at this Table confirms that economic performance in the period 2000-2003 was generally gloomy. Besides the above comments on GDP evolution, the Table suggests the following observations: • On the positive side, public deficit fell for two consecutive years below the 3 percent target (although one may question whether a sound budgetary consolidation was undertaken), growth in unit labour costs declined (making the country more attractive for industrial activity), the trade deficit decreased (but in part due to the decline in economic activities which led to a very small increase in imports) and public expenditures in education as a percentage of GDP slightly expanded (but, again, this was due to GDP decline and, furthermore, relatively high education expenditure does not yet materialise into a perceptible enhancement of human resources skills and capabilities). • On the negative side, one may note that inflation in 2003 clearly exceeded the EU average, employment slightly declined in 2003, labour productivity did not recover against the EU average, and direct investment inflow declined significantly (although still above EU average). To sum up, the performance of the Portuguese economy left much to be desired. The downturn phase of the economic cycle was too long, GDP growth was below the EU-15 average, and many people suffered the crisis, experiencing zero income growth and unemployment, stemming from both company failures and divestments by foreign subsidiaries3. Meanwhile, the invitation of Mr. José Barroso, the former Prime Minister, for President of the Commission led to a government change by mid-July 2004. Mr. Pedro Santana Lopes, the new chairman of PPD/PSD formed a new coalition government with CDS/PP; this will be developed in 1.2.2. below. 3 The rate of creation of new employments by both existing and new firms was very low. European Trend Chart on Innovation Table 1 – Indicators of Economic Performance Indicator Unit Year Portugal EU (15) EU (25) Gross Domestic Product (PPS per inhabitant) EUR 2000 2003 15260 15910(a) 21680 23200(a) 20630 22280(a) GDP Growth Rate percent 2000 2003 3.4 -1.2 3.5 0.7 3.6 0.8 Public Balance percent GDP 2000 2003 -2.8 -2.8 1.0 -2.6 -0.8 -2.8 Inflation Rate percent 2000 2003 2.8 3.3 1.9 2.0 2.4 2.0 Harmonised Annual Average Consumer Price Indexes 1996 = 100 2000 2003 109.4 122.3 106.2 113.0 109.0 116.3 Total Employment Growth (annual percentage change) percent 2000 2003 2.0 -0.8 2.0 0.2 1.5 0.2 Labour Productivity per Person Employed EU (15) = 100 2000 2003 64.6 64.2(a) 100.0 100.0 92.3 93.0(a) Unite Labour Cost Growth -2000 2002 1.5 -0.9 0.5 -0.5 (b) (b) Exports 1000 mill. EUR 2000 2002 47.4 51.2 1574.5 1632.9 (b) (b) Imports 1000 mill. EUR 2000 2002 59.4 60.6 1643.6 1569.9 (b) (b) Net Balance 1000 mill. EUR 2000 2002 -12.0 -9.4 -69.1 63.0 (b) (b) Spending on Human Resources (Public expend. in education) percent GDP 2000 2001 5.74 5.90 4.98(c) 5.09(c) 4.94(c) 5.09(c) Inward FDI percent GDP 2000 2002 6.4 3.5 1.2 0.9 1.2(d) 0.9 Notes: (a) Forecast (b) Data not available (c) Eurostat estimate (d) 2001 Source: EUROSTAT Innovation Performance Two main findings emerge from the analysis on innovation in Portugal: (1) a weak overall performance, with most indicators below the EU average, especially concerning education and skilled human resources, and (2) some recovery, but at a pace too slow to enable a fast catching-up. In the analysis below, the EIS 2003 will be considered as the basic source of information. To provide a simultaneous perspective of the situation and the trends vis-à-vis EU average, Figure 1 was built on the basis of the data provided in the EIS 2003. Figure 1 includes only those indicators for which trend data were available; this means that indicators based on information taken from the European Innovation Survey were not considered4. For all the indicators considered, Portugal’s performance is below the EU-15 average. Public R&D expenditure/GDP and ICT expenditure/GDP are those which exhibit the lowest gap vis-à-vis EU-15. A brief comparison with the new member countries shows that there is not a single indicator where Portugal would take the lead vis-à-vis those countries; again, the ratio of public R&D expenditure to GDP was the indicator where Portugal fared better. The behaviour of this index reflects the effort undertaken between 1995 and 2001 to expand public investment in R&D activities. 4 The reader may find below a brief analysis of Community Innovation Survey (CIS III) data for Portugal. European Trend Chart on Innovation Figure 1: Innovation in Portugal – Relative Performance and Trends -25 -15 -5 5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 1.1 1.2 1.3 1.4 1.5 2.1 2.2 2.3.1 2.3.2 2.4.1 2.4.2 4.2 4.5 4.6 P score UE score P trend UE trend Source: Based on EIS (2003) If performance scores provide a very gloomy picture, the situation improves when one looks at trends. In fact, for the majority of indicators Portugal exhibits more positive trends than EU-15 – though not necessarily with regard to the new member countries5. Exceptions with regard to the EU-15 average are: ICT expenditures to GDP; high-tech manufacturing value-added share; employment on medium and high-tech manufacturing; participation in lifelong learning; and early stage venture capital to GDP. These are troubling, since they have in several cases a negative trend, going therefore counter to a catching-up logic. The indexes on manufacturing high-tech value added and employment translate, in our opinion, the indirect effect of the growing weight of service sector employment, on the one hand, and the incapacity to attract new investments, mainly foreign, for technology intensive manufacturing activities; it is expected, however, that the announced investments by Volkswagen, Siemens and Infineon may contribute to redress the situation. The participation in lifelong learning shows a troubling trend, since it indicates a decline in the effort on this issue. This is surprising: having in mind the weakness exhibited by Portugal with regards to overall education levels and the challenges raised by the Lisbon strategy, one might expect a strong investment. The decline in early stage venture capital to GDP was evident (-22.2), contrasting with an improvement for the EU-15 average. This negative trend may be interpreted as the consequence of three factors: the general decline in the dot.com investments; an increased perception of risk by VC firms (mostly owned by traditional banks) stemming from the fall in the dot.com market; this also increased – third factor – the risk assessment by potential entrepreneurs, leading them to refrain from launching new projects. There are, however, also positive signs. These are mostly concentrated in three areas. First of all there is the significant growth of business R&D expenditure to GDP. Although the very positive trend needs to be qualified, since a large part of the increase in R&D expenditure in 2001 was due to one company only, there is no doubt that it goes in the right direction. A further increase in the years to come might be expected, should the NITEC programme (PT 36) confirm the expectations of a good start. One should not forget, however, the very weak starting point. Further growth in business R&D effort is clearly needed. Second, there is the seemingly strengthening of the number of young science and engineering graduates, which exhibited a trend figure of 33.3 percent against 9 percent only for EU average. This positive development may be a consequence of the launching of new courses in the first half of the 1990s. Such an interpretation is made more plausible when trend data are compared: in fact, for more 5 Unfortunately there is no consolidated trend date for the new member countries as a whole. European Trend Chart on Innovation recent data the increase is less strong than the one reported under EIS 2002(+72.2 percent), showing therefore that growth is accelerating less. The third area where trends are clearly positive with regard to EU average is patenting. Such data should, however, be interpreted with great caution. In fact, the seemingly very positive trend is mostly due to the extremely low starting point, and not so much to a significant and sound change in patenting strategies by Portuguese firms. According to a study on the use of industrial property mechanisms recently undertaken, if the average trend of the indicator of USA patents by million inhabitants between 1981-96 and 1997-2001 were projected in the future, it would take about one century for Portugal to converge with EU-15 average in this regard6. As mentioned above, EIS 2003 does not provide trend data for the indicators based on the Community Innovation Survey. Since preliminary data from CIS III for Portugal are already available, a brief comparative exercise might be undertaken. First, for CIS II, it is interesting to remark that Portuguese firms fare relatively well: they exhibit better performances that EU-15 average on with regards to four indicators (SME in house innovation in services, SME innovation co-operation in services, and new to market products in both manufacturing and services), and are not very disadvantaged for the other four indicators. A cautionary remark is, however, needed: since CIS is based on self-assessment one cannot disregard the possibility of an over assessment of performance. This was already pointed out as an explanation for the positive figures7, and more recently other authors raised the question of ‘ what the characterisation of innovation in Portugal would be, were it based, instead of self-reported indicators, on ‘independent’ assessment’ 8? Turning now to a chronological analysis of CIS data on Portugal, a significant improvement is found for CIS III against CIS II. Such improvement is noteworthy on the following indicators: share of innovative firms, investment in innovation (especially in manufacturing, where it corresponded to 3.9 percent of turnover for CIS III, compared to 1.7 percent for CIS II), and the commercial performance of new-to-market products in the manufacturing industry. On the basis of such data, Portugal appears to have converged with the EU at a fast pace9. Again, however, the reliability of self-assessment responses raises serious doubts. For an independent observer, the change is too dramatic, and does not correspond to one’s day-to-day analysis of company innovative behaviour. To sum up, it may be argued that there were some improvements in the position of Portugal in the context of EIS. However, in spite of the rosy picture of CIS III, convergence has been slow. In some areas weaknesses are even more evident, and the key structural weakness remain almost unchanged. There is no doubt that further (and stronger) effort is needed to strengthen Portugal’s capabilities to innovate and to increase her competitiveness in a globalised World. Portugal’s innovation performance and competitiveness It is consensual that the limited innovation commitment of the Portuguese society as a whole (and in particular of Portuguese companies) is a strong barrier to increased competitiveness. The President of the Republic has ‘crusaded’ to wake the society to the challenges of innovation – and the opportunities it may raise. The Government has, during the last year, put more emphasis on the link between innovation and competitiveness. A new organisation – COTEC – was created under the ‘patronage’ of the President of the Republic, with the mission to increase the competitiveness of firms located in Portugal through the development and diffusion of an innovative culture and practice; COTEC members include the biggest Portuguese firms. This initiative, though important, does not 6 See M. Mira Godinho, T.S. Pereira, V. Corado Simões, S.F. Mendonça and V.S. Sousa, Estudo sobre a utilização da propriedade Industrial em Portugal, Lisboa, INPI, 2003. 7 See Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, various issues. 8 See M.J. Boia, P. Conceição, R. Santos and M. Heitor, ‘Innovation in Portugal: What do we know? What would we like to know?’, document presented at a workshop on Innovation in Portugal, Calouste Gulbenkian Foundation, October, 2003. 9 See M.J. Boia et allii, op. cit. European Trend Chart on Innovation erase the structural weaknesses that Portugal suffers. Furthermore, the negative economic climate further stressed short-term company strategies instead longer term approaches. Therefore, as pointed out above, some positive trends do not conceal a generally gloomy picture, showing how Portugal’s innovation performance is below the EU-15 average. Old competitiveness factors are no longer relevant in an enlarged European Union and in a globalised World. New competitiveness factors, based on innovation and knowledge, need to be forged. This issue is particularly relevant in view of the challenges raised by new member countries. Most SWOT analyses undertaken in the last years converge in the identification of the main issues faced by Portugal. The position of Portugal in the context of EU structural indicators, undertaken by PROINOV, remains generally valid. Furthermore, there is a high degree of consistency in successive EIS exercises in indicating where the main weaknesses lay. Based on these and other sources, a brief SWOT overview is provided in Table 2. Table 2 – National Innovation SWOT Overview STRENGTHS WEAKNESSES • Increased awareness of the relevance of innovation • Improved innovative behaviour by firms according to CIS III data • Propensity for technology adoption • Level of ICT expenditures • Existence of the most relevant nodes in NIS • Current R&D business expenditures • Employment in high-tech activities • Labour productivity • Commitment to, performance on lifelong learning • Overall education level, and particularly secondary education • High tech manufacturing value added and exports • Patenting • Insufficient technology support to SMEs • Scale of venture capital business • Lack of a culture of rigour, exigency and professionalism • Lack of a service culture in Public Administration • Managerial capabilities • Organisational innovation • Low co-operative behaviour • Insufficient links among NIS players • Lack of leveraging capabilities in technology and international marketing OPPORTUNITIES THREATS • Development of existing clusters with some innovative content • Introduction of new technologies to vitalise traditional industries • International leveraging of innovative SME through links with international players • Strengthening of co-operative relationships with existing MNE Centres of Excellence located in Portugal • Initiative for reforming Public Administration • Double challenge raised by more developed countries and by new EU members • Increased difficulty to attract new foreign investments • Fading out of traditional location advantages • Increased knowledge