Forum Scientiae Oeconomia

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1 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Innovations, entrepreneurship and economic growth Theme editors Katarzyna Szczepańska-Woszczyna, Prof. & Ladislav Klement, Ph.D

2 Forum Scientiae Oeconomia It is a quarterly scientific journal published by the Faculty of Applied Sciences of the University of Dąbrowa Górnicza. Editorial Team Editor-in Chief: Włodzimierz Sroka, Prof. Deputy Editor-in-Chief: Marek Walancik, Prof. Deputy Editor-in-Chief: Anna Wziątek-Staśko, Prof. Secretary: Małgorzata Caban, MA Editor for statistics: Jan Czempas, Prof. Editorial Staff: Renata Pikiewicz, MA Editorial Staff: Barbara Borkowska-Kępska, MA Theme Editors Strategic Management: Włodzimierz Sroka, Prof. Human Resource Management: Anna Wziątek-Staśko, Prof. Finance and world economy: Romuald N. Hanisz, Prof. Marketing: Katarzyna Szczepańska-Woszczyna, Prof. IT systems in management: Mirosław Zaborowski, Prof., Piotr Pikiewicz, PhD Management systems and business models: Adam Jabłoński, Prof. Value Based Management: Marek Jabłoński, Prof. Cover design: Beata Madera Technical editor and typesetting: Digitalpress Lidia Jaworska Wydanie publikacji naukowej zostało sfinansowane ze środków dotacji podmiotowej na utrzymanie potencjału badawczego w 2015 roku, przyznanej Wyższej Szkole Biznesu w Dąbrowie Górniczej przez Ministra Nauki i Szkolnictwa Wyższego. Copyright by the University of Dąbrowa Górnicza, Cieplaka street No. 1c, Dąbrowa Górnicza, Poland ISSN: Scientific Publishing of the University of Dąbrowa Górnicza, Cieplaka street No. 1c, Dąbrowa Górnicza, Poland Printed by: Digitalpress Lidia Jaworska

3 Table of contents 1. Ľudmila Fabová, Hana Janáková What does prevent Slovak enterprises to develop their innovativeness? Marcela Kovaľová People in the process of innovation and as the factor increasing business performance Dominika Gadowska, Agnieszka Różycka Innovations, R&D and knowledge transfer in the healthcare sector Krzysztof Waśniewski Innovation and new forms of economic governance Vanda Maráková, Diana Kvasnová Cooperation as a driving force of innovations in destination marketing management Małgorzata Wachowska Lags between academic science and inventiveness in Poland Vladimír Hiadlovský, Andrea Danková, Petra Gundová, Miroslava Vinczeová University as innovative organization Kamil Bąk Academic entrepreneurship conceptual framework and example from Poland Ladislav Klement, Ľubica Lesáková, Vladimíra Klementová, Ľuboš Elexa Innovation performance of the Slovak Republic Petra Hlaváčková, David Březina Economic insight into forest enterprises in the context of regional development Monika Burżacka, Elżbieta Gąsiorowska The importance of venture capital financing of start-up companies Iveta Kmecová Survey analysis of business potential and aptitude for business Guidance on the composition and structure of papers submitted to Forum Scientiae Oeconomia

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5 WHAT DOES PREVENT SLOVAK ENTERPRISES TO DEVELOP THEIR INNOVATIVENESS? Ľudmila Fabová Hana Janáková 1 hana.janakova@stuba.sk Slovak University of Technology in Bratislava, Slovakia 1 Corresponding author Abstract. The ability of a company to survive in the current business innovative environment essentially depends on its ability to innovation. Analysis of the behaviour of the most innovative countries in the world and use their experience may bring a lot of benefits to the Slovak companies, contributing thus to their development. There are several examples of successful innovators in the world and their experience could be used by Slovak companies to improve their innovativeness. Therefore the purpose of this paper is to identify the reasons of the poor innovativeness of the Slovak companies and propose some instruments for its improvement. Key words: innovation, innovation development, Global Innovation Index, Innovation Efficiency Index, innovation policy. Introduction Businesses operating in the current advanced economies have completely different conditions than in the past. Developed countries are in the stage of construction and developing knowledge economy and at the same time ongoing globalization processes are affecting all the economies. As a result, the business environment is changing in these economies. Their economic success depends primarily on the ability to use effective intangible assets. These include in particular knowledge, skills and innovation potential which are regarded as the most important source of competitive advantage of individual economies on macroeconomic and microeconomic level (Balog 2013). Businesses must adapt to the changes conditions and methods of competitive struggle. Their ability to survive in the competitive environment depend increasingly on their ability to innovate and appropriate utilisation of innovation. Majority of Slovak companies, especially small and medium ones, have a lot to do in this regard. Therefore analysis of the behaviour of the most innovative countries in the world and use their experience may bring a lot of benefits to the Slovak companies, contributing thus to their development. That s because there

6 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 are several examples of successful innovators in the world and their experience could be used by Slovak companies. Analysis of these examples and synthesis of selected data from the statistical resources allow to identify the basic reasons of poor innovativeness of Slovak companies. Thus the purpose of this paper is to identify the reasons of this situation and propose some instruments for its improvement. 1. Methods and resources Innovation is the way to increase efficiency and competitiveness of not only individual companies but also all of the economies. The level of innovation can be assessed at the macroeconomic level (i.e. evaluating the innovativeness of particular countries) and at the microeconomic level which evaluates the innovative activity of individual enterprises. Several indexes can be used to evaluate innovativeness at macroeconomic level. Nowadays, innovation and its development can be continuously monitored and observed by all the countries in the world. Investigated data are summarized and published by statistical agencies which consequently prepare central database for different world regions (Drucker 1993). Global inventory system is centralized in the World Trade Organization. This paper examines and analyzes the positive and negative aspects of development in selected areas of the world economy, including trade of goods and services. All tables and figures have been created based on data obtained from publicly available databases. At the global level for the evaluation of innovativeness among every indicators can be used the Global Innovation Index (GII) assessing the innovation capacity of the countries which is based on exploitation of their innovative potential. GII has been published every year since 2007 by the World Intellectual Property Organization together with Cornell University and INSEAD 1. Their report of 2015 evaluates 141 economies in the world using 79 indicators. The Global Innovation Index consists of two sub-indicators evaluation inputs and outputs of innovation processes. The inputs are evaluated by five pillars forming environment in the economy that stimulates the development of innovation. It consists of: institutions, human capital and research, infrastructure, market environment and business environment. Outputs, i.e. results of innovation activities are evaluated by two pillars that represent actual achievements in the sphere of innovation. These include: output in the form of knowledge and technology and creative outputs. The Global Innovation Index is the result of averaging the above two sub-indexes. In addition, the Innovation Efficiency Index (IEI) is calculated as the ratio of sub-index innovative products and sub-index of innovation inputs. The Innovation Efficiency Index allows to evaluate the effectiveness of innovation 1 Institute Européen d Administration des Affaires is one of the most famous and the biggest economic universities with campuses in Europe (Fontainebleau - France), Asia (Singapore) and the Middle East (Abu Dhabi). 6

7 What does prevent Slovak enterprises to develop their innovativeness? systems in different countries. Database is periodically updated based on the documents of other global databases. They are listed in Table 1. Table 1. Statistical data sources used in calculations EUROSTAT, Comtext and on-line databases SLOVSTAT, Statistical office of the Slovak Republic Innovation strategy of the SR in GII, The Global Innovation Index 2015 Country Report Slovakia 2016 The Global Competitiveness Report , World Economic Forum World Bank, World Development Indicators Source: The Global Innovation Index Discussions and results Innovation activities of enterprises in the SR OECD, Main Economic Indicators INSEAD 2.1. Evaluation of innovativeness in the world Nowadays innovations are considered to be one of the most important sources of economic growth. Therefore there are efforts to create an environment that would generate innovation and development. In the group of the most innovative countries in the world that are ranked by GII, there are only European countries, except the US and Singapore (Table 1). Also in the first group of 25 countries, there are mainly European countries (only 9 of them are non-european ones) and their positions change only. It is a positive change for Europe because a few years ago the European countries stayed behind their competitors. According to the economic maturity of the country s position, the first 28 countries in the ranking belong to the group of most developed countries. The others belong to less and the least developed countries. Therefore it is possible to conclude that the level of innovativeness of the country is closely related to its economic level. Economically most developed countries have enough resources for innovative development. Table 2. The top 10 in the GII and IEI in 2015 Rank Global Innovation Index Country Score (0-100) Innovation Efficiency Index Rank Country Ratio 1 Switzerland 68,30 1 Angola 1,02 2 United Kingdom 62,42 2 Switzerland 1,01 3 Sweden 62,40 3 Luxembourg 1,00 4 Netherlands 61,58 4 Iceland 0,98 5 USA 60,10 5 Republic of Moldova 0,98 6 Finland 59,97 6 China 0,96 7 Singapore 59,36 7 Malta 0,95 8 Ireland 59,13 8 Netherlands 0,92 7

8 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 9 Luxembourg 59,02 9 Viet Nam 0,92 10 Denmark 57,70 10 Côte d Ivoire 0,90 36 Slovakia 42,99 48 Slovakia 0,76 Source: The Global Innovation Index It is worth mentioning that the high efficiency of innovation can also be achieved by the least developed countries due to the fact that their innovative outcomes outweighs the innovative inputs. Therefore it is necessary to evaluate innovativeness of the countries comprehensively, analysing not only Global Innovation Index or Innovative Efficiency Index but also sub-indices of inputs and outputs, taking into account the stage of development of the economy. Analysis of separate indexes only may bring surprising results. For example, acc. to this index, Angola is ranked 1 st and Ivory Coast - 10 th. According to the YII ranking, there are only three countries from the top 10 evaluated by GII: Switzerland (2), Luxembourg (3) Netherlands (8). These three mentioned countries have been placed on the sub-index entries at the 2 nd, 20 th and 11 th places and in the sub-index for the first three outputs of the ranking. Switzerland, Luxembourg and the Netherlands therefore can be considered as the most innovative countries in the world as all of them have been placed at the front positions (The Global Innovation Index 2015). Switzerland requires a special attention as for the fifth time it is ranked on the 1 st place in ratings by GII. Switzerland is regarded as the innovation leader due to existence of global research institutions, high level of expenditures on research and development spent by businesses and intensive cooperation between academia and the private sector. Switzerland can be also proud of the highest number of patents per capita in the world and excellent education system that supports talents. Swiss innovation ecosystem creates a favourable environment for creative activity which is supported by public and private sectors and therefore obtains long-term innovative excellence Comparison of innovativeness of the Slovak Republic and Switzerland According to evaluation made by Global Innovation Index, Slovak Republic is ranked in the group of effective innovators, which cannot be satisfied. In 2015 Slovakia occupied 36 th place and among the members of the EU, only few countries were worse: Lithuania (38), Bulgaria (39), Croatia (40), Greece (45), Poland (46) and Romania (54) (The Global Innovation Index 2015). The analysis of the data presented in Table 3 allows to notice the following facts: in the Global Innovation Index, Slovakia achieved only 63% of the Swiss in 2015, while in the Innovative Efficiency Index it was 75%. When comparing the sub-indices of inputs and outputs, the difference is even greater. In case of 8

9 What does prevent Slovak enterprises to develop their innovativeness? the former which characterizes the innovative environment - Slovakia reaches 72% of Swiss level. This is probably the result of a relatively high evaluation of two pillars, i.e. institutions and infrastructure that reached 84%. It is necessary to note, however, that these two pillars are the worst in case of Switzerland (10 th and 15 th place in the ranking). Much worse is the result of sub-indices comparison of outputs, that evaluates the results of innovation activities. Slovakia achieved only 54% of Swiss level. This is again a consequence of the low evaluation of two pillars affecting outputs: knowledge and technology (47% of Swiss level) and creative output (62%). Among the seven pillars characterizing the inputs and outputs of innovation processes in Slovak republic, the lowest level were achieved by: human resources and research (53 rd place), the market environment (53 rd place) and business environment (58 th place). These three pillars of the five are characterizing the outputs of innovation processes. It means that Slovak Republic doesn t create an environment that would stimulate the development of innovation. Table 3. Comparison of innovation in Slovakia and Switzerland in 2015 Indicator Switzerland Slovakia Rank Value Rank Value SK/CH (%) Global Innovation Index 1 68, ,99 63 Innovation Input Sub-index 2 67, ,93 72 Institutions 10 89, ,1 84 Human capital & research 6 59, ,2 56 Infrastructure 15 58, ,3 84 Market sophistication 5 72, ,4 70 Business sophistication 3 60, ,7 61 Innovation Output Sub-index 1 68, ,05 54 Knowledge & technology outputs 1 72, ,7 47 Creative outputs 3 64, ,4 62 Innovation Efficiency Ratio 2 1, ,76 75 Source: Based on The Global Innovation Index Evaluation of the pillars of innovativeness of the Slovak Republic One of the worst evaluated pillars of innovativeness is human resources and research, therefore it will be analysed in more detail. The level of this pillar is influenced by the government expenditure spent on education and research and development (R&D). In case of these indicators the Slovak Republic is lagging not only for the Switzerland but also for the other European countries. The share of public expenditure on education (as a percentage of GDP) amounted to 3.1% in 2012, while in Denmark 8.8%, Switzerland 5.2%, and the EU average 5.3%. In the same year the annual expenditure for one student amounted to 9

10 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 2,810 Euros but in Switzerland 18,493 Euros. Table 4 compares the evolution of the expenditure on R&D as a percentage of GDP in the Slovak Republic and the European Union. The positive fact is that the expenditure on research and development in Slovakia since 2008 have increased but they still constitute less than a half of the EU average. Slovak Republic expenditure on research and development in 2014 constituted only 0.89% of GDP while the EU average was 2.03%. Several EU member states (Finland, Sweden and Denmark) have spent more than 3% of GDP on R&D ( Switzerland also spends around 3%). On the other hand, Israel spends 4.2% of GDP on R&D (Eurostat 2016). These countries belong to the innovative leaders. Table 4. Share of expenditures on R&D in relation to GDP in the EU 28 and Slovakia Region /year EU 28 1,76 1,76 1,78 1,78 1,85 1,94 1,93 1,97 2,01 2,01 2,03 Slovakia 0,50 0,49 0,48 0,45 0,46 0,47 0,62 0,67 0,81 0,83 0,89 SK/EU (%) Source: Based on Štatistický úrad Slovenskej republiky. Beside insufficient level of expenditures on R&D, one can observe inappropriate structure of these expenditures. In contrast to global trend, which promotes especially applied research, in Slovakia still dominates supported basic research (45% of expenditure). Additionally, R&D are financed mainly by business sources in advanced economies (EU 64%), while in Slovakia R&D are financed mostly by public funds (41%) (Eurostat 2016). Figure 1 presents the development of public and private expenditures spent on research and development in Slovakia in % of GDP. It points one negative aspect: while the public expenditure since 2013 has increased (mainly due to the disbursement of EU funds), the private expenditure is getting down. Figure 1. Public and private R&D expenditure in Slovakia (% of GDP) Source: Country Report Slovakia 2016:

11 What does prevent Slovak enterprises to develop their innovativeness? 2.4. Suggestions and measures Slovakia has set a target to increase expenditures spent on research and development to 1.2% of GDP by 2020 (Jeck 2014). Research and innovation strategy for smart specialization should start the reform of research and development in the period of This should include notably increasing resources of business environment so that in 2020 it accounted for 2/3 of the total resources spent on R&D. This implies much greater business involvement in research and also change of the nature of research (higher utilisation of research results in practice). The state should therefore adopt measures that would encourage businesses to a greater extent to engage in research, development and innovation. Some kind of remedy may be a tax relief of companies dealing with research and development. The government has also approved the concept for the development and support of start-up s ecosystem, however in practice the impact of these instruments has not been expressed yet. Slovak Republic has a lot of qualified and skilled labour power which, however, is not used properly and in the innovation area is not bringing the expected effects. The consequence of this fact is unsatisfactory qualification structure which is a result of improper educational system, i.e. not enough educating graduates orientated technical and natural science. In a companies there is a lack of creative workers innovators and to solve this problem, it is necessary higher interest of Slovak s high schools and universities in the practical needs and educate absolvents based on demands of their future employers. Every business subject should be involved more actively in the educational processes. For instance, the future employers should be engaged in the creation of educational programs. The mentioned problems could solve dual education system which starts to be implemented to the educational system in vocational high school. Companies could also support lifelong learning of its employees aimed at improving their qualifications and skills needed for the implementation of innovative actions. When comparing Slovakia with developed economies, one can observe that total number of employees working in R&D is relatively low. This is reflected in the poor performance measured by the number of scientific publications and citations. Slovak scientific and research institutions are weakly engaged in international cooperation which is be probably a consequence of their low competitiveness. Furthermore, this may be a result of a lack of quality evaluation of young scientists and creative workers. Development of innovation in a certain economy is providing a particular business sector (community). The level and intensity of innovation activity in individual companies depend not only on the willingness or ability of the company to devote to innovation but it is influenced also by external factors. One of them is appropriate pro-innovative business environment enabling enterprises in a greater extent to participate in the innovation processes. 11

12 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 A poor quality of business environment is one of the factors which characterize the innovation environment in the Slovak republic. It was noticed by the European Commission in its evaluation report for One emphasizes particularly detrimental bureaucratic and regulatory obstacles of law, inefficient public administration, under-utilizing electronic services, law enforcement and lengthy judicial procedures and even frequent changes in legislation and lack of transparency, as well as corruption (Country Report Slovakia 2016: 31). Low quality of business environment in Slovakia decreases attractiveness of the country for foreign and domestic investors and hamper innovation development of Slovak companies which are weakly involved in innovation activity. According to the data of Statistical Office of the Slovak Republic for the period of , innovative enterprises constituted 34% of all the enterprises, while the average in the European Union in the same period was 48.9%. Compared to the previous period , in which the share of innovative enterprises in Slovakia was 35.6%, the situation is even worse (Eurostat 2016). The low number of innovative enterprises in the Slovak Republic is the result of innovation barriers that are an obstacle for the successful development of innovation activities in businesses. These include cost, market and knowledge-based factors. Costs belong to the greatest barriers of innovative activities for Slovak businesses. Specifically is the lack of own resources for the financing of innovation, lack of finance from outside sources and really high costs of innovation that significantly reduces innovation activity of enterprises both in the industry and services. Access of individual enterprises to innovative activity and willingness to invest in the development of innovative processes is important too. To improve the innovation performance of enterprises and the entire economy, it is necessary to identify and eliminate innovation barriers. Some of the barriers can be eliminated at the enterprise level but most of them require solutions at the state level. Therefore the task for the state is to ensure adequate inputs for innovation process and create conditions (i.e. environment that can stimulate development of innovation) for its effective utilization. Innovation policy of each country (regions) has an important role to support innovation. It includes all the instruments and tools which are stimulating innovative development based on support of innovation and the creation of pro-innovation business environment. The result of the effective innovation policy could be sufficient investment in the R&D, high-quality scientific research and educational institutions and cooperation with businesses, intellectual property protection, as well as sophisticated system of support for innovative businesses from the state. In our opinion, however, such policy has not existed in Slovakia yet. 12

13 What does prevent Slovak enterprises to develop their innovativeness? Conclusions Historically, innovations have had a great impact on the economic growth of the particular countries. A number of leading economists confirmed this thesis. On the basis of the information overview on pro-innovation environment which were obtained from available resources like Global Innovation Index, Regional Innovation Strategy, and statistical databases, it is possible to identify some factors which influence enterprise innovation activity and its development. On the other hand, though Slovakia has adopted a number of strategic documents which should speed up the implementation of innovations into practice, the stated objectives are still impossible to meet and the country lags in the innovation development behind the developed countries. The basic reason of low innovative performance of the Slovak republic and the factor preventing the development of Slovak enterprises in their innovation is in our opinion the low amount of funds invested in innovation development. Therefore the government of the Slovak republic should finally pass from words to action and long-verbally declared support for research, development and innovation and change it to a gradual increase of the funds invested in this area. Because Slovakia is a small country, it requires prioritizing and investing money in these areas of research and development which bring desired effects and innovation. It means that Slovak scientific and research base should specialize mainly at the areas of science and research which can reach internationally comparable results. It finds also its confirmation in the EU as more established companies that dominate in the European economy focus on improving their products and services rather than on innovation. References Balog, M. (2013), Inovatívne Slovensko východiská a výzvy, Slovenská inovačná a energetická agentúra, Bratislava. Drucker, P.F. (1993), Inovace a podnikavost, Praha: Management Press. Country Report Slovakia European Commission, Brussels, , available at: en.pdf, (accessed 04 March 2016). Eurostat (2016), Statistics explained, available at: statistics-explained, (accessed 10 March 2016). Inovačná aktivita podnikov v Slovenskej republike (2014), ŠÚ SR, Bratislava, available at: (accessed 12 March 2016). Inovačná stratégia SR na roky , available at: gov.sk/attachment/vlastn%c3%bd%20materi%c3%a1l_doc.pdf?in- steid=1&atteid=51522&doceid=287000&mateid=5788&langeid=1&t- Stamp= , (accessed 15 March 2016). Jeck, T. (2014), Malé a stredné podniky na Slovensku a v Európskej únii: bariéry, financovanie a inovačné správanie, Bratislava: Ekonomický ústav SAV. 13

14 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Poznatkami k prosperite Stratégia výskumu a inovácií pre inteligentnú špecializáciu Slovenskej republiky, (2013), available at: /127879s (accessed 15 March 2016). Schwab, K. (2015), The Global Competitiveness Report , World Economic Forum, available at: Global_Competitiveness_ Report_ pdf, (accessed 13 March 2016). Správa o stave výskumu a vývoja v SR za rok 2014, Ministerstvo školstva, vedy, výskumu a športu Slovenskej republiky, Bratislava, available at: Material=25012, (accessed 13 March 2016). Štatistický úrad Slovenskej republiky, available at: (accessed 11 March 2016). The Global Innovation Index 2015, Effective innovation policies for development (2015), Geneva, available at: content/page/gii-full-report-2015/ (accessed 01 March 2016). 14

15 PEOPLE IN THE PROCESS OF INNOVATION AND AS THE FACTOR INCREASING BUSINESS PERFORMANCE Marcela Kovaľová Matej Bel University in Banská Bystrica, Slovakia Abstract. The article deals with the importance of human resources (HR) in the process of innovation. The employees stand for the important component of increasing innovativeness, performance and competitiveness of an enterprise. The aim of the article is to analyse the components of creativity, as well as its barriers and to propose the recommendations for its improvement, as an important prerequisite for creating innovations and increasing the overall business performance. The corporate culture and people in the context of innovation were discussed. The questionnaire with 44 statements was used with the aim to identify the type of the corporate culture, its strengths and weaknesses and its connection with the innovations at particular university department. Two typologies were used, F. Trompenaars typology and R. Goffee and G. Jones typology. 25 employees were asked and 18 answers were processed. Two predominant types of culture were identified and the main characteristics regarding the innovations were analysed in order to set the potential base for further improvements. Key words: business performance, creativity, human resources, innovations. people. Introduction The employees represent an important element of increasing innovativeness, performance and competitiveness of an enterprise. It is essential to manage people (human resources), as well as to ensure the right environment for people s creativity which supposes to be the precondition for the innovations. Consequently, the innovations are one of the preconditions for the overall performance of an enterprise. The article is divided into three sections people (human resources) in the process of innovation, people as a factor increasing business performance and corporate culture in the context of innovations. 1. Literature review 1.1. The importance of human resources in the process of innovation People (employees) are one of the most important resources of an enterprise creating the innovations. The competitive advantage of an enterprise often lies in the creativity of its human resources producing the right amount of (prop-

16 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 er) innovations. As Gupta and Singhal (1993) argue successful companies are innovative and creative not by accident, they effectively manage human resources to create and market new products and services. People are an innovative organization s most vital resource. Human capital, creativity, and diversity operate jointly in the production of innovation (Lee et al. 2010). The statement that human resources and their management is a key to successful innovation is supported also by Dalotă and Perju (2010) who claim the human element is involved in the whole innovation process. Specialists state that there are no good technologies or good innovations without competent people who can adequately use them and get benefit from them (Dalotă, Perju 2010). It can be stated that employees are one of the preconditions for the overall enterprise s performance, together with the technologies and the appropriate corporate culture. Based on the opinion of Barrett (2010), there are three drivers of innovation: smart people, smart ideas and the right environment that the government sets for innovation. This topic has been heterogeneous in the literature. Many authors deal with this issue (e.g. Hsu 2013; Chung 2004; Murray, Lewis 2015; Dalotă and Perju, 2010; Lee et al. 2010; Gupta, Singhal 1993; Thompson 2004; Workman 2009 etc.). As Dalotă and Perju (2010) confirm, human resource management has been scarcely treated in studies on innovation in the enterprises and the conclusions of some empirical studies in recent years are heterogeneous and focus on U.S. firms. Regarding the small and medium-sized enterprises, relatively few studies address innovation-related people management practices because HR practices are still considered to be emerging rather than fully developed and because relatively little focus has actually been placed on people management practices in the small and medium-sized enterprises context (Reid et al. 2002). On the other hand, studies have identified the importance of human capital in economic growth (Lee et al. 2010) but they have not considered the role of human capital in innovation or the relationships among human capital, innovation, and economic growth. The authors argue that the empirical literature has provided little evidence of the whole chain of causal flow from human capital via innovation to economic growth or has failed to specify the causal mechanisms at work among human capital, innovation and economic outcomes. The role of the management is in managing the creativity of people to produce the innovations. According to Hotho and Champion (2011), the source of innovation resides in the creativity and innovator capability of people. Agreeing with Okpara (2007), all innovation begins with creative ideas. Creativity is the starting point for innovation. Creativity is necessary but not sufficient condition for innovation. Innovation is the implantation of creative inspiration. This idea is supported also by Chak-Keung and Wai-Ling (2003) that it has become of the utmost importance for organizations to address business issues 16

17 People in the process of innovation and as the factor increasing business... creatively. Szczepańska-Woszczyna (2014) writes that at a time when finance is expensive, the firm s liquidity is bordering on crisis, the need for creativity, and innovation is more pressing than ever and as competitors fall by the way side, the rewards for successful products and process are greater. We should mention that not all employees can be totally creative, thus this is the job of the managers not only to manage the creativity but to recognize the talents as well. It is all right to have a heterogeneous team of people some of them being inventive and the others being uncreative. The concepts (terms) of creativity and innovation are often used interchangeably in the literature. In the opinion of desousa et al. (2012), researchers in creativity and in innovation come from different backgrounds and fail to make the necessary convergence. The field of creativity is closer to the behavioural sciences (like psychology and education) while researchers in the field of innovation come from areas related to management, economics, public administration or political science. Therefore, depending on the origins, both terms have been used with similar or different meanings, often contradicting each other. Some authors differentiate between the two concepts and consider creativity as an internal and intellectual process of bringing about new ideas while innovation refers to the practical application of such ideas (Mostafa 2005). It can be argued that this is the reason of the heterogeneity in this field. The idea of interchangeability of the terms is supported also by desousa et al. (2012) who write creativity and innovation could be used as synonyms, and we can refer to organizational creativity as a system to develop and channel individual creativity, through teams, towards profitable company innovations. The enterprise needs skilled and creative people in order to produce the innovations and to be competitive on the market. The dependence of the performance on the creativity, innovations and other variables is supported by Okpara (2007) who writes people become more creative when they feel motivated primarily by the interest, satisfaction, and challenge of the situation and not by external pressures. Within every individual, creativity is a function of three components: expertise, creative thinking skills, motivation. On the other hand, Horibe (2003) argues people are creative anyway and innovation needs two things: creativity and political savvy but these two skills (qualities) rarely reside in the same person Business performance and its link to innovations, people and creativity According to Hiadlovský et al. (2014), innovation is a meaningful, dynamic and developing process, resulting in a positive change oriented on improving the transformation process in an enterprise. Based on the opinion of Barrett (2010), the 21 st century is the century of innovation which defines corporate and country competitiveness. Similar opinion could be found also in Dalotă and 17

