Weekly Briefing, Vol. 15, No. 2 (LT), February 2019
Lithuania announced at the Davos forum the decision to host the CERN technology transfer incubators
On 25 January the news have reached from the World Economic Forum that the European Organization for Nuclear Research (CERN), the major intergovernmental body for fundamental science which operates the largest particle physics laboratory in the world, would set up jointly with the Government of Lithuania two technology transfer and business incubators, the first of its kind in the Central and Eastern Europe (CEE). Both incubators, as it was announced in a joint statement by Dr. Fabiola Gianotti, director general of CERN, and the President of the Republic of Lithuania Dalia Grybauskaitė made in Klosters-Davos, will be located in Vilnius and Kaunas, Lithuania’s two main cities.
The following is a brief overview outlining the importance of science in general and physics, life sciences, biotechnology and mathematics and informatics in particular in the long-term planning for the economic development of Lithuania, providing some background information about the conditions which elevated the support for and the promotion of the research and innovation in those fields to such a prominent place on the economic agenda of the country.
Lithuania’s joining of CERN as an Associated Member last year and the announced initiates of the CERN technology transfer hubs to be opened this year is a remarkable achievement showing how a small country is keen on allying itself with the international research bodies. The membership also opens up the possibilities for the Lithuanian industry to bid for CERN contracts and, in turn, to strengthen to some extent their competitiveness through the involvement in the value chains for the development of advanced technologies.
Lithuania’s emergence as a hotspot for certain fields of R&D over the recent years is even more remarkable when considering the fact that Lithuania‘s GDP share for research and development (R&D) remains one of the lowest in the European Union. According to Eurostat, the gross domestic expenditure on R&D as a percentage of GDP in Lithuania in 2017 were at the meagre level of 0,88 percent (similar to that of Slovakia). Few other countries in the CEE region are also low-performers in this respect: Croatia and Bulgaria, which have a comparably low level of GERD expenditures as Lithuania (0,86 and 0,75 percent), followed by Latvia (0,51 percent) and Romania (0,51 percent).
Besides, most of the expenditure on R&D in Lithuania (and this is the case in many other CEE countries which are the members of the EU) come from the public sources, which are heavily dependent on the EU structural and investment funds. Thus, when it comes to the business expenditure on R&D (BERD) in terms of its share of GDP, Lithuania‘s performance is even worse (0,26 percent of GDP in 2016), below that of Bulgaria (0,33 percent) and slightly above of Romania (0,20 percent). For example, the Czech Republic and Hungary lead the CEE region in this respect with 0,67 and 0,66 percent of GDP for BERD respectively.
Though during the period of 1996-2018 the GDP has grown in Lithuania annually by ca. 4,31 percent, yet the total expenditure on R&D for roughly the same period increased annually on average only by ca. 2,6 percent (in 1996 the GERD share of GDP was 0,49 percent while in 2017 – 0,88).
Thus, the observer could be easily puzzled how come that Lithuania, having limited public resources available for R&D and with only a very meagre level of expenditures to the R&D in the private sector, which has been largely dominated by the process industries and the lower value-added sectors, has developed into a country which has jumped ahead to sit at the forefront of the innovation and technology transfer in certain niches. And how come that the joint efforts by the government helped to prioritize the strategic drive for R&D to an extent that this has become the national consensus.
The key to understanding the drive for catching up in innovation which has been ongoing in the country since joining the EU is related to two aspects: first, one needs to consider the human resources available for the R&D in the country looking back at the origins of the institutionalized R&D, and, second, the market opportunities that are available to entrepreneurs in the pursuit of technology and new product development.
The track-record of research and development in Lithuania is not that long if compared with the established economies in the West. The first theoretical physics professor in Lithuania Adolfas Jucys had started his academic career in 1933. In 1938 he went at his own expenses to visit Professor Douglas Hartree at Manchester University (who would make a major contribution to mathematical physics and the development of the first computing machines in the US and the UK), and this was the start of the fundamental sciences in Lithuania. Being encouraged by Prof. Hartree to dedicate to nuclear physics, Prof. Jucys opened up a new direction in research, which after 1945 was supported by the Soviet authorities. In 1951 Jucys did his Ph.D. in Leningrad and in 1956 became director of the newly established Institute of the Physics and Mathematics of the Lithuanian Academy of Science, which is the institutional predecessor of the Centre for Physical Sciences and Technology, the largest research and technology organization in the Baltic region today.