content of business requires more managerial capabilities • Increased reliance on collaborative arrangements to innovate and compete Worldwide • Increased competition in traditional markets, namely in European markets • Difficulty to mobilise high skilled resources when compared to main competitors The Table is largely self-explanatory. It shoes how weaknesses prevail over strengths, placing Portugal in a difficult position to respond the threats and to exploit the opportunities raised by an enlarged Europe and an increasingly competitive World landscape. Portuguese firms are at a disadvantage in this game, namely because they lack the in-house capabilities and the environmental European Trend Chart on Innovation conditions to innovate. Portuguese firms face a double challenge. On the one hand, they feel the pressure of companies from more developed countries, with a stronger innovative behaviour and more prepared for a competition based on intangible assets. On the other, they face the challenge of companies from the new member countries, benefiting from a larger pool of educated people and enjoying lower production costs. They are to some extent ‘stuck in the middle’, and need to upgrade their innovative capabilities, not just in the technological field, but also with regards to the ‘interpretation’ of market needs and trends as well as organisational competencies, including the management of co-operative arrangements. European Trend Chart on Innovation 1.2 Innovation governance system 1.2.1 The national innovation system10 A national innovation system (NIS) is a network of organisations, individuals and institutions which contribute to generate, develop, absorb, share and use economically useful knowledge in a given territory – and which, in turn, shape the process of innovation and its performance in economic terms. From our perspective, and without denying the importance of the others, firms are the key players of NIS. Two other remarks should be made to fully characterise our view of NISs: (1) an NIS is much wider than an R&D system, and is not concerned with knowledge generation only; and (2) an NIS is not an ‘island’, and is necessarily connected with players located outside the national territory, that is, an NIS is linked to other NISs. A schematic presentation of the Portuguese NIS, mentioning the main players and their relationships is provided in Figure 1. However, to fully understand how the NIS works and its strengths and weaknesses, a more detailed and qualitative approach is needed. The Figure considers five main categories of institutions in the Portuguese NIS: (1) enterprises; (2) the institutes in charge of education, training and R&D activities, including namely Universities, University-based bridging units, and public laboratories; (3) support and consultancy organisations, such as technological centres, S&T parks, incubators, technology brokers and consultancy firms; (4) the financial system, including banks and venture capital organisations as well as business angels; and (5) public administration, including state agencies in charge of specific industries or issues (e.g. industrial property, innovation policy, training and SMEs). The analysis of the Portuguese NIS shows the existence of several positive aspects. The most relevant are, in our opinion, the following: (1) a relatively large number of players, especially in the areas of technology support and inter-face organisations, some of them with a very good performance; (2) the improvement in the capabilities and evaluation processes of University research organisations; (3) the increased experience of public institutions in the design and implementation of operational programmes; and (4) the existence of a thin ‘crust’ of internationally competitive, innovative companies as well as some dynamic clusters. There are, however, significant weaknesses which constrain the behaviour of the NIS as a whole. Three types of weaknesses deserve to be mentioned. First, the weak links among the various groups of players. This is, to a large extent, a result of the interplay of three factors: the lack of a co-operative attitude and behaviour, a historical trait which has long since conditioned the development of the country; the myopic perspective of many players, focussing on short, instead of long-term gains; and the lack of credibility of some organisations. Second, the limited in-house capabilities of many players. This is evident not only at company level, but also with regards to the education and training system, technology interface and support organisations (where marketing capabilities are low), the financial system (where there is a lack of experienced evaluators of innovative projects) and public administration. The shortage of capabilities is a consequence of a wider problem: the shortcomings in education, training and human resources skills. The third main weakness is the lack of a clear understanding of the systemic nature of innovation and, therefore, of the main tenets of an outward- looking innovation policy. In spite of the pioneering experience of PROINOV (now abandoned) and the improvements achieved in the co-ordination of policies and implementation mechanisms of the Ministers for the Economy (MEC) and for Science and Higher Education (MCES), innovation is still often envisaged from a linear perspective, thereby leading to biased and limited approaches towards innovation policy. 10 The text below is based on Vitor Corado Simões, ‘O sistema nacional de inovação em Portugal: Diagnóstico e Prioridades’, in M.J. Rodrigues, A. Neves e M.M. Godinho, eds., Para uma política de inovação em Portugal, Lisboa: Dom Quixote, 2003. See also the documents QCA III – Uma política integrada de apoio à inovação para vencer o atraso estrutural, and PROINOV, Competitividade e Inovação na Coesão, Lisboa, PROINOV, 2002. European Trend Chart on Innovation Figure 2: Portuguese NIS: Main Elements Consultancy and Support to Companies • Technology centres •Technology transfer centres • C&T parks • Incubators •New Technology Institutes • Technology brokers •Technology support organisations • Consultancy companies •Employers’ associations •Trade unions Education, Training and Research •University and Polytechnic Institutes •Secondary schools • Professional Schools • Training organisations • University research organisations • University-based interface organisations • Public laboratories •Centres for granting, validating and certifying competences Companies Financial System •Banking and insurance • Financial markets • Venture Capital organisations • Business Angels • Investment Societies •Mutual Guarantee Societies • VC Syndication Funds Public Administration and Agencies • Minister Assistant to the Prime Minister • Ministry of Economic Activities and Labour • Ministry of Science, Innovation and Higher Education • Ministry of Education • Ministry of Social Security, Family and Children • Ministry of Agriculture • Ministry of Public Works, Transportation and Communication • Ministry of Towns, Local Administration, Housing and Regional Development • Ministry of Environment and Territorial Management • Ministry of Finance • Public Agencies (AdI, UMIC, IAPMEI, API, ICEP, IPQ, INPI, FCT, GRICES, OCES, Competition Authority, IEFP, INOFOR) • Operational Programmes Management Bureaus Source: Translated from Simões (2003: 58) European Trend Chart on Innovation Based on a recent mapping exercise of NIS11, it seems that between 1996 and 2000 Portugal’s NIS experienced a positive evolution, reducing the gap vis-à-vis an average of 14 OECD countries12. Although with limitations, the results obtained may be understood as pointing towards a ‘recovery’ of Portugal’s NIS, measured by the change in a battery of 46 indicators. However, it has to be acknowledged that quantitative exercises, in spite of their relevance, may not fully capture the way the NISs work. 1.2.2 Innovation policy making and delivery structures The Government stemming from the March 2002 elections, led by Mr. José Barroso, undertook significant changes in the system of governance of national innovative policy. The main changes were the following: (1) creation of a Ministry of Science and Higher Education; (2) restructuring of the MEC; (3) redefinition of inter-Ministry relationships, with the assignment of double responsibilities regarding several organisations, such as the National Institute for Industrial Property (INPI) and public laboratories (this approach seems to have worked reasonably, without major inter-ministerial disputes, although in practice sectoral reporting prevailed over general co-ordination by the Minister Assistant to the Prime Minister); and (4) the assignment of the co-ordination of policies in the areas of innovation, information society and e-government to the Minister Assistant to the Prime Minister (MAPM), together with the creation of the Inter-ministerial Commission on Innovation and Knowledge (CIIC) and UMIC – Unidade da Missão Inovação e Conhecimento (Innovation and Knowledge Unit). In the period under review, however, there were no major changes in the institutional machinery: the main organisations involved in the governance of innovation policy remain the same. Figure 3 shows the structure of the system in the context of Mr. José Barroso’s government13. It should be acknowledged that only the ministries which have responsibilities over organisations deemed to be relevant players in the innovation field are mentioned. Three other ministries, although not fulfilling this requirement, also have a bearing on innovation policy: the Ministry of Finance, for obvious reasons; the Ministry of National Defence (now Ministry of National Defence and See Affairs), due to the innovation related implications of defence policy; and the Ministry of Towns, Territorial Planning and Environment (now split in two ministries: Ministry of Towns, Local Administration, Housing and Regional Development and Ministry of Environment and Territorial Management), which is responsible for environmental policy as well as for the Regional Co-ordination Commissions, dealing with regional development. Much more active and committed to science and technology policy than her predecessor, the MCES, Ms. Graça Carvalho, who took office in late 2003, recently disclosed new projects concerning the financing model of the science, technology and innovation system, a new legislation on scientific patronage, and changes to the Operational Programme on Science, Technology and Innovation (POCTI) and Information Society (POSI)14. She has also given a new impulse to the reactivation of the consultative Higher Council on Science, Technology and Innovation (CSCTI). CSCTI held its first meeting in January 2004, and has been very active since then, meeting often and providing its advice to the MCES concerning envisaged policy changes in the fields of science, technology and innovation. 11 M. Mira Godinho, S.F. Mendonça and T.S. Pereira, ‘Mapping Innovation Systems: a framework based on innovation data and indicators’, paper presented at the First Globelics Conference, Rio de Janeiro, 2003. 12 Portugal, Denmark, Italy, Germany, Finland, South Korea, US, Greece, Spain, Japan, Mexico, France, UK and Ireland. 13 Mr. Barroso’s government was replaced in July 2004 by a new government, as indicated in detail below. Since the organic structure of the new government has not been published at the time of writing (25th July 2004), it was decided too keep the ‘old’ structure, since it provides the basic tents of the governance system, in spite of a few changes introduced by the new government. 14 See details below. European Trend Chart on Innovation In the context of the MEc the main changes were the location of IAPMEI in Oporto, instead of Lisbon, and the nomination of a new manager for PRIME. The transfer of IAPMEI to Oporto was justified by the Minister with the argument that as most SMEs are located in the North of Portugal it would be advisable to have the organisation in charge of supporting SMEs closer to them. This decision has generated public opinion debate: some, especially those from the Northern area, welcomed this ‘decentralisation’ move, while others remarked that the decision had a regional and manufacturing bias, since though the majority of manufacturing SMEs are located in the North of Portugal, the same does not hold for all SMEs, irrespectively of the activity undertaken. Another relevant feature is the consolidation of the position of the Innovation Agency (AdI) as the body in charge of managing the support programmes dealing with innovation. The Technological Innovation Bureau (GIT) created in the context of POE/PRIME was closed, and its competencies were transferred to AdI. This decision has two main advantages: (1) fostering the convergence of public initiatives from different Ministries, namely MEc and MCES; and (2) facilitating the dialogue with companies with regard to innovation support programmes. The change is positive, but it does not mean, however, that AdI became a ‘one-stop shop’ for innovation support programmes: for instance, for SIME Inovação (PT 40) AdI is not the co-ordinating body, being only in charge of providing technical advice. A reference is also due to the work of UMIC. Although there were, as far as we know, no formal decisions, it seems that during the last year UMIC has concentrated much more on information society and e-government than on innovation policy. In fact, several relevant steps were taken in the former areas following the Action Plans for the Information Society and on Electronic Government, the National Broad Band Initiative and the National programmes for Inclusion of Citizens with Special Needs in the Information Society and on Electronic Purchasing15. These include namely the Law on Electronic Communications, the On-Line Knowledge Library, and the launching of the Citizens Portal. However, in the innovation field, the main initiative was relatively limited: the support to the development of new technology-based ideas and entrepreneurship, to encourage the creation of NTBFs. The long awaited Action Plan on Innovation has not been launched so far, although its four main areas seem to be already defined: (1) training of highly skilled human resources; (2) access to and diffusion of knowledge; (3) dynamising innovation networks; and (4) promoting new products and services. Turning now to the co-ordination of innovation policy, this was ascribed to the Minister Assistant to the Prime Minister, by Council of Ministers Resolution no. 135/200216. This Minister chairs the Inter- ministerial Commission on Innovation and Knowledge (CIIC). CIIC includes representatives from all the ministries as well as the UMIC manager and holds quarterly meetings. It was assigned four tasks: to suggest integrated development strategies regarding innovation, information society and e- government; to promote the co-ordination of the implementation of the programmes and initiatives in these fields; to discuss, approve and revise the responsibilities of the various ministries; and to follow up the implementation of the e-Europe 2005 Action Plan, as well as other EU Programmes in the fields concerned. The Minister Assistant to the Prime Minister should present to the Council of Ministers an annual report on the implementation of the measures defined in the fields of innovation, information society and e-government17. UMIC works as the body in charge of supporting the analysis, definition, implementation and evaluation of policies initiatives in the fields of innovation, information society and e-government. 