18 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Perju (2010), as they claim innovation and human resources management play an increasingly important role in sustaining leading edge competitiveness for organizations in times of rapid change and increased competition. In the literature, there are many articles dealing with the relation between the innovations and performance as well as between the creativity and performance of an enterprise (Mattia 2013; Mostafa, El-Masry 2008; Overall 2015; Stock et al etc.). Innovation is usually at the end of the creative process. Creativity or the results of creative process can be perceived one of the main sources of innovative ideas, products, services or solutions. Mattia (2013) and the others (e.g. Hessels et al. 2008) claim creativity that has an innovative outcome can lead to increased productivity and increased wealth for a firm. On the basis of Mostafa and El-Masry (2008) creativity may be the key to market success and improved operating efficiencies. They found specific results from increasing organizational creativity and those are new products, methods, increased efficiency, greater motivation, job satisfaction, teamwork, focus on customer satisfaction and more strategic thinking at all levels. Chung (2004) argues innovation is relatively easy to recognize, but very difficult to achieve consistently. The author has observed that innovation comes directly from two major areas: creativity and insight. Creativity can be spawned from the methods, processes, and applications. A strong method to problem solving can lead to great success. Talking about creativity, it is needed to discuss the factors enhancing creativity and the barriers to it. The barriers to creativity can be considered the opposites of the factors enhancing it, thus the list of the barriers to creativity in the enterprise could be as follows: criticism and sarcasm, extreme evaluation or over-control, conflicts and inappropriate corporate culture, no support and empathy, mistrust and fear among the employees and in relation to the managers, fear of failure, no humour and playfulness, no motivation to explore and curiosity, no incentives, no courage to risk, no environment for inventions and development of crazy ideas or solutions, no teamwork and responsibility, no discussion, no freedom and respect for the opinions of the others, sectorial specifications (some industries/branches are less innovative or creative), no time or money (lack of resources), excuses for being passive (not creative), no open-mindedness etc.. Reviewing the literature, the barriers can be completed with those from the studies (e.g. Mostafa 2005; Mostafa, El-Masry 2008; Chak-Keung, Wai-Ling 2003). Mostafa (2005) surveyed 170 managers to discover factors affecting organizational creativity in Egyptian organizations. He came to the conclusion (beside the others) that there is a statistically significant difference in attitudes towards organizational creativity based on the managers functional area in the organization and, at the same time, the higher the education of the manager, the 18

19 People in the process of innovation and as the factor increasing business... more is he/she likely to adopt creative and innovative activities. Mostafa and El-Masry (2008) distributed a total of 67 questionnaires among the students of universities throughout Egypt and 17 questionnaires among the students at the University of Manchester in order to analyse the barriers to organizational creativity. They discuss these barriers: not feeling involved, low morale, lack of communication, conflicting goals and objectives, lack of peer cohesion and support, no recognition and appreciation of work done, risk aversion, fear of failure, threatening evaluation, destructive criticism, status quo, management turn-down of suggestions, not supported by the management, time pressure, work pressure, rules and regulations to follow, conservative management style. Finally, Chak-Keung and Wai-Ling (2003) reviewed the literature and they found the environmental stimulants and obstacles to creativity. The environmental obstacles to creativity were following: time pressure, evaluation, status quo and political problems and the stimulants were as follows: various organizational characteristics such as inappropriate reward systems, constraint such as lack of freedom, organizational disinterest, poor project management, evaluation, insufficient resources, time pressure, over-emphasis on the status quo and competition. The authors further performed the research focused on the barriers to creativity in the hotel industry. 17 statements were taken into consideration when asking respondents from hotel industry about barriers to creativity. 288 valid responses were surveyed in order to discover the barriers to creativity. 4 factors, creativity barriers were recognized: low commitment to organization and system, fear of change and criticism, time and work pressure, rigid rules and company style. As Szczepańska-Woszczyna (2014) writes, organizational culture can effectively promote or inhibit cooperation, exchange of knowledge, experience and ideas. Open culture, promoting the participation of all team members in the creative process, is favourable to the activity and initiative of employees, while culture based on strong control is definitely not conducive to creativity and innovation. The author further states that in order to build innovative culture certain requirements must be met, involving six kinds of attitudes: the ability of managers to take risks, encouraging creativity, participation of all employees in building innovation-oriented culture, responsibility of both managers and employees for their actions, allowing employees to develop their interests and to use their unique talents, developing the company s mission, which the employees will identify with, providing employees with a sense that their work is meaningful and has a positive impact on the achievement of objectives (Szczepańska-Woszczyna 2014). In the literature, there are many typologies of the corporate cultures. Goffee and Jones (in Zabid et al. 2004) developed one of the most recent typologies of corporate culture. They categorized organizational culture into four main 19

20 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 types based on two dimensions: sociability, defined as friendliness in relationships between people in an organization, valued for its own sake and independent of its impact on the performance of the organization; and solidarity, the ability of people to pursue shared goals efficiently and effectively for the larger good of the organization without much regard for the impact on individuals and the relationships between them. Placing these two dimensions on the axes of a diagram, we can see four types of cultures defined as the quadrants: communal culture, fragmented culture, networked culture and mercenary culture. Each combination (culture) can have a positive or negative impact on the enterprise. According to Trompenaars typology (in Pyszka, Piłat 2011) culturally influenced organization can differ among countries based on certain key dimensions on the bipolar typology. The typology uses two dimensions: the orientation towards tasks or relationships being the first one, the orientation towards hierarchies or egalitarianism being the second one. The typology is based on four cultural types: family, Eifel tower, guided missile and incubator. It can be argued that the creativity in the company and the innovation, as its result, can be related to the employees (and their personality traits such as no courage, no open-mindedness, sarcasm, no humour or playfulness) as well as to the company (inappropriate social or working environment and culture, status quo, lack of money or time). Some of the barriers can be subjective as well as some others can be objective. 2. Corporate culture and people in the context of innovation at the university department In the last part of the article, the corporate culture and people in the context of innovation are discussed and this issue is based on the example of selected university department. Corporate culture, as in the literature mentioned, is one of the factors affecting people s creativity and innovations. In case it is inappropriately built and managed, it can be also a barrier to the innovations. Corporate culture is very strong and powerful motivational (or de-motivational) factor. The situation at the department, especially the innovations and the quality and quantity of work performance are directly influenced through the culture (regardless the branch, size or type of the company) Objective and methodology of research The aim of the research was to identify the type of the corporate culture, its strengths and weaknesses and its connection with the innovations at particular university department in Slovak Republic. The research was carried out and 25 employees were asked in order to gain the appropriate data. The answers from 18 respondents were used, representing 72% of all the staff. The type and position of corporate culture at the department were analysed and identified and most noticeable characteristics of the culture as the potential base for improve- 20

21 People in the process of innovation and as the factor increasing business... ments were detected. Two typologies were used, F. Trompenaars typology and R. Goffee and G. Jones typology. The culture was analysed from the point of view of insiders while using the observation as well as questionnaire and in-depth interviews. 44 statements about the corporate culture were included in the questionnaire with options to answer (from strong disagreement to strong agreement ) and this was distributed to all 25 employees of the department. The employees were asked to show their attitude to the statements such as: The relationships at the department are close, The employees are considered to be the sources of the growth of the department, There is a strong orientation towards tasks at the department, The employees are equal etc. 19 answers were received and 1 of them was eliminated due to the incompleteness. The structure of the sample was as follows: 9 pedagogical employees (50%), 4 operating staff (22.22%) and 5 postgraduates (27.78%); 10 employees working more than 10 years at the department and 8 employees working less than 10 years. On the basis of the results obtained, the predominant types of cultures were identified: according to F. Trompenaars it is the Eiffel tower culture (average agreement with the statements was 66.08%) and according to R. Goffee and G. Jones it is the networked culture (average agreement with the statements belonging to this type of culture was 49.43%). No absolutely pure type of the culture was identified since no one of them was completely predominant over the others or there were only little differences between the types. Figure 1. Average agreement with the statements about the corporate culture at the university department (in %) Source: Own elaboration. Analysing the responses related to the dominant culture (Eiffel tower culture based on the F. Trompenaars typology), it was found out that employees at the department are considered to be only the resources and the roles are exactly assigned to the employees on the basis of qualifications and skills. The university surrounding requires the employees to be the experts and to have required qualification. This could be sometimes understood as unrespecting people as the individuals (personalities) and it could negatively affect the overall atmos- 21

22 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 phere at the department, especially innovations. This type of culture is intended to symbolize the typical bureaucratic tall organization narrow at the top and wide at the base. The orientation toward building healthy (and informal) relationships is by employees appreciated much more than one-time increasing of salary. Regarding the second dominant culture (Family culture) it can be stated that there is the orientation toward relationships and hierarchies. Two most important culture types are oriented on the hierarchies not on the egalitarianism. The respondents answered that close relationships are typical only for small groups of people which cannot be considered the positive form of culture. This is visible in the context of innovations. Some employees belonging to the smaller groups strive to innovate while the others (as the outsiders) not a bit. The person of father at the department was hardly an inspiring leader but the formal authority, the innovation was poor. It was revealed that a father was only the figure on the top of hierarchy without the informal authority and respect from the side of the others. This statement does not support the family type of culture in the positive (ideal) meaning. Following the theory, it would be the best option to build an incubator-oriented culture at the department as it is the fulfilment-oriented culture with the emphasis on persons and equality. This type of culture is aimed at self-fulfilment and self-expression of its members, while the authority is associated to the personal traits of an individual rather than on the performance. This culture, when developed in a positive form, enhances the innovations and supports new ideas. Investigating the dominant culture according to the second typology (R. Goffee and G. Jones), the networked type (average agreement with the statements was 49.43%) and the fragmented type (average agreement with the statements received from 45.89% respondents) were revealed. The networked type of culture is the one with high sociability and low solidarity level, based on the personal relationships and friendships. Based on the results, the culture has the negative form. It was noticed that good relationships and sharing of information are performed within the specific small groups of people who are friends, while this is the cause of acting tactically and sharing the gossips rather than clear and true information. The decisions and the innovations as well, are made behind closed door or between friends. This can result in the breakup of atmosphere and can negatively affect the innovation and performance of the employees. The trust disappears, the informal groups are built, the adversaries and enemies are found, the collaboration is broken off and the sharing of information does not exist. Employees do not feel like a team and they are not willing to innovate, to work over-times or strengthen the relationships. An interesting fact was the employees did agree with the statement the department is characterized by the creativity, flexibility, loyalty of the employees, perhaps because they are well-educated and the workplace is specific due to its type 22

23 People in the process of innovation and as the factor increasing business... (university department). This statement could be perceived in a positive meaning as the results are influenced by specific environment. The employees of the university should be creative and flexible in order to fulfil the requirements of the customers (students), of the state and other interested parties (management, laws, community, region, city etc.). Discussing the second dominant type of the culture (the fragment type) it must be mentioned this is typical for the world of lawyers or journalists as well as for the university teachers and scientists. The respondents did agree with the statement they work for their own reputation and career not for the money and they are motivated intrinsically (they want to be the best in their branch). The results can be found disputable as in the world of university teachers there is sometimes no intrinsic motivation but the status quo which is hardly changeable (mostly for those who have been working as the teachers for long time and the change could be difficult e.g. financial situation, work time, family, commuting to the work etc.). Following the theory again, the networked type of culture would be most suitable for innovative companies as it is the culture characterized by good relationships (when built in a positive way), mutual cooperation support, hierarchical orientation, free information flows and almost no rules. In a negative form, the tolerance to the low performance due to the friendships, too high emphasis on the process and inappropriate politics, formation of the groups and circumvention of the formal hierarchies in an enterprise are present. The fragmented culture (the positive form) can be appropriate for some reasons in the enterprises where important innovations are produced by individuals not teams. This is the culture often typical for universities, consulting agencies or lawyers, editorial offices or virtual organizations and characterized by freedom, flexibility and fair-play in a positive form or by disloyalty, cynicism, criticism, struggle for survival and information hiding in a negative form Findings and limitations The employees stand for the important element of increasing innovativeness, performance and competitiveness of every enterprise. Reviewing the literature, it can be stated that the human resources, when appropriately managed, are involved in creative process and produce the right amount of innovations which can consequently result in increased performance and competitiveness. The most important findings emerging from the research at the selected university department can be summarized as follows (the symbol + standing for the strength of the culture, the symbol - representing its weakness and the symbol +/- meaning that it is the strength in some case and the weakness in the another case): the culture at the department is unambiguously hierarchically oriented (-), with low solidarity level (-) and the focus on the tasks rather than the relationships (+/-). The real manifested attributes of the culture (according the Trompenaars typology) at the department seems to be mostly consistent 23

24 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 with the attributes of the Eiffel tower type of culture, oriented towards the tasks, hierarchies and based on the roles (+/-). Following the Goffee and Jones typology, the most frequently represented type of culture was the networked one, based on low solidarity (-) and oriented towards common tasks and goals (+). In this type of culture, the tasks are of the greater importance than the relationships (+/-), the employees try to build the relationships one to each other (+) but the information, innovation and decisions are shared within the specific small groups and only among friends (-). Although the employees see the father in the head of the department (+), this person was rather the formal authority than the inspiring leader (-); the employees are loyal only as long as they get better job offer (-). The relationships are purpose-built (-), the values and goals are shared (+); the employees have high qualification and skills (+) as the department should be the place of high creativity, flexibility and expertise. The predominant type of culture should be the fragmented culture but the assumption has not been confirmed. Every typology of the corporate culture is very simplistic as it connects the elements of different (national) cultures. The differences between the types of the culture at the department were almost invisible. In the research, the authors strived for the objectivity due to the fact that the culture was analysed from the point of view of insiders. This could have provided them with the deeper look into the opinions and feelings but, on the other hand, the distance from the researched phenomenon could have been absent. The other discrepancies can be present as the authors applied the typologies from the Netherlands (F. Trompenaars) and the Great Britain (R. Goffee and G. Jones) to the conditions of the Slovak republic. Therefore it should be revised and adjusted to the conditions of the national culture. Conclusions Business performance is closely related to the innovations as well as people s creativity and to the appropriate work environment (i.e. corporate culture). The culture characterized by the openness, honesty, fair-play, good relationships, support, freedom, flexibility, self-fulfilment and self-expression is one of the factors enhancing creativity and innovations. The selected university department was researched in order to identify the type of corporate culture. Even though the theory says the culture based on strong control is definitely not conducive to creativity and innovation, the invisible control has the same effect on it. With the intention to improve the performance of the selected university department, following recommendations should be valuable: the ability of all employees to take responsibility to their actions as well as to take risks (e.g. even if no security of the employment exists at the department), participation of all employees in decision making process, developing the department s mission and provision of employees with a sense that the work is meaningful, 24

25 People in the process of innovation and as the factor increasing business... building healthy and competitive environment and relationships, supporting the employees in their efforts and enhancing their pride of the work, rewarding the efforts to innovate and to be productive etc.. If only some of the recommendations were followed, the performance could be increased and the stability of the results of the department could be achieved. References Barret, C. (2010), Smart people, smart ideas and the right environment drive innovation, Research Technology Management, 53(1): Chak-Keung, S.V., Wai-Ling, L.P. (2003), Barriers to creativity in the hotel industry -- perspectives of managers and supervisors, International Journal of Contemporary Hospitality Management, 15(1): Chung, W. (2004), The method and mode of research: Letting people s aspirations drive innovation and team collaboration, National Collegiate Inventors and Innovators Alliance, Proceedings of the Annual Conference Dalotă, M., Perju, A. (2010), Human resources management and the company s innovation, Romanian Economic and Business Review, 5(4): De Sousa, F.C., Pellissier, R., Monteiro, I. P. (2012), Creativity, innovation and collaborative organizations, International Journal of Organizational Innovation, 5(1): Gupta, A.K., Singhal, A. (1993), Managing human resources for innovation and creativity, Research Technology Management, 36(3): Hiadlovský, V., Tuschlová, M., Klement, L. (2014), Possibilities of innovations financing in one-man enterprise, in: Innovations and entrepreneurship the micro- and macroeconomic perspective, University of Dąbrowa Górnicza, Dąbrowa Górnicza: Horibe, F. (2003), Innovation, creativity, and improvement: Working the right lever to prosperity, The Canadian Manager, 28(1): Hotho, S., Champion, K. (2011), Small businesses in the new creative industries: Innovation as a people management challenge, Management Decision, 49(1): Hsu H. (2013), Factors affecting employee creativity in Taiwan s Hakka clothing industry, Social Behavior and Personality, 41(2): Lee R.F., Gates G., Florida R. (2010), Innovation, human capital, and creativity, International Review of Public Administration, 14(3): Mattia, A. (2013), Linking the creative process to innovation through software-enabled activities, International Journal of Management & Information Systems, 17(1): Mostafa, M. (2005), Factors affecting organisational creativity and innovativeness in Egyptian business organisations: An empirical investigation, The Journal of Management Development, 24(1): Mostafa, M., El-Masry, A. (2008), Perceived barriers to organizational creativity, Cross Cultural Management, 15(1): Murray, A., Lewis, J. (2015), Bringing together innovation, learning and people, KM World Magazine, 24(3):

26 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Okpara, F.O. (2007), The value of creativity and innovation in entrepreneurship, Journal of Asia Entrepreneurship and Sustainability, 3(2): Overall, J. (2015), A conceptual framework of innovation and performance: The importance of leadership, relationship quality, and knowledge management, Academy of Entrepreneurship Journal, 21(2): Pyszka, A., Piłat, M. (2011), Applying Trompenaars typology of organizational culture to implementation of CSR strategy, Journal of Intercultural Management, 3(2): Reid, R., Morrow, T., Kelly, B., Mccartan, P. (2002), People management in SMEs: An analysis of human resource strategies in family and non-family businesses, Journal of Small Business and Enterprise Development, 9(3): Stock, R.M., Six, B., Zacharias, N.A. (2013), Linking multiple layers of innovation-oriented corporate culture, product program innovativeness, and business performance: A contingency approach, Academy of Marketing Science Journal, 41(3): Szczepańska-Woszczyna, K. (2014), The importance of organizational culture for innovation in the company, Innovations and entrepreneurship The Micro- and Macroeconomic Perspective, 2(3): Thompson, J.L. (2004), Innovation through people, Management Decision, 42(9): Workman, M. (2009), Innovation through people, Professional Safety, 54(6): Zabid, A.R., Sambasivan, M., Azmawani, A.R. (2004), The influence of organizational culture on attitudes toward organizational change, Leadership & Organization Development Journal, 25(1):

27 INNOVATIONS, R&D AND KNOWLEDGE TRANSFER IN THE HEALTHCARE SECTOR Dominika Gadowska 1 dgadowska@wne.uw.edu.pl Agnieszka Różycka arozycka@wne.uw.edu.pl University of Warsaw, Poland 1 Corresponding author Abstract. The efficiency of the healthcare sector is highly determined by its ability to conduct innovative industrial research and development practices as well as to achieve effective knowledge transfers between the scientific world and the economy. The article presents the analysis of the current situation of the medical industry in Poland as well as abroad, describes factors and barriers influencing the advancements in innovative activities, and determinants of successful research and knowledge transfer. The main part of the article is a presentation of own research based on one of the basic innovation indicators patent publications whose analysis, taking into account type, time range and location, allowed for pointing out the most innovative areas with the best growth potential. Faced with a lack of comparable analyses, both in scope and specificity of data, we believe this research paper may carry substantial scientific value and could be of use in further studies. Key words: R&D, innovations, knowledge transfer, medicine. Introduction The term innovation comes from Italian innŏvātĭo and is used to describe new ideas, appliances, mechanisms or ways of developing them (Aronson 2008). In economics, innovation is often regarded as a precondition for higher productivity and sustained competitive advantage, as well as a prerequisite for boosting growth, especially during financial crises (Ciani et al. 2016). Product innovation is crucial for every single enterprise since it helps generating additional revenue. Process innovation aims at both increasing internal potential of a company and improving quality of products and services offered to the public (Omachonu, Einspruch 2010). In health policy innovation it s often equated with introducing new pharmaceuticals (Webb 2011; Bouvenot 2007). The efficiency of the healthcare sector is highly determined by its ability to conduct innovative industrial research and development practices as well as to achieve effective knowledge transfers between the scientific world and the economy. Innovations are among the key factors enabling companies to

28 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 succeed on the market, influencing the development of the economy in regions, countries and worldwide. The aim of this article is the analysis of innovative activities in the healthcare sector. Both current situation of the medical industry and future prospects of the sector are being discussed, with particular regard to Poland. The article presents the scale of innovation across selected countries, describes factors and barriers influencing the advancements in innovative activities, discusses determinants of successful research and knowledge transfer, as well as analyses the scale of innovation in medical sector as measured by patent publications data. The essay compiles numerous scientific works, information and data from several analyses and reports on the innovation topic, as well as Central Statistical Office of Poland (Główny Urząd Statystyczny, GUS), Eurostat, OECD and Espacenet statistics on the subject in question. 1. The protection of human health and innovations 1.1. Innovations in the healthcare sector Medical sector is said to be one of the most innovative fields, one that requires the use of advanced technologies and the newest science achievements. These aspects, paired with high expectations when it comes to life lengthening, enhancing diseased people s condition and introducing n ew medicines, make the collaboration of the scientific world with the business area absolutely crucial. Pharmaceutical companies very seldom decide to conduct basic research that is the first stage in the development of a new medicinal product. It s not only a very time-consuming step but a very risky one since only one among thousands of molecules being examined is qualified for further research, with the rest of the compounds never transcending to the next phase. Looking for ways to shorten the implementation path, pharmaceutical companies get interested in a specific research project only after it succeeds in having a positive preclinical experience. All that indicates that a new idea in the medical sector, its development and the beginning of the testing phase is usually conducted in scientific units and at universities. Characteristic to the medical sector are elevated hopes concerning the fulfillment of the basic needs of patients, fighting long-term suffering, illnesses and premature deaths. These expectations are the driving forces of the pharmaceutical market and lead to a continuous will to innovate and engage in research on new medicines, developing better methods of fighting pain, introducing supplements or providing access to cutting-edge diagnostic equipment. Implementing innovative solutions in the medical sector is very costly. According to data gathered in 2012 by a Forbes.com journalist, bringing one medical product to the market, if we take into account the failures of numerous research projects, cost around 4 billion US dollars. Average expenditures for 28

29 Innovations, R&D and knowledge transfer in the healthcare sector a single medicine varied between 3.7 and 11.8 billion US dollars (Herper 2013). One needs to remember that this amount is spread over many years since the average time for a new medical product to be brought to the US market is about 12 years. Therefore, the commitment of different people and entities from both the scientific world and the business sphere is prerequisite for conducting research in this sector. Entrepreneurial environment can not only introduce the new products to the market but also offer financial support. One of the basic indicators of the medical sector is the ratio of health spending to GDP. According to OECD statistics, the USA is the unquestionable leader of the ranking with health spending accounting for 16.4% of GDP in 2013, paired with a high level of private sector spending (8.5% of GDP). Figure 1 presents the situation for all OECD countries. Figure 1. Health spending (excluding capital expenditure) as a share of GDP, 2013 Source: OECD Health Statistics Since 2004, the average health spending as a share of GDP has risen by ca. 0.5 percentage points in OECD countries, mostly due to the growth in health spending, reaching 8.9% in In Poland the ratio of health spending to GDP is only 6.4% which is still significantly lower than the OECD average and ahead of only three countries: Mexico, Estonia and Turkey. When it comes to public spending share in total health spending, the OECD average is around 73% and this level was relatively stable over the last 10 years. Poland with its result of 71% doesn t differ much from that average. Among OECD countries, only two the United States and China reported the prevalence of private over public health spending. It s worth noting that in Poland, regardless of the slowdown caused by the economic and financial crisis, the growth rate of health spending was much higher than in the majority of OECD countries. In 2013 health spending per capita grew by 3.8%, significantly more than the observed increase of 29

30 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 ca. 1.0% in OECD countries. Total health spending growth slowed down mostly due to a decline in pharmaceutical spending. The latter was partially caused by changes in law introducing profit margin limits to wholesalers and retailers and cutting pharmaceutical spending within the social security budget. In 2013, expenditures on pharmaceutical products reached in OECD countries ca. 800 billion US dollars what accounts for around 20% of the average total expenses on healthcare (OECD Indicators 2015). Now let us look at the data gathered in the Eurostat database concerning the scale and scope of innovation in the medical sector in selected European countries. The analysis takes into account the following statistics of Medical and health sciences (FOS07): total intramural R&D expenditure in medical and health sciences, total R&D personnel and researchers in medical and health sciences as well as medical or veterinary science and hygiene patent applications to the European Patent Office (EPO). The study takes into account only these EU countries for which complete data entries in the Eurostat database for the most recent five-year period were available. Table 1 presents total intramural R&D expenditure in medical and health sciences per inhabitant. The countries were ordered by scale of spending in Poland came in second but last on that list with expenditures of 9.5 Euro per capita, preceding only Cyprus. The highest expenditures in this group are observed in Malta (34.2 euro per capita) who stayed the leader of the ranking even though the 2013 R&D spending fell by more than 7 euro per inhabitant as compared to the previous year. The Czech Republic and Bulgaria are the countries that are consistently demonstrating an increasing trend of spending. In Poland the expenditures were gradually rising as well, except for 2013 when the spending fell by 2 Euro per inhabitant. It s worth noticing that the situation in Slovenia changed significantly between 2005 and 2007 the country was spending on R&D much more (e.g Euro per capita in 2007) than in subsequent periods. Table 1. Total intramural R&D expenditure in medical and health sciences in selected European countries in (EUR per inhabitant) Country Malta 34,2 41,3 25,4 20,9 12,6 Portugal 26,5 28,5 30,9 29,5 27,5 Czech Republic 22,4 22,2 19, ,1 Bulgaria 15,9 15, ,1 3,6 Croatia 13,3 12,4 10,6 5,7 9,9 Slovenia 12,6 11,9 11,2 11,3 10,8 Turkey 12 12,3 11,4 11,6 10,9 Hungary 10,4 10,7 9 8,4 7,2 30

31 Innovations, R&D and knowledge transfer in the healthcare sector Slovakia 10,1 9,2 6,9 5,5 4,3 Poland 9,5 11,7 8,4 7,1 5,8 Cyprus 3,5 4,2 4,4 4,1 4 Source: Eurostat statistics If one looks at the total R&D personnel and researchers in medical and health sciences presented in the Table 2, it becomes apparent that the leader is Turkey with almost 36 thousand employees in 2012, almost double the number observed in Poland who is the second on the list (18865 people engaged in R&D activities). The comparison of data proves that over the years countries try, if not to increase R&D employment (the case of Portugal, Bulgaria and Slovakia), then to keep it at a stable level (in Slovenia and Croatia). In Poland R&D personnel numbers seem to be steady, except for 2007 and 2008 when they declined significantly. Table 2. Total R&D personnel and researchers in medical and health sciences in selected European countries in Country Turkey Poland Portugal Czech Republic Hungary Romania Slovakia Croatia Bulgaria Slovenia Malta Cyprus Source: Eurostat statistics. When taking into account medical sector, Poland seems to be placing itself in the middle of the league table, outrunning a lot of countries that are getting much better results in overall innovation rankings. If we look for example at the Summary Innovation Index (SII) computed within Innovation Union Scoreboard developed by the European Commission in collaboration with Maastricht Economic and Social Research and Training Centre on Innovation and Technology (MERIT), Poland found itself in the group of moderate innovators (Figure 2) leaving behind only Lithuania, Latvia, Bulgaria and Romania (Hol- 31

32 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 landers, Es-Sadki, Kanerva 2015). It may imply that Poland s ability to innovate is greater in medical sciences than in other fields of expertise. Figure 3. EU member states innovation performance as measured by SII The above finding is confirmed by the data gathered by the Central Statistical Office of Poland. In the pharmaceutical companies were the most innovative ones since up to 45.6% of them introduced innovations (Table 3). Table 3. Innovative enterprises in industry by type of introduced innovations, sections and divisions of NACE in Specification Enterprises that introduced innovations (%) Total New or significantly improved products New or significantly improved processes Total Mining and quarrying Manufacturing Manufacture of food products Manufacture of beverages Manufacture of tobacco products Manufacture of textiles Manufacture of wearing apparel Manufacture of leather and related products Manufacture of wood and of products of wood and cork, except furniture Manufacture of paper and paper products Printing and reproduction of recorded media

33 Innovations, R&D and knowledge transfer in the healthcare sector Manufacture of coke and refined petroleum products Manufacture of chemicals and chemical products Manufacture of basic pharmaceutical products and pharmaceutical preparations Manufacture of rubber and plastic products Manufacture of other non-metallic mineral products Manufacture of basic metals Manufacture of fabricated metal products, except machinery and equipment Manufacture of computer, electronic and optical products Manufacture of electrical equipment Manufacture of machinery and equipment n.e.c. Manufacture of motor vehicles, trailers and semi-trailers Manufacture of other transport equipment Manufacture of furniture Other manufacturing Repair and installation of machinery and equipment Electricity, gas, steam and air conditioning supply Water supply; sewerage, waste management and remediation activities Source: Own elaboration based on Główny Urząd Statystyczny, Factors and barriers influencing the innovation capabilities in the medical sector One can identify numerous factors and barriers affecting innovative processes in the medical sector. The major constraints can be classified into the following categories: financial, procedural and efficiency issues connected with the production and delivery methods. The major impediment to developing innovations in healthcare are financial matters. The producers of pharmaceuticals or medical devices are rarely capable of covering high operational costs, not to mention those attributable to new research projects or patent protection fees. The main reasons for that are the elevated expenses linked with carrying out research, including specialized laboratory equipment, reagents and qualified personnel. Within financial barriers limiting the development of the medical sector, it s worth mentioning insufficient private healthcare spending in less developed countries, like Poland (OECD 2015). 33

