Smart Specialization Strategy: What Does It Specifically Bring to Companies and Entrepreneurs?

—

—

At the very end of last year, the Government adopted a new Smart Specialization Strategy until 2029, which will, in simplified terms, assist domestic companies in development and provide easier access to European Union financial resources in the field of research, development, and innovation (RDI). This is, in fact, an improved version of the first such strategy that Croatia introduced for the period from 2016 to 2020, which defined the priorities of innovation policy.

The most well-known, but also the most generous element of the Smart Specialization Strategy (also known as S3) are the RDI calls for support for research and development in the business sector, where total joint investments through the use of structural funds and private capital should reach 340 million euros by 2027. Therefore, the adoption of this Strategy, explains Domagoj Šarić, head of the Department for Competitiveness of the Croatian Chamber of Commerce, can help the Croatian economy reach levels comparable to other EU member states.

—

Domagoj Šarić, HGK

—– The importance of S3 for Croatia can be read not only through the ‘econometric’ effect in the growth of investments in research, development, and innovation, which is recorded in tables and indices of innovation and digitalization, but also as a concrete tool to combat the overall lagging of the economy behind other members. Here we can highlight long-standing challenges and obstacles to stronger potential growth manifested in low productivity (productivity growth is an extremely important driver of long-term economic well-being, welfare, and convergence), insufficient or inadequate skills, unfavorable demographics (brain drain), insufficient export in areas of higher technology and added value, as well as weak involvement in global value chains – says Šarić.

Focus on Digital Products and Startups

And besides the fact that the new strategy now takes into account the acquired experiences and lessons learned from the previous period, it also has a new area on the joint initiative of economic ICT associations – digital products and platforms. Thus, it is now divided into a total of seven priority thematic areas: personalized health care, smart and clean energy, smart and green transport, security and dual-use, sustainable and circular food, customized and integrated wood products, and the latest area, digital products and platforms. The business community has advocated for this since the adoption of the previous S3 strategy, which did not recognize the digital potential, notes Ratko Mutavdžić, a member of the Executive Board of the ICT Association at the Croatian Employers’ Association and director at Microsoft Croatia.

—

Ratko Mutavdžić

—– Specifically, digital potential in Croatia is finally being supported, not just that belonging to information and communication companies, but generally all creators of digital products and solutions. The strategy opens easier access to EU financial mechanisms that encourage this approach, for example, Digital Europe, but also focuses on the development of technologies based on artificial intelligence, blockchain, either through existing organizations or startup companies – explains Mutavdžić, who expects targeted competitions promoting the construction of products and platforms based on innovative technological solutions, as well as activities focused on knowledge, digital skills, and digital products in the fields of culture and education.

– The strategy aims to direct us towards the development of new, innovative, and competitive solutions that can be applicable in most global markets and seeks a departure from traditional, specific solutions for a single user for which we are known – completely customized solutions that are uncompetitive and unadaptable for market competition. In addition, such solutions must have an innovative component with added value, which can partly arise from in-house development, but also through collaboration with the academic sector, i.e., the part that can assist in research and development. Significant collaboration between the academic and private sectors has always been lacking in our development – partly because the academic sector has not been encouraged to take a stronger market role and collaborate, but also because part of the private sector has not entered the real market but depended on state consumption and the internal market. The strategy thus favors small, innovative, fast startup companies that want to compete globally and for whom innovation is the key to their success – believes Mutavdžić.

Development of Resilience in the ICT Sector

The Smart Specialization Strategies, continues Šarić, are a prerequisite for accessing funds from structural and investment funds (ESIF), as a key aspect of EU policy aimed at promoting innovation, competitiveness, and sustainable growth. However, as Hrvoje Balen, president of the HUP-ICT association and one of the participants in the preparation of the Strategy, emphasizes, it is not only a basis for directing funds through future RDI projects but also for projects transforming Croatia’s less developed regions, which will be financed from the allocated Integrated Territorial Program (ITP). Likewise, besides money, Balen emphasizes that S3 should transform the entire ICT industry.

—

Hrvoje Josip Balen

—– Thus, the task of this new vertical is to assist efforts to ‘push’ the ICT industry towards its own products and intellectual property, which have greater added value. Therefore, S3 and financial resources from structural and national budgets are intended to shift the focus of the ICT sector from renting people on projects and working on orders for software and platforms owned by foreign clients, in order to create greater resilience of companies to various fluctuations and crises and thus provide a basis for retaining the best people – explains Balen, who, along with colleagues from HUP ICT and the associations HGK IT and CISEx, lobbied for changes to the Strategy at the Ministry of Economy and the Ministry of Science, as well as with the European Commission and the World Bank.

The strategy, developed by MINGOR and MZO, was created through a ‘bottom-up’ approach, i.e., during its development, the insights of entrepreneurs and scientists were taken into account, all to be based on their real needs, capacities, and potentials. It is almost the only structured framework ‘to prove ourselves as a well-coordinated and trained team in the global innovation race or game’, believes Šarić.

– This approach and success would result in better unification of domestic forces, knowledge, and solutions within individual value chains for entering global markets, but also systematically attracting more technologically advanced and higher quality domestic and foreign investments. Perhaps S3, together with the Industrial Transition Plan, which is part of the integrated territorial program (ITP), should be our opportunity and the first real incentive instrument and platform to more strongly initiate functional and market unification of companies and scientists and all other potential stakeholders in joint, but targeted innovative ventures – adds Šarić.

Wider Impact ‘on the Ground’

After adoption, for the Strategy not to remain just dead letters on paper, it is important how it will be implemented for concrete results. Given the five-year scope and the RDI activities that are very dynamic and market difficult to predict, in practice, S3 should be an open document ready to change depending on circumstances, believes Šarić. However, in implementation, there is always a problem, especially with bureaucracy, according to Mutavdžić.

– Projects of innovative digital products and platforms are dynamic, with many adjustments and very often change and redirect, requiring quality support mechanisms. In other words, we now need to focus on the speed and quality of execution of the S3 strategy because we are in a competitive game with other countries that also want to apply innovative IT technologies and platforms for their competitive solutions. We cannot afford to have a strategy, sources of funding, and potential activities for which we are not sure how to apply, execute, and what results they will bring – concludes Mutavdžić.

Also, as Balen explains, it will be extremely important how future calls for project proposals will be announced.

– Unlike some calls from the period from 2014 to 2020, the dominant focus should be that applicants and holders in RDI and ITP projects can be companies, not scientific institutes, because only in this way can we utilize the transformational effect of the available funds – believes Balen.

On the other hand, as Šarić notes, practical impact and achieving goals should be ensured through effective management of the Strategy itself, but it remains to be seen how the new management system will function and whether the seven thematic ecosystems will cooperate in achieving the goals or whether ‘this cooperation will happen sporadically and intensively before the calls and competitions themselves are released’.

– The task of smart specialization strategies is not only innovation but also the transformation of those areas of the economy to which it is thematically and focused. However, like any other strategy, to have an effect, it must be understandable and implementable. If we look at it exclusively through the so-called RDI calls, the only sure indicator is the share of gross domestic expenditure on research and development in GDP (GERD) that will grow. However, whether the realization of RDI calls will have a broader impact ‘on the ground’ depends on how capable we are of orchestrating all these complex processes. And for those who need to orchestrate this, it should be a primary job, not a secondary or one of – concludes Šarić.