15 See Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, Covering period: September 2002-August 2003. 16 This was the same resolution that created UMIC. 17 However, in the revision we undertook of Council of Ministers decisions summaries for the period under analysis we found no reference to the discussion of such an annual report. European Trend Chart on Innovation In the first Council of Ministers held in 2004, the Prime Minister announced ‘the knowledge and Innovation Strategic Initiative’ to show his personal commitment to the promotion of innovation and the development of knowledge. This Initiative includes the revision of POCTI (now labelled Operational Programme for Science and Innovation (POCI – CIÊNCIA 2010) and POSI, the Operational Programme on the Information Society (renamed as POSI – FUTURO 2010). In practice, however, higher-level co-ordination of innovation policy is relatively loose, and in fact the main players at Government level have been the MEc and MCES. The first traditionally addresses the relationships with firms and the support of firms’ growth and investment, inter alias in innovation, its main programme being PRIME (Incentive Programme for Economic Modernisation). The latter is mostly focussed on the relationships with Universities and the scientific community; the main operational programme under MCES is POCTI (Operational Programme Science, Technology and Innovation), renamed POCI – CIÊNCIA 2010. A positive feature is the collaboration between the two ministries. This was expressed in the melding of the formerly distinct co-operative R&D support programmes led by each Ministry into a single, joint programme: IDEIA – Applied Research and Development in Companies (PT 33). Another example of such co-operation is the increased role assigned to AdI in the management of innovation-orientated support programmes. Following the designation of Mr. José Barroso as President of the European Commission, a new Government, based on the same Parliamentary majority and led by Mr. Pedro Santana Lopes, took office in mid-July 2004. The main structural changes introduced concern the division of the old Ministry of Towns, Territorial Planning and Environment (now split into two ministries: Ministry of Towns, Local Administration, Housing and Regional Development and the Ministry of Environment and Territorial Management) and the merging of Economy and Labour in same Ministry – the Ministry of Economic Activities and Labour. This will be led by Mr. Álvaro Barreto, a heavy-weight from the PPD/PSD with a extensive governmental and entrepreneurial experience. Furthermore, the label of the old Ministry of Science and Higher Education was changed into Ministry of Science, Innovation and Higher Education. This suggests, at least in word, a commitment to developing innovation policy. Ms. Graça Carvalho was reinstated as Minister18. The new Government has just disclosed its programme. It will be discussed by the Parliament in July 2004. A cursory look at the programme indicates that innovation, training and improving skills are envisaged as important instruments for enhancing Portugal’s competitiveness. It seems that innovation follows mainly under the purview of the Ministry of Science, Innovation and Higher Education, but co-operation with the Ministry of Economic Activities and Labour is acknowledged. It is argued that National System of Innovation should be organised in a way to articulate company strategies, the scientific system, technological infrastructures and public administration and policies to accomplish its strategic objectives. The Government defined the objective of strengthening the whole of science, technology and innovation in the Portuguese society, namely by increasing public investment in science and innovation and promoting a facilitating environment for the development of private investments in science and innovation. 18 Since, the new Government has just taken office, for the sake of clarity the old designation of Ministry of Science and Higher Education, and Ministry of the Economy will be used throughout this report. European Trend Chart on Innovation Figure 3: National System of Governance of Innovation Policy (as of June 2004) IPQ INPI INETI ICEP API IAPMEI Competition Authority POCTI Management Universities FCT OCES GRICES Technological Centres AdI General Directorate Enterprises … High Council On H Ed. High Council on STI. IEFP INOFOR PRODEP Management POEFDS Management POAP Management INIAP LNEC Ministry of Agriculture, Rural Development and Fisheries Ministry of Social Security and Work Ministry of Public Works, Transportation and Housing Ministry of Education Ministry of Economy Prime Managemen PRIME MINISTER PARLIAMENT Minister Assistant to the Prime Minister UMIC CIIC POSI Management Ministry of Science and Higher Education POSI Management 12 European Trend Chart on Innovation 1.2.3 Regional innovation systems and policies Portugal is not a regionalised country, except as regards the specific situation of the Atlantic archipelagos of Azores and Madeira. Therefore, there is not a consistent regional approach to innovation policy. There are no regional operational programmes for Continental Portugal. In spite of the exercises of diagnosis of regional innovation capabilities and strategy definition undertaken under RITTS – which led, for instance, to the launching of NORTINOV, LISACTION (PT 28) and INOVALGARVE (PT 29)19 –, it would not be correct to argue that there are ‘true’ regional innovation strategies in Portugal. Assuming that an innovation strategy exists, it is national, not regional. In the context of the Third Community Support Framework, a countervailing mechanism was introduced to allow some decentralised implementation. This was achieved through: (1) the inclusion of a line of actions on the promotion of ‘ the sustained development of regions and national cohesion’, aimed at reducing regional imbalances; and (2) the provision, within each ‘sectoral’ operational intervention, of a budgetary line for ‘non concentrated’ actions. The promotion of the sustained development of regions involves seven operational interventions corresponding to the seven main divisions of the Portuguese territory: North; Centre; Lisboa and the Tagus Valley; Alentejo; Algarve; Madeira; and the Azores. ‘Non concentrated’ actions are addressed to the development of regionally based projects with a ‘structuring’ content. In the case of PRIME they include, for instance, setting up or improvement of company location areas, tourist integrated projects and strengthening local endogenous capabilities. The amounts assigned to these ‘non concentrated’ actions correspond to around 25 percent, three percent and 23 percent, respectively, for PRIME, POCTI and POSI. A ‘decentralisation package’ was launched in 2003, with four main features: the definition of a new legal framework for Metropolitan Areas (associations of Municipalities around a large, focal town), laid down by Law 10/2003, of 13 May; a new regime for the creation and activities of inter-municipal communities, established by Law 11/2003, of 13 May; the transfer of several competencies from Civil Governors (representatives of the central Government in territorial districts); and a change in the structure and functions of Regional Co-ordination Commissions. So far, these have been the regional bodies with a say, though limited, in the area of innovation policy. With the creation of Metropolitan Areas and inter-municipal communities, the activities of the Regional Co-ordination Commissions may be weakened. In a recent article published in the press, it is argued that the transfer of municipal and central competencies, and financing, to those new bodies might enable a long term development model, more based on innovation and knowledge and not so much on physical infrastructures20. The merits of the new system, namely its polarisation and lack of ‘critical masses’, were, however, criticised by the Opposition21. Mr. Santana Lopes, the new Prime Minister, expressed his intention to ‘decentralise’ Government by locating some ministries and secretaries of State outside Lisbon. It is still to be seen how this will materialise, and its consequences for regional development and public administration efficiency and effectiveness. 19 A new exercise for the Alentejo region has just started. Catarina Selada and J.R. Felizardo, ‘Como reinventar o território com inovação’, Público, 12 January 2004. 21 See Público, 30 April 2004. European Trend Chart on Innovation 2. Innovation policy in Portugal 2.1 Innovation policy framework In Portugal there is no explicit and stand-alone innovation policy. An attempt to have such a policy was PROINOV, launched in 2001. The Government change which occurred in 2002 altered the mood. Although the new policy document – PPCE, the Programme for Productivity and Economic Growth – presented by Mr. Barroso’s government still included a mention to a ‘ revitalising’ of PROINOV, this is now defunct. The Government which took office in 2002 felt the need to redefine the institutional machinery and the policy mix in the area of innovation, information society and e-government. Co-ordination of policy in these areas was assigned to the Minister Assistant to the Prime Minister. A new body was crested to support the analysis, definition, implementation and evaluation of policy initiatives – the UMIC, Unidade de Missão Inovação e Conhecimento (Innovation and Knowledge Society Union). Although UMIC has shown the intention to define a new, encompassing Action Plan on Innovation this has not happened so far. UMIC gradually focussed on information society and e-government, where it achieved a remarkable activity, not only by publishing several Action Plans (namely the Action Plans on Information Society and on Electronic Government), but also by promoting their implementation. Unfortunately, in the innovation field no major policy document was completed and disclosed. The main policy guidelines dealing with innovation policy are included in PPCE which was published in July 2002 under the Minister for Economy. PPCE is a wide programme with the objectives of strengthening productivity and fostering economic growth. It is argued that effective convergence with the EU will only be possible through a strong and continued increase in both productivity and competitiveness. PPCE included a set of 44 measures, clustered around five axes: (i) strengthening competition and regulation; (ii) promoting productive investment and exports; (iii) consolidating and revitalising company fabric; (iv) supporting innovation, research and development; and (v) debureaucratising and de-regulating. In the context of PPCE, several relevant measures dealing with innovation were launched, ranging from the creation of new technology based companies (NEST) to the support to R&D consortia (IDEIA)22. In practical and financial terms, however, the Operational Programmes under the Third Community Support Framework were the key documents. They provided the basic policy framework and defined budgetary envelopes. The most important were the Operational Programme for the Economy (POE), for Science, Technology and Innovation (POCTI) and for the Information Society (POSI)23. They were defined for the 2000-2006 period. POE dealt with support to company activities and was by far the most important. It included two main incentive systems – SIME and SIPIE24 - but also measures more focussed on innovation. The Barroso government undertook a revision of POE, and changed the label to PRIME (Programme of Incentives for Modernising the Economy) in early 2003. This was organised in three main areas: company dynamisation, human resources skills, and dynamising company environment. In January 2004, the Prime Minister announced the launching of the strategic initiative on knowledge and innovation25. It is aimed at investing ‘more and better’ in training, capabilities, science and research, and knowledge as a basis for development. The initiative has four priority areas: innovation, information and knowledge society, modernisation of public administration, and development of 22 A summary of PPCE is provided on Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, Covering period: October 2001-September 2002. 23 See 1.2.2. above. 24 See below for details. 