34 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The second group of barriers limiting the growth of innovative activities are procedural ones. Its significance is growing given the rising requirements of the medicine certification authorities: the number of procedures that need to be accomplished is mounting, and clinical tests need to be conducted on bigger groups of participants. Healthcare market is one of the most regulated ones in view of the necessity to assure that the medical treatment is not harmful to patients health and it doesn t have a negative impact on the environment. All the existing regulations significantly slow down the process of implementing innovations. Unfavorable bureaucratic arrangements impeding the functioning of companies are not helping either. Poland is among the most bureaucratically burdened systems in Europe. And, as international research carried out during the last 20 years in 40 countries around the world by Grant Thornton (one of the world s leading organizations of independent audit, tax and advisory firms) for International Business Report shows, excess of formalities leads to limiting the innovative initiatives and hinders entrepreneurship (Bariery rozwoju ). The third group of barriers is formed with efficiency issues. The assessment of the degree of economic effectiveness is crucial for formulating adequate health policy and is laying ground for effective management on different levels (Nojszewska 2011). The medical assessment of the efficacy of conducted research is yet another essential element since in order to be implemented, innovative solutions in the medical sector have not only to provide a high standard of healthcare and prove not be harmful to patients, they also need to fit the policy of minimizing costs. Moreover, accomplishing the assessment of medical efficacy can be a real challenge in the face of limited access to qualified doctors having acknowledged experience and expertise in the necessary areas. The next impediment to implementing medical innovation is the difficulty in performing a thorough market analysis. When it comes to innovative healthcare products it s hard not only to get trustworthy information concerning the effectiveness of treatment but also to foresee how the market would react to the introduction of a new medicine and how this would fit the delivery chain (Grajewski 2015). The mechanisms of developing new solutions in the area of human health and life protection mostly promote innovative medications that are aimed at curing diseases affecting the world population (e.g. anybody can go on to develop cancer, regardless of the region or prosperity of the country). Pharmaceutical companies, encouraged by a chance to set up a price monopoly provided by the patent protection, are more likely to invest in such area of research rather than, say, in curing filariasis observed in some regions of Africa and Asia (Nathan 2007). Such a race to maximizing profit may be a barrier to innovation since it prioritizes solutions offering the best revenue perspectives before those with highest scientific potential. 34

35 Innovations, R&D and knowledge transfer in the healthcare sector Another group of limitations is formed by production and distribution factors that are particularly important in healthcare. Manufacturing problems are quite common in all high-technology sectors and can include difficulties in switching to a new production cycle when a new medication is introduced, as well as technical or financial aspects of production itself. The distribution of an innovative healthcare product can be another substantial hurdle given the specificity of the medical sector and its complicated delivery chain including producers of medical equipment, distributors, doctors and nurses, as well as government bodies. A lot of difficulties arise from intellectual property rights law because enforcing a patent is very pricey, the procedure of getting protection requires the support of patent attorneys, and the risk of having to prove in court that one hasn t stolen an idea for a medical invention is relatively high (Grajewski 2015). The list of barriers limiting innovation in the medical sector can be very long, not only confirming how unique this area is but also pointing to some common elements, such as: lack of centralized knowledge base, limited resources and fast developing industry. Inventors and companies or institutions engaged in research and development in every single area need to face numerous challenges but the institutional, industrial and knowledge-based ones the medical sector encounters are unique. The optimization of innovative processes in the medical sciences requires surmounting various difficulties and cooperation of many parties: producers, service providers, conductors, doctors and patients. Among other, not yet enumerated, barriers, it s worth noting that the medical sector is characterized by high risk aversion. Doctors familiarized with specific procedures and methods of treatment, are reluctant to switch to use new pharmaceuticals. Their day-to-day focus on caring for patients may not be helping either since they don t have enough time to follow new therapy methods. The situation gets even more complicated by the level of stress of medical personnel and frequent exhaustion caused by working long hours. These factors may limit innovative thinking and decrease creativity of the staff involved (Grajewski 2015) The opportunities and perspectives of the medical sector The medical sector is constantly developing as a consequence of rising customer needs resulting from growing population, population ageing, higher chronic diseases morbidity, infrastructure development, technological progress and emerging markets growth. Global healthcare spending is constantly increasing. In 2013 it reached 7.2 trillion USD (10.6% of global GDP) which is 2.8% more than in the previous year. The growth rate is expected to accelerate in the following years (with an average of 5.2% a year), and spending reaching 9.3 trillion USD between 2014 and 2018 (2015 Global Health Care Outlook 2015: 1). 35

36 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The value of all companies active in the healthcare, as measured by market capitalization, surpasses now (as of April, 25 th 2016) 83 billion USD, with ca. 60% of this amount generated by major drug manufacturers. The biotechnological companies come in second with a result of 16.6 billion USD, followed by entities operating in generic drugs area (7.6 billion USD) and medical appliances & equipment 3.6 billion USD (Industry Browser Healthcare Sector). The market capitalization of the healthcare sector by industry is presented in Figure 4. Figure 4. Market capitalization of the healthcare sector by industry Source: Industry Browser, The value of the world s pharmaceutical market, which can be considered representative for the whole healthcare sector because of its size, has been showing positive growth rates for years. The volume of sales grew from 567 billion USD in 2006 by a third, reaching 770 billion USD in 2015 (Figure 5). The forecasts show that it will surpass a trillion of dollars by It is anticipated that the role of biotechnological solutions will be increasing and the sales of conventional drugs will be declining. The latter accounted for almost two thirds of the sales volume in 2006 but estimates show that their market share in 2020 will shrink to around 52%. 36

37 Innovations, R&D and knowledge transfer in the healthcare sector Figure 5. Global pharmaceutical revenues in by type of product * forecast Source: Statista, 2016 a. In 2015 R&D expenditures of the pharmaceutical sector reached 141 billion USD, more than 30% above the amount spent in According to the forecast, the value of research and development spending can grow by additional 19 billion USD until 2020, reaching 160 billion USD (Figure 6). Figure 6. Global pharmaceutical R&D spending in * forecast Source: Statista, 2016 b. As Figure 7 shows, a growth is also anticipated in the area of research and development spending in the medical technology sector which includes technological solutions designed to diagnose, monitor and treat all sorts of diseases. In 2007 investment in R&D in this area amounted to a bit more than 18 billion USD, was by 38% higher in 2015 and is expected to grow by additional 5.5 billion USD by

38 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Figure 7. Global pharmaceutical R&D spending in * forecast Source: Statista, 2016 c. The value of the Polish healthcare products market is estimated at 2 billion USD, out of which 85% is imports. According to Włodarczyk (2015), it should reach 3 billion USD by the end of the current decade. The pharmaceutical market is growing dynamically as its value increased in 2015 by 4.9% as compared to the previous year, reaching 29.9 billion PLN (Rynek Zdrowia 2015). With estimates indicating further growth, the volume of healthcare products sales may equal to 30.7 billion PLN (Frąckowiak 2016). The reports mentioned present general forecasts of the healthcare sector development. It s worth noting that given how unique this area is, the reality may as well be different. It is a fairly atypical domain demanding high research inputs, calling for a substantial level of innovation, with further development conditioned by new discoveries. The medical sector will be evolving for sure but these factors may influence the dynamics or even the direction of the progress observed. The final outcome may surprise everyone. 2. The authors research results 2.1. General outline Literature studies show a lack of research papers similar in aim and scope to this article. In view of the scarcity of compound, cross-section analyses of innovation in medical sector, the following part of the essay is based on the authors own studies. They take into account one of the main innovation indicators patents. The analysis of the number of patents published, including their timeline and geo-positioning, allowed us to identify general trends in innovative activities in medical sector, as well as to delineate significant forecasts for the coming years. The categorization of patents enabled us to identify which areas of the healthcare sector are the most interesting to re- 38

39 Innovations, R&D and knowledge transfer in the healthcare sector searchers and those characterized by the highest innovation indicators. Faced with a lack of analyses comparable in scope and specificity of data, we believe this research paper may carry substantial scientific value and could be of use in further investigation Methodology The Espacenet database was the main source of data on patent publications used in this paper. The search was carried out with regard to the following criteria: I. location Worldwide Patents, European Patents, Polish (patents classified as Polish); II. year from 1996 till 2015 and a forecast until 2025; III. category limiting the search results to those IPC categories (International Patent Classification, that are related to the healthcare sector. The following patent groups were included: A. Human necessities: A 61. Medical or veterinary science; hygiene: A61B. Diagnosis, surgery; identification; A61C. Dentistry; apparatus or methods for oral or dental hygiene; A61F. filters implantable into blood vessels; prostheses; devices providing patency to, or preventing collapsing of, tubular structures of the body, e.g. stents; orthopedic, nursing or contraceptive devices; fomentation; treatment or protection of eyes or ears; bandages, dressings or absorbent pads; first-aid kits; A61G. transport, personal conveyances, or accommodation specially adapted for patients or disabled persons; operating tables or chairs; chairs for dentistry; funeral devices; A61H. physical therapy apparatus, e.g. devices for locating or stimulating reflex points in the body; artificial respiration; massage; bathing devices for special therapeutic or hygienic purposes or specific parts of the body; A61J. containers specially adapted for medical or pharmaceutical purposes; devices or methods specially adapted for bringing pharmaceutical products into particular physical or administering forms; devices for administering food or medicines orally; baby comforters; devices for receiving spittle; A61K. preparations for medical, dental, or toilet purposes; A61L. methods or apparatus for sterilizing materials or objects in general; disinfection, sterilization, or deodorization of air; chemical aspects of bandages, dressings, absorbent pads, or surgical articles; materials for bandages, dressings, absorbent pads, or surgical articles; 39

40 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 A61M. devices for introducing media into, or onto, the body; devices for transducing body media or for taking media from the body; devices for producing or ending sleep or stupor; A61N. electrotherapy; magneto therapy; radiation therapy; ultrasound therapy; A61P. specific therapeutic activity of chemical compounds or medicinal preparations; A62. Life-saving; fire-fighting: A62B. devices, apparatus or methods for life-saving. Multiple database inquiries were performed. A single search included: IPC patent category, date ( period) and region (World, Europe, Poland). Since the search results in Espacenet database are limited to 10,000 records, sometimes in order to obtain adequately detailed data it was necessary to carry out searches covering monthly or even fortnightly data and then adding them for respective calendar year. Single patents may have belonged to more than one IPC category, e.g. a pharmaceutical product could be classified as A61K (the patent then included the method of production), as well as A61P (when the specific therapeutic activity was protected by the patent). These instances were not excluded from the database since each patent, even belonging to a few IPC categories described a different part of the discovery its unique feature, a process or use so constituted a separate component of each category, contributing to scientific progress achieved by a group of innovations. The data gathered provided detailed information on those areas of the healthcare sector that are particularly interesting for research communities, allowed for assessing the scale of innovative activities in terms of localization and time, evaluation of the current situation, as well as indicating tendencies and generating forecasts for the coming years. For the latter the trend extrapolation method was used Data Tables 4, 5 and 6 present the data on patent publications acquired from the Espacenet database classified by region (World, Europe, Poland) and IPC category (codes as mentioned in methodology section). Table 4. The number of patents in the healthcare sector worldwide in Year IPC category A61B A61C A61F A61G A61H A61J A61K A61L A61M A61N A61P A62B

41 Innovations, R&D and knowledge transfer in the healthcare sector Source: Own elaboration based on Espacenet Patent Search, Table 5. The number of patents in the healthcare sector in Europe in Year IPC category A61B A61C A61F A61G A61H A61J A61K A61L A61M A61N A61P A62B Source: Own elaboration based on Espacenet Patent Search, Table 6. The number of patents in the healthcare sector in Poland in Year IPC category A61B A61C A61F A61G A61H A61J A61K A61L A61M A61N A61P A62B

42 Forum Scientiae Oeconomia Volume 4 (2016) No Source: Own elaboration based on enet Espacenet Patent Search, Results World The analysis of global data indicates that almost 480 thousand healthcare patents have been published in It s almost three times as much as two decades ago. One can notice a significantly higher number of innovations appearing after 2005 when the number of patents surpassed 405 thousand. In the following years, especially in 2006 and 2007, there was a notable decline in the number of new findings which can be attributable to the world financial crisis, that had negative effects on the R&D sector. As a result, in 2006 there were only 367 thousand patents published. After the crises ended we are noticing again an upward trend that is particularly visible after The most numerous group is formed by A61K category of patents that includes different types of drugs and cosmetics that because of their active ingredients or specific form are not included in other categories that are meant for typical body cosmetics. This particular category accounts for around 33% of all patent publications (157.6 thousand), a bit less than in previous years since between 1996 and 2007 it was 38-39% (Figure 8). Still, we can call this category the most innovative one. A61P category is coming in second. It includes specific therapeutic activities of chemical compounds or medicinal preparations that may also fall into previously mentioned category A61K. Whereas in A61K category the mixture of ingredients, ways of composing them or treatment methods are being protected, in A61P only therapeutic activities are being safeguarded. Since 2013 the A16P category accounts for ca. 20% of all patent publications (97 thousand patents). In previous years it was even more 23-24%. The third 42

43 Innovations, R&D and knowledge transfer in the healthcare sector dominating category of patents is group A61B that makes up ca. 16% of all patents and is constantly increasing its share in the total number of patents. This category includes tools and equipment used in diagnostics and surgery. In thousand patents formed this group, almost four times as much as in The remaining categories account for less than 10% of all patents. Among them two are stepping out: A61M (including among others devices for introducing media into, or onto the body and devices for producing or ending sleep or stupor) and A61F (including among others filters implantable into blood vessels, prostheses, orthopedic, and nursing or contraceptive devices, and bandages) that account for 8.1% and 6.5% of all patents respectively. Figure 8. The structure of patent publications worldwide by IPC category in Source: Own elaboration based on Espacenet Patent Search, Technological progress and a resulting growing research potential cause the total number of patent publications to increase. Between 1996 and 2015 there was a 176% rise worldwide. Categories that stand out substantially are: A61G (transport, personal conveyances, or accommodation specially adapted for patients or disabled persons), A61H (physical therapy apparatus) and A61B that rose by 300% in that period. As previously mentioned, years were detrimental to all patent categories each one of them recorded a decline in the number of patents. In the following years the situation started to get better, with the indicators getting back on a path of growth (Table 7). Table 7. Average annual growth of the number of patent publications worldwide by IPC category in IPC category Year A61B A61C A61F A61G A61H A61J A61K A61L A61M A61N A61P A62B ,0% 0,4% 8,0% 6,9% 4,7% 8,2% 8,3% 5,6% 1,7% 9,2% 8,3% 23,3% ,7% 23,2% 13,6% 3,5% 4,5% 2,1% 13,0% 13,1% 14,6% 5,9% 13,6% -5,9% ,4% -2,2% 7,5% 8,0% 7,0% 4,4% 7,5% 7,8% 5,6% 11,4% 10,6% 5,8% 43

44 Forum Scientiae Oeconomia Volume 4 (2016) No ,2% 7,5% 9,7% 17,3% 20,0% 10,3% 13,6% 12,3% 7,4% 12,7% 26,1% 7,0% ,7% 10,2% 12,4% 8,1% 0,6% 4,2% 13,5% 14,3% 12,2% 10,8% 18,5% 0,8% ,7% 10,1% 12,5% 2,6% 5,8% 21,2% 18,1% 18,4% 14,7% 17,1% 19,9% 21,6% ,9% 0,4% 8,4% 5,8% 21,5% 14,3% 9,5% 15,6% 13,2% 11,5% 10,1% 23,8% ,7% 21,9% 7,3% 4,0% 5,5% 1,4% 5,2% 6,7% 8,7% 12,3% 1,3% 22,2% ,9% 1,4% 0,7% 1,1% 7,7% -3,3% 0,6% -4,8% 1,1% 4,0% -5,5% -0,5% ,7% -5,9% -10,0% -4,1% -5,9% -15,7% -8,4% -18,3% -12,2% -5,9% -11,3% -5,7% ,2% -6,4% 3,2% -1,3% -3,7% -0,2% -0,6% -0,8% 4,7% 1,9% 1,0% -9,4% ,3% 7,9% -2,8% 3,8% 8,2% 6,5% 0,3% -4,2% 4,5% -0,4% 11,6% -5,9% ,5% -4,0% -4,2% -2,3% -3,2% 1,3% -3,0% -2,9% -1,5% -4,6% -2,4% -4,0% ,4% 2,7% -0,2% 16,0% 19,6% 21,2% -5,6% 3,4% 10,1% 8,3% -2,5% 17,0% ,1% 3,9% 4,1% 10,8% 6,5% -9,1% 1,8% 2,3% 5,0% 5,0% 3,7% 13,1% ,6% 5,8% 3,4% 19,8% 11,4% 24,3% -1,3% 1,8% 14,9% 6,1% -0,7% -7,3% ,6% 4,8% 1,9% 23,1% 13,5% 3,8% 1,2% 5,0% 7,6% 4,9% -8,4% 14,3% ,7% 1,6% 2,6% -7,3% 0,4% -3,9% 9,9% 5,7% 0,5% 1,3% 9,0% 0,4% ,8% 5,2% 4,3% 41,9% 27,3% 23,5% 9,2% 12,6% 15,9% 12,4% 9,1% 7,6% Source: Own elaboration based on Espacenet Patent Search, The forecasts for the coming years indicate that the number of patent publications in the area of human health and life protection will be constantly growing. In 2018 one can expect surpassing the barrier of 0.5 million, and in 2025 this number may exceed 0.6 million patents. As a result, the number of innovative solutions may triple during three decades (Figure 9). Figure 9. The number of patents in the healthcare sector worldwide in * forecasted values Source: Own elaboration based on Espacenet Patent Search, may bring a significant drop in the number of patent publications in some categories, especially in A61G (-26%) and A61H (-17%). Other groups may experience smaller declines or even a slight growth. This may apply to A61P (+8%) and A61F (+6%). The situation should stabilize in the following years with the annual growth rates of around 2-4% (Table 8). It s worth noting 44

45 Innovations, R&D and knowledge transfer in the healthcare sector that the number of patents in all IPC categories will be growing but at a diminishing rate (usually smaller by 0.1% annually worldwide). Table 8. Forecasted annual growth rates of the number of healthcare patents worldwide in IPC category Year A61B -3,4% 3,8% 3,6% 3,5% 3,4% 3,3% 3,2% 3,1% 3,0% 2,9% A61C 2,4% 2,6% 2,5% 2,5% 2,4% 2,3% 2,3% 2,2% 2,2% 2,1% A61F 6,1% 2,2% 2,1% 2,1% 2,0% 2,0% 2,0% 1,9% 1,9% 1,9% A61G -25,9% 3,7% 3,6% 3,5% 3,3% 3,2% 3,1% 3,0% 3,0% 2,9% A61H -16,9% 3,8% 3,7% 3,5% 3,4% 3,3% 3,2% 3,1% 3,0% 2,9% A61J -11,9% 2,9% 2,9% 2,8% 2,7% 2,6% 2,6% 2,5% 2,4% 2,4% A61K 2,6% 2,2% 2,1% 2,1% 2,0% 2,0% 2,0% 1,9% 1,9% 1,9% A61L -2,9% 2,0% 2,0% 1,9% 1,9% 1,9% 1,8% 1,8% 1,8% 1,7% A61M -8,3% 3,4% 3,3% 3,2% 3,1% 3,0% 2,9% 2,8% 2,8% 2,7% A61N -0,5% 3,3% 3,1% 3,1% 3,0% 2,9% 2,8% 2,7% 2,6% 2,6% A61P 8,0% 2,5% 2,5% 2,4% 2,4% 2,3% 2,2% 2,2% 2,2% 2,1% A62B 0,9% 3,0% 2,9% 2,9% 2,8% 2,7% 2,6% 2,6% 2,5% 2,4% Source: Own elaboration based on Espacenet Patent Search, If one looks at the forecasted structure of patent publications, A61K group will still be dominating but its share will be gradually declining (from 33.7% in 2016 to 32.4% in 2025). Minor downturn may affect A61P and A61F categories (ca. 0.3% in 10 years). The most significant growth is expected in A61B group (1.19%). The second highest growth 0.39% is foreseen in A61M category (Figure 10). Figure 10. Forecasted structure of patent publications worldwide by IPC category in Source: Own elaboration based on Espacenet Patent Search,

46 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Europe In Europe, between 1996 and 2015 there were around 537 thousand patent publications in the area of human health and life protection. The highest number of inventions was reported in 2004 (more than 35 thousand), and the following years as it was worldwide reflect the impact of the world financial crisis and its consequences. One can observe the lack of a constant trend in patent publications (see Table 9) significant falls (reaching 20%) are alternately replaced by substantial growths (up to 35%). The highest increase since 1996 was noted in A61B (+259%), A61H (+230%) and A61N (+201%) categories. Table 9. Average annual growth of the number of patent publications in Europe by IPC category in Year IPC category A61B A61C A61F A61G A61H A61J A61K A61L A61M A61N A61P A62B ,7% 8,7% 3,1% -11,8% 24,7% 9,1% 9,5% 0,3% -2,5% 19,5% 11,4% 12,5% ,5% 22,2% 6,9% 17,0% -24,1% -19,7% 9,3% 8,8% 16,7% -3,9% 7,3% 1,2% ,8% 10,9% 25,1% 18,4% 26,1% 12,6% 8,4% 7,8% 9,2% 29,6% 7,3% 4,9% ,4% 23,3% 28,8% 31,6% 43,2% 21,8% 39,6% 33,5% 25,0% 32,4% 50,3% 38,4% ,1% 3,7% -1,9% 4,9% -10,1% 30,7% 5,1% 9,7% -5,4% 3,9% 18,8% -4,2% ,5% 0,8% 4,5% -11,6% 17,5% 5,2% 6,0% 14,9% 9,3% -7,3% 11,9% 16,7% ,7% -8,1% 3,2% 5,7% 7,1% -2,0% 4,6% 4,5% 9,4% 4,1% 3,1% -7,5% ,0% 32,4% 25,3% 20,7% 37,2% 32,0% 18,8% 23,3% 27,0% 26,0% 17,1% 44,7% ,6% 3,1% -9,2% -7,6% -8,9% -19,1% -5,3% -11,1% -8,4% 14,0% -24,3% 2,2% ,8% 7,7% 6,9% -9,7% 13,3% -8,6% 1,5% -2,7% -1,7% -2,9% -7,1% 1,1% ,9% -10,9% -2,5% 15,2% -13,3% -15,5% -3,7% -6,3% -5,7% -7,6% 0,0% -19,0% ,6% 4,2% 2,4% -3,9% 14,5% 5,4% 1,7% -3,9% 7,7% 25,4% 3,9% 14,8% ,5% 6,9% -9,8% -1,5% -11,1% -1,7% -11,3% 0,7% -3,9% -5,4% -8,4% -19,9% ,9% -3,6% -3,6% 1,1% 18,7% 0,0% 1,7% 2,6% 9,2% -4,2% 5,1% 35,0% ,8% -0,6% 10,9% 3,4% 1,1% 16,3% 15,5% 0,6% 15,0% 14,1% 18,1% -10,8% ,1% 4,4% 0,0% 5,1% -22,2% -7,1% -16,3% -3,4% 3,6% -1,4% -21,4% 11,5% ,1% -3,0% -3,0% -3,1% 14,3% 10,9% -10,0% -12,0% -2,5% -6,5% -9,6% 4,3% ,0% -1,8% 1,7% 10,3% 7,9% 2,6% -2,4% 5,6% 7,7% -1,7% -3,6% -17,7% ,9% 5,2% -7,8% -5,5% 18,5% -9,3% -1,4% -15,2% -6,9% 0,5% -1,2% -0,6% Source: Own elaboration based on Espacenet Patent Search, In line with worldwide trends, the most innovative IPC category in Europe are pharmaceuticals (A61K), accounting for 33% patents in However, the importance of this group is diminishing, especially in favor of A61B category with its 19% share of all patents compared to 11% in 1996 (Figure 11). Moreover, this category is the second biggest in Europe while worldwide it is the third. A61P, currently the third most significant patent group, is reducing its share from 21% in 1996 to 17% in The shares of other, less important categories (i.e. A61C, A61H, A61M and A61N) are slightly increasing, indicating growing research interest in these areas. This may imply a bigger innovative potential or higher expected demand in target groups that trigger researchers reaction. 46

47 Innovations, R&D and knowledge transfer in the healthcare sector Figure 11. The structure of patent publications in Europe by IPC category in Source: Own elaboration based on Espacenet Patent Search, The forecasts for the coming years indicate a further growth of innovation in human health and life protection as measured by the number of patent publications. It will increase from 28 thousand in 2015 to more than 42 thousand in 2025 (Figure 12). Figure 12. The number of patents in the healthcare sector in Europe in * forecasted values Source: Own elaboration based on Espacenet Patent Search, IPC category A61B, as well as A61N and A61M will experience the highest growth rate (ca. 3% annually). The lowest growth (1.2%) will be observed in A61P group (Table 10). Similarly to global trends, one can expect in Europe a diminishing rate of growth (anticipated to be lower by % annually). 47

48 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Table 10. Forecasted annual growth rates of the number of healthcare patents in Europe in IPC category Year A61B 12,4% 3,6% 3,5% 3,4% 3,2% 3,1% 3,0% 3,0% 2,9% 2,8% A61C 13,4% 2,7% 2,6% 2,5% 2,5% 2,4% 2,4% 2,3% 2,3% 2,2% A61F 23,9% 2,3% 2,2% 2,2% 2,1% 2,1% 2,0% 2,0% 2,0% 1,9% A61G 10,0% 2,2% 2,2% 2,1% 2,1% 2,1% 2,0% 2,0% 1,9% 1,9% A61H -0,5% 3,2% 3,1% 3,0% 2,9% 2,9% 2,8% 2,7% 2,6% 2,6% A61J 12,5% 1,6% 1,5% 1,5% 1,5% 1,5% 1,5% 1,4% 1,4% 1,4% A61K 33,5% 1,8% 1,8% 1,7% 1,7% 1,7% 1,7% 1,6% 1,6% 1,6% A61L 40,8% 1,8% 1,8% 1,7% 1,7% 1,7% 1,6% 1,6% 1,6% 1,6% A61M 11,5% 3,1% 3,0% 2,9% 2,8% 2,7% 2,7% 2,6% 2,5% 2,5% A61N 21,0% 3,2% 3,1% 3,0% 2,9% 2,9% 2,8% 2,7% 2,6% 2,6% A61P 34,7% 1,4% 1,3% 1,3% 1,3% 1,3% 1,3% 1,2% 1,2% 1,2% A62B 26,9% 2,7% 2,6% 2,6% 2,5% 2,4% 2,4% 2,3% 2,3% 2,2% Source: Own elaboration based on Espacenet Patent Search, The predicted structure of patent publications in Europe confirms the tendencies already observed in previous periods A61P and A61K categories gradually give way to less popular groups of patents. The decrease of their shares in total number of patents, though, will happen very slowly, not threatening their dominant role (Figure 13). Figure 13. Forecasted structure of patent publications in Europe by IPC category in Source: Own elaboration based on Espacenet Patent Search, Poland The growth of innovation in Poland was very dynamic before the global financial crisis. The economic slowdown had an exceptionally negative impact on Polish research and development area. The annual number of patent publi- 48

49 Innovations, R&D and knowledge transfer in the healthcare sector cations was the highest in 2004 and 2005 surpassing 5,000. Till 2007 it fell to only 628, i.e. by 88% as compared to Since then it has been gradually growing. In 2015 there were more than 2,600 inventions registered and this number is forecasted to reach 2,887 in 2025 (Figure 14). Figure 14. The number of patents in the healthcare sector in Poland in * forecasted values Source: Own elaboration based on Espacenet Patent Search, Since some of the IPC categories contained only a few patent publications a year, there was no point in analyzing annual growth rates. That was the reason for calculating 5-year growth ratios that are presented in Table 11. What becomes apparent is the leading trend indicating an initial dynamic increase in innovation that has then slowed down after 2006, and a gradual recovery in the following years. The biggest changes were observed in A61P category with an intensive growth between 2001 and 2005 (+177%), a significant fall between 2006 and 2010 (-66%) and a notable improvement between 2011 and 2015 (+119%). Similar tendencies could be spotted in other innovation groups, e.g. A61L, A61K, A61F or A61M. Quite unusual is the A62B category, which in fact is not a medical one but includes devices, apparatus and methods used by rescue specialists and fire brigades, so directly connected to life-saving and thus taken into account in this study. This group experienced the opposite trend a slowdown of innovations before and after the crisis and an increase of innovative activities during the crisis. One has to bear in mind that there were not too many innovations developed in this area so the results may be biased and disturbed. What is interesting is that not only A62B category resisted the difficult conditions of the crisis. Between 2006 and 2010 two more groups experienced a significant growth: A61G (+58%) and A61B (+27%). 49

