Estonia

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Estonia is a small European economy, which has experienced turbulence since 2008 from contraction of 14.1% in 2009, to growth of 9.6% in 2011, to growth of just 0.8% in 2013. Following the Knowledge-Based Estonia II Research and Development and Innovation Strategy (2007-13), the government has created two medium-term strategies: the Estonian Research and Development and Innovation Strategy (2014-20) and the Estonian Entrepreneurship Growth Strategy (2014-20).

Hot Issues

Hot Issues are major national STI policy priorities, as self-reported by countries in their responses to the OECD STIO 2014 policy questionnaire.

Improving the framework conditions for innovation (including competitiveness)

Estonia has a conducive business environment, and an improved supply of venture capital (Panel 1j, h). Through the Estonian Entrepreneurship Growth Strategy, the government aims to shift to a market- based approach to public support, with fewer direct grants and more financial instruments, including venture capital. In addition to project financing, it will put services (e.g. strategic business analysis, project planning, and capacity building for enterprises) at the heart of its support for business innovation. Over 2014-20, the government has allocated USD 155 million (EUR 85 million) for the Entrepreneurs’ Development Programme and Innovation Voucher scheme, USD 87 million (EUR 48 million) for various entrepreneurship schemes, and USD 12.7 million (EUR 7 million) for innovative start-ups (Start-up Estonia).

Targeting priority areas/sectors

Investing in smart specialisation high-growth areas to increase the return on public investment in R&D is the guiding principle for targeting priority areas. The new R&D and Innovation (RDI) Strategy (2014-20) prioritises RDI investments selected and managed by the smart specialisation method to foster faster growth in the selected fields. These are: ICT, including the use of ICT in industry and other sectors, cyber-security and software development; health technologies and services, including biotechnology, e-health (IT use in the development of medical services and products); and more effective use of resources, including materials science and industry, innovative construction, i.e. “smart houses”, health-promoting foods, chemical industry (more effective use of oil shale). The Estonian Entrepreneurship Growth Strategy targets the same priority areas as above, and both strategies have the same focus.

Encouraging innovation in firms and supporting entrepreneurship and SMEs

During the decade ending in 2012, BERD grew faster than in most OECD countries and has reached the OECD median (Panel 1d). Innovation performance, however, has yet to reach OECD levels (Panel 1e, f, g). BERD is concentrated in medium-high to low-technology manufacturing and services (Panel 2) and in a small number of firms. Productivity growth and higher employment through capital deepening and structural change to higher added value activities are central objectives of the government’s economic policy. Innovation is considered essential to achieving these goals and the government is committed to stimulating business R&D and innovation through direct funding and non-financial measures with a combined budget of USD 255 million (EUR 140 million) over 2014-20. The Entrepreneurs’ Development Programme was launched in 2013 to increase the international competitiveness of Estonian firms through better strategic planning, R&D and skills development. Launched in 2012, the Baltic Innovation Fund (BIF), with USD 182 million (EUR 100 million) for 2013-16, will invest in private equity and VC funds in Estonia, Latvia and Lithuania.

Improving returns and impact of science

Public research has improved significantly over more than a decade. Today, Estonia has a relatively strong public research system, with a high level of public R&D expenditures and strong performance in terms of international scientific publications (Panel 1a, c). The system is quite well connected to global knowledge and innovation networks (Panel 1q, r). However, industry-science linkages are not very strong (Panel 1o). Efforts are being made to strengthen interactions between the scientific and business communities. For example, the University ofTartu has adopted a new governance structure that involves external partners in the university’s management. The government has a programme for training doctoral students in co-operation with firms as well.

Country Charts

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Selected Highlights

STI policy governance

The two new medium-term strategies mentioned above were prepared together in a co-ordinated process. Based on the 2011 amendments of the Organisation of Research and Development Act (ORDA), several changes in governance have been made since 2012. The Estonian Research Council was established in March 2012 and combines the functions of several previous bodies (the Estonian Science Foundation, the Research Competence Council, and the Department of International Co-operation of the Archimedes Foundation). A strategic aim of the Estonian R&D and Innovation Strategy (2014-20) is to strengthen the role of branch ministries in supporting R&D in socioeconomically important areas. Representatives of these ministries are being invited to the advisory bodies of the Ministry of Research and the Ministry of Economic Affairs and Communication (MEAC) and are involved in preparations to join international research networks (such as joint programming initiatives).

New challenges

Energy, sustainable development and environmental issues are increasingly important government priorities. In 2008-15 the Estonian government has six national programmes in support of R&D in energy technology, ICT, biotechnology, health, environment technology and material technology. The Estonian Energy Technology Programme is a co-operative programme involving research, business and the state to develop oil shale technologies and new, mainly renewable, energies. The centres of excellence and competence centres also target ICTs, the environment, new materials, health care and medicine.

Universities and public research

In 2010, the government adopted a Research Infrastructures Roadmap for upgrading existing research infrastructures and creating new ones. It lists 20 research infrastructures of national importance to guide public investments in R&D infrastructures over the next 10-20 years. Over 2007-13, investments in R&D infrastructures – USD 322 million (EUR 177 million) – were largely funded by EU Structural Funds. In continuing to modernise R&D infrastructures, the government’s priorities are to achieve sustainable funding and maintenance of R&D infrastructures and to support the effective use and sharing of these infrastructures, including with the business sector. The Research Infrastructures Roadmap will be renewed in 2014.

Clusters and regional policies

A smart specialisation strategy serves as the overall theme of several government policies. The government aims to harmonise the priorities of R&D, higher education and enterprise policies through such a strategy. Instruments to support smart specialisation include co-operation schemes (such as competence centres and clusters), demand-side measures, and the Start-up Estonia programme.

Skills for innovation

Estonia already has a good skills base, and its 15-year-olds perform very well in science (Panel 1s, t, v). With regard to skills development, the government’s priorities are to continue to develop human resources with a focus on engineers, to turn brain drain into balanced brain circulation, and to increase the attractiveness of careers in research. The R&D and Innovation Strategy aim for 300 PhD graduates a year by 2020. The Estonian Euraxess Services Network provides information services and customised assistance for increasing the inward and outward mobility of foreign and Estonian highly skilled people.To address the relatively low rate of doctoral graduates in S&E (Panel 1w), several public initiatives aim to raise young people’s interest in S&T careers. For 2014-20 specific measures are being planned to support the development of human resources and to raise the quality of teaching.

Recent developments in STI expenditures

Estonia has had one of the fastest increases in GERD in the OECD area, averaging 14.2% a year over 2007-12. In spite of the recent economic crisis, GERD rose from 1.28% of GDP in 2008 to 2.19% of GDP in 2012. The Strategy for R&D and Innovation targets GERD at 3% of GDP and BERD at 2 % of GDP by 2020.