25 No supporting policy document was disclosed. The main information available is the text of Prime Minister’s declaration on this regard. European Trend Chart on Innovation science and training and higher education. It will be implemented through two instruments: (1) the Operational programmes on Science and Innovation (POCI), which will replace POCTI; and (2) the Operational Programme on Knowledge Society (POSC), which will replace POSI. At the time of writing, these programmes were still being negotiated with the European Commission. In the context of this initiative, the MCES is preparing a new plan of action on science, technology and innovation, under the title ‘ Investing in R&D – An Action Plan for Portugal until 2010’. This Action Plan, which will incorporate several actions presently carried out under POCTI and POSI, is aimed at responding to challenges raised by the Barcelona three percent objective. According to the Minister, a target of 1.17 percent was defined for the ratio of R&D expenditures to GDP by 2006. The Action Plan includes four priority axes: (1) to increase public investment in R&D; (2) to promote an environment conducive to private investment in R&D; (3) to increase the supply of science and technology skilled human resources; and (4) to promote scientific employment. Table 3 – Main Policy Documents Since 2000 Title of document Date Organisation Responsible Legal Status POE – Operational Prog. for the Economy 2000 MEc Operation. Programme under IIICSF POCTI – Oper. Prog. Science, Technology and Innovation 2000 Ministry of S&T Operation. Programme under IIICSF POSI – Oper. Prog. Information Society 2000 Ministry of S&T Operation. Programme under IIICSF PROINOV – Integrated Programme on Innovation 2001 PROINOV Cabinet Government Decision PPCE – Programme for Productivity and Economic Growth 2002 MEc Government Decision PRIME – Programme of Incentives for Modernising the Economy 2003 MEc Operation. Programme under IIICSF Action Plan on the Information Society 2003 UMIC Government Decision 2.2 Policy events & policy debates In the framework of Government activities dealing with research and innovation activities, the main event was the special Council of Ministers on science issues, held in January 2004 at Obidos, where the ‘strategic initiative’ on knowledge and innovation was discussed. It is too early, however, to see how this will be implemented, the more so as a new government has taken office. Taking a more general stance several events deserve a mention: • The launching of the ‘Compromisso Portugal’ initiative: led by a group of entrepreneurs, top executives and academics in their 40’s. The initiative was aimed at stressing the need for further economic liberalisation. A number of policy suggestions, going from changing banking secrecy rules to changing labour laws and including a plea for a more innovative and risk-taking approach, was presented to the Government. The main promoters started a road show to diffuse their ideas throughout the country. • The Employers Congress, under the general theme of the opportunities for change. The keynote speaker was the former Prime Minister, Mr. Cavaco Silva, who discussed the situation of the Portuguese economy and its future opportunities. One of the panels was specifically concerned with employers’ positioning with regard to innovation. • The workshops convened by the Portuguese Industrialists Association to discuss the Lisbon Strategy and the organisation’s initiatives to promote innovation in SMEs. • The workshop organised by the Higher Council on Science, Technology and Innovation to discuss innovation policy. The workshop was organised in three panels: innovation and European Trend Chart on Innovation wealth; agents and policies; and new strategies. The opening speech was given by Ms. Graça Carvalho, the MCES. • The Parliamentary hearing on ‘Innovation – a new attitude, a continuous process of learning and change’. A remarkable feature of this hearing was the consensus of the two main political parties on the need to foster innovation. 2.3 Key developments in innovation policy measures A summary of the new measures introduced in the period going from September 2003 to August 2004 is presented in the Table below, as well as a reference to the existing measures subject to modifications during the above mentioned period. Table 4 – New and revised Innovation Policy measures Code Title Action Plan Category Degree of Novelty Agency Administering PT 04 SIFIDE – Fiscal Incentives for Investment in R&D II.6; III.2 Discontinued. Replaced by PT 46 PT 15 SIPIE – Small Company Initiatives Incentive System (POE/PRIME) I.4; II.2;II.5;III.5 Changed after preliminary evaluation IAPMEI PT 16 SIME - Company Modernisation Incentive System (POE/PRIME) I.4; II.2; II.5;III.2;III.3; III.4;III.5 Changed after preliminary evaluation IAPMEI PT 20 Measure for Supporting the Dynamisation of Technology, Training and Quality Systems – MTTQS (POE/PRIME) I.1; I.4; I.6; II.5; III.2; III.4; III.5 Replaced by PT 42 PT 24 Financial Innovation – Action A (POE/PRIME) II.5 Slightly changed IAPMEI PT 33 IDEIA - Applied Research and Development in Companies (POCTI/PRIME) I.6; II. 5; III.2; III.4; III.5 Slightly changed AdI PT 37 DEMTEC – Incentive System for Undertaking Pilot Projects Concerning Technologically Innovative Products and Processes (POE/PRIME) I.4; II.5; III.2; III.4; III.5 Slightly changed AdI PT 39 PRIME Jovem I.4; II.2; II.5; III.2; III.4; III.5 New IAPMEI PT 40 SIME Inovação I.4; II.5; III.1; III.2; III.4; III.5 New (autonomised from SIME – PT 16) IAPMEI, ITP and API PT 41 SICE – Incentive System on Firm Cooperation I.4; II.6; III.4 New IAPMEI PT 42 Technology, Training and Quality Infrastructures I.1; I.4; I.6; II.5;: III.4; III.5 Replaces MTTQS (Pt 20) AdI, IAPMEI PT 43 Doctoral Grants in Companies I.1; I.2; I.4; II.5; III.1; III.2; III.4; III.5 New FCT PT 44 Training of Human Resources I.1; I.4; II.5; III.4; III.5 New. Replaces older POE regulation IAPMEI, IFT, ICEP PT 45 Regime of Scientific Patronage I.1; I.2; I.3; I.4; I.6; II.5; III.1; III.2; III.3; III.4 Replaced older regime FCT PT 46 Tax Reserve for Investment II.6; III.2; III.4; III.5 Replaces SIFIDE (PT 4) IAPMEI PT 47 SIPIE (Technology Based Firms) II.5; III.2; III.3; III.4; III.5 Specific fund under SIPIE (PT 15) IAPMEI The main new measures are SIME Inovação (PT 40), SICE (PT 41), on inter-firm co-operation and networking, the Doctoral Grants in Companies (PT 43) and the Tax Reserve for Investment (PT 46). This replaced the old SIFIDE (PT 4), but does not seem to be working effectively. Meanwhile, the main incentive systems – SIPIE (PT 15) and SIME (PT 16) – were subject to significant revisions. Such revisions follow and consolidate revisions, undertaken in 2002, on the basis of a preliminary assessment of the working of these incentive systems. The revision in line with PPCE guidelines are aimed at enhancing the selectivity of the systems (especially SIPIE, which was found to be too European Trend Chart on Innovation ‘open’), to strengthen the ‘performance prize’ and to adjust the evolution procedure, strongly dominated by financial considerations. In contrast, IDEIA (PT 33) and DEMTEC (PT 37) underwent minor, very specific modifications. European Trend Chart on Innovation 3. Implementing innovation policy in Portugal 3.1 Fostering an innovation culture 3.1.1. Education and initial and further training. There is a consensus that the low educational level of the population is the main weaknesses of Portugal. Successive documents have mentioned the need to improve the situation, strongly increasing the number of people with at least secondary education. Mr. António Guterres, the chief of the two socialist governments, announced education as his ‘passion’. The Regional Development Plan for 2000-2006 stressed the need for a ‘paradigm shift’ in training and education systems. PROINOV also put emphasis on the improvement of education levels. Mr. Barroso’s government was also concerned with the quality of education, but argued that the main problem was not so much the shortage of resources but rather the lack of efficiency in allocating and managing existing resources. The President of the Republic launched an ‘Open Presidency’ last April focussed on education, underlying its relevance and visiting some schools of excellence that might constitute examples of best practice. However, in spite of several positive examples, the overall picture leaves much to be desired. As a leading opinion maker, Mr. António Barreto, wrote in a press article significantly entitled ‘ The mystery of Education’: ‘ (…) the first reaction consists in designing global reforms. Almost no government, almost no minister resisted [to this temptation]. If time was available, attempts were made. If not, the same happened. A careful analysis of the results shows that the situation has continuously deteriorated’ 26. Several measures have indeed been taken, but the outcome was very meagre. Among the measures more directly associated with innovation issues, a mention is due to the medium term financing of R&D units (PT 5), the S&T training under PRAXIS XXI (PT 8), the Internet initiative (PT 17), the certificate of basic competencies on information technologies (PT 19) (both under POSI), and the POE/PRIME measure for supporting the dynamisation of technology, training and quality systems (PT 20). This was recently replaced by a new regulation on scientific, quality and technological infrastructures (PT 42)27. Mr. Barroso’s outgoing government had some legislative initiatives in the field of education – again following the ‘temptation’ of drastic changes. A new Basic Law on Education was discussed and approved by the Parliament; it was considered by the Minister of Education as a laying the ground for a different education development strategy; the President of the Republic expressed concern about it and sent it back to the Parliament. A draft Law on Vocational Training was also prepared by the Ministry of Education team, but it was at an early stage of maturation. A new feature of the Basic Law on Education is the opportunity it provides for the launching of Technology Specialisation Courses. According to the MCES these are aimed at providing students that complete in secondary education and do not want to go straight for University with further training possibilities, while contributing to strengthen the links between education and the labour market. After a pilot experience at Aveiro University, 19 new courses – in different areas – were planned to be launched in the new academic year. These courses grant a technology specialisation diploma, providing access to a Professional Skills Certificate of level IV, and may enable the continuation of studies at university level. Meanwhile, the awaited University Teaching Career Statutes have been discussed but have not yet reached their final shape. Several voices have expressed the opinion that the internal mobility of University teachers should be promoted. In this regard, the Government announced the ‘Pedro Nunes’ programme. This is aimed at encouraging the mobility of young scientists in the country for periods between three months and one year. The programme will involve universities, polytechnic institutes, hospitals, municipalities and companies. However, no regulations were published so far to enable the implementation of the programme. 26 António Barreto, ‘O mistério da educação’, Público, 9 May 2004. 27 More on this below, on section 3.3.4.. European Trend Chart on Innovation Still in the University field, an interesting study on students’ success was disclosed by OCES. The results indicate that a large share of university students does not conclude their courses in the time schedule. The average survival rate was around 60 percent, but for several courses and Universities it was much lower. Three important measures were taken with regard to education and initial and further training: the Doctoral Grants in Companies (PT 43), the regulation on the support of human resources skills under PRIME (PT 44), and the revision of the regime of Scientific Patronage (PT 45). Doctoral Grants in Companies are aimed at encouraging the development of doctoral projects on subjects with relevance for companies28. The regulation on human resources skills (Ministerial Decree 1285/2003, of 17 November) replaces an earlier regulation on the same subject, and sets up the legal framework for providing support for vocational training co-financed with the European Social Fund in the context of PRIME. It defines inter alias the types of eligible projects, the selection criteria of training projects and the levels of public and private financing, as well as the decision process. The Law 26/2004, of 8 July, lays down the new Statute of Scientific Patronage. It defines the incentives to be provided to those individuals or organisations which provide grants to enable scientific research activities. There are five types of patronage: research projects; scientific machinery and equipment; diffusion of scientific knowledge; innovation or industrial applications; and human resources. The latter concerns the temporary transfer of researchers and experts between organisations for the purpose of carrying out a research or demonstration project. A final reference is due to the project on financing scientific and technological research, disclosed by the MCES. This project, defining new rules for medium term financing of R&D units (thereby aimed at replacing PT 5), generated a lively public debate, concerning not just the new financing model (where the so-called technology transfer is encouraged) but also the policy for attracting highly qualified people. Placed in the context of reaching the Barcelona three percent goal, the new model has among its objectives the strengthening of the scientific and technological system and the attraction of intellectual capital to Portugal. After a short period of public discussion, the Minister mentioned that the project would undergo a slight revision to enable a fast implementation. However, so far no legislation was published. Taking into account the relevance of this issue, it will be mentioned again under section 3.3.1. 3.1.2. Mobility of students, research workers and teachers This is a topic whose importance is generally recognised, but where the results have been meagre. People mobility and University-Industry linkages have been addressed by several operational programmes, namely the Operational Programme Education, the Operational Programme Employment, Training and Social Development, PRIME (formerly POE), POSI and POCTI. Since 2000 three main measures were launched in this regard. In 2001, a new regulation on the integration of doctors and masters in companies and technology centres was launched (PT 22), in the scope of POCTI and POSI. The implementation of this measure was subject to an evaluation in the context of mid-term POCTI evaluation29. The second measure is the QUADROS programme (PT 35). This is aimed at encouraging companies, namely SMEs, to recruit young technical staff, a Master or a Doctoral degree with a graduation, in technological areas, economics or management, up to a maximum of three people. QUADROS overlaps to a large extent with the ‘older’ measure of integration of doctors and masters in companies and technology centres. However, they are managed by different organisations. There were some rumours of an amalgamation of the two measures. This would imply a centralised management and a clarification of focus. Anyhow, there is a need for a clear decision in this regard – that is, merge or further differentiate – since the present situation raises 28 For a more detailed presentation of this measure, see section 3.1.2. below. 