Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized The opinions expressed in this report do not necessarily represent the views of the World Bank or its member governments. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsover for any consequence of their use. ISBN 83-89188-21-X © The World Bank, Washington D.C. 2004 The World Bank 1818 H street, N.W. Washington, D.C. 20433 USA Telephone: 202-477-1234 Facsimile: 202-477-6391 http://www. worldbank.org E-mail: [email protected] Published by “Rewasz” Publishing House P.O. Box 174, 05-800 Pruszków, Poland Telephone: (48 22) 798 33 84 Facsimile: (48 22) 798 60 30 http://www.rewasz.com.pl E-mail: [email protected] TABLE OF CONTENTS ACRONYMS AND ABBREVIATIONS ..................................................... 5 ACKNOWLEDGEMENTS ................................................................... 7 EXECUTIVE SUMMARY .................................................................... 8 1. INTRODUCTION ......................................................................... 13 2. PRODUCTIVITY, R&D, AND GROWTH IN POLAND ............................... 15 TOTAL FACTOR PRODUCTIVITY ................................................................ 15 ABSORPTIVE CAPACITY: APREREQUISITE FOR THE ASSIMILATION OF KNOWLEDGE ................ 16 BASIC RESEARCH ............................................................................. 19 FOREIGN DIRECT INVESTMENT (FDI) ......................................................... 20 3. A BUSINESS ENVIRONMENT FOR INNOVATION .................................. 21 THE NATIONAL INNOVATION SYSTEM (NIS) ................................................... 21 REGIONAL INNOVATION SYSTEMS (RIS) ....................................................... 23 Lagging Regions ......................................................................... 24 Advanced Regions ........................................................................ 25 Innovation Specifics ...................................................................... 25 ECONOMIC RATIONALE FOR PUBLIC SUPPORT OF INNOVATION AND R&D ....................... 26 POSITIONING THE FIRM AT THE CENTER OF R&D-BOOSTING EFFORTS .......................... 27 THE BUSINESS ENVIRONMENT IN POLAND ..................................................... 28 Business Incorporation .................................................................... 30 Labor Market Rigidities and Costs ........................................................ 30 Intellectual Property Rights (IPRs) ........................................................ 31 Building Enforcement Institutions (Including Enforcement of IPRs) ......................... 34 Effect of Bureaucracy and Corruption on Innovation ....................................... 35 4. ENCOURAGING PRIVATE FUNDING OF R&D ...................................... 37 The Commercialization Cycle ............................................................. 37 THE POLISH VENTURE CAPITAL INDUSTRY AND THE EQUITY GAP ............................... 38 GOVERNMENT PROGRAMS TO ENCOURAGE PRIVATE R&D ...................................... 40 Tax Incentives ............................................................................ 41 Matching Grants ......................................................................... 42 Conditional Reimbursable Loans .......................................................... 43 Government-Owned and -Managed Venture Capital Funds .................................. 44 Partial-Risk Guarantees .................................................................. 44 Government Risk Sharing in Privately-Run VC Funds ...................................... 45 PILOT SEED CAPITAL TRUST .................................................................. 46 CONCLUSION ................................................................................ 48 5. BUILDING INSTITUTIONS FOR R&D AND INNOVATION ........................ 50 STATE RESEARCH INSTITUTES (JBRS) ......................................................... 50 The Future of the JBRs in Poland .......................................................... 53 HIGHER EDUCATION INSTITUTIONS (HEIS) .................................................... 55 R&D COMMERCIALIZATION COORDINATION AND SUPPORT ..................................... 56 Business Clusters ......................................................................... 56 Training ................................................................................. 56 Incubators and/or Accelerators ............................................................ 57 6. LEARNING SYSTEMS FOR A KNOWLEDGE SOCIETY ............................. 60 SOME INTERNATIONAL COMPARATORS ......................................................... 