50 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Table 11. Annual growth rates of healthcare patent publications in Poland in IPC category A61B 1,3% 27,1% 114,5% A61C 54,1% -30,7% 68,4% A61F 15,4% -31,9% 117,9% A61G -28,9% 58,1% 30,1% A61H 5,7% -0,9% 43,2% A61J 5,1% -27,7% 76,7% A61K 83,1% -65,6% 111,0% A61L 33,6% -29,7% 169,7% A61M 25,9% -22,7% 112,9% A61N 54,7% -18,3% 79,1% A61P 177,1% -66,0% 118,5% A62B -28,0% 43,1% -32,0% Source: Own elaboration based on Espacenet Patent Search, The structure of Polish innovations (Figure 15) resembles more the global trends rather than the European ones, with an even stronger domination of A61K group (57% of all patents in 1999 and 42% now) and A61P category coming in second (28%). A61B group is third but its share in the total number of patent publications (8.8%) is significantly lower than globally and in Europe, not much higher than the forth category A61F with a result of 6.5%. For years we have been observing a continuous decline of the group A61K in favor of smaller categories that are becoming more popular. Figure 15. The structure of patent publications in Poland by IPC category in Source: Own elaboration based on Espacenet Patent Search, The forecasts for the coming years indicate a further growth of human health and life protection innovations in Poland (see Table 12). The number of innovations will be growing at a fastest pace in A61B, A61L, A61M and A61N categories (3-4% annually). An innovative downturn may be experienced in 50

51 Innovations, R&D and knowledge transfer in the healthcare sector A62B group (ca. 2% annually). In line with worldwide trends, growth rates will be positive but diminishing (they are expected to be lower by % annually). Table 12. Forecasted annual growth rates of the number of healthcare patents in Poland in IPC category Year A61B -27,2% 4,3% 4,1% 3,9% 3,8% 3,6% 3,5% 3,4% 3,3% 3,2% A61C -17,6% 2,7% 2,7% 2,6% 2,5% 2,5% 2,4% 2,3% 2,3% 2,2% A61F -15,0% 2,6% 2,5% 2,4% 2,4% 2,3% 2,3% 2,2% 2,2% 2,1% A61G 16,1% 2,6% 2,6% 2,5% 2,5% 2,4% 2,3% 2,3% 2,2% 2,2% A61H -15,4% 1,9% 1,9% 1,8% 1,8% 1,8% 1,7% 1,7% 1,7% 1,6% A61J 37,8% 1,4% 1,4% 1,4% 1,4% 1,3% 1,3% 1,3% 1,3% 1,3% A61K -3,0% 0,6% 0,6% 0,6% 0,6% 0,6% 0,6% 0,6% 0,6% 0,6% A61L -20,7% 3,7% 3,6% 3,5% 3,4% 3,3% 3,1% 3,1% 3,0% 2,9% A61M 12,2% 3,2% 3,1% 3,0% 2,9% 2,9% 2,8% 2,7% 2,6% 2,6% A61N -17,9% 3,3% 3,2% 3,1% 3,0% 2,9% 2,8% 2,8% 2,7% 2,6% A61P 0,4% 2,1% 2,1% 2,0% 2,0% 1,9% 1,9% 1,9% 1,8% 1,8% A62B 79,8% -1,9% -1,9% -2,0% -2,0% -2,1% -2,1% -2,1% -2,2% -2,2% Source: Own elaboration based on Espacenet Patent Search, The structure of patent publications in Poland will gradually start resembling that of the global sector. A61K category will slightly lose its importance in favor of A61P (Figure 16). The researchers will increase their engagement in innovations from less popular groups (A61F, A61G, A61L, A61M and A61N). We may experience a decline in innovations in A61J and A61P but one can t be sure of these estimates since they were based on limited data. Figure 16. Forecasted structure of patent publications in Poland by IPC category in Source: Own elaboration based on Espacenet Patent Search,

52 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Conclusions Due to its specific characteristics, the medical sector is a fairly unusual area of the economy, requiring significant outlays, involvement of highly qualified research personnel, using specialized laboratory equipment and demanding lots of labor and time input. At the same time, it s a domain constantly under social pressure attributable to growing expectations pertaining to life lengthening, alleviating signs and symptoms of diseases and developing new generations of drugs. Additionally, there are very strict regulations in the medical sector concerning tests conducted on animals and people, and constantly changing procedures generate supplementary financial investments prerequisite for a new pharmaceutical to get across all research stages. The analysis of the patent publications presented in this article proved that the healthcare sector is a very innovative one. In Europe the area of human health and life protection accounted for more than 21% of all innovations (20% in Poland). Given the fact that healthcare related patents constitute only one subcategory of the eight sections of IPC classification, this result is remarkable. A closer look at the Espacenet data collected, lets us conclude that the most innovative segment of the healthcare sector is the division of medicinal products and some groups of cosmetics that in 2015 make up the biggest share of all patents across all three geographical regions, especially in Poland (42% as compared to 33% worldwide). This confirms a very good condition of drug manufacturing companies, whose market value was previously mentioned as being the highest in the healthcare sector (Figure 3). The category including diagnosis, surgery and identification solutions is highly innovative as well. Its role is higher in Europe than globally, and interestingly significantly lower in Poland as patents falling into this category are 10% less than in Europe, where they account for 19% of all healthcare patents. The third group standing out is the category of specific therapeutic activity of chemical compounds or medicinal preparations. In this case, the situation is exactly the opposite. While researchers interest in this area is comparable globally and in Europe (20% and 17% of all patents respectively), in Poland the number of patents from this category is by 11% higher than the European average. The analysis showed an easily identifiable trend in how the structure of patents changes. The share of traditionally predominant categories is diminishing in favor of those less popular till now. One can expect more patents published in the area of devices for introducing media into the body, devices for transducing body media and apparatus used in electrotherapy, magneto therapy, radiation therapy or ultrasound therapy. As a result of continuous technical progress, the number of patent applications that are filed every year is rising. This situation is not going to change 52

53 Innovations, R&D and knowledge transfer in the healthcare sector in the foreseeable future but the barriers discussed in the paper will gradually slow down the growth rate of innovation indicators. Advancements in global research technologies increase R&D potential and simplifies the way experiments are being carried out. On the other hand, the more advanced the techniques used, the longer and more expensive the research process. Customers are getting more demanding, expecting innovative, scientifically proven and technologically advanced solutions. As a consequence, innovations are in greater demand than ever before. Regulatory authorities complicate the situation even further by imposing tighter regulations. As a result, innovation is and will be increasing but its growth rate is steadily declining (by ca % annually). In the coming decade, the total number of patent publications will increase by ca. 25% with the quantities mounting up every year. In Poland, both the medical sector situation and innovative activities trends are somehow different than those of other EU or OECD countries, but the observed growth rate of R&D spending, the use of EU funds, and the high level of expertise of Polish research personnel gives hope for the gradual creation of a level playing field. International innovation flow, knowledge transfer and cooperation of various groups of interest will be a key aspect allowing for breaking the boundaries existing in Poland, as well as abroad. References 2015 Global Health Care Outlook. Common goals, competing priorities (2015), Deloitte Touche Tohmatsu Ltd. Aronson, J.K. (2008), Something new every day: Defining innovation and innovativeness in drug therapy, Journal of Ambulatory Care Management, 31(1): Bariery rozwoju przedsiębiorstw, czyli co najbardziej hamuje wzrost polskich firm (2013), Raport z wyników ankiety przeprowadzonej podczas II Forum Przedsiębiorców Grant Thornton, grudzień Bouvenot, G. (2007), The benefit provided by new medicinal products in the viewpoint of the French National Authority for health, Therapie, 62(5): Ciani, O., Armeni, P., Boscolo, P. R., Cavazza, M., Jommi, C., Tarricone, R. (2016), De innovatione: The concept of innovation for medical technologies and its implications for healthcare policy-making, Health Policy and Technology, 5(1): Espacenet Patent Search (2016), available at: espacenet.com/ advancedsearch (accessed 07 June 2016). Frąckowiak, J. (2016), Dane Pharma Expert dotyczące rynku farmaceutycznego w Polsce, available at: rynek _ farmaceutyczny marzec_2016.pdf (accessed 25 April 2016). Grajewski, B. (2015), 10 barriers to healthcare innovation, The Guardian, Healthcare Network. 53

54 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Herper, M. (2013), How much does pharmaceutical innovation cost, Forbes, 11 August. Industry Browser Healthcare Sector Industry List (2016), available at: (accessed 25 April 2016). Nathan, C. (2007), Aligning pharmaceutical innovation with medical need, Nature Medicine, 13(3): Nojszewska, E. (2011), Economic effectiveness as an analytical tool for health care, Management Problems, 9(3): OECD Health Statistics 2015 (2015), Country note: How does health spending in Poland compare?, available at: (accessed 31 May 2016). OECD (2015), Health at a glance 2015, OECD Indicators. Omachonu, V.K., Einspruch, N.G. (2010), Innovation in healthcare delivery systems: A conceptual framework, The Innovation Journal: The Public Sector Innovation Journal, 15(1): Rynek Zdrowia (2015), Wartość aptecznego rynku farmaceutycznego w IV kwartale 2015 r. wzrosła o 3,6 proc., available at: pl/farmacja/wartosc-aptecznego-rynku-farmaceutycznego-w-iv-kwartale-2015-r-wzrosla-o-3-6-proc,158308,6.html (accessed 25 April 2016) to 2020, available at: worldwide-medtech-research-and-development-spending/ (accessed 25 April 2016). Webb, D.J. (2011), Value-based medicine pricing: NICE work?, Lancet, 377(9777): WIPO International Patent Classification (IPC) Official Publication, web2.wipo.int/classifications/ipc/ipcpub/#refresh=page (accessed 07 June 2016). Włodarczyk, W. (2016), Rośnie rynek wyrobów medycznych, jego wartość już przekracza 2 mld dolarów, termedia, available at: mz/rosnie-rynek-wyrobow-medycznych-jego-wartosc-juz-przekracza-2- mld-dolarow,19049.html (accessed 25 April 2016). 54

55 INNOVATION AND NEW FORMS OF ECONOMIC GOVERNANCE Krzysztof Waśniewski Andrzej Frycz Modrzewski Kraków University, Poland Abstract. The purpose of the paper is to study the connection between technological progress on the one hand, and systems of economic governance, on the other hand. A simple model of economic governance is introduced, deriving the functional capacity of social structures to carry out technological progress from their capacity to appropriate capital. That capacity is grounded both in efficiency and legitimation. That broad theoretical frame is applied to the coexistence of constitutional states and other forms of economic governance. Empirical evidence indicates that constitutional states are losing their capacity to appropriate capital. Additional, contextual evidence suggests two other patterns of social change. On the one hand, demographic growth is slowing down. On the other hand, absorption of innovation in the global economy, back in the past strongly correlated with the fiscal intervention of governments, presently seems to have disconnected from the economic power of constitutional states. Key words: economic governance, innovations, social change. Introduction December the 12 th, 2015, the Framework Convention in Climate Change was signed in Paris, under the auspices of United Nations. It marks an important step in facing the seemingly biggest challenge for our civilisation, namely the passage from fossil fuels to renewable energies, as well as the implications of the already happening climate change. The Framework Convention is based on the concept of nationally determined contributions, from the part of signatory states. Thus, constitutional state seems to be the pivotal structure of economic governance in that global, institutional scheme. Yet, new forms of economic governance are emerging. They can be tentatively grouped into three categories: libertarian, collaborative, and corporate. Libertarian initiatives seem to have gathered power after the financial crisis. It is to notice that the libertarians have evolved. During the period between 1950 through 1980, their ideology focused on the private property of assets, especially real estate, as expressed for example by Heath (1957) or by McCallum (1970). Presently, the libertarian doctrine seems to be grounded in the notion of social flexibility: modern libertarians assume that society is a form of technology. As such, it develops through diversity, and experimentation. Flexible social structures based

56 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 on private contracts are claimed to be much more apt to achieve these ends that the constitutional state (e.g. King 2005; Janeba 2006; Francis, Francis 2011). On the other hand, collaborative structures are emerging in very close connection with technological innovation. This is the so-called open source culture, reflected, among others, in intellectual property based on the notion of creative commons (which is de facto collective property). This type of social structures takes the form of fluid, flexible networks, based on adherence through action rather than on formal contracts. Three-dimensional printing, and the production of software are currently among the most preferred domains of those networks. An excellent account of developments in those structures is provided by Rifkin (2014). At the corporate level, interesting developments are taking place in the domain of international trade. The movement of trade facilitation, finds a very explicit expression in the Trade Facilitation Agreement (TFA), negotiated Bali, December 2013, under the auspices of the World Trade Organization. The TFA explicitly states that the principle of national sovereignty has produced too many non-tariff barriers to trade, and those barriers should be abolished in order to develop international trade. World Trade Organisation claims that especially the developing countries should give up some of the legal procedures they practice as for imported goods, in order to be able to have gains from trade. In parallel, regional agreements, like the Transatlantic Trade and Investment Partnership between the United States and the European Union, or the Transpacific Trade Partnership between the United States and Asian countries are being negotiated, in quite an intriguing secrecy. They all make a new generation of international agreements, and progressively introduce a new notion, namely a systematic primacy of corporate business interests over the interests of constitutional governments. That primacy seems to find its expression in a general principle that when national sovereignty comes in the way of international business, business should have priority. Are we facing as deep a shift in the paradigm of public governance as these initiatives suggest, or are they just foam on the surface? If there is a paradigm shift, is it functional or dysfunctional regarding the ambitious goals of the Framework Convention on Climate Change? The present paper attempts to tackle this issue. The next chapter provides theoretical foundations for such an assessment, and makes the grounds for presenting empirical evidence, which follows. 1. Theoretical model of economic governance The starting point of the theoretical reflection is the question whether at all, and to what extent social systems can improve endogenously. In this article, it is assumed that social systems have the capacity to learn through interaction and experimentation, i.e. they have the capacity to generate new, functional patterns of collective behaviour by experimenting with various strategies and 56

57 Innovation and new forms of economic governance sharing information about their outcomes. The accumulation of learning is imperfect, as the theory of games with imperfect recall, by Selten (1975), suggests. Besides the possible control of territory, hierarchical social structures have the capacity to control capital goods, through the acquisition of binding, enforceable claims on resources, or through force. Capital goods controlled exclusively through force have no measurable market value. The capacity of any social structure to impact or control the overall allocation of capital in the economic system depends on the share of the total capital stock that the given social structure can appropriate. The current state of technology is reflected in the allocation of resources capital and labour between various technologies. Each individual technology is represented by a production function. The latter can display perfect substitution between capital and labour, in the Cobb-Douglas manner, or an imperfect one. Technological change means significant (i.e. more than random) change in the distribution of resources over the set of available technologies. Systems of economic governance can be understood as complex sets of institutions pertaining to the appropriation and employment of valuable resources. Consistently with the relatively recent developments of the old institutional school, institutions emerge and change, as the outcome of linguistically logical statements about reality (Hodgson 1993, 2000, 2006; Searle 2005). Those linguistic structures give rise to recurrent forms of action, as described in the classical sociological theory by Parsons et al. (1965). Recurrent patterns of action transform, in turn, into the rules of social games with imperfect information, as described by Harsanyi (1953, 1966, 1967, 1968). Some of those rules are selected to be the constitutive rules of legal systems, and they become secondary rules of recognition as for the primary legal rules of conduct, consistently with Herbert Hart s theory of law (Hart 1961). In other words, any institutionalized system of economic governance emerges and acquires relative stability as the outcome of past strategies applied by social agents. Any presently observable form of economic governance is behaviourally logical, and, in the same time, lagging on current events, to the extent that it is grounded in collective, past experience. The institutional structure of an economic system can be represented as a total of shares in the capital stock, held by different types of social structures. The capacity, on the part of any type of social structures, to produce technological change depends on their relative share in the capital stock. In a simplified form, that institutional structure can be represented as a binomial distribution of capital between the constitutional states on the one hand, and all the other types of social structures, on the other hand. Those other types of social structures are, most of all: corporate structures, local communities and social networks of various types (e.g. collaborative commons as defined by Jeremy Rifkin). The current state of that binomial distribution, at a given point in time, 57

58 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 represents the cumulative outcomes of collective learning until that moment. It is further assumed that the capacity of constitutional states to appropriate capital depends both on the strictly spoken efficiency of employment that they use that capital for, and on political legitimation granted to governments. Economic systems may be adjusting, on the long run, to the fact that governments tend to distort the marginal efficiency of capital when they appropriate it (e.g. Meade 1958; Modigliani 1961; Diamond 1965). As for the concept of legitimation, it can be understood in two, slightly distinct ways. On the one hand, legitimation is a set of rules in itself, and those rules emerge in a discursive process, according to the theory of discursive politics by Habermas (1975, 1979, 1996; Fraser 1990). On the other hand, at any given moment, the political system has some definite capacity to represent collective interests, and assure the hold of the represented social groups on the capital stock available. Probably the best exposition of that second meaning of legitimation is to find in the so-called pork barrel theory, as developed by Weingast (Weingast et al. 1981; Weingast 1995, 1981). Significant institutional changes leading to the emergence of the presently known constitutional state took place on the rising tide of demographic revivals after major demographic slumps, associated with big waves of technological change. There were three such big revivals after big depressions (e.g. Braudel 1981, 1983: ). The first one is to notice between 1100 and 1350, and it was that mounting flow of population that made the background for the first entity recognized as a modern state, namely to the kingdom of Two Sicilies under Frederick II ( ). During this period, Europe developed its system of agriculture and food supply. That system reached the limits of its capacity about Between 1350 and 1450, the European continent experienced a significant demographic and economic depression. The trend reversed after 1450, and it was the turn of wind power and waterpower to be harnessed with the technology of mills. That technological wave was associated with another leap in the institutional development of the state: it was precisely when the three monarchs that Francis Bacon called Three Wise Men, namely: Henry VII Tudor, Louis XI of France, and Ferdinand of Spain, created really modern states, with armies, financial systems and distinct administrative structures. After 1650, until about 1750, Europe experienced still another demographic depression, and we can notice that the pattern of constitutional, republican state that we know today emerged only after 1750, and its emergence was associated with the development of large scale industry. It is to notice that each of the big technological waves in question required an important reallocation of capital. The institutions of the state could be possibly an active participant in such reallocation. Some theorists even go to claiming that state as an institution mostly developed in order to provide accurate protection and robustness to private 58

59 Innovation and new forms of economic governance property rights (e.g. Schlatter 1951). Basing on those presumptions, the present article assumes that the demographic component has significant impact upon institutional change, and technological progress. Demographic growth means that each consecutive generation comprises more people than the previous one. New social roles can emerge as more people inhabit the same territory and use the same resources, and the system of social norms, legal rules include, becomes more and more complex. The faster the demographic growth is, the faster increases the required complexity of institutions. As demographic growth slows down, the pressure on institutional complexity decreases. Social systems might find themselves with something, which fault of a better expression can be designated as an overhang of institutional complexity : institutions adapted to handle quick emergence of new social roles become excessively complex regarding the current pace of social change. On the other hand, demographic growth corresponds of a quantitative expansion of product markets, and of the labour market. Following the classical Smithsonian assumption, it can be presumed that in the presence of relatively quick demographic growth, domestic markets of individual constitutional states expand relatively fast, too. Conversely, when demographic growth slows down, or reverts to demographic depression, domestic markets shrink, too. It can be assumed, following the theory of business cycles by Joseph Schumpeter (Schumpeter 1939: 461), that technological innovation needs absorption in the form of new products and new businesses, if said innovation is supposed to change the economic system. That absorption is relatively easier in the presence of quick demographic growth. As population grows at a slower pace, or depresses, expansion of individual businesses is still possible, but it requires more effort in international trade. Thus, relatively slow demographic growth creates pressure to increase international trade in order to implement fully the technological change. This, in turn, makes national borders an obstacle to the absorption of innovation. Summing up, the demographic context can profoundly influence the functional value of constitutional state, as compared to and coexisting with other possible forms of economic governance. 2. Empirical evidence The theoretical foundations of institutional change, presented above, make the background for empirical investigation. Empirical evidence, provided further in this chapter, attempts to reconstruct the big, broad trends that take place at the scale of the whole planet. That investigation starts with the main background factor, namely the quantitative expansion of the global population, and of the global population as well. We are living a period, which, fault of a better word, can be called global slowdown. Demographic growth of the global population, as measured by the World Bank, was of 1,2% in 2014, as compared to 1,73% in It means that 59

60 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 constitutional states might currently contain, in their institutions, an excess of complexity, and that domestic markets of individual states might not offer enough opportunities for the growth of local businesses, and for the absorption of innovation. National borders might be becoming more a more an obstacle, rather than a stable benchmark. Interestingly enough, mankind is moving more and more, too. The international migrant stock, i.e. the number of people born in a country other than that in which they live, measured as percentage of the global population, was of 2,51% in 1965, and climbed to 3,09% in In the same time, economic growth is slow, and likely to slow down even more. Deflation, especially in the prices of raw materials and fossil resources, becomes a fact. On the whole, more threats than opportunities loom at the horizon. Some experts say directly that global growth falls short of expectations. According to the World Trade Organization, growth in global trade since 2011 through 2014, and in the first half of 2015, marked a historical slowdown. Up until 2010, global trade used to grow twice as fast as global GDP. Since 2011, that pattern seems to have been broken, and trade has been growing at a pace close to that of global output. Focused studies, conducted by the World Bank, regarding the global outcomes of digital technologies, show that the global diffusion of digital technologies is rather a somehow sluggish evolution, instead of being the so-called digital revolution. A system of economic governance can be judged as distinct from an older one, when it is correlated with a significantly different distribution of capital across the social system. A significant change in the respective shares in the available capital stock, appropriated by distinct types of institutionalized organisations, can indicate that a new system of economic governance is emerging. As it comes to comparing constitutional states with all the other types of organizations, the ratio of gross government expenditures, divided by the available capital stock, can be quite informative. It reflects the capacity of constitutional states to appropriate capital, both through taxation and borrowing, for financing current spending. Figure 1 shows the trend of that basic ratio in two variations: aggregate and distributive average. The former, represented by the continuous line on the graph, measures the ratio of total, global expenditures of all the governments studied (167 countries), divided by the global capital stock. The latter, which finds its illustration in the dotted line, is the arithmetical average of national ratios government spending divided by available capital stock. Both measures seem to be strongly correlated and follow the same trends, with three distinct periods. 60

61 Innovation and new forms of economic governance Figure 1. The trend of the basic ratio in aggregate and distributive average Aggregate, global public expenditures as a share of aggregate, global capital stock Average share of public expenditures in the national capital stock Source: Feenstra et al From 1950 to the mid-1970s, governments appropriate a growing share of the capital stock accumulated. That period roughly corresponds to the widespread tendency to apply Keynesian economic policy in the developed economies. Between the mid-1970s and the mid-1980s, a short saddle is visible: the public sector first recedes, then advances. These are the first years of fashion for monetarism in economic policy. After 1985, when the so-called NCM model of economic governance starts to take root, the trend is clearly descending: the capital stock accumulates much faster than public sectors grow. Currently, constitutional states seem to be losing their grip upon the available capital stock. It seems that a serious change in the institutional structure of the global economy has been and is taking place. The next step of empirical investigation is to place that institutional change in the context of innovation, and more specifically of technological progress. The theoretical assumptions introduced previously suggest using a measure of technological progress, which reflects well the overall absorption of new technologies in the social system. Thus, commonly used indicators of innovation, e.g. the number of patent applications, seems a little bit out of place. On the other hand, diffusion of innovation is a process of spill-over, from the most advanced fields of technology, down to the most day to day activities. In the basic sectorial structure of economic systems, agriculture is considered to be the least innovative field of activity: it is somewhere at the bottom of that fountain of new ideas. Hence, the indicator of agricultural productivity, as the cereal yield in kg per hectare, published by the 61

62 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 World Bank, seems to be a relevant measure to assess technological progress at the global scale. Figure 2. Trend of agricultural productivity 1,40 1,20 1,00 0,80 0,60 0,40 0,20 Aggregate, global public expenditures as a share of aggregate, global capital stock, index 1990 = 1 Global cereal yeld kg per ha, index 1990 = 1 Source: Feenstra et al. (2015). Figure 2 shows the trend of agricultural productivity, compared to the previously presented trend of aggregate, average share of public expenditures in the global capital stock. In order to assure full comparability, both indicators have been indexed on the constant basis of their respective values observable in Up until the early 1990s, those trends seem to have been strongly correlated. Since then, the correlation has broken, and agricultural productivity has been growing despite the shrinking participation of the public sector in the available capital stock. Technological progress seems to have accommodated to the institutional change. The fiscal intervention of constitutional states seems to matter less and less to the absorption of innovation. Clearly, other social structures are taking the relay. Conclusions The present paper is an attempt to assess, what new forms of economic governance are likely to emerge or develop presently and in the near future, as the institutional context for technological progress. The principal technological challenge for humanity as a whole is assumed to be the climate change, with all its implications, whilst the system of economic governance is studied as a dichotomy made of constitutional states on the one hand, and all the other forms of economic governance on the other hand. The theoretical model of economic governance introduced in this article assumes that any form of such govern- 62

63 Innovation and new forms of economic governance ance emerges and develops through the institutionalization of past experience. When new forms of economic governance are studied, the main question is: what institutions have taken form on the grounds of past events? In other words, however breakthrough a social ideology claims to be, it is always based on what people have actually practiced for generations. Constitutional states have emerged as a rational response to the conjoint necessity of stabilizing legal systems and claims on capital goods on the one hand, and organizing quickly growing populations in limited territories. Other presently observable forms of economic governance, like the libertarian communities, or collaborative commons, seem to be an antithesis to constitutional states rather than autonomous social inventions. In other words, the present article claims that those alternative forms of economic governance occupy as their own the social space left free by constitutional states. The economic power of constitutional states, as measured by their capacity to appropriate fiscally the available capital stock, has been decreasing since approximately Global technological progress, as measured by the index of agricultural productivity, had been strongly correlated with the fiscal participation of constitutional states in the capital stock, until the early 1990s. Since then, the correlation seems to have broken, and the global absorption of innovation takes place more and more outside of fiscal stimulation. Demographic growth is slowing down, national markets grow much slower than, for example, two decades ago. Constitutional states might represent, right now, an excess of institutional complexity, and the principle of national sovereignty might be becoming a burden to technological progress rather than a guarantor of legal security. Those observations allow formulating a tentative and cautious thesis that the allegedly new forms of economic governance, alternative to constitutional states, will be gaining in importance over the decades to come. Assuring the technological progress necessary to tackle the climate change with all the adjacent challenges might require a much larger than today recruitment of organizations other than national governments. References Braudel, F. (1981), Civilization and capitalism, Vol. I: The structures of everyday life, London: William Collins, Sons & Co. Braudel, F. (1983), Civilisation and capitalism, Part II: The wheels of commerce, Book Club Associates, London: William Collins, Sons & Co. Diamond, P.E. (1965), National debt in a neoclassical growth model, The American Economic Review, 55(5): Feenstra, R.C., Inklaar, R., Timmer, M.P. (2015), The next generation of the penn world table, American Economic Review, 105(10): Francis, J.G., Francis, L.P. (2011), Rights variation within a federalist system: understanding the importance of mobility, Political Research Quarterly, 64:

64 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Fraser, N. (1990), Rethinking the public sphere. A contribution to the critique of actually existing democracy, Social Text, 25/26: Habermas, J. (1996), Between facts and norms. Contributions to a discourse theory of law and democracy, Cambridge, MA: MIT Press. Habermas, J. (1979), Communication and the evolution of society, Boston: Beacon Press. Habermas, J. (1975), Legitimation crisis, Boston: Beacon Press. Harsanyi, J.C. (1966), A general theory of rational behavior in game situations Econometrica, 34(3): Harsanyi, J.C. (1953), Cardinal utility in welfare economics and in the theory of risk taking, The Journal of Political Economy, 61(5): Harsanyi, J.C. (1967), Games with incomplete information played by Bayesian players. Part I: The basic model, Management Science, 14(3): Harsanyi, J.C. (1968), Games with incomplete information played by Bayesian players. Part II: Bayesian equilibrium points, Management Science, 14(5): Hart, H.L.A. (1961), The concept of law, Oxford: Oxford University Press. Heath, S. (1957), Citadel, market, and altar. Emerging society. Outline of socionomy, The new natural science of society, Baltimore: The Science of Society Foundation. Hodgson, G.M. (1993), Institutional economics: surveying the old and the new, Metroeconomica, 44(1): Hodgson, G.M. (2006), Institutional economics, the individual actor and institutional change, For the Alexander von Humboldt lecture at the University of Nijmegen, 5 December: Hodgson, G.M. (2000), The essence of institutional economics, Journal of Economic Issues, 2: Janeba, E. (2006), Moral federalism, The B.E. Journal of Economic Analysis & Policy, 5(1): King, L.A. (2005), The federal structure of a republic of reasons, Political Theory, 33: McCallum, H.S. (1970), The art of community, Institute for Humane Studies, Inc. Menlo Park. Meade, J.E. (1958), Is the national debt a burden?, Oxford Economic Papers, 10(2): Modigliani, F. (1961), Long-run implications of alternative fiscal policies and the burden of the national debt, Economic Journal, 71: Parsons, T., Shils E.A., Smelser, N.J. (Eds.) (1965), Toward a general theory of action: Theoretical foundations for the social sciences, Transaction Publishers. Rifkin, J. (2014), The zero marginal cost society: The internet of things, the collaborative commons, and the eclipse of capitalism, Macmillan. Schlatter, R. (1951), Private property, the history of an idea, New Brunswick: Rutgers University Press. 64