29 For a brief summary of the evaluation findings see Chapter 4 below. European Trend Chart on Innovation some doubts for companies intending to profit from the schemes. The third measure is the NITEC programme (PT 36), supporting the creation of R&D teams in companies. In the period under review, there were new initiatives focussed on mobility. As mentioned above, the Government announced last May the intention to launch a new programme to encourage inter- regional and inter-organisational mobility – the ‘Pedro Nunes’ programme. It remains to be seen, however, which shape it will take in fact. Two other measures were launched in the period under analysis with a bearing on high skilled people mobility and inter-organisational co-operation: the Doctoral Grants in Companies (PT 43) and the human resources strand of the regime of Scientific Patronage (PT 45). Doctoral Grants in Companies are aimed at encouraging the carrying out of doctoral research projects in an industrial environment. Research projects should focus on issues relevant for the company concerned and their development assumes the co-operation, and close contacts, between the University and the company. Grants will apply for a maximum of four years, and include three main components: a monthly support (whose amount is shared by the Science and Technology Foundation and the company concerned); an inscription grant for the applicant to be accept in the University; and a subsidy for publishing the doctoral thesis. The human resources strand of the regime of Scientific Patronage allows, as indicated above, the temporary transfer of researchers and/or experts between organisations with a view to carrying out a research or demonstration project. Accredited patrons will be granted the Ciência 2010 certificate and will enjoy tax incentives with regard to income tax; a Scientific Patronage National Network will be created including all the entities involved in the regime. 3.1.3. Raising the awareness of the larger public and involving those concerned In April 2004 there was a Parliamentary hearing on innovation, open to the general public. It corresponds to the recognition of the relevance of innovation for improving both competitiveness and citizens’ standards of living. The hearing was focussed on ‘Innovation – a new attitude, a continuous process of learning and change’, based on a report written by two Members of Parliament, belonging to the main political parties. However, in spite of the advertisements posted in daily press, it did not generate much public interest: the vast majority of the audience was made of already ‘converted’ people, that is, those already concerned and/or working on the issue. The event shows, nevertheless, that the Parliament is becoming more concerned with innovation matters. In wider perspective, it is convergent with the creation of COTEC (Association of Companies for Innovation) and the innovation week initiative, launched by the President for the Republic in 2003. Here, a reference is due to COTEC, which has already started its activities. COTEC Action Plan for 2003/04 is ambitious, involving namely initiatives on the prevention of forest fires, the support to the implementation of ‘innovation districts’, studies on innovation benchmarking, a project on the support of high-tech SMEs, and the creation of an innovation portal. The first Meeting of COTEC provided an opportunity to further discuss the challenges to innovation in Portugal as well as to show the results of technological research carried out in Portugal. During the event, the chairman of COTEC announced the decision to open the association to SMEs by launching a club of innovative SMEs. The announcement and approval of changes in the Law on Scientific Patronage has also contributed to raise public awareness about the financing of scientific research. Here it is also worth mentioning the decision, disclosed only after his death, of Mr. António Champallimaud, a Portuguese multimillionaire, to create a foundation to support medical research, with an initial capital estimated between EUR 400 and 600 million. Mr. Champallimaud’s decision was much welcomed by the public opinion, and has taken to the fore the social value of scientific research. The issue which raised more public discussion was, however, the new model for financing scientific research and for encouraging the attraction of researchers, disclosed by the MCES. Though the time period allowed for public discussion was too short, there was a lively debate in which many participated. Unfortunately such a debate (to some extent because of the way the press approached the issue) focussed more on relatively marginal questions – such as the ‘famous’ 100 published articles required for providing support for scientists –, putting less emphasis of the key issues, namely the link between scientific European Trend Chart on Innovation research, innovation and competitiveness. The initiative is important, and marks a concern for scientific research (which was almost absent in the activity of the former MCES). However, it is questionable on several grounds, namely the dominance of a linear approach to R&D and innovation, and the fact that the basic funding for research units still come from the Community Support Framework, and not from the ordinary national budget. New guidelines were defined for scientific diffusion. The ‘Ciência Viva’ (Live Science) unit, created by Mr. Mariano Gago, the Minister for Science and Technology in the Socialist government, was not closed, but its prominent position has been significantly curtailed30. In the new model for 2004/2006 (endowed with EUR 40 million in the framework of POCTI/POSI and EUR 19 million from non- concentrated measures in science), the ‘Ciência Viva’ has to compete for financing together with other organisations concerned with scientific diffusion. Particular focus was put on three areas: mathematics and physics; sustainable development; and medical, life sciences and biotechnology. A Commission for Scientific Culture, integrating 13 scientists, was created. Such a Commission has been given the mission of contributing to the definition of national scientific diffusion programmes as well as to follow up the implementation of publicly financed scientific diffusion projects. With regard to the preparation towards the information society, UMIC has continued its activity, both in designing new initiatives and in implementing the programmes and Action Plans already disclosed. As it was mentioned in the previous report31, five relevant policy documents were already disclosed: the Action Plan for the Information Society (PASI); the Action Plan on Electronic Government; the National Broad Band Initiative; the National Programme for Inclusion of Citizens with Special Needs in the Information Society; and the National Programme on Electronic Purchasing. During the period under review several initiatives were pursued or launched in the context of the guidelines set out in the above documents. The most relevant were the following: . Launching the Citizens’ Portal, envisaged as a relevant step towards the development of e- government as well as towards a procedural change by Public Administration in the relationship with the citizens; the Portal provides informative contents, related to citizens’ everyday life, but also interactive and transactional contents32. . The creation of the On-Line Knowledge Library (www.b-on.pt) to enable electronic access to more than 3500 scientific journals. This will be a very important contribution to improve the productivity of Portuguese scientists and researchers, as well as to enable a better acquaintance with global research trends in most scientific disciplines. According to Mr. Diogo Vasconcelos, the UMIC manager, this service has three relevant features: an improvement in content access and organisation; the spreading of users (unlimited access to the library in the campuses of the 47 member organisations); and the savings achieved as against the traditional method of journal subscription. . Launching as from the next academic year of a discipline on information and communication technologies in secondary schools (in the 9th and 10th year of education). . Progress with regard to the Digital Cities and Regions programme. . Publishing the Law on Electronic Communications (Law no. 5/2004, of 10 February): it establishes the legal regime applicable to electronic communications networks and services, and defines the competencies of the regulatory authority in this field. The latter will have independence with regard to both the Government and the operators to enable an effective regulatory and supervising activity. The programme was subject to an evaluation in 2003 in the context of the POCTI mid-term evaluation. 31 See Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, Covering period: September 2002-August 2003. 32 According to a research on ‘Global E-Government’ coordinated by Darrell M. West, from Brown University, Portugal is ranked as 23rd in a ‘league’ of 198 countries. European Trend Chart on Innovation . Launching the Innovation and Knowledge Observatory, a structure in charge of ‘ following-up the developments with regard to the information and knowledge society in Portugal, with a view to provide information for both supporting public decision-making in this field and for diffusing throughout the civil society’. 3.1.4. Fostering innovative organisational and management practices in enterprises The need to improve company in-house capabilities as well as to promote organisational and management innovation in Portuguese companies has been acknowledged since PEDIP I. The then Minister for Industry diffused the idea of promoting the ‘complex competitiveness factors’. However, the intangible nature of organisational innovation has made it difficult to convince public administration officials, bankers and many company executives of its relevance. Although some change is evident, the movement has progressed at a slow pace. In the third Community Support Framework, PRIME (formerly POE) has been the main programme to support organisational innovation in companies. These included: SIPIE, the small company initiative incentive system (PT 15); SIME, the company modernisation incentive system (PT 16), the measure for supporting the dynamisation of technology, training and quality systems – MTTQS (PT 20); the mobilising projects for technological development (PT 23); and the PME Digital Initiative (PT 27). With regards to the programmes more recently launched, QUADROS (PT 35) is expected to have a positive contribution towards innovation in organisational and management practices. In fact, the recruitment of young graduates by SMEs may act as a catalyser for change, contributing towards the introduction of new approaches and procedures at both technical-production and management levels. Also relevant in this regard is DEMTEC (PT 37). Although mainly addressed to technologically orientated pilot projects, it may support technological applications to the development of organisational processes. Outside POE/PRIME scope, other measures were addressed in this topic. PROINOV put a strong emphasis on organisational innovation, but was short-lived. In the context of POSI and POCTI, R&D activities by consortia (PT 21) had an indirect effect on organisational practices. Its successor – IDEIA (PT 33) –, which combines funding from PRIME and POCTI, may also have such an effect, especially with regards to co-operation drive and project management know-how. Although with a limited scope, the ‘ Gerir’ programme (PT 30), launched by IAPMEI, made instruments available for improving organisational management practices in firms. Specifically focussed on organisational innovation, but addressed to a very small group of firms, was the INOFOR initiative RIO, the organisational innovation network. During the period under analysis, there were no relevant new measures aimed at strengthening organisational innovation. Most initiatives have focussed on technological innovation – namely SIME Inovação (PT 40) –, leaving aside the organisational issue. In spite of this, a few measures may have a positive indirect effect on organisational innovation. These include: PRIME Jovem (PT 39), insofar it promote the launching and development of entrepreneurial initiatives by young people, thereby enabling new organisational approaches; the Incentive System for Firm Co-operation (PT 41), which is addressed to promoting inter-firm c-operation, but may have an indirect organisational impact regarding an increased openness to co-operate and the capabilities for managing network and value chain connections; the new regulation on support for training human resources (PT 44), by providing room for training in organisation and management-orientated activities; and the new regulation for supporting technology, training and quality infrastructures (PT 42)33, especially where training and the promotion of quality are concerned, since quality systems are a very relevant instrument for promoting organisational change and innovation in companies. On the other hand, the recent SIME Inovação (PT 40) is exclusively concerned with technological innovation, and not with organisational issues. This regulation replaces to a large extent the measure for supporting the dynamisation of technology, training and quality Systems – MTTQS (PT 20), launched in 2001. European Trend Chart on Innovation 3.1.5. Public authorities and support to innovation policy makers Every new government emphasises the need to ‘open’ public administration to citizens and companies, thus making it more transparent. The Internet initiative (PT 17) and the PME Digital Initiative (PT 27) went in that direction. The action plans and programmes on the Information Society mentioned under 3.1.3. above go in the same direction. The generalisation of electronic connections between the Administration and firms made relationships easier, although the quality of the systems in some cases leaves much to be desired. The MEc has just announced that companies will be able to track the flow of their applications to incentive systems through internet connections. The Centres for Company Formalities significantly eased new company creation. Some initiatives in the context of PPCE are aimed at cutting red tape and enabling a more friendly relationship with companies. The changes in the institutional machinery of the MEc were intended to streamline procedures and to make relationships easier. However, the restructuring raised many doubts about competencies, generated black holes and disturbed working channels. The advantages of the new structure and organisational missions are not fully apparent, and the controversies about the location of some organisations – namely ICEP, the Institute for Foreign Trade – did not help much to clarify relationships. A positive development, already decided but now consolidated, was the assignment to AdI of responsibilities for managing the main innovation programmes under MEc and MCES. This was welcomed by companies and research organisations. After the changes introduced in 2002-03, the period since September 2003 was mostly of consolidation. The chief executives of a number of bodies, such as PRIME Management, POCTI Management and OCT (the Science and Technology Observatory), were changed however. IAPMEI, the Institute for Small and Medium Sized Firms, was moved to Porto, with the argument that most SMEs are located in the Northern region. A new High Council for Foreign Direct Investment (FDI), including eminent entrepreneurs, executives and scientists, was created to advise API (the Portuguese Investment Agency) on FDI policy. Under MCES, there was a dynamisation of the advisory council