60 ACHANGING LABOR MARKET ................................................................ 61 Poland’s General and Vocational Education System ......................................... 62 TERTIARY EDUCATION IN POLAND ............................................................. 62 OUTCOMES OF A DECADE OF REFORM IN HIGHER EDUCATION .................................. 64 Linkages to Research and Development and Responsiveness to Innovation ................... 68 THE WORLD BANK 3 Table of Contents ALIFELONG LEARNING STRATEGY FOR POLAND ............................................... 69 Proposals for the Implementation of a Lifelong Learning System ............................ 71 CONCLUSION ................................................................................ 71 7. BUILDING THE ICT INFRASTRUCTURE ............................................. 72 THE ICT CONTEXT .......................................................................... 72 ICT and Innovation ...................................................................... 73 Linkages between ICT and Productivity .................................................... 74 Public Policy on ICT: Public Support for Diffusion and/or Production? ...................... 76 ICT IN POLAND .............................................................................. 76 Performance ............................................................................. 76 Accession and the EU Context ............................................................ 77 Infrastructure ............................................................................ 79 Unlocking the Market and the Regulatory Framework ...................................... 81 The Access Gap .......................................................................... 82 ICT POLICY PROPOSALS ...................................................................... 83 8. POLICY PROPOSALS .................................................................... 85 ANNEX 1: THE “SMART SUBSIDY” APPROACH TO UNIVERSAL ACCESS ........ 89 THE CONCEPT ............................................................................... 89 SMART SUBSIDIES FOR RURAL ACCESS IN LATIN AMERICA ...................................... 90 ANNEX 2: QUALITY ASSURANCE IN TERTIARY EDUCATION ...................... 92 ANNEX 3: PROSPECTS FOR EXPORT-LED GROWTH AND DATA SOURCES ...... 94 ANNEX 4: MATCHING GRANTS IN ISRAEL ............................................ 97 BIBLIOGRAPHY ............................................................................. 99 4 THE WORLD BANK ACRONYMS AND ABBREVIATIONS CASE Center for Social and Economic Research CBOS Centrum Badania Opinii Społecznej, Public Opinion Research Center CEEC Central and Eastern Europe Countries CEO Chief Executive Officer CMEA Council for Mutual Economic Assistance EBRD European Bank for Reconstruction and Development ECTS European Credit Transfer System EIF European Investment Fund EPO European Patent Office EU European Union EUA European University Association FDI Foreign Direct Investment FIAS Foreign Investment Advisory Service, World Bank FTE Full-Time Equivalents GDP Gross Domestic Product GERD Gross Domestic Expenditures on R&D GICT Global Information and Communication Technologies Department, World Bank GNI Gross National Income GRI Government Research Institute, See (JBRs) Jednostki Badawczo-Rozwojowe GSM Global System for Mobile Communications GUS Gło´wny Urza˛d Statystyczny, Central Statistical Office of Poland HEI Higher Education Institution IALS International Adult Literacy Survey, OECD ICA Investment Climate Assessment, World Bank ICT Information and Communication Technologies IDC International Data Corporation IFI International Financial Institutions IPO Initial Public Offering IPRs Intellectual Property Rights ISP Internet Service Provider IT Information Technology JBR Jednostki Badawczo-Rozwojowe. [Government research institutes / units] KAUT Komisja Akredytacyjna Uczelni Wyz˙szych, Accreditation Commission for Technical Universities KBN Komitet Badan´Naukowych, State Committee for Scientific Research. See MNiI KEA Knowledge Economy Assessment, World Bank KRASP Komisja Akredytacyjna Konferencji Rektoro´w Akademickich Szko´ł Polskich Accreditation Committee of the Conference of Rectors of Polish Academic Schools LAC Latin America and the Caribbean Region, World Bank LGS Loan Guarantee Scheme, United Kingdom MA Master of Arts MAP Multi-Annual Programme, European Commission MBA Master of Business Administration MCI [A Polish venture capital fund] MENiS Ministerstwo Edukacji Narodowej i Sportu, Ministry of National Education and Sports MNiI Ministerstwo Nauki i Informatyzacji