65 Innovation and new forms of economic governance Schumpeter, J.A. (1939), Business cycles. A theoretical, historical and statistical analysis of the capitalist process, New York-Toronto-London: McGraw-Hill. Searle, J.R. (2005), What is an institution?, Journal of Institutional Economics, 1: Selten, R. (1975), Reexamination of the perfectness concept for equilibrium points in extensive games, Journal International Journal of Game Theory, 4(1): Weingast, B. (1981), Regulation, reregulation, and deregulation: the political foundations of agency clientele relationships, Law and Contemporary Problems, 44(1): Weingast, B. (1995), The economic role of political institutions, The Journal of Law, Economics, and Organization, 11(1): Weingast, B.R., Shepsle, K.A., Johnsen, C. (1981), The political economy of benefits and costs: A neoclassical approach to distributive politics, The Journal of Political Economy, 89(4):

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67 COOPERATION AS A DRIVING FORCE OF INNOVATIONS IN DESTINATION MARKETING MANAGEMENT Vanda Maráková 1 vanda.marakova@umb.sk Diana Kvasnová diana.kvasnova@umb.sk Matej Bel University in Banská Bystrica, Slovakia 1 Corresponding author. Abstract: Cooperation and its form in terms of collaboration, partnerships and networking represent main consequences of globalization and growing competition. All these forms of cooperation are connected with innovations in managing and marketing tourism offerings. The main aim of the paper is to document how cooperation enhances the innovative processes within tourism destinations. The material utilizing by the authors are in major secondary data supported by the outcomes of the field research. The paper is based on qualitative research presented in the form of case study innovation processes in the High Tatras tourism region. The paper underlines the importance of innovations in destination marketing management in Slovakia and confirms that cooperation as a result of institutional innovations enhances other innovations processes in tourism destinations, mostly product and marketing innovations. Key words: cooperation forms, destination marketing management, High Tatras tourism region, innovations. Introduction Nowadays, cooperation is inevitable in order to enhance networking among stakeholders as well as to ensure the competitive tourism product development. The tool ensuring cooperation and coordination stakeholders is destination marketing management. Application of this concept enhances tourism development in destinations, systematic planning, price creating and distribution, with the purpose to achieve goals of stakeholders and destination. Its main objective is primarily to determine the strategic direction of tourism destination and to influence amount, composition, timing and spatial distribution of its supply. Responsibility for fulfillment of these objectives has destination management organization (DMO), which connects individual stakeholders and their different interests. The acronym DMO can be also interpreted as destination mar-

68 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 keting and management organization because its crucial function is to perform destination marketing. For long term success of tourism development in destinations is inevitable to support innovation processes in destination marketing management. The main aim of the paper is to document how cooperation enhances the innovative processes within tourism destinations. We underline that new forms of cooperation are being developed as an innovative organizational structures stimulating innovations processes in tourism destinations. The first part of the paper focuses on cooperation as the one kind of innovations and describes its basic forms used in tourism destinations. The second part characterizes common forms of cooperation utilized in Slovakia, their advantages and disadvantages. The third part is dedicated to characteristics how cooperation enhances innovations processes in chosen destination The High Tatras region. The material utilizing by the authors are in major secondary data, professional books, journals, web sites and annual reports. The secondary data are supported by the outcomes of the field research presented in the form of case study on innovation processes in selected tourism destination. Empirical research was limited by the availability of data. 1. Theoretical framework Innovations can be characterized as a the driving force of economy. We can characterize them as a combination of production factors affecting business activity (Schumpeter 1987). The main goals of innovations are the growth of product s quality and increasing its value for customers, increasing competitiveness, market share and profit, improvement of working conditions, rationalization of processes and reduction impact on environment (Hall, Williams 2008). In tourism, innovations are not widespread as in the other industries. Until recently, they were not the subject of systematical research. In the context of tourism destinations, we support definition that innovations are changes, focus on introduction new, better products or services and implementation new processes into destination marketing management. The result of these changes is to create added value and to satisfy customers needs in conformity with the principles of sustainable development (Lencsésová 2015). The main reasons for innovations in tourism destinations are usually incessant changes in visitors needs, an effort to be better than competitors, to increase market share and impact of life cycle of tourism destination and its products. According to Nordhorn (2015), innovations in tourism destinations, but also in general, consist of new products, services, business models and new markets. Through innovations gain tourism destinations competitive advantages time advantages, cots advantages and potential for prices. It is important for tourism destinations to focus on innovations not only at the beginning of their activities, but during the 68

69 Cooperation as a driving force of innovations in destination marketing management whole time of their existence. Nowadays, as a result of globalization and high competition, innovations are the base for success of tourism destinations. The typical feature of innovations in tourism destination is distinctiveness, derived from basic nature of tourism and its product: intangible character of tourism product (services) with high necessity of human labor. Subsequently, innovations depend on knowledge and skills of people participated in the product creating process; in the case of personal services is needed to integrate the customer into the process of their production. According to this, customer directly affects providing services, their quality and other characteristics. These make possible to innovate product in the customers opinions and to improve satisfying of their needs; tourism product usually occurs in the form of package, consists of some services produced by tourism and the other industries. In this way, innovations in tourism are result of innovation activities in these industries as well as changes in external environment (e.g. new technologies, trends in customers behavior) (Gúčik 2012). The approaches towards defining the innovations vary in the literature sources as well as the approaches towards its differentiations. We adopt the classification of Hjalager (2002, 2010) which creates a framework for the research presented. According to the author, innovations can take place in one or a combination of these five categories: product innovations represent the altered or completely new products or services, which new features are evident for customers and can become the key factor influencing their buying decisions; process innovations mean the change in existing operations, which goal is to increase efficiency and productivity in consequence of their replacement new or better technologies; management innovations are related to new ways of work organizing, education, employee management and motivation; marketing innovations consist of the regulation of information and building relationship between the providers of servicers and customers; institutional innovations include establishment forms of cooperation (e.g. collaboration, partnerships, networks, clusters, associations) at the tourism destination level, which help tourism to develop. Cooperation is not such a new topic in tourism literature and many authors are interested in this issue (Bartl, Schmidt 1998; Franch, Martiny 2002; Pásková, Zelenka 2002; Carter, Fabricius 2007; Ryglová 2008; Gúčik 2010; Wang 2011; Maráková 2012; Morrison 2013; Gursoy et al. 2015). Cooperation among different stakeholders in tourism destinations and synergy following from their 69

70 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 networking creates a starting point for following innovation processes. Application of cooperative behavior in tourism destinations depends primarily on tradition, legislation, phase of development, quality of business environment and existence of business ethics and culture. Stakeholders usually need some motivation to initiate the joint activities. The primary motives enhancing cooperation are strategic (better utilization of sources and long-term tourism development, creating complex products, higher competitiveness, penetration into new markets), costs (decreasing costs for marketing activities and new technologies, economies of scale), marketing (common promotion and image) and information motive (transfer of knowledge and skills). Stakeholders are looking for direct benefits as an outcome of cooperation. We consider as the most important benefits introducing common brand, creating product portfolio, higher quality of services, permanently improving of all activities, division marketing cost, building mutual trust and establishment of partnerships. Specific forms of cooperation depend on the level of tourism development in destination, the tourism destination s stage of life cycle, current economic, political, cultural conditions and the stakeholders willingness to share responsibility. Following the recommendations of domestic and foreign authors we briefly explain the most common forms of cooperation: collaboration, partnerships, clusters and networks. Collaboration in tourism destination is a process, where two or more stakeholders work together to achieve shared vision and objectives. It is deep, collective determination to reach goals by sharing knowledge, know-how and learning how to make compromises and agreements (Gursoy et al. 2015). J. Wood and B. Gray (in Czernek 2012: 84) define collaboration in tourism destinations as voluntary connection among independent stakeholders in which mutual bonds are created and are approved common decisions about tourism development in destinations. Collaboration enables the prosperity of stakeholders as well as tourism destinations and is the key assumption securing its sustainable development. Collaboration usually arises when some stakeholders face the same problems. Its formation in tourism destinations is desired at local, regional, national and also at international level. Partnership in tourism destination is considered as the base for achievement of competitiveness. The most common definition of partnership refers it as the form between two or more businesses in which partners cooperate to achieve joint goals. In tourism destinations can be partnership considered as the strategic alliance of different stakeholders, which follow the same interests. All the partners activities are coordinated to achieve set goals, to create complex product or to achieve others common activities. The basic principles of partnership are conception (fulfilling of strategic goals), cooperation (active cooperation based on mutual trust), communication (among partners and to external 70

71 Cooperation as a driving force of innovations in destination marketing management environment), creativity (e.g. in all marketing activities), coordination (joint action) and complexity (considering all linkages, benefits, threats and cost of partnership) (Palatková 2011; Nejdl 2010). Cluster can be defined as geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries and associated institutions (e.g. universities and trade associations) in particular fields that compete, but also cooperate (Porter in Michálková 2010: 47). In essence, cluster emphasizes innovation processes, connection with universities, financial and research institutions. In tourism destination is cluster a system within are created closed ties among its members. Clustering can generate several benefits including economies of scale, a focus on innovations, increased synergies, productivity, knowledge transfer and competitiveness of tourism destination (Sotiriadis et al. in Gursoy et al. 2015). Networks are widely used forms of cooperation in tourism. They consist of a series of direct and indirect ties from one actor to others (Smith-Ring in Michael 2007: 46) and stress on self-coordination and self-organization of networks members to achieve strategic goals. In tourism destinations they increase their flexibility and enable to use the benefits of synergy (Scott et al. 2008). The main reasons for their establishment are to simplify accession to domestic and foreign markets and to financial and human resources, the exchange of know-how and skills, development of competitiveness and joint visions. Networks are advantageous for smaller tourism destinations. In this way, they can moderate the drawbacks following from size of tourism destinations. The key function of all these forms of cooperation (DMOs) is to secure destination marketing management. This conception is based on principles destination management and marketing and consists of activities typical for them. This process includes market research and analysis of current situation, determination of vision and aims of destination, identification of strategic business units (business activities of destination) and new opportunities on the markets, formulation strategies, creating and realization marketing mix and evaluation of all these activities. According to this, we can classify this process on strategic and tactical destination marketing management. Strategic destination marketing management is the base for all performed activities in destination and to determine future tourism development in it. After formulation strategies is possible to implement tactical destination marketing management creating marketing mix, its realization and evaluation (Morrison 2013). Destination marketing management is continuous process through DMOs plan, research, implement, control and evaluate activities designed to satisfy visitors needs and the goals of individual stakeholders and destination. It represents activities focus on creating added value for visitors and to developing long-term relationships with them, in way bringing benefits for all subjects. 71

72 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The majority of DMOs are mostly concentrate in tactical than strategic tasks in this process. They are usually focused on market research (market segmentation, targeting and positioning), creating new and improving existing products and services, programming (creating new events, festivals) and to ensure common brand and promotion of tourism destination. DMOs have responsibility for mobilizing resources among individual stakeholders and for identifying the processes leading to integrated marketing management of tourism destination. 2. The analysis of cooperative forms within tourism destinations in Slovakia and its functioning In the modern age of Slovakia the most frequently applied forms of cooperation within the tourism industry are: tourism associations, clusters, local and regional DMOs. The longest traditions in Slovak tourism destinations have tourism associations. They can be defined as voluntary, nonpolitical interest associations of subjects established on the basis of public-private partnership. They are based on common interests and unified vision to satisfy customers needs and to support prosperity its members and tourism destination (Gúčik et al. 2012: 71). The members of tourism associations can be villages, cities, natural and juridical persons with the relationship to tourism. The first tourism association in Slovakia was established in The establishment of tourism associations can initiate both private and public sector. The aim of tourism associations as nonprofit juridical persons is to coordinate and to create conditions for tourism development and to defend interest of their members. They are usually active in the field of product, price, distribution and communication policy and their specific activities are result of agreement of all members. The importance of tourism associations is in support of product creating process, exchange of know-how, introduction new technologies and in realization marketing activities focus on education residents in tourism. However, in the conditions of Slovak tourism destinations, activity of these associations, do not bring so many benefits as they could. As the main cause of this situation we consider insufficient amount of members, consist mainly of tourism businesses and local self-governments. The absence of businesses from other industries decrease ability of associations to influence all components of product created for visitors. We perceive it as a problematic, that tourism associations suffer from a lack of financial and human resources, too. Thus, these facts decrease their ability to support tourism in destinations. In consequence of this in 2008 started to establish in Slovakia new forms of cooperation clusters. Tourism clusters contrary to associations should boost tourism development, make relationships among different stakeholders more flexible and encourage the key stakeholders to be a part of them. Regrettably, researches show that tourism clusters mostly focus on marketing activities and missing strong ties inside them. The most tourism clusters in Slovak destinations do not fulfill the basis 72

73 Cooperation as a driving force of innovations in destination marketing management of clusters in generally and do not cooperate with universities and research institutes. The positive change in destination marketing management came in In this year was passed the law no. 91/2010 about the support of tourism development in destinations. This law make possible to establishment national and regional destination management organizations based on the public-private partnership. In this law are clearly defined competencies of these organizations, duties and ways of their financing. Great attention and a lot of discussions caused just the last mentioned point financing. The possibility to gain subsidy from state budget caused that in 2016 in 21 tourism region we have 36 local DMOs and 5 regional DMOs. The primarily purpose of subsidy was to motivate stakeholders to establish these forms of cooperation in destinations. But, after 6 years of their functioning we can note, that some of them do not fulfill their purpose and they were establish only to gain financial support. They focus mostly on promotion and do not manage tourism development comprehensively. For better future development in Slovakia is necessary not only the financial support, but teach stakeholders approach to tourism development responsibly. 3. The case study analysis: Cooperation as a driving force of innovations in the High Tatras tourism region The importance of innovations in destination management marketing and its affirmative effects will we demonstrate on example of The High Tatras tourism region. This region belongs to the most favorite tourism destinations in Slovakia for domestic as well as foreign visitors. It is situated on the north of Slovakia and consists of two sub-regions: The High Tatras and The Norh Spiš. The administrative centers are cities Poprad, Kežmarok and Satrá Ľubovňa. Tourism development started in this region in the end on 19 th century. In the beginning was their reason for coming health and treating of respiratory system. They were usually interested in hiking, too. This was the main impulse for creating trails, bulging chalets, accommodation, restaurants and the other tourism facilities. Into permanent awareness of visitors is this region from 1970, when took place here world ski championship. Tourism development in this region summarizes Table 1. We can see that the numbers of selected indicators changed from to 2008 considerably. Year 2008 was for the region very successful, but in 2009 become evident consequences of global crises and euro adoption. Fortunately, the situation has become better every next year. Table 1. Selected indicators of tourism development in the High Tatras region Year Number of accommodation facilities Occupancy rate % Number of visitors Number of overnight stays Average overnight stays , , ,3 73

74 Forum Scientiae Oeconomia Volume 4 (2016) No , , , , , , , , , , , ,1 These data is possible to use in the theory of destination life cycle (Butler 2009) for illustration, in which stage the region currently is. If we connect the data (e.g. number of visitors) with this theory we will see, that in 2009 changed the stage decline to the stage of rejuvenation (Picture 1). The stage decline was distinguished by reduced number of visitors, accommodation facilities, overnight stays and occupancy rate, too. On the contrary, for the stage rejuvenation in this region is characterized increasing number of all indicators mentioned before and mostly the institutional, product and marketing innovations. We illustrate these innovations on some particular examples in this region. Figure 1. Development of number of visitors in The High Tatras tourism region Institutional innovations Cooperation as the result of institutional innovations was formed in this region in 1994, when was established the fist tourism association in Slovakia at all Tourism association The High Tatras. The aim of this association is to enhance competitiveness of this region compared to the others tourism destinations in Slovakia, but also in surrounding countries like Czech Republic, Poland, Hungary and Austria. Its main tasks are to coordinate its members activities and to direct them in products creating process, to enhance communication among its members, to promote this region, to collects statistics data and last, but not least to support sustainable tourism development in this region. In 2015 association has 190 members from both public and private sectors. The financial sources for all its activities consist of membership dues, accommodation tax, gifts and its own commercial activities. In the beginning, was cooperation between private and public sectors fragile and was necessary to make a lot of 74

75 Cooperation as a driving force of innovations in destination marketing management compromises and to learn to mutual trust. Another form of cooperation was established in this region in 2010 as a result the law no. 91/2010 about the support of tourism development in destinations. After this year, one by one, have risen local DMOs. In 2016 exist in the region 4 local DMOs: Region Vysoké Tatry (6 members including Tourism association The High Tatras), Tatry-Podhorie (13 members), Tatry-Spiš-Pieniny (26 members) and The North Spiš-Pieniny (16 members). Their members are mostly local governments, tourism businesses and other services providers and their long-term vision is to integrate this region into strong and complex destination. As we have mentioned before, local DMOs tasks follow from the law and they are mostly focus on support creating products and strategic documents for future tourism development, promotion in Slovakia and abroad, to secure sustainable tourism development and to provide consultancy for all DMOs members. In contrast to the association they should focus on qualitative goals and to secure benefits for residents, local business and environment. Previous researches have shown that cooperation among different stakeholder from public and private sector within individual DMOs is strong and stakeholders in the region are willing to cooperate (Gajdošík 2015). On the other hand, cooperation among existing DMOs does not develop in the same way. DMOs perceive themselves as competitive entities fighting for visitors and for gaining financial support from state. The platform for their functioning is insufficient and their activities do not support creating the integral image of the High Tatras tourism region (Gajdošík et al. 2015). Product innovations The original product of this region are services connected with spa, health care and hiking. The target markets for these services were solvent clientele and middle class. Afterwards the establishment of DMOs has this traditional core of product changed and nowadays, its focus on entertainment and fun. The garget groups of visitors have changed, too. Now it is only the domestic and foreign solvent clientele. The most important products innovations in the region are reconstruction of accommodation and mountain transport facilities, modernization of ski slopes and building new facilities for sport and relax, too. Moreover, accommodation facilities have created every season new thematic oriented products mostly for younger people and families. In an effort to support selling these products, services providers usually connect them with some events regularly organizing in the region. The most favorite events for visitors are in winter season The ice cathedral on Hrebienok, Bears day on Hrebienok during summer and sport event Tatras in move, which attract every year thousands of visitors. New, but very popular product for young active people is also Geocaching. Especially for families was in 2015 created product Tatras fairytale kingdom. The main idea of this product is to teach children 75

76 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 something about the High Tatras region, its nature, peaks, mountain lakes and animals playful and interesting way. For the future is preparing product Route via mineral springs, which aim is to create network of paths linking the most important mineral springs rising in this region and its surroundings. This product and its specialization are based on typical attractions and we assume it as a good example for future DMOs products. Marketing innovations The successful products selling and its promotion are not possible without innovations in marketing. Very successful marketing innovation Tatry card was created in Tatry card is special card for visitors providing them discounts from 5 to 50%, some services for free or some other benefits and it is accepted in a lot of different services providers. The card can visitors buy in selected accommodation facilities and it is valid for 5 days (with the possibility to prolong). Except benefits in chosen restaurants, cafés, accommodation facilities, ski schools, rental and services, museums, fun and aqua parks this card is valid as a travel ticket for all trains of Slovakia Railways Company on selected routes and includes mountain insurance covers costs of Mountain Rescue Service operations (Región Vysoké Tatry 2016). On the same way works another Spiš Pieniny card, which is valid in sub-region the north Spiš as a part of the High Tatras region and in Pieniny. Important innovation is also the incoming travel agency Region Tatry Travel, Ltd., which establishment was approved in January In the beginning will be the travel agency focuses on two target countries Great Britain and Israel and its main goal will be to create new products and to cooperate with foreign travel agencies. Conclusions Nowadays, innovations are considered as a key success factor of tourism development in destinations and the essential condition their long-term competitiveness. Cooperation is not such a new topic in tourism literature, but in last decades its importance within the tourism research is growing due to the effort to achieve higher competitiveness. Both, academics and practitioners agree that cooperation in tourism destinations is inevitable. The challenge is to determinate its optimal form, which will contribute to the competitive advantage of the tourism destinations. Cooperation is the result of innovations in destination marketing management as the main consequence of globalization, high competition and fragmented nature of tourism destinations. In the research of cooperative forms within tourism destinations, uniqueness of tourism industry and services should be considered. Tourism in Slovakia has over a long period been stagnating sector. Its existing potential is not fully using and tourism development in Slovak destinations is confronted by several issues. We considered as the most serious issues the 76

77 Cooperation as a driving force of innovations in destination marketing management absence of continuity of national tourism politics, the missing complex product and its quality and insufficient promotion of tourist attractions. Even though are they regularly mentioned in strategic documents, usually have declarative character and we miss systematic attitude to improve this situation. On the other hand, academics and also managers representing tourism destinations agree, that the key factor changing this current situation is innovation in destination marketing management based on cooperation among public, private sector and residents. In Slovakia are the most common forms of cooperation tourism associations, tourism clusters and local and regional DMOs. These organizations are primarily focused on destination marketing, mostly on creating new products, programming, implementation common brand, promotion and on developing new ways of distribution. We analyzed forms of cooperation and innovation following from their activities in The High Tatras region. We argue that the establishment of tourism association and local DMOs encourage development of product and marketing innovations. But, existing product is focus on entertainment and stakeholders forget about traditional attractions typical for this region. In this region exist 5 DMOs which do not cooperate very well and their responsibilities and tasks overlap. We can conclude that applied cooperation patters within tourism industry in Slovakia do not fully utilize the potential of the sector and thus do not contribute fully to a higher competitiveness of Slovak republic on international market. Only few of them were established with the truly vision to support tourism development in destinations and not just to reach financial support from state. Despite this, fact that stakeholders are willing to be a part of these networks and are willing to cooperate is promising for the future tourism development in Slovakia. Thus, stakeholders need some time to experience mutual trust and to make compromises to achieve their vision and synergy effects. For the future success of tourism development in Slovakia should further research develop in two directions. The first should focus on the quality of relationships among the stakeholders of DMOs and also the relationships across DMOs in tourism destinations. It is necessary to evaluate the efficiency of DMOs performance which is influenced by these relationships. The second direction of research should concentrate on innovation processes within tourism destinations on local, regional and national level. Previous researches published were focused mainly on innovations in tourism businesses (micro-level) which have not taken into consideration special features of tourism destinations (local, regional and national level). Sustainable tourism development requires systematic approach towards creation of financial framework. Tourism support act which was adopted in Slovak republic in 2010 creates platform for innovations in destination marketing management in Slovakia. For the long term competitiveness of tourism industry it 77

78 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 is inevitable to ensure support of productive and meaningful partnerships of public and private sector within the industry. Acknowledgements The research was supported by the project VEGA 1/0509/16 "Perspectives of development of volunteer tourism in Slovak republic" that is carried out at the Faculty of Economics, Matej Bel University in Banská Bystrica within the period References Butler, R.W. (1980), The concept of a tourism area life cycle of evolution: Implications for management resources, The Canadian Geographer, 24(1): Czernek, K. (2012), Determinants of cooperation in a tourist region, Annals of Tourism Research, 40(1): Gajdošík, T. (2015), Vplyv životného cyklu na kooperatívny manažment a marketing v cieľových miestach cestovného ruchu, Ekonomická revue cestovného ruchu, 48(1): Gajdošík, T., Medveďová, M., Maráková, V. (2015), Formovanie organizácie cestovného ruchu ako predpoklad účinného manažmentu cieľového miesta, Brno: Masarykova univerzita. Gúčik, M. et al. (2012), Manažment cieľového miesta cestovného ruchu, Banská Bystrica: Slovak Swiss Tourism. Gúčik, M. (2012), Inovácie v cestovnom ruchu ako súčasť stratégie Európa 2020, Ekonomická revue cestovného ruchu, 45(2): Gursoy, D., Saayman, M., Sotiriadis M. (2015), Collaboration in tourism businesses and destinations. A handbook, Bingley: Emerald Group Publishing. Hall, M.C., Williams, A.M. (2008), Tourism innovation, New York: Routledge. Hjalager, A.M. (2010), A review of innovation research in tourism, Tourism Management, 31(1): Hjalager, A.M. (2002), Repairing innovation defectiveness in tourism, Tourism Management, 23(5): Lencsésová, Z. (2015), Inovácie a ich meranie v horských strediskách cestovného ruchu na Slovensku, Ekonomická revue cestovného ruchu, 48(1): Maráková, V., Holúbeková, K., Makovník, T., Gajdošík T. (2013), Uplatnenie modelu životného cyklu cieľového miesta na príklade Tatranského regiónu cestovného ruchu, Banská Bystrica: Dali-BB. Michael, E. et al. (2007), Micro-clusters and networks: The growth of tourism, Oxford: Elsevier. Michálková, A. (2010), Regionálne siete v cestovnom ruchu, Bratislava: Ekonóm. Ministerstvo dopravy, výstavby a regionálneho rozvoja SR, available at: (accessed 20. April 2016). Morrison, M.A. (2013), Marketing and managing tourism destination, London: Routledge. Nejdl, K. (2011), Management destinace cestovního ruchu, Praha: Wolters Kluwer. 78

79 Cooperation as a driving force of innovations in destination marketing management Nordhorn, CH. (2015), Innovation and product development, Lecture at the Faculty of Economics at Matej Bel University. OOCR Región Vysoké Tatry, available at: (accessed 20 April 2016). OOCR Severný Spiš Pieniny, available at: (accessed 20 April 2016). Palatková, M. (2011), Marketingový management destinací, Praha: Grada Publishing. Schumpeter, J.A. (1987), Teória hospodárskeho vývoja, Bratislava: Pravda. Scott, N., Baggio, R., Cooper, CH. (2008), Network analysis and tourism research, Clevedon: Cromwell Press. Štatistický úrad Slovenskej republiky, available at: (accessed 20 April 2016). 79

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81 LAGS BETWEEN ACADEMIC SCIENCE AND INVENTIVENESS IN POLAND Małgorzata Wachowska University of Wroclaw, Poland Abstract. The purpose of the paper is to show how fast university knowledge is transferred to enterprises located in Poland. An analysis of patent applications of enterprises made it possible to conclude that (1) academic knowledge diffuses to enterprises faster (11.93 years) than industrial knowledge (13.63 years); (2) university knowledge from patents diffuses faster (11.62 years) than from scientific papers (12.45 years) and (3) academic knowledge of foreign origin diffuses to enterprises faster (9.96 years) than knowledge of domestic origin (12.87 years). Key words: inventions, knowledge diffusion, patent citations, Poland, universities. Introduction Inventions, frequently referred to as breakthrough innovations, are the driving force for enterprise, industry and entire country development. This is why it is so important for policymakers to stimulate inventiveness of domestic entities, which can result in their improved competitiveness but also that of the entire domestic economy. University research is commonly regarded as one of the key factors that determine creativity and inventiveness and, consequently, competitiveness of enterprises (Rosenberg, Nelson 1994; Monjon, Waelbroeck 2003; MacGarvie, Furman 2005; Branstetter, Ogura 2005; Kim et al. 2005; Motohashi 2005; Nilsson et al. 2010; D Este, Perkmann 2011; Roessner et al. 2013). Therefore, policies of the most countries use instruments that encourage academic researchers to conduct studies meeting the needs of industry as well as to cooperate and share their knowledge with business representatives (Link, Siegel 2005; Lach, Schankermen 2008). It is also shown that the inventive output of industry is the larger and the economy is the closer to the perfect frontier of innovation capacity the stronger are linkages between science and business and the faster ideas developed at universities reach enterprises (Adams et al. 2006; Adams, Clemmons 2013). It is therefore an important question how fast academic science leaks to economy. According to common expectations, knowledge of university origin should diffuse more quickly than knowledge coming from company laboratories. It stems mainly from the fact that scientific researchers are interested in rapid dissemination of the results of their studies (Stephan 2004) while enter-