on science policy, now labelled High Council on Science, Technology and Innovation (CSCTI). Since early 2004, it has played a very active role in advising the MCES and in consultation regarding policy initiatives in the science area. CSCTI organised, last May, a seminar on ‘Innovation Policies – Research, Competitiveness and Wealth’; this provided a good opportunity for the exchange of views among many players involved in innovation policy definition and implementation. In the field of information society and e-government, the creation of the Citizens’ Portal may play an important role in easing the relationship between companies and Public Administration, while encouraging an increased collaboration between different public organisations. It will have a strand exclusively addressed to companies, a feature which may make the articulation of policies in the area of economic affairs, including the furthering of collaboration between the various operational programmes much easier. A final word is due with regard to evaluation. The mid-term evaluation of the Community Support Framework was completed. The exercise was very relevant not just to assess the performance of the various programmes but also to further the recognition of evaluation as an integral part of policy design and implementation. The main results of the evaluation of POE/PRIME and POCTI, the two main programmes dealing with innovation issues, will be presented under Chapter 4 below. European Trend Chart on Innovation 3.1.6. Promotion of clustering and co-operation for innovation Many observers have pointed out the absence of a truly co-operative culture as one of the main obstacles to the competitiveness of Portuguese companies (and of Portugal as a whole). The problem seems to be particularly acute in the context of the present drive towards an information and knowledge society, where connectivity and networking are increasingly relevant. Both individuals and organisations are, as a rule, too ‘individualistic’, and the convergence of efforts is difficult. Since PEDIP I, several policy measures were launched to promote co-operation. One of the main tenets of the original POE was the so-called Partnerships and Public Initiatives (PIP), aimed at combining public and private efforts to support company upgrading and modernisation. With the changing of POE into PRIME, PIPs were replaced by the Support Entrepreneurial Partnerships action. According to the Government these assign private organisations a more active role than in PIPs, being envisaged as a key instrument for combining private and public interests in strengthening competitiveness. While such partnerships are also envisaged for innovation issues, so far they have been mostly focussed on internationalisation policies, concerning namely the promotion of Portuguese products and services abroad as well as the strengthening of Portuguese companies’ trade marks. In this context, a Council on Trade Marks was created. More specifically, the main legislative measure taken in the period under analysis was the Incentive System for Company Co-operation – SICE (PT 41). This system is aimed at promoting Portuguese firms’ competitiveness via support to the building of company networks as well as to the consolidation and dynamisation of already existing networks. Support is provided to two main types of co-operative projects: (1) dynamisation of co-operation in activities along the value chain, as well as product design and development, logistics, marketing and distribution (including the creation of trademarks); and (2) dynamisation of ‘regional or sectoral innovation systems’. The beneficiaries of support are the networks themselves; this means that they should be formalised as legally independent organisations; the basic incentive rate corresponds to 30 percent of eligible expenditures. Since this measure was launched very recently (Ministerial Decree no. 516/2004, of 20 May), it is still too early to assess the results of its implementation. Having in mind the ‘individualistic’ attitude of many Portuguese firms, one may doubt whether in the absence of complementary inducement measures it will generate significant effects; these are more probable along value chains where there is a dominant player strong enough to combine efforts, than in ‘horizontal’ approaches. Be as it may, it is difficult to understand how this measure may, on its own, lead to the ‘ dynamisation of regional or sectoral innovation systems’; this requires combined endeavours and cannot be achieved by a single measure only. Other measures with an impact on co-operation for innovation are: the new regulation on supporting technology, training and quality infrastructures (PT 42), which aims at strengthening not only the capabilities of such infrastructures, but also their co-operation with companies; the Doctoral Grants in Companies (PT 43), expected to contribute towards an increased University-Industry co-operation; the regime of Scientific Patronage (PT 45), for the reasons pointed out under 3.1.2. above; and the slight revision of IDEIA (PT 33), clarifying the compensation of scientific organisations for industrial property whose rights were assigned to companies. In spite of the relevance of the launch of SICE (PT 41), there is no general, transversal policy towards clustering and co-operation for innovation. Although UMIC indicates that a cluster approach will be followed to promote innovation there were, to our best knowledge, no initiatives in this regard. Similarly, the announcement of the Tecnopolos programme, in November 2002, was not followed by any consistent initiative in the field34. UMIC is envisaging to launch the Centres of Excellence 34 See, for instance, Catarina Selada and P.A. Paulo, ‘Como evitar que os tecnopolos virem ‘catedrais no deserto’’’, Público, February 2004. European Trend Chart on Innovation programme to support the co-operation, at regional level, between entrepreneurs and scientific and technological organisations to generate, develop and transfer knowledge. 3.2 Establishing a framework conducive to innovation 3.2.1 Competition One of the main tenets of PPCE, the Programme for Productivity and Economic Growth, launched by the MEc, was the dynamisation of competition policy. This led to the creation of a Competition Authority (Decree Law no. 10/2003, of 18 January) and to a new Competition Law (Law no. 18/2003, of 11 June). The ground being laid in the above legal documents, the Competition Authority has pursued its activities, and has already investigated some important economic groups. There was, however, a rumour that Competition Authority activities were curtailed by severe budgetary constraints. It appears to have been sound, since a decision was taken by the Government to increase the Authority financing sources. According to the Decree Law no. 30/2004, of 6 February, sectoral regulators should pay the Competition Authority a royalty of up to 7.5 percent of their receipts. The argument for this is twofold: the Competition Authority should be as much as possible independent from the public budget; and the Authority plays an overall role ensuring competition, providing an overall frame relevant for sectoral regulators to better carry out their activities. 3.2.2 Protection of intellectual and industrial property In the last years, the National Institute for Industrial Property (INPI) has been very active, adopting an ‘open-minded’ approach, with a culture of service, pro-active involvement in innovation issues, and networking. Three relevant measures in this field between 2000 and 2003 were the launching of SIUPI, to promote the use of industrial property by companies (PT 18), the creation of the Industrial Property Support Offices (GAPI) network (PT 26), and the publication of a new Industrial Property Code (Decree Law no. 36/2003, of 5 March). In the period under review, however, there were no major measures launched in this field. From a legal perspective, the most relevant was the revision of IDEIA (PT 33) to improve the regulation industrial property issues. The revision stated that the scientific institutions involved in IDEIA projects were entitled to a compensation for industrial property rights stemming from joint projects and assigned to companies. From the diffusion perspective, efforts were undertaken to enlarge, strengthen and dynamise the GAPI network. New GAPIs was opened in the Azores and Evora Universities and several workshops were held to increase researchers’ and companies’ awareness to industrial property mechanisms as instruments for protecting inventions and appropriating the benefits of innovation. INPI also sponsored research on the use of industrial property in Portugal35. It shows that the actual use of industrial property rights is still very limited. More than half the firms surveyed mentioned a ‘low interest’ in these issues, trademarks being the modality which generate higher attraction (18 percent of firms declared to have applied for trademarks, while the corresponding figure for patents is slightly above four percent). The study concludes that there is much room for improvement in this area, the strategic role of industrial property rights calling up for a more central role of INPI as an actor in innovation policy. 35 Manuel Mira Godinho, Tiago S. Pereira, Vitor C. Simões, S.F. Mendonça and V.S. Sousa, Estudo sobre a Utilização da Propriedade Industrial em Portugal, INPI, 2003. European Trend Chart on Innovation 3.2.3 Administrative simplification One of PPCE priorities is fighting against bureaucracy. This included a wide range of initiatives, from easing administrative procedures to improving the level of service rendered by public bodies. An important feature has been the implementation of the ‘one-stop-shop’ concept, to reduce the number of public administration counterparts to firms. According to the MEc, all the measures included in PPCE were already put into practice. In the period under review, the restructuring of the services under the MEc was completed. New regulations on the organisation and functioning of many bodies were published, namely the Bureau for Strategy and Studies, the National Institute for Engineering, Technology and Innovation, the ICEP (foreign trade organisation) and the Institute for Quality. As indicated above, IAPMEI headquarters were moved from Lisboa to Porto. So far the results of those changes are not perceptible for the outside observer, and it seems that there is a need for defining interfaces more clearly. The last government considered the reform of Public Administration as a key step towards administrative simplification. A new law was published concerning the system of performance evaluation of Public Administration (Law no. 10/2004, of 22 March). According to the information disclosed by that government the new system is aimed at creating a new culture in public administration as well as to introduce a management by objectives philosophy. The outgoing government was preparing legislation and specific regulations for implementing the law. There is, however, a clear impression that the main orientations will not be subject to major changes by the new Government. Another strand of initiatives towards administrative simplification comes in the wake of the Action Plan on Information Society (PASI). It is an umbrella for e-government and e-purchasing initiatives. Particularly relevant are two actions already mentioned: the publishing of the Law on Electronic Communications (Law no. 5/2004, of 10 February), and the launching of the Citizens’ Portal. This has an area open to companies and is expected to become a instrument relevant in promoting administrative simplification and in easing the relationships between business and public bodies. 3.2.4 Amelioration of legal and regulatory environments According to a study commissioned by the MEc36 on the productivity issue, informality – defined as the non-compliance of their obligations by economic agents – was envisaged as the main barrier to productivity growth. Other relevant barriers were bureaucracy in territorial management and plant licensing (weight of 24 percent), public services supply (18 percent), market regulation (13 percent) and labour law (13 percent). These findings were interpreted by the government, and namely the MEc, as a further sign of the need to change and liberalise the legal environment for business. Liberalisation was already a key feature of PPCE. Actions carried out in this regard include the streamlining of company creation procedures, the regulation on industrial location areas, the publication of the Investor’s Guide, the privatisation of notary public activities, and the publication of a new labour law (Law no. 99/2003, of 27 August). The building blocks of this liberalisation drive are already in place. During the period under analysis, government activities were mostly concerned with the drafting of enabling legislation, namely in the framework of the labour law. The Government has also approved the Code on Company Insolvency and Recovery, aimed at making the associated administrative processes easier and faster. ‘Portugal 2010: Acelerar o crescimento da produtividade’, Síntese de Conclusões, Lisboa, September 2003 (taken from Governments’ website). European Trend Chart on Innovation 3.2.5 Innovation financing The Portuguese innovation financing system is credit-based, bank loans being the main source of external financing for Portuguese firms, especially SMEs. Financial support provided under operational programmes has been extensively used to promote innovation projects. R&D consortia were promoted under PRAXIS XXI (PT 1) and more recently under POCTI and POSI (PT 21). The main instruments, however, have traditionally come from programmes managed by the MEc, under PEDIP (PT 3, PT 9, PT 10 and PT 12) and PRIME/POE (PT 15, PT 16, PT 20, PT 24, PT 25, PT 31 and PT 32). In the late 2002/early 2003, a host of new measures were launched, in the context of PPCE and PRIME, already presented in our previous report37: IDEIA (PT 33), on R&D consortia; NEST (PT 34), on new technology-based firms; NITEC (PT 36), on the creation of in-house R&D teams in firms; and DEMTEC (PT 37), on pilot projects on technology innovative products and processes. These four programmes, together with the new SIME Inovação (PT 40), are the cornerstones of the innovation support building designed by the government. An important role is also played by venture capital, namely through the creation of venture capital syndication funds (PT 31), and in connection with NEST (PT 34). Several new initiatives, and revisions of older programmes, were launched with regard to innovation financing. Our analysis will mainly focus on the programmes of MEc. In fact, the project of new financing model disclosed by Ms. Graça Carvalho, the MCES, is mainly addressed to scientific