In 1960s and 1970s the Lithuanian Academy of Science had remarkably developed and the Soviet Union authorities founded a number of the state research institutes in the field of semiconductor physics, life sciences, biotechnology which worked on both the fundamental scientific challenges and on the more applied research solutions linked to the needs and demands of the defence sector as well as the key sectors for the Soviet state-planned economy, namely, agriculture, energy and manufacturing industry.
At the time of the political changes in the years 1989-1990, two major cities in Lithuania (Vilnius and Kaunas which the authorities planned to bring together in one conurbation area stretching by 100 km) had almost 1 million inhabitants. About 10 thousand employees were reported working for research and development institutions (1 research per 100 inhabitants of those two cities). Since that time the ratio between the number of researchers and the total number of inhabitants has increased almost twice as there are now more than 18 thousand employees working in R&D institutions in Vilnius and Kaunas.
The sustainability of the research sector in Lithuania at all odds and low levels of remuneration could be explained by taking into consideration two circumstances: first, the limitations of the social mobility for the educated middle class which had until recently faced a very harsh competition on the job market for the average-paid jobs (while the research sector provided certain benefits even if the researchers have not been remunerated adequately), and, second, the EU structural funds during the previous Financial Framework (2007-2013) had been directed to the research and higher education sector providing the researchers with additional professional opportunities, including the possibility to do research in the new state-of-the-art research facilities setup in both cities (Vilnius and Kaunas) with the EU support.
The EU strategic focus on building a knowledge economy to compete with the more technology-intensive countries was formulated in the EU Lisbon Strategy in 2000 (and the revised Lisbon Strategy in 2008) which identified the need for the EU member states to spur the R&D investment to reach 3% of GDP. The strategy was based on the neoclassical growth model and growth accounting developed by Solow and Swan in 1956 (at the time when the first R&D institutionalization took place). The model stated that aggregate output can be expanded either by increasing the amount of labour or fixed capital used in production, or through an expansion of the stock of knowledge. Since the increase of both capital and labour leads to an increase in output, yet this, in turn, results in diminishing marginal returns to individual inputs. It was presumed that the only way for the neoclassical economy to keep growing on a per capita basis is by continuously expanding the stock of knowledge. And the knowledge could be generated only by scientists and innovators.
The Lisbon Strategy created a market opportunity for the research sector in Lithuania which has survived the transformational period thanks to the meager but continuous national support for the prioritized R&D areas (applied physics and lasers, life sciences and biotechnology, mathematics, and informatics). Thus, when Lithuania joined the EU, the EU structural funds became the vehicle to tap into the human resources and the infrastructure in the prioritized R&D areas and create the new momentum for innovation.
Though the economic value of research and development is very much debated concept among the policymakers and the stakeholders at the national and the EU level, yet there is a growing realization in the EU that the source of innovation can come only by putting together educated, talented and creative people to solving the challenges and seeking the solutions that could be found through the dedication and the efforts in both fundamental science and applied research.
In a 2015 policy paper “Value of Research” by the by the Research, Innovation, and Science Policy Experts (RISE) group at the European Commission the following conclusions have been made: “There is overwhelming evidence from multiple sources to justify research as one of the best investments that can be made with public (and private) funds. Rates of return are of the order of 20-50% and there are few innovations that do not have at least a proportion of their realization rooted in publicly funded research. Economic evidence also indicates that public sector R&D does not crowd out private investment but rather is complementary and a driver of business investment. “
This has been echoed in the recent announcement of Lithuania’s President about the opening of the CERN incubators when President’s Office announced that „Membership in CERN has opened new opportunities to participate in scientific research projects, start innovative businesses and develop national industrial potential “. Fabiola Gianotti, the CERN director general, reiterated: “scientific knowledge is the fuel of progress because it pushes the limits of what we know…. Without innovative ideas and scientific breakthroughs, progress stagnates. History shows us that major breakthroughs often come from fundamental research.“
References:
- Press Service of the President of the Republic of Lithuania: “Davos: Final decision on CERN business incubation centers in Lithuania”, http://www.urm.lt/mission-geneva/en/news/davos-final-decision-on-cern-business-incubation-centers-in-lithuania
- European Commission, “Value of Research: Policy Paper by the Research, Innovation, and Science Policy Experts (RISE), by Luke Georghiou“, June 2015 https://manchester2016.esof.eu/files/_pdf/georghiou-value_research.pdf
- Fabiola Gianotti, „Bringing Science to Davos“, https://home.cern/news/opinion/cern/bringing-science-davos
- Kristian Uppenberg, „The knowledge economy in Europe: A review of the 2009 EIB Conference in Economics and Finance“, http://www.eib.org/attachments/efs/the_knowledge_economy_in_europe.pdf