82 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 prises tend to protect access to their own know-how (Furman, Stern 2004). So far as academic knowledge itself is concerned, the results of studies included in scientific publications should be more quickly transferred to enterprises than ones included in patent publications because scientific publications become public knowledge faster than patent ones do. In most countries, complete information about an invention is disclosed only after patent protection has been granted (Baughn et al. 1997; Cohen et al. 2002; Wachowska 2015), which results in time of knowledge diffusion from patents being extended by the time of exclusive rights granting procedure. Considering that in many countries patent procedure takes about 3 to 8 years (Niklewicz-Pijaczyńska 2015) and sometimes it extends to as long as about 10 years, the diffusion of academic knowledge from patents may take 3 years longer than in the case of knowledge diffusion from publications. Although the diffusion of basic research stimulates innovativeness and economic growth, there are relatively few studies addressing the problems of the rate of knowledge diffusion, including that of university knowledge. Moreover, in most of them, authors focus on indicating the factors that are stimulants for or obstacles to the rate of know-how diffusion rather than on estimating this rate. Meanwhile, those which make attempts at measuring the rate of diffusion of new ideas yield fairly different results. The study by Griliches (1957), in which the author undertook the measurement of the rate of knowledge diffusion by estimating time needed by American farmers to adopt hybrid corn, may be regarded as pioneering. Mansfield was also occupied with the problem of the rate of knowledge leakage and he analyzed the causes of lags in the adoption of diesel locomotive by American companies. Mansfield also made an attempt at estimating the rate of diffusion of various types of technological knowledge of enterprises to their competitors (1985) and he found that information on development decisions leaks to the rivals within 12 to 18 months while information on a new product does so within one year. Studies aimed at estimating the rate of industrial knowledge diffusion were also conducted by Adams, Clemmons and Stephan (2006), according to whom industrial knowledge diffuses between enterprises within 3.3 years and by Adams and Clemmons (2013) who showed that lags between basic research and inventions of enterprises are about 11 to 16 years. Sorenson and Singh (2007), meanwhile, argue that the number of years necessary for industry-generated inventions to diffuse depends on what type of knowledge they are based on. According to them, inventions based on university science diffuse faster than any other ones. So far as the measurement of the rate of academic knowledge is concerned depending on the research period and the entities covered by the analysis the conclusions from the research are fairly different. According to Adams (1990), 82

83 Lags between academic science and inventiveness in Poland the absorption of the effects of university research by industry takes 20 years, Branstetter and Ogura (2005) estimate it to take years while Adams et al. (2006) find that 3 years are enough for the knowledge from universities to leak to industry. Problems of the rate of knowledge diffusion were also addressed by other researchers (Scotchmer 1991; Henderson, Cockburn 1996; Mansfield et al. 1981) but they focused mainly on factors stimulating and delaying adoption of new knowledge rather than on estimating the rate of transfer of know-how. It must be also emphasized that the majority of studies on the rate of knowledge diffusion are limited to the United States. In the Polish literature on the subject there is a lack of works to address the problems of the rate with which knowledge originating from universities is transferred to enterprises. This paper contributes to the debate on the efficiency in the area of relationships between science and industry by proposing research focused on the rate of diffusion of academic knowledge among enterprises in the conditions of Polish economy. The purpose of this paper is to indicate how fast knowledge developed in academic laboratories is transferred to enterprises located in Poland. The paper considers three questions: (1) how fast does academic knowledge leak to industry? and (2) how fast does academic knowledge diffusion occur in comparison with industrial one?, (3) what are differences between the rates of knowledge diffusion from academic papers and patents? and (4) what are differences between the rates of diffusion of foreign and domestic academic knowledge? In order to address these questions, firstly the rate of diffusion of academic knowledge has been estimated with the use of lags in patent citations, defined as the difference between the year of the first filing of the citing industrial invention for protection and the year of the first filing of a cited invention or the date of a cited academic publication. More specifically, patent documents of enterprises have been analyzed with the focus on how many years passed from the moment in which a given academic invention had been filed for patent protection or a given scientific paper had been published up to the moment in which they were cited in a patent application by an enterprise located in Poland. Further based on lags between citing and cited industrial patents the rate of science diffusion has been compared with the rate of industrial knowledge diffusion. Subsequently, based on lags between citing industrial patents and cited academic patents, the rate of academic knowledge diffusion from papers has been compared with the rate of academic know-how diffusion from patents. And ultimately with the use of lags between citing patents of enterprises and cited domestic academic papers and patents as well as foreign academic papers and patents a comparison has been made between the rates of domestic and foreign academic knowledge. 83

84 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The paper uses a unique database developed by the author that combines the characteristics of cited academic papers and patents with the characteristics of citing industrial patents. Patent documents have been analyzed 22 enterprises filing their inventions for patent protection in Poland which showed the largest inventive activity in years A total of 413 patent applications have been analyzed which related to protection rights to inventions granted by the Polish Patent Office (UPRP) in years 2005 to Because of the fact that Poland is at a different stage of development than the United Stated, Japan or many EU countries and occupies a distant place in international competitiveness rankings, which results in Polish enterprises being absent from the rankings of world leaders of innovation, the study has covered a relatively small number of enterprises (22). This is due to the fact that in Polish conditions enterprises obtain relatively few patents. For instance, the most active enterprises in terms of innovation received on average from 1.6 to 10 patents a year in while the enterprise occupying the 22 nd place received as few as 0.3 patents a year. Hence including taking further enterprises in the analysis would probably not change the final results which have been based on 22 enterprises only. 1. Measurement of the rate of knowledge diffusion with the use of lags in patent citations Patent documents, by providing various characteristics pertaining to inventors and their inventions, are a valuable source of information on knowledge diffusion. Patent applications disclose, among other things, details of the entity that has received exclusive rights to an invention, the creators of the invention, the number of years of protection paid by the entity eligible to the patent, and finally the detailed information on inventors and their publications (patent and scientific) whose knowledge has been an inspiration to generate the invention. In particular, the latter information is helpful in estimating the size and strength of know-how diffusion and Jaffe et al. (1993) were the first to use it to do this. A patent application lets us know, among other things, (1) to whom the invention of scientific paper cited in this application belongs, (2) whether the cited invention or publication has been developed in an enterprise, university laboratory or other R&D entity, (3) in which country the entity that is the creator of the cited invention/publication is located, (4) in which year and what country the cited invention was filed for patent protection for the first time as well as (5) in which year the cited publication was published. If we compile these data with the information on the year of filing of the citing invention for patent protection then it will be possible to estimate the lag in patent citations, i.e. the rate of knowledge diffusion from the cited researcher to the citing one, including its division into the rates of knowledge diffusion from enterprises and universities. 84

85 Lags between academic science and inventiveness in Poland Although the use of patent citations for the measurement of the magnitude or the rate of knowledge diffusion has some limitations, this method is considered to be one of the best. It is so in the first place because unlike other methods based on citations there is little probability that creators of inventions will conceal the work of others on which they based their technical solutions since this would expose them to legal sanctions or that they will show irrelevant knowledge since then they would reduce the extent of patent protection. Moreover, patent citations reflect the most valuable knowledge, the most precious know-how of the researchers. This is because they disclose only this transfer of knowledge which contributes to the development of breakthrough innovations, i.e. inventions, which means that they make it possible to evaluate the actual diffusion of knowledge rather than only the diffusion of imitation processes. In spite of its advantages, the method of patent citations is not perfect. Firstly, some citations in patent descriptions are included by patent researchers, which means that in fact the inventor did not use the cited knowledge (Azoulay et al. 2011; Alcacer et al. 2009; Alcacer, Gittelman 2006). Secondly, patent citations do not reflect flows of more private knowledge, obtained in an informal way, which has not left its trace on paper (Roach, Cohen 2012). Finally, because of the fact that not all innovations are being patented, patent citations are only a partial measure of knowledge flows. In order to determine the average number of years needed by enterprises from Poland to acquire academic knowledge, the paper uses lags in citations included in patent applications of 22 enterprises relating to protection rights to inventions which were granted by UPRP in Rate of adoption of academic knowledge by enterprises from Poland: analysis of research results On the basis of an analysis of 413 patent applications of 22 enterprises filing their inventions for patent protection in Poland it may be concluded that knowledge of university origin diffuses among the enterprises covered by the study faster than knowledge created in industrial laboratories (Table 1). This finding is consistent with the expectations and results of analogical studies for other national economies. Table 1. Adoption times of academic and industrial knowledge by enterprises from Poland Enterprise Total number of patents Average number of years of academic knowledge acquisition Average number of years of industrial knowledge acquisition Average number of years of knowledge acquisition in total ABB Sp. z o.o ,69 14,84 14,28 Polin Sp. z o.o ,22 11,60 11,84 Pioma S.A ,00 14,92 17,18 85

86 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Zakłady Azotowe Puławy S.A ,31 21,38 19,52 Sigma S.A ,75 9,33 9,92 KGHM Cuprum Centrum B+R 27 3,00 7,33 6,25 Zelmer S.A. 12-9,77 9,77 Rybnicka Fabryka Maszyn Ryfama S.A. 8-13,6 13,60 Apator S.A ,75 12,05 12,69 Dozut-Tagor Sp. z o.o ,00 8,3 9,00 Seco/Warwick S.A. 8 6,4 8,27 7,87 Zakłady Mechaniczne Pamet Sp. z o.o. Południowy Koncern Energetyczny S.A. 4-12,40 12, ,0 13,00 12,60 KGHM Polska Miedź S.A. 8-12,25 12,25 Przedsiębiorstwo Farmaceutyczne Jelfa S.A. Bombardier Transportation (ZWUS) Polska Sp. z o.o. Zabrzańskie Zakłady Mechaniczne S.A. Fabryka Okuć Meblowych Stalmot Sp. z o.o. ICSO Chemical Production Sp. z o.o. Zakłady Organiczne Organika-Sarzyna S.A. Fabryka Zmechanizowanych Obudów Ścianowych FAZOS S.A ,00 11,55 11, ,11 7, ,33 11, ,4 18,30 17,26 8 9,7 21,61 14, ,00 15,00 15,00 Becker-Warkop Sp. z o.o. 11 7,00 8,00 7,84 Enterprises totally ,93 13,63 13,39 The average lag between the academic science and the inventiveness of enterprises in the period under study was years while industrial knowledge took years to diffuse into enterprises (Table 1). It should be emphasized here that the time of adoption of know-how of the others coming both from academic centers and company laboratories varies, sometimes significantly, between enterprises and also that diffusion of academic knowledge among several enterprises occurred slower than in the case of industrial knowledge, which is an unusual phenomenon. The analysis of patent documents from Poland made it also possible to formulate the conclusion that contrary to common expectations university knowledge from publications diffuses among the entities covered by the study slower than knowledge from patents. On average, the former has taken years and the latter years to reach enterprises. Moreover, in the case of the strong majority of enterprises it was academic knowledge coming from scientific publications that has taken a longer time to acquire (Table 2). 86

87 Lags between academic science and inventiveness in Poland Table 2. Adoption time of academic knowledge from publications and patents by enterprises from Poland Enterprise Total number of patents Average number of years of academic knowledge acquisition from publications Average number of years of academic knowledge acquisition from patents Average number of years of academic knowledge acquisition in total ABB Sp. z o.o ,28 11,87 11,69 Polin Sp. z o.o ,22 14,22 Pioma S.A ,00 32,00 33,00 Zakłady Azotowe Puławy S.A ,78 9,14 12,31 Sigma S.A ,5 10,00 17,75 KGHM Cuprum Centrum B+R 27-3,00 3,00 Zelmer S.A Rybnicka Fabryka Maszyn Ryfama S.A Apator S.A ,75 15,75 Dozut-Tagor Sp. z o.o ,00 16,00 Seco/Warwick S.A. 8 1,00 7,75 6,4 Zakłady Mechaniczne Pamet Sp. z o.o. Południowy Koncern Energetyczny S.A ,00 12,00 9,0 KGHM Polska Miedź S.A Przedsiębiorstwo Farmaceutyczne Jelfa S.A. Bombardier Transportation (ZWUS) Polska Sp. z o.o. Zabrzańskie Zakłady Mechaniczne S.A. Fabryka Okuć Meblowych Stalmot Sp. z o.o. ICSO Chemical Production Sp. z o.o. Zakłady Organiczne Organika- -Sarzyna S.A. Fabryka Zmechanizowanych Obudów Ścianowych FAZOS S.A ,00-1, ,4 10,4 8 10,08 8,5 9, ,00 15,00 Becker-Warkop Sp. z o.o. 11-7,00 7,00 Enterprises totally ,45 11,62 11,93 The above findings suggest that although the access to scientific publications is faster than to patent publications industry representatives base their inventiveness to a greater extent on earlier academic inventions than scientific papers and it is these, and not publications, which are more valuable for them. Considering the fact that the most effects of R&D efforts of academic researchers are disseminated through scientific papers, it may be concluded that a large part of scientific output of academic centers never reaches economic practice. 87

88 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Finally, on the basis of the conducted analysis of patent documents it may be said that enterprises from Poland take much longer to acquire knowledge of domestic than foreign origin. The average lag between the science of Polish academic centers and the inventiveness of enterprises was years while in the case of academic knowledge of foreign origin that indicator was 9.96 years. This means that in Polish conditions geographic proximity is irrelevant to the rate with which academic knowledge is transferred to enterprises as it is emphasized in many theoretical and empirical publications. It may also mean that foreign knowledge coming from foreign research centers is more valuable than domestic one for enterprises from Poland. Conclusions The rate with what academic knowledge leaks to the economy influences innovativeness and competitiveness of enterprises. Keeping this in mind, the purpose of the paper has been to estimate the number of years that pass from the moment of making knowledge originating in academic centers public to the moment in which this knowledge is used by enterprises in the process of invention. The main conclusion that comes to mind from this paper is that the patterns of academic knowledge acquisition by Polish enterprises largely differ from the world trends. The only finding consistent with other studies is that science diffuses faster than technology. The diffusion of academic knowledge among enterprises takes years and takes on average about 2 years less than in the case of diffusion of industrial knowledge. It is interesting, however, that university knowledge from patents diffuses faster (within years) than from scientific papers (12.45 years). The above findings suggest that inventors from enterprises reach for scientific papers to a lesser extent than for academic patents. Taking into account that the vast majority of the effects of university R&D work is disseminated through publications, it also means that a large part of scientists work is wasted because it never reaches economic practice. Therefore, state policies should include on the one hand instruments encouraging entrepreneurs to become interested in scientific publications and on the other hand ones motivating academic researchers to make inventions that meet the needs of industry. It is also atypical that academic knowledge of foreign origin on average diffuses to enterprises covered by the study faster (within 9.96 years) than knowledge of domestic origin (within years). This is due to the fact that, because of cultural and geographic proximity, domestic knowledge tends to be the fastest to diffuse. In Polish conditions, however, such tendency may be justified. Probably, Polish enterprises prefer to reach for foreign scientific achievements because it is other countries and not Poland which are world leaders of innovation. When it is taken into account, however, that there are many world-class 88

89 Lags between academic science and inventiveness in Poland Polish technical solutions and at the same time they are better suited for use in the Polish reality, then state policies should put greater emphasis on tightening the relationships between science and business in order to make industry representatives more appreciate the work of Polish academic researchers. The results of these analyses can be useful for future research which could focus on the estimation of differences in the rate of academic knowledge diffusion between particular sectors and areas of science as well as on the attempt at answering the question of what do these differences result from. Moreover, further research could shed more light on geographical directions from which Polish enterprises acquire knowledge the fastest. And finally, further research could extend this analysis by the rate of academic knowledge diffusion among not only enterprises but also other scientific researchers. To this end, lags should be measured between citing and cited scientific publications as well as between citing academic patents and cited academic publications. References Adams, J.D. (1990), Fundamental stocks of knowledge and productivity growth, Journal of Political Economy, 98(4): Adams, J.D., Clemmons, J.R. (2013), How rapidly does science leak out? A study of the diffusion of fundamental ideas, Journal of Human Capital, 7(3): Adams, J.D., Clemmons, J.R., Stephan, P.E. (2006), How rapidly does science leak out?, NBER Working Paper Series, No Alcacer, J., Gittelman, M. (2006), Patent citations as a measure of knowledge flows: The influence of examiner citations, The Review of Economics and Statistics, 88(4): Alcacer, J., Gittelman, M., Sampat, B.N. (2009), Applicant and examiner citations in U.S. patents: An overview and analysis, Research Policy, 38(2): Azoulay, P., Graff Zivin, J.S., Sampat, B.N. (2011), The diffusion of scientific knowledge across time and space: Evidence from professional transitions for the superstars of medicine, NBER Working Paper Series, no Baughn, C.C., Bixby, M.L., Woods, S. (1997), Patent laws and the public good: IPR protection in Japan and the United States, Business Horizons, 40(4): Branstetter, L., Ogura, Y. (2005), Is academic science driving a surge in industrial innovation? Evidence from patent citations, NBER Working Paper Series, no Cohen, W.M., Goto, A., Nagata, A., Nelson, R.R., Walsh, J.P. (2002), R&D Spillovers, patents and the incentives to innovate in Japan and the United States, Research Policy, 31(8-9): D Este, P., Perkmann, M. (2011), Why do academics engage with industry? The entrepreneurial university and individual motivations, Journal of Technology Transfer, 36(3):

90 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Furman, J.L., Stern, S. (2004), Climbing atop the shoulders of giants: The impact of institutions on 24 cumulative research, Working Paper, Boston University and Northwestern University. Griliches, Z. (1957), Hybrid corn: An exploration in the economics of technical change, Econometrica, 25(4): Henderson, R., Cockburn, I. (1996), Scale, scope, and spillovers: the determinants of research productivity in drug discovery, RAND Journal of Economics, 27(1): Jaffe, A.B., Trajtenberg, M., Henderson, R. (1993), Geographic localization of knowledge spillovers as evidenced by patent citations, Quarterly Journal of Economics, 108(3): Kim, J., Lee, S.J., Marschke, G. (2005), The influence of university research on industrial innovation, NBER Working Paper Series, no Lach, S., Schankerman, M. (2008), Incentives and invention in universities, RAND Journal of Economics, 39(2): Link, A.N. Siegel, D.S. (2005), Generating science-based growth: An econometric analysis of the impact of organizational incentives on university-industry technology transfer, European Journal of Finance, 11(3): Macgarvie, M., Furman, J.L. (2005), Early academic science and the birth of industrial research laboratories in the U.S. pharmaceutical industry, NBER Working Paper Series, No Mansfield, E. (1985), How rapidly does new industrial technology leak out?, The Journal of Industrial Economics, 34(2): Mansfield, E. (1963), Intra-firm rates of diffusion of an innovation, The Review of Economics and Statistics, Vol. 45, no. 3: Mansfield, E., Schwartz, M., Wagner, S. (1981), Imitation costs and patents: An empirical study, The Economic Journal, 91: Monjon, S., Waelbroeck, P. (2003), Assessing spillovers from universities to firms: Evidence from French firm-level data, International Journal of Industrial Organization, 21(9): Motohashi, K. (2005), University-industry collaborations in Japan: The role of new technology-based firms in transforming the national innovation system, Research Policy, 34(5): Niklewicz-Pijaczyńska, M. (2015), Commercialization of research results: Effectiveness of the patent system, in: (Eds.), Loster T., Pavelka T., The 9 th International Days of Statistics and Economics: Conference Proceedings, Prague: Nilsson, A.S., Rickne, A., Bengtsson, L. (2010), Transfer of academic research: Uncovering the grey zone, Journal of Technology Transfer, 35(6): Roach M., Cohen, W.M. (2012), Lens or prism? Patent citations as a measure of knowledge flows from public research, NBER Working Paper Series, No Roessner, D., Bond, J., Okubo, S., Planting, M. (2013), The economic impact of licensed commercialized inventions originating in university research, Research Policy, 42(1):

91 Lags between academic science and inventiveness in Poland Rosenberg, N., Nelson, R.R. (1994), American universities and technical advance in industry, Research Policy, 23(3): Scotchmer, S., Standing on the shoulders of giants: Cumulative research and the patent law, Journal of Economic Perspectives, 5(1): Sorenson, O., Singh, J. (2007), Science, social networks and spillovers, Industry and Innovation, 14(2): Stephan, P.E. (2004), Robert K. Merton s perspective on priority and the provision of the public good knowledge, Scientometrics, 60(1): Wachowska, M. (2015), The role of the Polish patent system in knowledge diffusion, in: Strategic guidelines of Ukraine s economy development, Materials of 2 nd international scientific internet-conference of students, postgraduates and young researches, Ivan Franko National University of L viv, L viv:

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93 UNIVERSITY AS INNOVATIVE ORGANIZATION Vladimír Hiadlovský 1 vladimir.hiadlovsky@umb.sk Andrea Danková andrea.dankova@umb.sk Petra Gundová petra.gundova@umb.sk Miroslava Vinczeová miroslava.vinczeová@umb.sk Matej Bel University in Banská Bystrica, Slovakia 1 Corresponding author Abstract. The article defines a university as one of the key innovative organizations regarding the societal needs. It identifies the sources of innovations in the university setting and determines a critical role and competences of a chief executive for the innovation potential of an institution from the perspective of an organization management. It also addresses the issue of barriers and institution resistance to innovations, mainly in light of conservative management, and the issue of financing innovations in general. Key words: innovations, innovative organization, university. Introduction Innovations constitute an accompaniment of entrepreneurship. They appear one of the best tools of maintenance and improvement of the country development and competitiveness of organizations in the local as well as global business environment. Their substantial feature is the realization of a new product, technology, or service added value in the market. Creativity is one of factors affecting successful management of innovations. As stated by Lesáková et al. (2008: 16), creativity, the ability to bring on new ideas, inventions, to combine them in a unique way can be termed as innovativeness and an organization supporting innovativeness creates conditions for new procedures and solutions. The aim of the article is to define a university as one of key innovative organizations. In the beginning we introduce the examined issues briefly define innovations from the macroeconomic (by means of selected indicators) as well as microeconomic point of view. The essential part of the article contains de-

94 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 termination of the role of university in the process of increasing the innovation potential not only of an individual, but also of the university itself. The final part of the article is devoted to barriers towards innovations and conservative management. 1. Significance of innovations in the macroeconomic and microeconomic view Innovations may be considered a driving force of economic growth and one of the key competitiveness factors not only at the level of businesses but also as for whole nations (Galia, Legros 2004). In this respect, Drucker (1998) points out that innovation is at the heart of entrepreneurial activity, and drives many entrepreneurs to carry out their activity. Innovation, therefore, creates a feedback effect in which entrepreneurs innovate, and their innovations stimulate other entrepreneurs to carry out their activity (De Cleyn, Braet 2012; Zortea-Johnston et al. 2012). As stated by Lesáková (2013: 133), innovation is a meaningful, dynamic, developing process, the result of which is a positive change oriented on the improvement of the transformation process in enterprises and better satisfaction of customer needs. An innovation may be understood as an introduction of new, significantly improved products or processes, a new marketing or organizational method within a business or in external relations (Oslo Manual 2005: 31). Since 2001, the European Commission has monitored innovation performance of countries in the evaluation report The EIS European Innovation Scoreboard and later The IUS Innovation Union Scoreboard. The Innovation Scoreboard capturing in total 25 indicators provides an overall picture of innovation performance. Based on the innovation performance, the EU member states fall into to four performance groups: "innovation leaders (Denmark, Finland, Germany, and Sweden), innovation followers (Belgium, France, the Netherlands, Ireland, Luxembourg, Austria, Slovenia and the UK), moderate innovators (Cyprus, the Czech Republic, Estonia, Greece, Croatia, Lithuania, Hungary, Malta, Poland, Portugal, Slovakia, Spain and Italy) and modest innovators (Bulgaria, Latvia and Romania). The Scandinavian countries together with Germany belong to countries which have been achieving the highest innovation performance for the long term. Sweden was in the first position in 2014 (with the innovation performance index of while the 2014 EU average was 0.551). This position was mainly achieved due to the higher (as for the proportion to the GDP) and more stable investments in research and development. The following figure presents the innovation performance index in countries belonging to the Visegrad group V4 (i.e. Poland, Hungary, the Czech Republic and the Slovak Republic) over the period. In 2014 the all V4 countries fell in the group of moderate innovators based on the innovation performance index and that of Slovakia was Slovakia disposes of the 94

95 University as innovative organization provable innovation potential the growth of which should be stimulated and supported. There are many small and medium-sized rapidly growing enterprises with the potential to become leaders in a certain area of entrepreneurship in which many new ideas are generated. These, however, may hardly be transferred into new products, patents, competitive advantages or jobs. The Czech Republic with the innovation performance index of in 2014 is in the best position within the V4 countries. Hungary (the innovation performance index of ) achieved roughly the same innovation performance than Slovakia. The index value of Poland was However, Poland has recently started to build and support the research-development centres in Krakow, Katowice, Rzeszow, Wroclaw where important technological and research centres are established. Figure 1. Development of the V4 countries innovation performance in Source: European Commission, Another significant indicator affecting the country s innovation performance is the ratio of R&D expenditures to GDP given as a percentage. The 2014 overall EU average was According to OECD, the expenditures on education dropped between 2010 and 2012 which is viewed as a delayed effect of the 2008 world economic crisis. This fact did not hold valid in the V4 countries which is illustrated in the following table. Table 1. Development of R&D expenditures to GDP in V4 countries (%) Country SVK 0,618 0,665 0,808 0,827 0,886 PL 0,721 0,746 0,881 0,871 0,941 CZ 1,34 1,56 1,79 1,91 1,997 HU 1,47 1,196 1,27 1,397 1,371 Source: OECD,

96 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 As the above table shows, the highest proportion was achieved in the Czech Republic. The fact that in all countries (except Hungary in 2011 and Poland in 2013) there has been a growing tendency of the indicator since 2010 can be considered positive. In Slovakia the indicator value was % of GDP in 2014 while recorded overall current R&D expenditures were 553,934,000 EUR (Ročenka vedy a techniky v Slovenskej republike 2015). The R&D realization also requires personal constitution. The following graph displays the development of a number of R&D employees in the V4 countries. In Poland, the Czech Republic and Hungary the number of employees was growing. That of Slovakia fell down in 2013 by 3.66% compared to Figure 2. Development of a number of R&D employees Source: Eurostat, 2016 b. The last monitored indicator is the gross value added. When we evaluate GDP from the production point of view, relative significance of ten activities as for their contribution to the gross value added emerges in the centre. Over the period the industry share in the EU-28 value added declined by 1.2% to 19.1 % while there was a close edge over the wholesale and retail trade, transportation and accommodation, and catering services (19.0%) the proportion of which also decreased for that period by 0.7 %. The public administration, education and healthcare share increased, on the other hand, by 1.0% to 19.4% in This shifted these activities from the third to first position according to the value added (if we remain on this specification level). The further largest 2013 share was recorded by activities in the real estate area (11.2%) followed by expert, scientific, technical, administrative and supporting services (10.4%), building industry (5.7%), financial and insurance activities (5.5%) and information and communication (4.5%). Entertainment and other activities (3.6%) and agriculture, forestry and fishing (1.7%) recorded the lowest share. 96

97 University as innovative organization Realization of innovations results in positive effects not only on a national level but also on the level of businesses. Innovations may help an organization to gain strategic advantages containing an ability to offer something exceptional, hardly-to-manage, gain a considerable market share with a new product or service, compete in prices, quality and assortment, offer something that represents an entirely new concept and change a view on the way of cooperation of particular system slices (Tidd et al. 2007). A top priority of global management is to manage change, which requires establishing an innovative organization to be responsive to change. An innovative organization is required to implement those core elements such as self-actualization, self-development, social acceptation, shared vision and transformational leadership. Managerial innovation is achieved by incorporating organizational learning within the innovative organization. The alignment of the core elements required for organizational learning with the key factors of an innovative organization enables an environment inspiring individuals passion and initiative to manage change (Chang et al. 2008: 842). Within innovation organizations, organizational activities are changed by improving productivity and quality of work life in a sustainable way. The raising productivity and quality of work life is based particularly on a combination of technologies and employees capabilities, their as well as management s involvement and motivation to bring new products, services and work procedures. The increased innovation capacity of an organization generates a favourable circulation in which innovativeness leads to productivity. Based on that, it is possible to invest earnings in the organization to support innovativeness again (EHSV 2011). In innovative organizations each employee is required to think about the future of their organization and participate in new ideas generation. Top management naturally attaches a high priority to innovations which reaches an understanding of a change necessity, culture change, creation of new open atmosphere, change of thinking, values, hearing to new voices, acceptance of new ideas resulting from new sources, creation of multidisciplinary teams, understanding of personal change need, respecting opinions of the others, understanding a new role of managers, ability to generate resources human and financial ones to ensure generation of new ideas, experiments and opportunities. The components of an innovative organization include a shared vision, direction and will to innovate, proper structure, key individuals, efficient team work, continuous individual development, broad communication, high level of involvement in innovations, external focus, creative atmosphere and learning organization (Tidd et al. 2007). An innovation capacity of an organization depends on management s and other employees motivation and determination to renew their work as well as 97