and technological research, and not so much to innovation as such; this project will be presented in detail under 3.3.1. below. Still, under the aegis of MCES, the Doctoral Grants in Companies (PT 43) and the regime of Scientific Patronage (PT 45) may have a positive influence on company innovation activities, though they are chiefly concerned with the financing of scientific research and University- Industry linkages. The main measure launched by the MEc was the much awaited SIME Inovação (PT 40), in the context of the PRIME operational programme. SIME Inovação corresponds to the autonomisation of innovation and technological matters from the general SIME programmes, on promoting company modernisation (PT 16). The new programme provides support for R&D activities leading either to new products, processes and systems or to significant improvements in those already existing in the company. More specifically, eligible projects should concern industrial research or pre-competitive development. Eligible expenditures include namely the wages of employees fully dedicated to R&D activities, scientific and technical assistance expenditures, and technology transfer or acquisition operation leading to the ‘endogeneisation’ of the technology concerned. Taken together with IDEIA (PT 33) and NITEC (PT 36), SIME Inovação may provide an important lever for Portuguese companies to increase their engagement in innovation activities38. Worth special reference is also the incentive system for firm co-operation (PT 41). In spite of being specifically focussed on promoting co-operation, this system may provide financing for firm consortia or networks dealing with product design and development. It is, however, to be seen whether firms will profit from this programme to get financial support for co-operative research and innovation projects. A possible barrier is the obligation to express the co-operation into a legally independent firm, separated from their ‘parents’ or promoters. Three other measures which may contribute, though indirectly, to the financing of innovation activities are: the PRIME Jovem programme (PT 39), addressed to companies created or managed by young entrepreneurs; the regulation on human resources training (PT 44), to the extent that it may be applied to enhance the skills of people engaged in R&D and innovation activities; and the regulation 37 See Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, Covering period: September 2002-August 2003. 38 Since these programmes will be envisaged as complementary from the company stand point, it is a pity that SIME inovação management were not assigned to AdI. European Trend Chart on Innovation on technology, training and quality infrastructures (PT 42), though this is especially addressed to support organisations, and not to firms themselves. Several programmes with a bearing on innovation financing were subject to changes in the period under review. One was IDEIA (PT 33), where rules regarding the revenues from industrial property rights were introduced, as indicated above. The others were the main company incentive systems – SIPIE (PT 15)39 and SIME (PT 16)40. Both replace the previous guidelines, defining new procedures for the calculation of the incentives, aimed at fostering productivity. For both, an increase of five percent in incentive rate is assigned to young entrepreneurs; for SIPIE, addressed to small company initiatives, a majoration of five percent is also granted for companies created and managed by individuals coming from companies under restructuring. The improved incentive conditions for young entrepreneurs are also associated with the PRIME Jovem programme (PT 39). This programme includes a strand aimed at creating the conditions for launching innovation activities by young entrepreneurs; this enables improved conditions in the access to incentives under QUADROS (PT 35), IDEIA (PT 33), DEMTEC (PT 37) and NITEC (PT 36). Prime Jovem encompasses actions concerning venture capital: in the context of the PRIME Venture Capital Syndication Fund (PT 31), an amount of EUR 15 million is exclusively assigned to supporting projects undertaken by young entrepreneurs. Venture capital is indeed envisaged by the government as an important instrument for promoting innovation and entrepreneurship. There was a concern with the improvement of the framework for venture capital operation, expressed in measures taken in the context of PPCE. After the definition of the ‘financial innovation’ measure of POE, now PRIME (PT 24 and PT 25), still in 2001, the measures on Venture Capital Syndication Funds (PT 31) and the Fund for Guaranteeing Credit Certificates (PT 32), the launching of venture capital syndication fund PME-IAPMEI and the prominent role assigned to venture capital in the working of the NEST programme (PT 34), the ground for the development of venture capital as an innovation financing mechanism is established. UMIC is envisaging to launch NEOTEC, a programme aimed at stimulating entrepreneurship and providing seed capital. Portugal now appears to be a very attractive country for venture capitalists: according to a study carried out by EVCA, Portugal is ranked sixth in terms of tax and legal environment for the venture capital business. Against this background it was not surprising to find that no major initiatives were taken in this during the period under analysis. The only relevant decision concerned the improvement in framework conditions to achieve a better harmonisation between the regimes for venture capital funds and venture capital societies as well as to ‘flexibilise’ to regime applicable to venture capital funds. 3.2.6 Taxation The main tax instrument for promoting innovation and R&D has been, since the mid 1990s, SIFIDE, the system of fiscal incentives for investment in R&D (PT 4). However, SIFIDE has an ‘announced death’: it is in force only for applications relating to the 2003 fiscal year and will no longer apply for the current year of 2004. In fact, the 2003 budget introduced a new tax incentive with implications on R&D activities – the investment tax reserve. This was regulated by the Decree Law no. 23/2004, of 23 January (PT 46). According to this document, the new tax reserve system is aimed at promoting investments by firms producing internationally tradable products and services, as well as R&D activities. Firms may retain 20 percent of the income tax to create a special reserve to be used for eligible investments (namely investments in R&D) in the two following years. 39 Ministerial Decree no. 1254/2003, of 3 November. 40 Ministerial Decree no. 262/2004, of 11 March. European Trend Chart on Innovation 3.3 Gearing research to innovation 3.3.1 Strategic vision of research and development In January, in the final declaration of a Council of Ministers focussed on science issues, the then Prime Minister, Mr. José Barroso, stated that ‘ it is decisive [for Portugal] to invest more and better in training and skills upgrading, in science and research, in knowledge as a development factor’. If not in the deed, at least in words the Government expressed its commitment to science and innovation. Having in mind Lisbon and Barcelona objectives, the Prime Minister announced a ‘strategic initiative’ on knowledge and innovation to achieve a more sustainable, productive and competitive economy. The initiative includes four priority axes: (1) innovation, (2) information and knowledge society, (3) the modernisation of public administration and (4) the promotion of science and training in the higher education sector. Two main programmes will provide operational support for the initiative: the Operational Programme on Science and Innovation – POCI (the ‘successor’ of POCTI) and the Operational Programme on Knowledge Society – POSC (the ‘successor’ of POSI). In the Prime Minister’s words, this initiative corresponds to the ‘largest investment ever undertaken in Portugal in the field of science and research’. POCI will be assigned EUR 419 million and POSC EUR 634 million. It should be acknowledged, however, that only a part of this is really new money. In fact, most of the budget corresponds to those assigned to the ‘old’ POCTI and POSI for 2004-2006. Another part of the budget comes from the reserve of efficiency allocations already envisaged in those programmes. Finally, there was a reallocation of money from other operational programmes, namely in connection with reserve of efficiency endowment. Be as it may, there was an increase in science and innovation budgets and a commitment to these issues, taken at the highest governmental level. Later, the MCES disclosed a new model for funding research units, which was opened to public discussion. This new model comes in the context of an Action Plan being prepared to stimulate R&D investment in order to meet the three percent objective, called ‘ Investing in R&D – An Action Plan for Portugal until 2010’ . Such an Action Plan has four main objectives: (1) to increase public investment in R&D; (2) to promote an environment conducive to private investment in R&D; (3) to increase the supply of science and technology skilled human resources; and (4) to promote scientific employment. The new funding model is, according to the information disclosed by MCES, aimed inter alias at promoting the attainment of a critical mass in science and technology activities, the transfer of technology towards companies, the stimulation of scientific employment and the consolidation of intellectual capital, and the strengthening of the institutions which are part of the Portuguese scientific, technological and innovation system. The model includes three main financing axes: (1) the definition of the rules for basic funding of research units, drawing on international external evaluation procedures, together with complementary incentives regarding scientific and technology transfer performance; (2) an additional support to those scientists satisfying some criteria in terms of international publication and supervision R&D projects; and (3) specific financing of R&D projects, on a competitive basis. The proposal has generated a vivid debate. Several observers have praised the concern with the promotion of technology transfer and the commitment to attract Portuguese and foreign scientists working abroad. But many criticisms were also raised, including the dominance of a linear approach in envisaging technology transfer, the lack of sensitivity to the requirements of different S&T fields, the increased discretion in granting support, the unrealistic targets defined for attracting scientists and the fact that basic funding for research units is based on the Community Support Framework and not on ordinary national budget. The public discussion period was very short, and was closed by the end of April. The unexpected government change will imply some delay in the definition of the final shape of the funding system, although it is positive that the Minister, Ms. Graça Carvalho, keeps her post. European Trend Chart on Innovation 3.3.2 Strengthening research carried out by companies Portuguese companies have a very low propensity to undertake R&D activities. This is partly due to their sectoral specialisation in traditional, supplier-dependent industries, but it is also associated with insufficient in-house competencies both in strategy making and in technological expertise. The strategic relevance of research activities is not fully recognised, the capability to ‘interpret’ and anticipate market trends is low, and companies’ technological bases are weak. Efforts have been undertaken to redress the situation; there was an increase in business enterprise R&D expenditures and some success cases may be identified. There is, however, a need to strengthen companies’ technological capabilities and research activities. Several measures have been adopted in the past with a view to stimulate R&D activities in companies. The include namely SIFIDE (PT 4), and the launching of SIME (PT 16) – which formerly had a research and innovation strand, now automised under SIME Inovação (PT 40). Support to the recruitment of masters and doctors by companies (PT 22) was also envisaged as an instrument for enhancing companies in-house R&D capabilities and activities. Since 2002 several new measures were launched in this regard, namely the following: IDEIA (PT 33), on R&D consortia; NEST (PT 34), on the creation of new technology based firms; and DEMTEC (PT 37), on the support to pilot projects on technologically innovative products and processes. Although without a direct effect, UMIC’s programme for supporting SMEs participation in the VI Framework Programme (PT 38) has also generated inducements for carrying out R&D activities. The most relevant programme, from our perspective, has been NITEC (PT 36), specifically addressed to support the creation or strengthening of R&D teams in companies. In fact, DEMTEC, NEST and IDEIA, together with NITEC, are key instruments for promoting in-house R&D activities by firms, either alone or in the context of collaborative agreements. During the period under review, these programmes were subject to minor changes, some of them already mentioned. For instance, the revision of IDEIA integrated new rules concerning industrial property rights. NITEC was also modified, with a slight redefinition of eligible expenditures, due to the need for harmonising the support provided by the various programmes. The main news, however, concerns the launching of SIME Inovação (PT 40) and Doctoral Grants in Companies (PT 43). As mentioned above, these Grants are addressed to promote the carrying out of doctoral research projects in industrial environment. Research projects should focus on issues relevant for the ‘hosting’ company. They may not just promote research but must also increase the bonds and the cooperation between companies and Universities. SIME Inovação is, however, more specifically focussed on strengthening research carried out by firms. Its main objective is the support to in-house R&D projects leading to the creation of new products, processes or systems or to the introduction of significant improvements in those already existing. Projects should involve a minimum amount of EUR 50,000 or EUR 200,000 (for SMEs and non SMEs respectively), a maximum length of two years, be reported by a sound strategic analysis, and involve skilled human resources. Support corresponds to a mix of reimbursable and non-reimbursable incentives; a performance incentive is also included in the incentive package. European Trend Chart on Innovation 3.3.3 Start-up of technology-based companies The basic support system for the creation of technology-based firms is NEST (PT 34), launched in December 2002. NEST makes strong use of venture capital mechanisms. In fact, promoters should have a minimum of five percent in the new firms equity; the remaining equity will be contributed by a venture capital company and by the Venture Capital Syndication Fund (in this case, up to 15 percent). Data disclosed by AdI, the agency in charge of NEST management, in April 2004 indicated that there were so far 42 applications, mostly from information and communication technologies (20 cases) and biotechnology (13 cases). In the period under review, four initiatives deserve to be mentioned: • The launch of the above-mentioned PRIME Jovem (PT 39), which, while not specifically addressed to new high tech firms, promotes entrepreneurial projects by young people (below 35 years). • The assignment under SIPIE (PT 15), the small companies incentive system, of a budget of EUR 1.5 million exclusively addressed to technology-based projects. Eligible firms should base their business in proprietary technology or technology used under exclusive licenses, but subject to firm ‘endogeneisation’; and the business application of the technology should correspond to an innovation in the market concerned. • The idea contest launched in the context of ‘Nortinov’, the regional innovation plan for Northern Portugal: the 30 best ideas for technology-based companies will be selected and support will be provided for the development of sound business plans; this contest is to some extent envisaged as a pipeline for future applications to NEST. Meanwhile, UMIC is envisaging to launch The NEOTEC, a programme addressed to development of technology based entrepreneurial ideas. This programme has three main objectives: to support the development of technology-based ideas; to promote the creation of market-orientated new products or services; and to stimulate entrepreneurship. 