Innovation.bg Measuring the Innovation Potential of the Bulgarian Economy EDITORS Professor Marin Petrov, Chairman, Expert Council on Innovation, Applied Research and Communications Fund, Sofia Ruslan Stefanov, Project Coordinator, Economic Program, Center for the Study of Democracy, Sofia WORKING GROUP Dr. Teodora Georgieva, Member of the Expert Council on Innovation, Applied Research and Communications Fund, Sofia Dr. Konstantin Pashev, Senior Researcher, Economic Program, Center for the Study of Democracy, Sofia Todor Yalamov, Coordinator, Expert Group on Information and Communication Technologies, ARC Fund, Sofia Georgi Chinkov, Central European University, Budapest Daniela Mineva, Fellow, Economic Program, Center for the Study of Democracy, Sofia APPLIED RESEARCH AND COMMUNICATIONS FUND WOULD LIKE TO THANK: Albena Vutsova, Director, Scientific Research Directorate, Bulgarian Ministry of Education and Science Galina Doinova, State Expert, Directorate of Technological Development and Innovation Bulgarian Small and Medium Enterprises Promotion Agency Genika Boshnakova, Editor, University Publishing House “Economy”, University of National and World Economy, Sofia Grigor Stoevski, Analyst, Department of Economic Research and Forecasting. Bulgarian National Bank Eli Anavy, Director, Enterprise Policy Directorate, Bulgarian Ministry of Economy and Energy Emilia Radeva, State Expert, Enterprise Policy Directorate, Bulgarian Ministry of Economy and Energy Latchezar Borissov, Senior Expert, Economic Policy Department, Bulgarian Ministry of Economy and Energy Lyubomir Dimitrov, Director, Macroeconomic Analyses Department, Bulgarian Agency for Economic Analyses and Forecasting Dr. Maria Yordanova, Director, Law Program, Center for the Study of Democracy, Sofia Petar Kanev, London University (SOAS) Roumen Borissov, Executive Director, Bulgarian Agency for Economic Analyses and Forecasting Tihomir Bezlov, Senior Analyst, Vitosha Research, Sofia EXPERT COUNCIL ON INNOVATION AT THE APPLIED RESEARCH AND COMMUNICATIONS FUND Professor Benislav Vanev, Chairman, Bulgarian Union of Automatics and Informatics Georgi Vutev, Manager, Inventa Ltd. Georgi Dokov, Manager, Ikonomteh Ltd. Professor Dimitar Damyanov, Lecturer, Technical University, Sofia Professor Ivan Georgiev, Lecturer, University of National and World Economy, Sofia Professor Kostadinka Simeonova, Director, Centre for Science Studies and History of Science, Bulgarian Academy of Sciences Professor Liliana Pavlova, Centre for Science Studies and History of Science, Bulgarian Academy of Sciences Mario Hristov, Secretary General, Union of Inventors in Bulgaria Professor Milanka Slavova, University of National and World Economy, Sofia Professor Neno Trichkov, Deputy Dean, Faculty of Forest Industry, University of Forestry, Sofia Peter Petrov, Manager, Point L Ltd. Professor Rada Angelova, Agricultural College Professor Snezhana Hristiva, Executive Director, Business Innovation Centre – IZOT AD Hristo Traikov, Laboratory of Telematics, Bulgarian Academy of Sciences Dr. Tsvetàn Manchev, Deputy Governor, Bulgarian National Bank This publication is made possible with the support of the Bulgarian Small and Medium Enterprises Promotion Agency 1 Sv. Nedelia Sqr., 1000 Sofia, Bulgaria www.sme.government.bg ISBN-10: 954-9456-06-4 ISBN-13: 978-954-9456-06-6 © Applied Research and Communications Fund 2006 All rights reserved. 5, Alexander Zhendov Street, 1113 Sofia Tel.: +359(2) 973 3000 Fax: +359 (2) 973 3588 www.arcfund.net 2 TABLE OF CONTENTS SUMMARY . 9 INTRODUCTION . 15 THE BULGARIAN ECONOMY – IT IS INNOVATION TIME . 18 BUSINESS ENVIRONMENT FOR INNOVATION . 20 INSTITUTIONAL FRAMEWORK OF THE NATIONAL INNOVATION SYSTEM . 23 LEGISLATIVE FRAMEWORK FOR SCIENCE, TECHNOLOGY AND INNOVATION . 24 ORGANIZATIONAL STRUCTURE OF THE NATIONAL INNOVATION SYSTEM . 27 INDEX INNOVATION.BG . 31 1. GROSS INNOVATION PRODUCT . 35 INNOVATION PRODUCT . 36 TECHNOLOGICAL PRODUCT . 41 SCIENTIFIC PRODUCT . 44 2. ENTREPRENEURSHIP AND INNOVATION NETWORKS . 49 ENTREPRENEURSHIP . 50 INNOVATION NETWORKS . 52 TECHNOLOGY MARKET AND INFORMATION SOURCES . 54 3. INNOVATION INVESTMENT AND FINANCING . 57 INTERNATIONAL TRANSFER OF R&D INVESTMENT . 