98 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 a whole organization. That results in the newest models of products and services or organizational processes beneficial for customers. The more developed processes are employed by an organization, the better its ability to implement innovations (EHSV 2011). An effort to realize innovations has definitely to be supported by a general innovative policy and innovation programme which come as a result of the elaboration of functional strategies of the organization. A change of organizational culture as one of complex managerial tasks is a part of innovations support. One of possible procedures leading to its successful implementation consists of the following nine items: 1. an explicitly determined, understandable and stable innovation strategy of a business; 2. a clear formulation of business employees expectations; 3. a definition of main parameters and characteristics of future business culture in a broadest possible extent; 4. a description and evaluation of current business culture in key areas fixed to the business strategy; 5. a definition of key areas of business management which are directly associated with business culture; 6. information of employees and an introduction of reasons to change culture; 7. quality education and practical training; 8. control and sanctions; 9. diagnostics of changes in culture. After the project accomplishment, it is necessary to evaluate the change and identify efficiency of the whole process. It is advisable not to neglect factors affecting the success of innovation activities of an organization. They include an advantageous orientation on an innovation portfolio containing a balanced representation of varied innovation conceptions, the rate of response to market requirements, use of own strengths, technical performance, top management support, application of the innovation process management system. The factors of failure mostly comprise disobedience to market conditions, a low level of innovation projects execution and insufficient differentiation. 2. The role of university in increasing the innovation potential Universities undoubtedly have the huge potential to become leaders in the area of R&D, education and learning. Likewise, they may become a significant driving force in supporting involvement and cooperation of subjects within a certain locality and creation of a certain community. The university is certainly a place where it is possible to express one s ideas and opinions freely, a creative, innovative along with critical approach to problem-solving is promoted, new knowledge is generated, conventional paradigms fade and are replaced by new ones. We think that an educational system of each country is one of the most important indicators of development and its standard and quality constitute one of key requirements of country s welfare and sustainable growth. In this context, sustainability may be also understood as a process or strategy leading 98

99 University as innovative organization to sustainable future. Sustainability yet refers not only to ecology and environment, but rather to the ability of an organization or a system to be maintained at a certain level or rate of performance and that can continue or be continued for an indefinite period. Sustainability, therefore, suggests an activity or, more properly, a set of interrelated activities that is viable for an extended period of time, because it can accommodate itself, and adapt to the vagaries of its physical, social, economic and intellectual environment. It nowadays encompasses a holistic approach in which issues of social, financial, health-related and educational sustainability underpin the fundamental notion of environmental sustainability (Barnard, Van der Merwe 2016). As Moore (2005) also points out, sustainability must become a fundamental priority. She notes that the sustainable development policy of the university outlines the need for sustainable development of campus buildings and operations and education related to sustainability. The principle and concept of sustainable growth involves a large number of perspectives, innovative approaches, initiatives and strategies which should be incorporated at top management levels. An educational level of population is one of factors determining competitiveness of any country, it enables to develop their excellence, predicts many of their competitive advantages (but also disadvantages) compared to other countries. Nowadays, in the era of the knowledge society, education has become a fundamental source of development and economic growth. We can also argue that in the entrepreneurial sector as well as in other spheres including institutions providing university education or performing scientific research a principle holds valid that innovations are a key to survival and sustainable development. Barnard and Van der Merwe (2016) place emphasis on agility and flexibility to enable pro-active strategies in reaction to constantly changing circumstances. Leaning on modern definitions of sustainability the above authors derive the following set of necessary and sufficient conditions for sustainable development in the university environment: the cultivation, through the teaching and learning process through an institutional ethos actively generated by all, of an entrepreneurial and innovative spirit among staff and students. Such a spirit, tangible within a university, enables improvement of the conditions of life through the generation of knowledge which, in turn, creates an improved understanding of the human condition and is also convertible into products and services that develop/improve the prevailing quality of life; a standard of teaching and learning and curriculum content that enables its graduates to use the skills, knowledge and competencies gained to the demonstrable advantage of civil society and their own fulfilment; 99

100 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 earnest and ongoing endeavour to ensure that the internal resources (human, financial and infrastructural) of the institution is gainfully utilized, conserved, replicable and renewable, and that the resources external to the institution for its effective functioning are gainfully utilised, conserved, replicable and renewable. The above conditions represent values for the university to establish foundations of its functioning and direction. Such value orientation of the university can then, in our opinion, help all involved individuals and subjects reflect on declared values which underline formulated objectives and use these values as an initial postulate of their decision making, and define priorities and that all based on conclusive connections between values and objectives. In this context, it is often perceived that globalization serves as both a catalyst of accelerated development as well as an agent of chaotic disruption resulting in socio-economic and political dislocations. In light of this, a key idea may be that heterogeneity could be understood as a mind-set and a practice where complexity and diversity are leveraged strategically in a manner that promotes organizational sustainability (Carayannis et al. 2015). We suppose that the pursuit of sustainability and competitiveness of the university in the current turbulent environment accompanied by continuous changes and at the time when in the knowledge society in which the university functions it will increasingly naturally lead to the formation of the environment supporting creation of innovations and their commercialization. Based on Carayannis et al. (2015) and agreeing with Barnard and Van der Merwe (2016) we may define organizational sustainability (also in respect to understanding the university as an innovative organization) as the sum of the following features: an appropriately resourced and clearly defined institutional identity for the university, located in its core academic functions, that is not only financially and environmentally sustainable, but also sustainable within the broader body politic; the culture of sustainability fosters an environment conducive to innovation and entrepreneurship; the technology focus should have a clear sustainability culture embedded within it for it to not become subsumed within or subservient to the traditional formative, academic, role of the university; a system of governance and an organizational design that promotes and protects the academic and other institutional values on the basis of which the university functions and against which it is measured by its stakeholders; a transformation agenda that establishes the social and economic conditions necessary for full equality of opportunity for staff and students. 100

101 University as innovative organization 3. Institutional resistance and barriers of innovations in the university setting As stated above, the positive management s attitude towards innovations at all management levels and the organization s flexibility rate in wider meaning belong to key conditions of the organization s innovation potential. The management s dynamic reaction to operational and strategical changes or the rate of resistance in a historically conventional way of management and thinking significantly influence effectiveness of the innovation process. Generally, we can classify innovation barriers to internal and external ones. Internal subjective barriers affect a certain subject in such an extent in which a single organization intensively eliminates their influence by its targeted innovation policy. External barriers, largely having an objective character, affect all subjects in an approximately same way, however, they can be partially eliminated by targeted strategic management which individually enables to achieve a different level of their influence in practice. In the public universities setting the following external innovation barriers may be considered most crucial: the legislative definition of margin of manoeuvre in several key areas of the innovation potential development, together with limited force and competencies; determined rules of financing, in the wider context particularly government policy in the area of the volume of universities financing, prevailingly regarding the share of sources intended for science financing which is strongly correlated with the university s innovation potential; the solution of structural unemployment in the context of targeted public resources spending on the university study aimed at synchronization of the labour market needs with the offer of universities regarding produced graduates; the rate of pyramidal perception of the country s innovation potential in relation to the educational system; the efficient use of the innovation potential is not achieved till at the university level but only providing that significance of quality of the educational system as a whole in which primary education performs its crucial task is considered cardinal; the absence of the long-term stable and effective strategy in education at the Ministry of Education level. Internal barriers of the university innovation potential development (from the point of view of public universities) can include: the low rate of flexibility and reaction to external needs by management at all management levels; 101

102 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 the insufficient ability to raise sources of finance from non-public funds, the high rate of resistance of employees thinking in relation to innovations, both towards management and in general; universities should represent a country s goldfish bowl as for learning organizations and the grade of institutional innovation potential; unfortunately, contrary is often the case; appreciation of innovations significance for long-term efficient operation of the university and the natural interest of each employee to contribute to the increase of the institution s innovation potential. Conclusions Tertiary organizations including universities should function as knowledge and innovative organizations with the aim to generate and share knowledge bringing on the support of sustainability and development. However, it is inevitable for universities and their successful operation to be managed in an innovative way as only flexible management with a naturally positive relation to innovations is able to reflect on a current fundamental success principle saying that innovations are a key to survival of the university, its sustainability and successful future direction and competitiveness in the challenging environment. Since, as we have already mentioned, education has become one of main sources of economic growth, the successful and innovative university will then provide quality education, prepare graduates able to meet actual practical needs and thus contribute to competitiveness of the whole society. References Barnard, Z., Van der Merwe, D. (2016), Innovative management for organizational sustainability in higher education, available at: i/full/ /ijshe (accessed 28 April 2016). Carayannis, E. G., Sindakis, S., Walter, CH. (2015), Business model innovation as lever of organizational sustainability, available at: com/article/ / s y (accessed 28 April 2016). De Cleyn, S.H., Breat, J. (2012), Do board composition and investor type influence innovativeness in SMEs?, International Entrepreneurship and Management Journal, 8(3): Drucker, P.F. (2008), The discipline of innovation, Harvard Business Review, 76(6): European Innovation Scoreboards, available at: industry/ innovation/factsfigures/scoreboards/index_en.htm (accessed 27 April 20146). Eurostat (2016 a). File: Gross value added at basic prices, 2003 and 2013 (% share of total gross value added) YB15.png, available at: eurostat/statistics-explained/index.php/file:gross_value_added_at_basic_ 102

103 University as innovative organization prices,_2003_and_2013_(%25_sshar_of_total_gross_value_added)_yb15. png (accessed 26 April 2016). Eurostat (2016 b). Total R&D personnel by sectors of performance, occupation and sex, available at: TableAction.do (accessed 26 April 2016). Galia, F., Legros, D. (2004), Complementarities between obstacles to innovation: Evidence from France, Research Policy, 33: Chang, T.J., Hsu, P.S., Chuang, C.P., Chang, W.S. (2008), Key factors of an innovative organization to adapt to changing global management, International Conference on Industrial Engineering and Engineering Management, 8-11 December, Singapore: Innovation Union Scoreboard 2015, available at: growth/industry/innovation/factsfigures/scoreboards/files/ius_2015_executive_summary_en.pdf (accessed 26 April 2016). ISSR, available at: C3%A1l_doc.pdf?iinstEI=1&attEID=51522&docEID=287000&matEI D=5788&langEID=1&tStamp= (accessed 26 April 2016). Lesáková, Ľ. (2013), Main priorities of the innovation policy of the Slovak Republic, Knowledge for market use 2013 public economy - present situation and future prospects, September, Olomouc: Lesáková, Ľ. (2008), Manažment zmien, in: Lesáková, Ľ. a kol. (Ed.), Inovatívny manažment vo vedomostnej ekonomike. Banská Bystrica: Univerzita Mateja Bela v Banskej Bystrici: Moore, J. (2005), Seven recommendations for creating sustainability education at the university level. A guide for change agents, available at: (accessed 28 April 2016). OECD (2016), 2016 Gross domestic spending on R&D, available at: oecd.org/rd/gross-domestic-spending-on-r-d.htm (accessed 26 April 2016). Oslo Manual, available at: (accessed 26 April 2016). Ročenka vedy a techniky v Slovenskej republiky 2015, Štatistický úrad Slovenskej republiky. Stanovisko Európskeho hospodárskeho a sociálneho výboru na tému Inovatívne pracoviská ako zdroj produktivity a kvalitných pracovných miest, available at: doc (accessed 26 April 2016). Tidd, J., Bessant, J., Pavitt, K. (2007), Řízení inovací, Brno: Computer Press. Zortea-Johnston, E., Darroch, J., Matear, S. (2012), Business orientations and innovation in small and medium sized enterprises, International Entrepreneurship and Management Journal, 8(2):

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105 ACADEMIC ENTREPRENEURSHIP CONCEPTUAL FRAMEWORK AND EXAMPLE FROM POLAND Kamil Bąk Koźminski University, Poland Abstract. The article is devoted to very important subject of Academic Entrepreneurship. Author tries to describe state of the art by reviewing various articles presenting most recent approaches to different aspects of this subject. Review emphasize the complexity of the problem and numerous factors determining the success of the institutions in their entrepreneurial endeavors. Second part of the paper describes the case from Poland Technology Transfer Office of University of Warsaw. In the last part author presents identified areas for further research and investigation as well as comments on current state of Polish AE and proposes some possibilities for development. Important finding states, that for business success investment in social capital and attitude change may be equally important as capital investments and policymaking. Key words: academic entrepreneurship, innovation, spin-off, license, science-business collaboration, technology transfer. Introduction This paper aims to present the state of the art of Academic Entrepreneurship (AE), allowing for understanding of the most recent trends in this subject and trying to identify the fields for further researches to be conducted. To achieve this goal author has reviewed the publications about AE (mostly from the recent decade) and chosen the sample to present various angles of this subject. They complement each other to present wider perspective, however in some cases the undertaken research resulted in opposing or more controversial findings. First part of the article is trying to present the theoretical background and main concepts of this crucial for economy process. Author reviews various researches and articles regarding various perspectives of this subject. In second part, author presents the example from Poland, how the process of technology transfer is organized by University of Warsaw. In the last part, findings are summarized and commented, also the recommendations for further development are presented. Academic Entrepreneurship is a relatively young concept in the Management Science. Entrepreneurial University was described for the first time in 1983 by Etzkowitz in the discussion about application of American academic

106 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 science in commercial environment. Since then, the concept was developed in various countries and became an important part of modern economies. Effectively, the whole process of creation, protection and commercialization of intellectual property was organized with the whole framework surrounding it. To understand the idea of Academic Entrepreneurship it is vital to become familiar with concepts and definitions of entrepreneurship, innovation, technology transfer, spin-off, license, collaboration. All those elements are interfering with each other and allow to understand the whole process. Entrepreneurship Since the research and work of Schumpeter (1934), multiple definitions of entrepreneurship were developed and presented. Disregarding all the minor differences, there can be a unified core part identified in most of them. It states that entrepreneurship is a set of actions that combine various resources in order to produce new goods or services. It always includes the risks as the outcomes of the process are uncertain. It needs to be organized, to create the whole process leading to expected results. And lastly it should be innovative in a certain way, that it is not just replicating the existing solutions (Shane 2004). Innovation For many years scholars have attempted to define and explain innovation. Despite their efforts, it seems there is still no agreement on single definition of this concept. In public debate, innovation is very popular concept, extensively used on various occasions, among many groups of stakeholders. Almost every day, we can hear or read in the media about building the competitive economy based on the innovation. Support for the innovative solutions and enterprises is widely debated. However, to make discussions more effective it should be agreed at the beginning what is understood under this definition. Some groups may read it as a disruptive kind of innovation with impact comparable to the creation of wheel, digital camera, Skype or Facebook. For the others innovation is presenting new, more effective or efficient way of conducting the same old process. Both approaches are correct and have support in the literature, but for the sake of e.g. creating policies on a government level, it is important that the idea and its understanding is unified and precise. One the most recognized and widespread definition was created by Peter Drucker (1985) The practice of innovation is the specific tool of entrepreneurship, the means by which they exploit change as an opportunity for different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation. Later he was leading numerous studies about inno- 106

107 Academic entrepreneurship conceptual framework and example from Poland vation subject in his career, but this basic understanding is sufficient for the purpose of this article. Technology transfer Technology transfer (TT) became very important part of the economy in last couple of decades, therefore is a field of multiple researches and studies. The importance of the subject is emphasized by publishing a dedicated Journal of Technology Transfer. It can be briefly described as a process of passing the intellectual property (IP) to another party for an agreed remuneration (usually certain amount of money). Transfer is a crucial step in commercialization of technology, and allows further business development and use. For universities, well organized and effective Technology Transfer Office (TTO) is one of the most important elements to become successful in its entrepreneurial proceedings. It is the unit, which supports the commercial endeavors of scientists and as a technology broker it connects the needs of both sides, of business-science equation at any stage of collaboration. It can help to organize the funding for the research as well as offer to the market technology already developed at the university. What is important, studies of Powers and McDougall (2015) proved that TTOs age is positively correlated with its significance for commercial success of the institution. Along with gathered experience, TT officers were open to more sophisticated commercialization methods, utilizing their expertise in such a complex process. From the same study, another factors were identified to have impact on effectiveness of university technology commercialization. Among them faculty quality, R&D spending of the industry and generosity of venture capital proved to predict success in that area. What might be surprising, there was no such a positive correlation with numbers of patents. Reason for that might be vast number of other factors affecting the extensive way from filing the patent to commercial success of innovation. More details about particular TT methods will be described further part of the article. 1. Various aspects of academic entrepreneurship All previously presented definitions give wider perspective on Academic Entrepreneurship and allow for better understanding of the concept. Previous paragraphs offered the description of Entrepreneurship. One of its specific types is AE. It can also be approached wider adding Academic based Entrepreneurship then it would include all enterprises created by faculty and students, not only those exploiting the technology or IP created at their institution (Osiri et al. 2014). Core AE, where IP created inside the institution is used, can be further divided in two categories. First one is the most common understanding of AE commercialization of technology via TT, it may also be referred to as hard type of AE. The ways of transfer include: creation of spin-off company, licensing, selling the technology. Majority of scientific papers about AE are 107

108 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 dedicated to this one. One of the reasons for this can be ease of measuring its effectiveness by numerical parameters (number of spin-off companies, value of sold licenses, number of staff etc.) (Osiri et al. 2014). Second category includes all the actions that are entrepreneurial in nature and can result in any financial reward (either for them individually or for their institutions. This may include any type of commercial collaboration like: consultancies, sponsored research, cooperative programs. This category is much wider and includes much more activities which are not in scope of typical TT. Those more informal methods of partnership may be more frequent for some science fields like: humanities, social sciences where technology transfer is usually not the case (Abreu et al. 2013). Informal ways of technology transfer, such as collaborative research, contract research, consulting, providing ad hoc advice and networking with practitioners are also referred as academic engagement (Link et al. 2007; Siegel, Wright 2015) propose very different approach. Their groundbreaking article propose to look on the whole subject from a new perspective. According to their findings, AE needs to be analyzed much wider, as roles of stakeholders have changed dramatically in recent years. The new position of the university in the AE process and the framework for further research in this new perspective of AE is proposed by authors. For the purpose of this article AE will refer to the first category, i.e. mainly formalized process of technology transfer. Success factors Another group of studies investigate the personal motivation and characteristics of Academics involved in the entrepreneurial activities. Number of factors affecting success of business endeavors in academic world is very wide. Giuliani et al. (2010) reviewed different factors, which may generally be divided into three groups institution, organizational and individual. All of them are equally important for the final success and neglecting any of those groups may be the reason why some institutions are performing better than the others. Many studies focus on understanding who are the scientist most interests in various types of collaboration. They identified the impact of country (e.g. Azagra-Caro et al. 2006), field of the conducted studies, as well as the sex and age (Klofsten, Jones-Evans 2000; O Shea et al. 2005). The faculty experience, cannot also be ignored, however some articles suggest that many institutions put to big focus on experienced professors with decades of research, numerous publications, and not taking into account the meaning of young scientists, including PhD student, who will take over their positions in the future (Bienkowska et al. 2016). This factor is especially important while working on policies regulations and streaming the resources in the new solutions and fields One of the studies proved that the level of government funding for certain scientific field or a group can highly affect willingness of individuals to start a business (Bo- 108

109 Academic entrepreneurship conceptual framework and example from Poland zeman, Gaughan 2007). The influence of peers behaviors cannot be neglected working within a group active in commercial collaboration, can highly increase the chance of individual decisions to cooperate with business. Personal characteristics of entrepreneurs are correlated with the type of activities they are involved in. That imply the need for acceptance of certain risks and focus on applicability of their actions to achieve the expected commercial results in the most effective way. Scientists, however, are usually focused on exploring unknown areas and contribution to scientific environment. Many of their projects are dedicated to an extremely narrow field with no guarantee of further commercial benefits. This could lead to a conclusion that by default those two groups are presenting different behaviors. In contrary to that approach, some studies present the research results, proving that both entrepreneurs and scientists share some common characteristics. This might be the result of the fact that in many countries, process of patenting results of the research and commercializing it on the market, already fell into typical scope of scientists duties (Lee, Rhoads 2004). Some authors propose, to look at those similarities as a possible source for further research. That could allow to determine, how this fact could be used by authorities to motivate scientists for more engagement in entrepreneurial activities (Sinell et al. 2015). 2. Limitations of previous studies Researchers already approached the subject from various angles. However due to the fact that the area is relatively young, and most of the articles fall into the last decade, it can be concluded that there is still many opportunities for further development in area of AE. This is also supported by the fact that new definitions of AE arise, what opens space for another researches and studies (Siegel, Wright 2015). Some reviews proved that the growth number of publications about AE is still lower compared to core entrepreneurship (Osiri et al. 2014). There are some limitations, identified by the author during the review of existing literature. Firstly, there is always a need to choose proper sample for any detailed research. High quality review of the whole population all research centers and universities from various countries would be impossible to conduct due to resource limitation. That leads to other issue. Many of the studies have been exposed to a school, discipline or country bias. That means the sample was too small and therefore not diversified or too homogeneous. Most of the studies were located in highly developed countries United States of America, United Kingdom, Germany or Scandinavian countries. There is also limited number of studies from developing economies, but they were able to present that the motivation and factors affecting entrepreneurial behaviors, as well as the whole process can be very different for those cases (Bernasconi 2005). The same problem is linked to choice of University or discipline for a research 109

110 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 visible tendency to concentrate mostly on the successful cases and known leaders, can affect the whole picture. Effectiveness of the process varies among the departments of a single University, and can be very diverse for the whole region or country. 3. Example from Poland University of Warsaw Poland is not a leader in the area of business-science collaboration. According to Global Innovation Index Report (2015) Poland was ranked 46 th in general classification. That was the second worst (26 th ) result among EU countries (only before Romania) It was even worse in terms of efficiency where the inputs on innovation were compared with its effective output the 93 rd position (out of 141 countries). That leads to the clear conclusions. High spending on the innovative infrastructure cannot guarantee the commercial success. It is vital to create well-structured processes and policies, allowing to properly streamline the resources, spent on the innovation. It is necessary to remember that big part of technological solutions is created at the scientific centers, it is crucial not to overlook the importance of business science relations. Effective regulations and policies could present the possibility to coordinate and efficiently utilize existing infrastructure in the future. Research conducted for Eastern Europeans countries confirmed the importance of Higher Education development in creation of competitive knowledge based economy (Fotea, Guju 2016). Very important aspect is a social capital. Brendzel-Skowera (2016) described the European paradox of problems with low efficiency of commercialization, despite the taken efforts. One important finding is that internal university regulation alongside with social capital and lack of trust are major problems. It was determined in previous paragraphs that success of commercialization is determined by vast number of factors on the multiple levels. The highest one would be the government regulations and institutions. In Poland central institution for business-science collaboration is National Center for Research and Development (NCBiR) runs projects (e.g. financial grants) with aim to ignite science business collaboration. As stated on their website: The National Centre for Research and Development is the implementing agency of the Minister of Science and Higher Education. It was appointed in the summer 2007 as an entity in charge of the performance of the tasks within the area of national science, science and technology and innovation policies. When if was founded, it was the first entity of this type, created as the platform of an effective dialogue between the scientific and business communities. The Center plays also an important role in managing government and EU funds for the researches and granting it though the various programs. One of the examples can be Bridge ALFA a seed level funding for technological startups/ spin-offs. In first half of 2016 the center changed the whole board. That also led to the change in strategy and policies within NCBR. One of the 110

111 Academic entrepreneurship conceptual framework and example from Poland main goals is closer cooperation with business and more engagement from this side in business-science relations. However, it needs some more time to properly assess the effects of undertaken changes. Next level are Scientific Institutes (currently more than 100 in the country), most of which are organized with affiliation of different universities. The biggest ones have already created their TTOs. University of Warsaw is one example of the institution which has formally organized the process for commercialization of technology. It consist of 3 different bodies responsible together for the whole process. Inkubator UW is a system of business incubators. They are responsible for promoting entrepreneurship among students and faculty. Support is given from the very early stage of business idea. They are managed together with AIP (Akademickie Inkubatory Przedsiębiorczości which stands for Academic Entrepreneurship Incubators), a countrywide network of incubators. What is worth mentioning, it allows for development of any kind of business ideas, by students, faculty and alumni. It is mostly focused on Academic based entrepreneurship, therefore it is not reviewed in the details. UOTT University Technology Transfer Office (TTO) The office is supporting scientists from the University to protect the intellectual property from their researches, studies. Allows them to file the patents and leading them through the whole process. At the stage of creation spin-off projects are send to UWRC. UWRC is responsible for revenue side of the process. It is organized as a Special Purpose Company, wholly owned by University of Warsaw. It supports creation of the spin-off, and its development. It takes equity share, which spin-off company is obliged to buy back after finished cooperation (maximum 5 years). On top of that it offers three ways to commercialize the project: license granting the rights to the Intellectual Property in return for the agreed percentage of revenue. Split of the income is transparent and set by the UW regulations spin-off Company creating a new venture, usually led by one of the research team members. It can also be a user of the license selling the rights one time transaction to sell the rights for the technology. Split of the income is also regulated. Beside the main scope of duties the office is also organizing various projects to promote entrepreneurship among the faculty and students, offers legal advisory and Intellectual Property related consultancies. UOTT is operating since 1998, but it probably was not very active at the beginning. All the spin-off companies in its portfolio were founded no more than a few years ago. This fact is showing some alignment to the trends of leading institutions from other countries. On the other side, according to previously mentioned studies, it may take some time for the TTO to gain the expertise necessary to compete with the leading institutes. 111

112 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 More TTOs are organized by other technical universities. All of them could be possible sample for very valuable researches from the organizational side, to compare them with the most effective TTOs from other countries. Other streamline of research could include scientist and staff of TTOs, their motivation and individual characteristics. Conclusions and recommendations In conclusion, the paper presented various aspects of Academic Entrepreneurship and its application in Poland. The definition of AE was located in comparison with general entrepreneurship and various types of AE were presented. Author also reviewed existing literature to present various angles of the subject and researches conducted before. The best described area seems to be Technology Transfer, especially at the level of leading Universities in United Stated or United Kingdom. In contrary, areas of motivational aspects, soft science-business collaboration and all aspects of AE in developing countries could still highly benefit from further research. Presented example from Poland proved that the whole process needs a lot of improvements. At the time the paper is prepared there are numbers of actions undertaken by the government to support business-science cooperation, including changes in NCBR, legal regulations, policies and surrounding institutions. Effects of those actions could be possible to measure and describe within a few years from implementation. Currently it is possible to conclude from previous years, that high government spending on the scientific infrastructure, without proper regulations and building social capital is not sufficient for success in technology commercialization. As the article described, many studies proved that the whole process is much more complex and success needs coordination on various levels. Very important aspect is also attitude and social capital among academics. Poland still suffers from lack of trust among many stakeholders, not only between business and science but also among groups in the same environment. Breaking those barriers is necessary to proceed to the next level of economic development. Effectiveness of described TTO of University of Warsaw (UWRC) is also difficult to assess at this stage, however it seems to confirm the study mentioned before, that its effectiveness is highly correlated with the age of TTO and experience of its staff. Conducting a case study research of Polish TTOs would be very beneficial and recommendations and findings from detailed study could improve their effectiveness. References Abreu, M., Grinevich, V. (2013), The nature of academic entrepreneurship in the UK: Widening the focus on entrepreneurial activities, Research Policy, 42(2): Azagra-Caro, J.M., Archontakis, F., Gutiérrez-Gracia, A., Fernández-De-Lucio, I. (2006), Faculty support for the objectives of university industry 112

113 Academic entrepreneurship conceptual framework and example from Poland relations versus degree of R&D cooperation: the importance of regional absorptive capacity, Research Policy, 35(1): Bernasconi, A. (2005), University entrepreneurship in a developing country: The case of the P. Universidad Católica de Chile, , Higher Education, 50(2): Bienkowska, D. Klofsten, M., Rasmussen, E. (2016), PhD students in the entrepreneurial university perceived support for academic entrepreneurship, European Journal of Education, 51(1): Bozeman, B., Gaughan, M. (2007), Impacts of grants and contracts on academic researchers interactions with industry, Research Policy, 36(5): Brendzel-Skowera, K. (2016), Paradoxes in the development of academic entrepreneurship, Research Papers of the Wroclaw University of Economics, 419: Drucker, P. (2014), Innovation and entrepreneurship, London-New York: Routledge. Etzkowitz, H. (1983), Entrepreneurial scientists and entrepreneurial universities in American academic science, Minerva, 21(2/3): Etzkovitz, H. (1998), The norms of entrepreneurial science: cognitive effects of the new university industry linkages, Research Policy, 27(8): Fotea, A.C., Guju, C. (2016), Historical and theoretical framework of the relation between higher education institutions and the process of regional economic development, Entrepreneurial Business and Economics Review, 4(1): Giuliani, E., Morrison, A., Pietrobelli, C., Rabellotti, R. (2010), Who are the researchers that are collaborating with industry? An analysis of the wine sectors in Chile, South Africa and Italy, Research Policy, 39(6): Global Innovation Index 2015 report, available at: (accessed 30 April 2016). Klofsten, M., Jones-Evans, D. (2000), Comparing academic entrepreneurship in Europe the case of Sweden and Ireland, Small Business Economics, 14(4): Lee, J.J., Rhoads, R.A. (2004), Faculty entrepreneurialism and the challenge to undergraduate education at research universities, Research in Higher Education, 45(7): Link, A.N., Siegel, D.S., Bozeman, B. (2007), An empirical analysis of the propensity of academics to engage in informal university technology transfer, Industrial & Corporate Change, 16(4): NCBiR, available at: (accessed 28 April 2016). O Shea, R.P., Allent, T.J., Chevalier, A., Roche, F. (2005), Entrepreneurial orientation, technology transfer and spinoff performance of US universities, Research Policy, 34(7): Osiri, J.K., Miller, D.R., Clarke, L., Jessup, L. (2014), Academic entrepreneurship: technology transfer in higher education, Journal of Entrepreneurship Education, 17: Powers, J.B., McCougall, P.P. (2005), University start-up formation and technology licensing with firms that go public: a resource-based view of aca- 113

114 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 demic entrepreneurship, Journal of Business Venturing, 20(3): Schumpeter, J.A. (1934), The theory of economic development, Cambridge: Harvard University Press. Siegel D.S. Wright, M. (2015), Academic entrepreneurship time to rethink?, British Journal of Management, 26(4): Shane, S. (2004), Academic entrepreneurship: university spinoffs and wealth creation, Cheltenham: Edward Elgar. Sinell, A., Heidingsfelder, M, Schraudner, M. (2015), Entrepreneurship and academic employment more alike than you d think, Journal of Technology Management & Innovation, 10(3): UOTT, available at: (accessed 26 April 2016). UWRC, available at: (accessed 26 April 2016). 114

115 INNOVATION PERFORMANCE OF THE SLOVAK REPUBLIC Ladislav Klement 1 ladislav.klement@umb.sk Ľubica Lesáková lubica.lesakova@umb.sk Vladimíra Klementová vladimira.klementova@umb.sk Ľuboš Elexa lubos.elexa@umb.sk Matej Bel University in Banská Bystrica, Slovakia 1 Corresponding author. Abstract. The paper introduces an existing system of innovation performance measurement in European Union. The paper aims to analyse the innovation performance and to present the position of the Slovak Republic in European Union. It points out the most significant barriers in innovative performance growth among Slovak SMEs. The analysis is carried on data retrieved from Eurostat and the Statistical Office of the Slovak Republic, as well as from empirical research. Consequently the paper presents conclusions and recommendations for stimulating the innovation performance growth in the Slovak Republic. Key words: innovations, innovation performance, Summary Innovation Index, barriers in innovations. Introduction The globalization brought many changes in the world economy and for the Slovak Republic it is not possible to be successful without a major utilization of innovations. Innovations are influencing every activity in human life. They do not only affect life today, but also future opportunities and living conditions (Maital, Seshadri 2012). Innovations are the accompaniment of business. They represents one of the best tools how to maintain and enhance the economic development of the state and improve the competitiveness of enterprises in local and global business environment. Their essential feature is an implementation of new value-added to products, technologies or services on the market. Innovations are the driving force to keep businesses competitiveness.

