The need for innovation is not the same in all branches of the economy

According to the latest OECD report Poland is making progress in modernization of the economy, but still lacks innovation. Not only state-level support is needed, but also a greater activity of the enterprises.

A country’s involvement in the development of advanced production is traditionally measured by the amount of expenditures on research and development (R&D) in relation to GDP. The situation in Poland is improving, mainly due to public institutions and EU funds. In Poland the participation of enterprises in financing innovation is not only lower than in the most-developed European countries, such as Germany or France, but also lower than in countries at a similar level of economic development, such as Hungary or the Czech Republic.

The OECD report provides a lot of comparative knowledge – relating the results of Poland to those recorded in other countries – concerning the innovative foundations for growth of the Polish economy. The observed shortage of innovation largely results from the structure of the Polish economy, and in particular the manufacturing, which is dominated by relatively simple processing sectors. At the same time, the vast majority of enterprises are very small companies, employing fewer than 10 FTE and focused on reproducing rather than creating new products. However, innovations are necessary in order to change this structure.

It’s worth noting several interesting findings of OECD’s analysts. Areas of modern manufacturing are of little importance in Poland’s economy. This is evidenced, i.a. by the level of employment in industries associated with technical developments. According to the United Nations methodology, they include the production of computers, electronics, optical products, telecommunications, computer programming and IT services. Only a little more than 2.5 per cent of employees work in these areas in Poland, while the average for OECD countries is over 3 per cent. This ranking is led by Estonia, where such industries employ over 4.75 per cent of all employees, with Finland being very close in this respect.

What really matters, however, is not only the size of employment, but also the qualifications of employees. The OECD measures this using the number of researchers in relation to the total employment. Despite the educational boom that has been going on for many years, in Poland there are only 5 scientists per one thousand employees, while in Israel there are 17 researchers per one thousand employees. The average in the OECD is 8. But there are countries with worse results that Poland – Italy and Latvia.

A good measure of scientific activity is the number of patents, which OECD’s experts refer to the size of a given country’s GDP calculated – for a better comparison – according to purchasing power parity (PPP). In the years 2010-2015 Poland’s achievements remain very modest. In Poland there are only 0.4 patents filed per USD1bn of GDP. The average in OECD countries is almost 3.5 patents. Japan is unrivaled with 8.6 patents per USD1bn of GDP. Poland also ranks low in terms of the number of scientific publications.

The key to success seems to lie with the activity of enterprises in the field of innovation. In the last 10 years (2005-2015), the expenditures of Polish enterprises on R&D grew faster than in all other OECD countries (by 14 per cent annually on average), but the starting point was very low, which means that there is still a long way to go. Especially since Poland is lagging far behind other OECD countries even in the area of access to high-speed internet, which is currently the basic tool for the acquisition of knowledge and for business. In 2016, Poland ranked the last among the OECD member states in terms of the share of enterprises using cloud-based services. Its state administration is also lagging behind.

The basic problem may lie not in the need to catch up with the infrastructure development required for innovation, but in the awareness of the necessity to utilize it to a greater extent. This awareness is increasingly visible among the decision makers. The OECD’s latest report notes the Polish government’s efforts – both organizational and financial – aimed at basing the economic development on innovation. The report cites government documents that assume increases in R&D spending from 1 per cent of the GDP in 2015 to 1.7 per cent in 2020, and for a rise in the total rate of investment expenditures to over 22 per cent of the GDP.

The OECD also indicates barriers to closer collaboration between science and manufacturing. They include numerous bureaucratic obstacles existing in the scientific institutions (i.a. the excessively wide application of the public procurement law), which makes it impossible for scientific establishments to promptly address to the needs of manufacturing.

However, the businesses, which should generate the demand for innovation, are not without a fault, either. Barriers arising from insufficient awareness can be observed. The OECD’s report presents the findings of interesting studies on education of managers, which show that over 25 per cent of Polish managers – the highest share among OECD countries – have merely secondary education. The average for OECD countries is approx. 16 per cent.

It is therefore not out of the question that a significant percentage of business owners and company managers in Poland still do not see the need for growth through innovation. This conclusion is confirmed by the latest data on the 2017 financial performance of companies in Poland, published by Poland’s Central Statistical Office. The data shows that amid rising wages, the net profits of enterprises are growing even faster than their sales. If that is the case – there is no strong motivation for innovation and investment.

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