58 R&D INVESTMENT – SECTORS OF PERFORMANCE, SOURCES OF FUNDS, TYPES OF R&D . 60 FINANCING INNOVATION – VENTURE CAPITAL . 64 4. HUMAN CAPITAL FOR INNOVATION . 67 EDUCATION OUTCOMES, QUALITY OF EDUCATION AND LIFELONG LEARNING . 68 SCIENTIFIC CAREER, R&D AND HIGH-TECH EMPLOYMENT . 70 5. INFORMATION AND COMMUNICATION INFRASTRUCTURE . 73 ICT INFRASTRUCTURE AS A BUSINESS ENVIRONMENT . 74 ICT INFRASTRUCTURE AS A MEANS FOR DOING BUSINESS . 77 APPENDIX 1: NOTES ON METHODOLOGY, INFORMATION SOURCES AND DEFINITIONS . 81 GROSS INNOVATION PRODUCT . 83 ENTREPRENEURSHIP AND INNOVATION NETWORKS . 85 INNOVATION INVESTMENT AND FINANCING . 86 HUMAN CAPITAL FOR INNOVATION . 87 INFORMATION AND COMMUNICATION INFRASTRUCTURE . 88 APPENDIX 2: SCIENCE LITERATURE CLASSIFICATION . 89 APPENDIX 3: ADDITIONAL DATA . 93 LITERATURE . 97 INNOVATION . BG 3 ABBREVIATIONS AEAF - Agency for Economic Analyses and Forecasting BARDA - Bulgarian Association of Regional Development Agencies BAS - Bulgarian Academy of Sciences BCCI - Bulgarian Chamber of Commerce and Industry BG - Bulgaria BIA - Bulgarian Industrial Association BNB - Bulgarian National Bank BPO - Bulgarian Patent Office BSA - Business Software Alliance BSMEPA - Bulgarian SMEs Promotion Agency CEE - Central and Eastern Europe CEECs - Central and Eastern European Countries CERN - European Organization for Nuclear Research CMEA - Council for Mutual Economic Assistance CSD - Center for the Study of Democracy DCM - Decree of the Council of Ministers DNS - Domain Name Server EBRD - European Bank for Reconstruction and Development EC - European Commission EFTA - European Free Trade Area EPC - European Patent Convention EPO - European Patent Office ERP - Enterprise Resource Planning EU - European Union GDP - Gross Domestic Product GVA - Gross Value Added HU - Hungary IASTC - International Association of Science-Technology Centers ICT - Information and Communication Technologies IP - Internet Protocol KÀÌ - Knowledge Assessment Methodology MA - Medical Academy MBA - Master of Business Administration MEE - Ministry of Economy and Energy MES - Ministry of Education and Science MLSP - Ministry of Labor and Social Policy MVI - Market Value Index NACE - Nomenclature des Activites de Communaute Europeenne NCAS - National Centre for Agrarian Sciences NDP - National Development Plan NGO - Non-Governmental Organization NIF - National Innovation Fund NII - National Innovation Initiative NIPE - National Intellectual Products Exchange NK-NA - Does Not Known - No Answer NPO - Non-Profit Organizations NPP - Nuclear Power Plant NSF - National Science Fund NSI - National Statistical Institute OECD - Organization for Economic Cooperation and Development PIRLS - International Reading Literacy Study PISA - Programme for International Student Assessment R&D - Research and Development RIS - Regional Innovation Strategy SCR - South Central Region SG - State Gazette SIBIS - Statistical Indicators Benchmarking the Information Society SMEs - Small and Medium Sized Enterprises SU - Sofia University TIMSS - Third International Mathematics and Science Study TLD - Top-Level Domain UN - United Nations UNCTAD - United Nations Conference on Trade and Development US - United States USA - United States of America USB - Union of Scientists in Bulgaria USPTO - United States Patent and Trademark Office VC - Venture Capital WEF - World Economic Forum WIIW - Wiener Institut fur Internationale Wirtschaftsvergleiche 4 INDEX OF TABLES TABLE 1: SELECTED LAWS REGULATING THE SCIENTIFIC, TECHNOLOGICAL AND INNOVATION ACTIVITY IN BULGARIA . 24 TABLE 2: PRINCIPAL ACTIONS FORESEEN BY THE NATIONAL INNOVATION STRATEGY FOR 2005 . 25 TABLE 3: PROJECT GRANT APPLICATIONS AT THE NATIONAL INNOVATION FUND (SPRING SESSION MARCH 15 – MAY 5, 2005) . 25 TABLE 4: SECTORAL DYNAMICS OF R&D ORGANISATIONS IN BULGARIA DURING THE PERIOD 1994 – 2002 . 27 TABLE 5: USPTO PATENTS ISSUED TO BULGARIAN INVENTORS (1991 – 2004) . 42 TABLE 6: PARTICIPATION OF BULGARIAN ORGANISATIONS IN PROJECTS UNDER THE FIFTH FRAMEWORK PROGRAM OF THE EU FOR SCIENCE, TECHNOLOGICAL DEVELOPMENT AND INNOVATION (ACCORDING TO PROGRAM AREAS) . 66 TABLE 1.1.: MAIN MACROECONOMIC INDICATORS FOR BULGARIA . ..