3.3.4 Intensified co-operation between research, universities and companies University-Industry co-operation is often used in Portugal as a ‘magic formula’ to overcome the weaknesses in R&D and innovation activities. The MCES mentioned the need to stimulate ‘technology transfer’ between the University and Industry when she presented the new model of funding for research units. COTEC has also underlined the need to bridge university research and company needs. The President of the Republic has, long since, insisted on the co-operation between University and Industry to generate virtuous circles of technological development and an upsurge in innovation. The set of measures launched by the Government in 2002/early 2003 has also a bearing on cooperation. DEMTEC (PT 37), NEST (PT 34) and especially IDEIA (PT 33) addressed this issue. IDEIA emerged as the key policy instrument to promote the creation of consortia involving firms, universities and research and technology organisations to carry out R&D projects. IDEIA supports both pre- competitive research and industrial research. During the period under analysis, SICE (PT 41) and the Doctoral Grants in Companies (PT 43) were the most relevant initiatives in this respect. Albeit more indirectly, the new regulation for support of technology, training and quality infrastructures (PT 42) and the regime of Scientific Patronage (PT 45) are also conducive to enhanced University-Industry co-operation. Similarly, SIME Inovação (PT 40), though specifically addressed to companies’ in-house activities, may have a leverage effect, making firms more capable and confident to engage into R&D co-operation with other players. SICE (PT 41), the incentive system for company collaboration, deals with inter-firm co-operation, adopting a network approach. Two main types of co-operative projects are considered: dynamisation of co-operation along the value chain; and dynamisation of ‘ regional or sectoral innovation systems’. European Trend Chart on Innovation If this type of project is to be supported, it will necessarily entail the ‘opening’ of the networks to other organisations, namely universities and research and technology organisations located in the region and/or knowledgeable about the sector concerned. The Doctoral Grants in Companies (PT 43) will imply at least a co-ordination between the ‘hosting’ company and the University the doctoral research student is associated with. The doctoral project and the doctoral candidate will be ‘bridges’ to link both types of organisations. Even the preliminary discussion and agreement on the doctoral projects will inject a ferment of co-operation, which might be further pursued ex-post should the candidate come back to the University. This may even extend the range of bodies involved in the co-operation. It is, however, still to be seen how the programme will unfold in practice. UMIC is envisaging to launch two new programmes in this field: Centres of Excellence and OTIC. The first, mentioned already under 3.1.6. above, is aimed at promoting University/Industry co-operation at regional level. The second (OTIC) is focussed on the transfer of research results from research institutions to industry, through the creation of technology transfer units in research organisations. 3.3.5 Strengthening of the ability of companies, particularly SMEs, to absorb technologies and know-how Since E.C. accession, in 1986, financial incentives have dominated the scene of innovation policy, while insufficient attention was given to the needs of firms, especially SMEs, in the areas of business services, business advice, and skilled human resources. SIPIE (PT 15) and SIME (PT16) were aimed at strengthening companies ‘absorptive capacity’, but the results appear to be limited. There was an insufficient selectivity, and tangible investments prevailed over intangible ones. The measure for supporting the dynamisation of technology, training and quality systems (PT 20), was also expected to have an indirect effect on SMEs ‘absorptive capacity’; the same happens with the POCTI/POSI integration of Doctors and Masters in firms (PT 22), the PME Digital initiative (PT 27), and the ‘Gerir’ programme (PT 30). COTEC Portugal appears to be sensitive to this question, and aims at developing forms of co-operation between large firms and SMEs, for these to upgrade their organisational and technological capabilities. Although the PPCE programme is more concerned with the financial than technological weaknesses of SMEs, several measures associated with it may have a positive impact in this field. The IDEIA programme (PT 33) may contribute to strengthen absorptive capacity, enabling companies to cooperate with and learn from S&T organisations, in the context of projects. The creation of R&D teams under the NITEC programme (PT 36) will also have a very positive influence on SMEs’ capacity to select, master and develop technologies. Not so deep, but probably wider, will be the influence of the QUADROS programme (PT 35), supporting the employment of young graduates by companies, namely SMEs. The DEMTEC programme (PT 37) is expected to have a demonstration effect, leading SMEs to a faster adoption of new technological solutions. The support for SME participation in the Fifth Framework Programme (PT 38) may also play an indirect role in enhancing SME absorptive capabilities. Among the recently launched programmes, there are two which may contribute to foster companies, including SMEs, absorptive capabilities. SIME Inovação (PT 40) is mainly addressed to in-house R&D projects. It is well known, however, that carrying out R&D activities has a very positive impact on absorptive capabilities. The drawback is that SIME Inovação requires a minimum level that most SMEs will not meet. From this perspective, and similarly to what was mentioned with regard to the QUADROS programme (PT 35), the measure on the support training (PT 44) may have more impact on ‘ordinary’ SMEs, since it raises lower barriers to entry and is directly concerned with the key ingredient of absorptive capabilities – human resources skills. European Trend Chart on Innovation 4. List of TREND CHART measures Code Title Start/End Dates Action Plan Area(s) Status PT 1 R&D Activities by Consortia (PRAXIS XXI) 1994/2000 II.4; II.5; III.2; III.4 Ended PT 2 Recruitment of Doctors and Masters (PRAXIS XXI) 1994/1999 I.2; III.4; III.5 Ended PT 3 PEDIP II Financial Engineering Measures 1994/1999 II.5 Ended PT 4 Fiscal Incentives for Investment in R&D (SIFIDE) 1997/depend. Budgetary Law II.6; III.2 Discontinued. Replaced by PT 46 PT 5 Medium-Term Finance Programme of R&D Units 1997/Not defined I.1 Old PT 6 Science and Technology Observatory 1997/Not applicable I.3; I.5 Old PT 7 Development of Technological Capabilities at enterprise level (SME Initiative) 1997/2001 II.5; III.2; III.3; III.4; III.5 Ended PT 8 S&T Training (PRAXIS XXI) 1994/1999 I.1 Ended PT 9 Financial Incentives to R&D Industrial Projects (PEDIP II) 1994/1999 II.5; III.2; III.4 Ended PT 10 Innovation and Technology Transfer Measure (PEDIP II) 1994/1999 II.5; III.1; III.4 Ended PT 11 Mission for the Information Society 1996/1999 I.3 Gave rise to the Operational Programme on Information Society PT 12 PEDIP II Demonstration Actions 1994/1999 I.4; II.5; III.5 Ended PT 13 Centres for Company Formalities 1997/Not applicable II.3 Old PT 14 Restructuring of INPI 1998/Not applicable II.2 Old PT 15 SIPIE – Small Company Initiatives Incentive System (POE/PRIME) 2000/2006 I.4; II.2;II.5;III.5 Changed after evaluation PT 16 SIME – Company Modernization Incentive System (POE/PRIME) 2000/2006 I.4; II.2; II.5;III.2;III.3; III.4;III.5 Changed after evaluation PT 17 Internet Initiative 2000/2006 I.3; I.4;I.5 Old PT 18 SIUPI – Industrial Property Use Incentive System (POE/PRIME) 2000/2006 II.2; III. 4; III.5 Old PT 19 Certificate of Basic Competencies on Information Technologies 2001/Not applicable I.1; I.3 Old PT 20 Measure for Supporting the Dynamisation of Technology, Training and Quality Systems – MTTQS (POE/PRIME) 2001/2006 I.1; I.4; I.6; II.5; III.2; III.4; III.5 Replaced by PT 42 PT 21 R&D Activities by Consortia (POSI) 2001/2006 II.5; III.2; III.4 POCTI measure integrated in IDEIA (PT 33) PT 22 Integration of Doctors and Masters in Companies and Technology Centres (POCTI) 2001/2006 I.2;III.2;III.4; III.5 Replaces PT 2 PT 23 Mobilising Projects for Technological Development (POE/PRIME) 2001/2006 I.4; I.6; III.2; III.4 Old PT 24 Financial Innovation – Action A (POE/PRIME) 2001/2006 II.5 Slightly changes PT 25 Financial Innovation – Action B (POE/PRIME) 2001/2006 II.5 New. Linkages with the old PT 3 PT 26 Industrial Property Support Offices – GAPI (POE/PRIME) 2001/2006 I.3; II.2; III. 4 Old PT 27 PME Digital Initiative (POE/PRIME) 2001/2006 I.3; I.4; III.1; III. 5 Old PT 28 Lisbon and Tagus Valley Programme on Regional Innovation Actions - LISACTION 2002/2003 I.6; II.5; III.4; III.5 Old PT 29 Programme of Innovative Actions for the Algarve Region – INOVAlgarve 2002/2003 I.6; II.5; III.4; III.5 Old PT 30 Programa Gerir 2002/2006 I. 4; III. 5 Old. PT 31 Venture Capital Syndication Funds (POE/PRIME) 2002/2006 II. 5; III.3 Launched in the context of PT24 e PT 25 PT 32 Credit Enhancement Securitisation Fund (POE/PRIME) 2002/2006 II. 5; III.5 Launched in the context of PT24 e PT 25 PT 33 IDEIA - Applied Research and Development in Companies (POCTI/PRIME) 2003/2006 I.6; II. 5; III.2; III.4; III.5 Slightly changes PT 34 NEST – New Technology Based Companies 2003/2006 II.5; III.2; III.3; III.4 New PT 35 QUADROS Programme 2002/2006 I.2; I.4; III.5 New PT 36 NITEC – Incentive System for Creating R&D Nuclei in the Company Sector (POE/PRIME) 2003/2006 I.2; II.5; III.2; III.4; III.5 New PT 37 DEMTEC – Incentive System for Undertaking Pilot Projects Concerning Technologically Innovative Products and 2003/2006 I.4; II.5; III.2; III.4; III.5 Slightly changes 33 European Trend Chart on Innovation Processes (POE/PRIME) PT 38 Programme for Supporting and Encouraging the Participation of Portuguese Organisations in the VI Framework Programme (POCTI/POSI) 2003/2006 III.2; III.4; III.5 New PT 39 PRIME Jovem 2003/2006 I.4; II.2; II.5; III.2; III.4; III.5 New PT 40 SIME Inovação 2004/2006 I.4; II.5; III.1; III.2; III.4; III.5 New (autonomised from SIME – PT 16) PT 41 SICE – Incentive System on Firm Cooperation 2003/2006 I.4; II.6; III.4 New PT 42 Technology, Training and Quality Infrastructure 2004/2006 I.1; I.4; I.6; II.5;: III.4; III.5 Replaces MTTQS (Pt 20) PT 43 Doctoral Grants in Companies 2004/2006 I.1; I.2; I.4; II.5; III.1; III.2; III.4; III.5 New PT 44 Training and Human Resources 2003/2006 I.1; I.4; II.5; III.4; III.5 New. Replaces older POE regulation PT 45 Regime of Scientific Patronage 2004/ onwards I.1; I.2; I.3; I.4; I.6; II.5; III.1; III.2; III.3; III.4 Replaced older regime PT 46 Tax Reserve for Investment 2003/2004 II.6; III.2; III.4; III.5 Replaces SIFIDE (PT 4) PT 47 SIPIE (Technology Based Firms) 2003/2006 II.5; III.2; III.3; III.4; III.5 Specific fund under SIPIE (PT 15) 34 European Trend Chart on Innovation 5. Bibliography and sources A. António Barreto, ‘O mistério da educação’, Público, 9 May 2004. Catarina Selada and J.R. Felizardo ‘Como reinvestir o território com inovação’, Público, 12 January 2004. Catarina Selada and P.A. Paulo, ‘Como evitar que os tecnopolos virem ‘catedrais no deserto’’’, Público, February 2004 M. Mira Godinho, S.F. Mendonça and T.S. Pereira, ‘Mapping Innovation Systems: a framework based on innovation data and indicators’, paper presented at the First Globalies Conference, Rio de Janeiro, 2003. M. Mira Godinho, T.S. Pereira, V. Corado Simões, S.F. Mendonça and V.S. Sousa, Estatuto sobre a Utilização da propriedade Industrial em Portugal, Lisboa, INPI, 2003. M.J. Boia, P. Conceição, R. Santos and M. Heitor, ‘Innovation in Portugal: What do we know? What would we like to know?’, document presented at a workshop on Innovation in Portugal, Caloust Gulbenkian Foundation, Octover, 2003. Manuel Mira Godinho, Tiago S. Pereira, Vitor C. Simões, S.F. Mendonça and V.S. Sousa, Estudo sobre a Utilização da Propriedade Industrial em Portugal, INPI, 2003 Vitor Corado Simões, ‘O sistema nacional de inovação em Portugal: Diagnóstico e Prioridades’, in M.J. Rodrigues, A. Neves e M.M. Godinho, eds., Para uma política de inocação em Portugal, Lisboa: Dom Quixote, 2003. QCA III – Uma política integrada de apoio à inovação para vencer o atraso estrutural PROINOV, Competitividade e Inovação na Coesão, Lisboa; PROINOV, 2002. Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, Covering period: September 2002-August 2003. Vitor Corado Simões, Monitoring, updating and dissemination developments in innovation and technology diffusion in the Member Sates – The TREND CHART: Portugal, Covering period: October 2001-September 2002. B. Daily and Weekly Press • Público • Expresso • Fórum Empresarial • Semanário Económico • Jornal de Negócios C. Web Sites www.governo.gov.pt www.inpi.pt www.umic.pt/UMIC www.autoridadedaconcorrencia.pt www.min-edu.pt www.oces.mces.pt www.min-economia.pt www.icep.pt www.prime.min-economia.pt www.cotec.pt www.iapmei.pt www.mces.pt www.fct.mces.pt www.adi.pt