116 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The founder of innovation, as a term, could be considered J.A. Schumpeter, who defined an innovation in 20 th century as an implementation of production of new product, entering of new market, implementation of new production process or new work organization (Čimo, Mariáš 1999). Definition according to European Union, which is implemented also in Slovak Innovation Strategy defines a innovation as a reproduction and enlargement of product and service portfolios, markets, creation of new production, distribution and supply methods, implementation of changes in management, labour conditions and labour organization and all improvements in work force qualification (Franková 2011). Today, more than ever, it is necessary that a modern economy is based on knowledge and innovative open society. The innovation performance of enterprises is primarily determined by their own innovative activities and the interaction with their innovation-related environment. This environment typically differs among countries (Hinloopen 2010). The importance of SMEs in the innovation development of the country is discussed quite long and often. It is generally accepted view of their great importance in improving innovation performance (Bobáková 2015). 1. Measurement of innovation performance in the European Union Measurement of performance of a country includes a lot of potential factors, which are influencing results. One of the most important factor is innovation activity of enterprises (Kovaľová 2016; Dragnić 2013). There are several indicators, which could be used for measuring of position and performance of country (region) in innovation activities (Innovation Union Scoreboard, Global Innovation Index etc.) and innovation performance of enterprise (Innobarometer, Community Innovation Survey etc.). Indicators orientated on measuring of countries innovation performance include also measures focused on enterprises innovation activities. Innovation Union Scoreboard Innovation Union Scoreboard measurement framework is using three main types of indicators and eight innovation dimensions, capturing in total 25 different indicators. The first indicator called Enablers capture the main drivers of innovation performance external to the enterprise and cover 3 innovation dimensions: Human resources, Open, excellent and attractive research systems as well as Finance and support. The second indicator Firm activities capture the innovation efforts at the level of the enterprises, which are grouped in three innovation dimensions: Enterprise investments, Linkages & entrepreneurship and Intellectual assets. The third indicator Output covers the effects of enterprises innovation activities in two innovation dimensions: Innovators and Economic effects of innovations. Consequently, the EU Member States are divided 116

117 Innovation performance of the Slovak Republic into four groups according their innovation performance. The first group of Innovation leaders includes Member States in which the innovation performance is well above that of the EU, i.e. more than 20% above the EU average. The second group of Innovation followers includes Member States with a performance close to that of the EU average i.e. less than 20% above or more than 90% of the EU average. The third group of Moderate innovators includes Member States where the innovation performance is below that of the EU average at relative performance rates between 50% and 90% of the EU average. The fourth group of the modest innovators includes Member States that show an innovation performance level well below that of the EU average, i.e. less than 50% of the EU average (European Commission 2015). Summary Innovation Index compares and rank the EU Member States and describes the innovation performance. The SII also enables to compare the countries according to selected group of criteria. The Community Innovation Survey The Community Innovation Survey (CIS) is a survey of innovation activity in enterprises. The harmonised survey is designed to provide information on the innovativeness of sectors by type of enterprises, on the different types of innovation and on various aspects of the development of an innovation, such as the objectives, the sources of information, the public funding or the expenditures. The CIS provides statistics broke down by countries, type of innovators, economic activities and size classes. The survey is currently carried out every two years across the European Union, some European Free Trade Association (EFTA) countries and EU candidate countries. In order to ensure comparability across countries, Eurostat, in close cooperation with the countries, has developed a standard core questionnaire starting with the CIS3 data collection, along with an accompanying set of definitions and methodological recommendations (Eurostat 2015). Innobarometer Innobarometer is aimed at capturing the main behaviours and trends of EU enterprises as far as innovation related activities are concerned. The research is carried out in the 28 EU Member States, as well as in Switzerland and the United States. It was designed to collect information on the profiles of innovative companies, to measure the impact of innovations on turnover and the proportion of turnover invested in innovation activities, to explore barriers to commercialisation, as well as identify the areas where public funding could best support innovation (Innobarometer 2015 The innovation trends at EU enterprises 2015). The Innobarometer survey has been carried out irregularly by TNS Political & Social network since The results are presented according to surveyed 117

118 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 areas, not by particular countries. It means, the study presents profiles of innovative enterprises, common problems (barriers) of innovations and other areas according to all respondents. Only main features are highlighted also by the countries. Slovak statistics on innovations National statistics about innovation activities in the Slovak Republic are summarized in survey, which is realized by the Statistical Office of the Slovak Republic. Till now, there were several surveys, the first during the year and the last during the years (published in 2014) (Statistical Office of the Slovak Republic 2015). In 2016 we expect another survey about innovation activities in Slovakia during the years The structure and methodology for collecting the information is harmonized within the European Union, so datasets could be easily passed to the Eurostat. Slovak statistics contains no international comparison to EU member states. Table 1. Share of enterprises with innovation activity in Slovakia in percent Indicator Share of enterprises with innovations Small enterprises Medium enterprises Large enterprises Source: Based on the data of Statistical Office of the Slovak Republic. Table 1 presents innovation performance of Slovak SMEs from We can see an increase in number of enterprises, which performed at least one innovation during this period. The highest share of innovative enterprises was during the period of Then there was a decrease, which was typical also for most of EU countries. In the EU just under half (48.9%) of enterprises reported innovation activity during the period The proportion of innovative enterprises in the EU dropped in compared with both (51.5% innovative enterprises) and the peak recorded in (52.8%). By focusing on the size of enterprises, we can conclude, that the bigger was the enterprise, the more likely it was to realize innovation activity during the observed period. Global Innovation Index If we exceed the borders of the European Union, we must mention the Global Innovation Index (GII). Since 2007, the GII Report consists of a ranking of world economies innovation capabilities and results. The GII includes indicators that go beyond the traditional measures of innovation such as the level of research and development. The Global Innovation Index relies on two sub-in- 118

119 Innovation performance of the Slovak Republic dices, the Innovation Input Sub-Index and the Innovation Output Sub-Index, each built around pillars. Five input pillars capture elements of the national economy that enable innovative activities: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. Two output pillars capture actual evidence of innovation outputs: (6) Knowledge and technology outputs and (7) Creative outputs. Each pillar is divided into sub-pillars and each sub-pillar is composed of individual indicators (79 in total) (Cornell University, INSEAD, WIPO 2015). In 2015 the Slovakia was ranked on 36 th place among 141 evaluated countries, Hungary placed as 35 th country, the Czech Republic was on 24 th place and Poland on 46 th place. In comparison to year 2007, when the GII Global report was created for the first time, the position of Slovakia (35 th place) and Hungary (36 th place) was more or less the same. A progress could be observed by the Czech Republic (32 nd place) and Poland (56 th place) from 107 evaluated countries (Cornell University, INSEAD, WIPO 2015). 2. Methodology The aim of the paper is to analyse and to present a current position of the Slovak Republic in the European Union according to its innovation performance. The evaluation of Slovakia was done by portfolio of indicators, which are being used for measuring of the country innovation performance. The article is focused on evaluation of Slovak position according to Summary Innovation Index (SII), because the indicator ranks the EU countries and allows detailed analysis of their innovative performance. The sources of information were databases of Eurostat and the Statistical Office of the Slovak Republic. The paper presents results of empirical research realized in among Slovak SMEs about the main barriers in their innovation activities. Research sample consisted of 140 Slovak SMEs, which were asked to identify and evaluate the importance of barriers by questionnaire. To fulfil the paper goal we formulated a set of research questions: What is an innovation performance of Slovakia in comparison to EU member states? What are the main barriers of Slovak SMEs in innovation activities? 3. Position of Slovakia in the European Union according to innovation performance For describing the innovation performance of the Slovak Republic we have chosen the Summary Innovation Index (SII). It is a composite indicator obtained by an appropriate aggregation of the 25 indicators. Figure 1 shows the performance results for all EU member states in year The position of the Slovak republic (SK) in 2014 was in the group of moderate innovators, which included EU member states, where the innovation performance was below that 119

120 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 of the European Union average at relative performance rates between 50% and 90% of the European Union. Figure 1. EU member states Innovation performance in 2014 Source: Data extracted from Innovation Union Scoreboard The ranking of the Slovak Republic according to SII indicator has been measured since the year At the beginning the Slovakia was in the group of catching-up countries (countries with the lowest innovation performance), later in 2009, the Slovakia moved to group of moderate innovators. In 2014 Slovakia was on the 10 th place out of 13 countries in this group. The next figure presents the development of innovation performance of the Slovak Republic from 2007 to Figure 2. Development of SII of Slovakia during years Source: Data extracted from Innovation Union Scoreboard The Slovak innovation performance, measured by SII, has increased between 2007 and 2014, but declined in 2010 and in 2013 (Figure 2). The performance relative to the EU has had more fluctuations, but over time has increased significantly. Performance relative to the EU reached a peak in 2012 at 69 % of the EU average, but fell to 64% in The exceptional growth of innovation performance in Slovakia could be confirmed also by the eight position, among EU 28 member states, in rate of innovation performance growth in period of (Figure 3). 120

121 Innovation performance of the Slovak Republic Figure 3. The rate of innovation performance growth of EU countries during Source: Data extracted from Innovation Union Scoreboard As showed in Figure 4, in 2014 the Slovakia performed below the EU average for all observed dimensions, except Human resources, and also for most indicators. Human resources dimension was the only one, where the Slovakia had two out of three indicators better than EU average. Figure 4. Innovation performance measured by SII in 2014 Source: Data extracted from Innovation Union Scoreboard Note: 100 equals to EU SII average in 2014, numbers in %. The Slovak second strong dimension was the Economic effects from innovations, where Slovakia had two out of five indicators better than EU average. Slovak strengths were in indicators Sales share of new innovations (158% of EU average) and New doctorate graduates (133% of EU average). Slovak weaknesses were in indicators License and patent revenues from abroad (only 121

122 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 1% from EU average), Non-EU doctorate students (6% from EU average), PCT patent applications in societal challenges (11% from EU average) and PCT patent applications (13% from EU average). In comparison to year 2013 the overall Slovak performance in 2014 in most dimensions and most indicators has improved. The right part of the figure 4 presents the growth rate of particular indicators in Most of indicators were increased in 2014 (19 out of 25 indicators) in comparison to The highest growth in terms of indicators was observed for Community trademarks (18%) and Non-EU doctorate students (14%). However, neither the strong growth in these indicators improved the performance significantly. Unfortunately, a very strong decline in performance can be observed in License and patent revenues from abroad (- 38%), while this indicator reached only 1% from EU average. The second biggest decline was for Non- R&D innovation expenditures (- 8.8%). Despite of this, the indicator remained by 16 % over the EU average. For comparison of innovation performance of V4 countries we selected the SII within the period of The Fig. 5 shows, that the position and innovation performance of Slovakia was not very optimistic. Figure 5. Development of SII in V4 countries Source: Data extracted from Innovation Union Scoreboard The best innovation performance had the Czech Republic, which was over the other countries for all the time. The second place belonged to Hungary, the third was Slovakia and Poland was the fourth. In 2012 Slovakia exceeded Hungary and since this year their development of innovation performance was quite similar. Unfortunately, in comparison to EU SII average, the performance of all V4 countries was very moderate. The gap against the EU-28 SII average value remained for Slovakia and other V4 countries, during the observed period, about the same. The detailed analysis of particular SII dimensions and indicators in 2014 confirmed, that the Czech Republic was over the EU average in 10 out of 25 in- 122

123 Innovation performance of the Slovak Republic dicators (4 out of 8 dimensions had the value over 90% of EU average human resources, firms investments, linkages and entrepreneurship and innovators. Slovakia, Poland and Hungary was in only one dimension over 90% of EU average. In Hungary it was economic effects of innovations (Hungary had 6 out of 25 indicators better than EU average). In Poland it was dimension of human resources (Poland had 5 out of 25 indicators better than EU average). In Slovakia it was human resources dimension (113%) and it had 7 out of 25 indicators better than EU average. 4. Barriers to innovation activities in Slovakia According to Statistical office of the Slovak Republic, there were innovators in 34.2% of SMEs, while the average in EU was almost 49%. Although the share of Slovak innovative SMEs was quite small, their share on total sales (70%) and total employment (60%) was very significant. It means, that economic importance of enterprises with innovation activity is higher than their amount and these enterprises significantly influence the Slovak economy, Low share of innovative enterprises in Slovakia is a consequence of innovation barriers. Innovation barriers in Slovak enterprises are mostly cost, market and knowledge factors (Fabová 2013). During the years we have realized an empirical research among Slovak SMEs. We interviewed 140 small and medium sized enterprises. One of the goals was to identify the main barriers of innovation activities among enterprises. Results in table 2 present that SMEs considered the lack of financial sources, the system of state support, inappropriate legislation, poor connection of enterprises with schools, high costs and complicated administrative environment as the biggest barriers to innovations. Respondents expressed strong dissatisfaction with government support system and its complexity. We can conclude that this is one of the biggest barriers for innovative enterprises in Slovakia. On the other hand, the lowest barrier was the lack of information for performing of innovation activities. Table 2. Barriers to innovations in Slovak SMEs 1 - the lowest 2 - lower The importance of barrier 3 - medium 4 - higher 5 - the highest Lack of financial sources 2.86 % % % % % System of government support for innovations % 8.96 % % % 43.28% Lack of information % % % % 7.69 % Lack of time for innovations % % % % % Inappropriate legislation 9.09 % 9.09 % % % % 123

124 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Low connection among schools and enterprises Insufficiently qualified labour force Low performance of Slovak economy Low purchase power of customers % % % % % % % % % % 6.25 % % % % % 5.88 % 8.82 % % % % High costs for innovations 2.90 % % % % % Complexity of administration 7.58 % 6.06 % % % % Uncertain demand for innovations 5.80 % % % % % Another research conducted by the authors of Innobarometer (2015) states that the most significant barrier for Slovak enterprises, since the year 2012, was the dominant position of established competitors (63% of enterprises), lack of financial resources (67%) and costs or complexity of meeting standards or regulations (68% respondents). Another important barrier was the low potential demand for innovations (56%). The smallest barrier was the difficulty in maintaining intellectual property rights (35%). 5. Conclusions and recommendations According to presented information and analysed data, the innovation performance of Slovakia could be described as relatively stable during the period of eight years ( ). Unfortunately, stable in this case means that the performance was developing similarly as the performance of other countries in EU. Although there was one dimension and indicator, where the progress of Slovakia was outstanding (Human resources, Sale share on new innovations), in most dimensions the development was slower. We compared the position of Slovakia among the closest competitor regions (V4 countries). Slovakia overtook Poland and was very close to Hungary, but still was lagging from the Czech Republic. The dominance of the Czech Republic was significant according to most of 25 indicators included in SII. Although the Czech Republic had no dominantly developed dimension (the value of dimension over EU average), all dimensions were developed proportionally and half of them was very close to EU average. The structure of SII in Hungary, Poland and Slovakia was different, because these countries had one dominant dimension and other were very underdeveloped. Slovakia has a small, underfunded and centrally managed system of research and innovation. The Act no. 185/2009 Law on R&D Stimulus concentrates on support for basic research, applied research and experimental development. The support is given on a case-by-case basis and depends on resources allocated from the State Budget. The overall amount of support from the State budget is too low to generate a significant impact on innovation development (Baláž 124

125 Innovation performance of the Slovak Republic 2015). Slovak gross expenditure on research and development was 0.89% of GDP in 2014, in 2012 it was 0.81% of GDP. Especially investment from Slovak businesses into research and development system were extremely low. The government should focus on motivation for businesses to increase the amount of money, which they invest into innovations. The most important barriers to innovations (lack of financial sources and complexity of government support system), identified by empirical research, are still obstructing the SMEs sector. The new indirect support tool for enterprises in Slovakia was introduced in The amendment of the Act no. 595/2003 Law on Income Tax set a tax relief for R&D performers. Tax relief can be claimed by any organisation performing R&D projects. Tax relief for R&D projects is likely to improve the framework conditions for the development of applied research and innovation in Slovakia. The tax relief is based on fact, that enterprises, which realized some kind of innovation or research activity during the year could deduct 125% of total costs and decrease the income tax base. Accepted are all costs spending on innovations, development, wages for researchers and also spending for cooperation with academic and research institutions orientated on innovations. Slovak public investments in research and development were strongly supported by the EU structural funds. The question is, what will happen to research and innovation expenditures, when the structural funds from EU will be decreased or stopped? The Slovak Government attempted to address structural challenges via a number of policy initiatives. The first government document on innovation was created as late as in 2005 (The Competitiveness Strategy the Lisbon Strategy for Slovakia). The 2007 Innovation Strategy concentrated mostly on the implementation of policy measures from the Structural Funds (Baláž 2015). The 2013 RIS 3 document is a more complex document. It proposes specific policy measures aimed at increasing embeddedness and related variety of the key Slovak industries, reform of R&I governance; reform of public R&D performers; building foundations of excellent science and supporting innovations in SMEs. But there has been done no or minimal improvement in complexity of administration for SMEs, in some areas (low information linking among public institutions, bureaucracy and corruption in system of EU funds distribution), the situation is even worse. References Act 595/2003 Law on Income Tax. Act 185/2009 Law on R&D Stimulus. Baláž, V. (2014), RIO Country Report Slovak Republic, Publications Office of the European Union, Luxembourg. Bobáková, V. (2015), Nevyhnutnosť podpory inovácií v malých a stredných podnikoch, available at: 125

126 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Bobakova.pdf (accessed 10 April 2016). Cornell University, INSEAD, WIPO (2015), The Global Innovation Index 2015: Effective Innovation Policies for Development, Fontainebleau, Ithaca and Geneva. Čimo, J., Mariáš, M. (1999), Inovačná stratégia firmy, Bratislava: Ekonóm. Dragnić, D. (2013), Impact of internal and external factors on performance of fast-growing small and medium businesses, Management Journal of Contemporary Management Issues, 19(1): European Commission (2015), Innovation Union Scoreboard 2015, available at: i=8264ang = en&title=innovation -Union-Scoreboard-2015 (accessed 5 April 2016). Eurostat (2015), Community Innovation Survey, available at: eu/eurostat/web /microdata /community-innovation-survey (accessed 4 April 2016). Fabová, Ľ. (2013), Bariéry inovačnej činnosti podnikov v Slovenskej republike, Journal of Knowledge Society, 1(2): 1-5. Franková, E. (2011), Kreativita a inovace v organizaci, Praha: Grada Publishing. Hinloopen, J. (2003), Innovation performance across Europe, Economics of Innovation and New Technology, London: Routledge. Innobarometer 2015 The innovation trends at EU enterprises (2015), available at: getsurveydetail/instruments/flash/surveyky/2054 (accessed 5 April 2016). Kovaľová, M. (2016), Factors affecting individual and business performance, In: Hradec Economic Days, University of Hradec Králové. Maital, S., Seshadri, D.V.R. (2012), Innovation management, New Delhi: SAGE Publications. Statistical Office of the Slovak Republic (2016), Statistics on innovation activities in Slovakia, available at: (accessed 25 March 2016). 126

127 ECONOMIC INSIGHT INTO FOREST ENTERPRISES IN THE CONTEXT OF REGIONAL DEVELOPMENT Petra Hlaváčková 1 petra.hlavackova@mendelu.cz David Březina david.brezina@mendelu.cz Mendel University in Brno, Czech Republic 1 Corresponding author. Abstract. Forest enterprises are a specific component of the state economy as their economic activity is bound to rural regions. Benefits of forest enterprises for a local economy are combination of social and economic benefits. The article presents the alternative approach to the quantification of the importance of forest enterprises for the regional development. The approach is based on identifying cash flows in the area of interest and benefits of forest enterprises and forestry for the local economy development in the Czech Republic. Key words: economics, forestry, local multiplier, enterprises, region, Czech Republic. Introduction Relations between enterprises and regions are discussed in various regional theories (e.g. Armstrong, Taylor 2000). The most famous theory, which deals with benefits of enterprises for the local economy is the theory of localization. This theory is a part of the neoclassical economics theory. Von Thünen s theory of localization of agricultural activities from the year 1826 and Weber s classical theory of industrial localization from the year 1928 are considered as cornerstones for all the rest existing theories (Damborský, Wokoun 2010). Furthermore, the solution of the localization problem was extended for industrial enterprises (Lösch 1954) and there had been created various localization models (e.g. Hotelling 1929; Salop 1979), which are focused on different localization factors. North (1955) also dealt with localization theory and regional economic growth. The economic localization and its relation to the regional economy and politics was solved in the study of Armstrong and Taylor (2000), Sack (2002) and many others. Localization is a process of place selection of specific socioeconomic activities. Every place has certain resources and on the other hand every activity is characterized by certain needs. The best localization of a given socioeconomic activity is done there where optimal resources are located (e.g. Shuman 2010).

128 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Two basic questions are connected with localization (Maier, Todtling 2006): to what extent does localization of an enterprise have the impact on its economic result? and what is the influence of an enterprise on its surroundings? The paper deals particularly with the first question. In this case source is forest. The main localization factor is land. From a forestry-economic perspective, it is an important issue which creates benefits for the local economy because localization of individual enterprises is linked to forestry activities. Currently, the main benefits arise in field of recreational use of forests. The recreational forest function represents a direct utility value, thus it is derived from its direct usage. These activities can be commercial and their value is directly derived from the market value, alternatively it is possible to use administrative prices (Pearce 1993). However, in a majority of cases, these activities are not commercial, which makes their financial expression to be very problematic. Contemporary science has ample of explicit and implicit methods, by means of which forest function can be monetary expressed (e.g. Bateman 2011; Ninan, Inoue 2013). However, these methods represent only a theoretical basis and in most cases they cannot be used in practice. In strive to fill the gap in practical framework for monetary evaluation of forestry functions, this paper contributes with alternative approach to the quantification of the importance of forest enterprises for the regional development and local economy based on evidence from the South Moravian part of the Czech Republic. The approach is based on identification of financial resources used for assuring of the recreational forest function of the interest area. Quantification will be structured upon data on fulfilling the recreational function of forest paths and the aesthetical forest function in the area of the Training Forest Enterprise Masaryk Forest Křtiny (TFE Křtiny). 1. Material and methods As an interest area was chosen the Training Forest Enterprise Masaryk Forest Křtiny (here and after referred as TFE Křtiny ). This enterprise is located near Brno, the second largest city in the Czech Republic (CR). Brno has about 400 thousand inhabitants. One third of the TFE Křtiny is located in the Protected Landscape Areas of Moravian Karst. The forests are sub-urban and widely used for recreation. TFE Křtiny has the total area of 10,495 ha with forest cover of approximately 98%. The enterprise is divided into three forest districts Vranov (3,345 ha of forest land), Habrůvka (7,006 ha of forest land) and Bílovice nad Svitavou (2,920 ha forest land). All three forest districts are situated at altitudes ranging from 210 to 575 m above sea level and feature a great variety of natural conditions. This area is covered mainly by mixed woods, with 46% coniferous and 54% deciduous tree species. There are about 116 forest types situated in 4 forest altitudinal vegetation zones (TFE 2016). 128

129 Economic insight into forest enterprises in the context of regional development To determine the theoretical background a secondary research based on review of domestic and foreign studies was used. In the practical part there were used secondary data in combination with some primary data collected from the information system of the TFE Křtiny, specifically from synthetic and analytic accounts. The reference period covered the years 2013 to These data were necessary for determination of costs related to traffic at forest roads and costs related to forest aesthetics. The recreational function was evaluated from the perspective of territory use by visitors. This function is mostly fulfilled by forest roads and cycle paths. The survey of the number of visitors of the TFE Křtiny territory focused, among others, on determining the number of people using the forest roads and cycle paths. For the purpose of this research there were chosen the busiest roads in the forest road network and cycle paths located in three forest districts. The research was conducted in In the Czech Republic, the term forest transportation network is stated in the Czech national standard (CNS) and in Forest road network (FRN), and it represents transport facilities serving for connection of forest complexes with network of public communications, for transportation of wood, people and materials for different purposes of forest economy and other purposes, for example, recreational. FRN is divided according to importance and purposes into four basic classes characterized by several parameters maximal longitudinal decline, presence of roadway or another transport pavement, width of traffic line and total width in crown. The basic classes of forest roads are completed by forest paths and trails. Table 1 lists characteristics of the forest road network according to CNS Table 1. Forest road network in the Czech Republic Type Class Operational capacity Min. crown width (m) Max. decline (%) Surface type Purpose and usage Forest transport roads 1L Permanent 4, L1 Seasonal to permanent 3, L2 Seasonal 3, Dust-free roads, bitumen, concrete, hardened Simple road with dusty surface or transport pavement On bearing subsoils, without transport pavement Year round operation of transport by vehicle according to ČSN Seasonal transport of wood for vehicle according to ČSN Seasonal transport of wood Approaching roads and links 3L Seasonal 3, L 1,5 Ground, can be also partial transport pavement Ground without removing humus Approaching by tractors, transport by forwarders Approaching by tractors, horse Source: Klč

130 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 In the Czech Republic, the total lengths of 160 thousands of km of FRN is created by a basic frame of 46.8 thousands of km of forest transport roads, which are used during the year by the forestry of the CR for permanent or seasonal transportation of wood by vehicles (Klč 2009). Density of the forest road network at the area of the TFE Křtiny can be calculated from the forest economy plan (FEP) and it also has been investigated in several studies, especially in bachelor or diploma theses (e.g. Douda 2007). The density of the FRN (d) represents the relationship between the length of the roads (l) and the forest area (F) that gravitates towards them and is expressed in number of metres per hectare (e.g. Hayati et al. 2012; Beneš 1986): (1) For determination of density only forest roads on forest land have been taken into account. The suggested density of forest roads according to type of land was defined by Beneš (1986) or Hayati et al From the informational system of the TFE Křtiny, there were investigated costs for repair and maintenance of forest roads for winter and summer maintenance separately and further cost of recreational infrastructure and costs for aesthetics of forest. Maintenance and repairs of forest roads are defined in CNS For the purpose of comparison in the international scales the exchange rate CZK/EUR for the period of 2013 to 2015 is necessary. The average exchange rates are shown in Table 2. Table 2. The exchange rates for years 2013, 2014 and 2015 CZK/EUR Exchange rate Source: Czech Statistical Office Results The forest road network of the TFE Křtiny was primarily created in order to support the forest management. However, since forests are located close to the city of Brno, they currently fulfil particular recreational function being destination for many visitors on the daily basis. The recreational potential of the area is strong and it is necessary to adjust the overall recreational infrastructure to it. The high visit rate of forests of the TFE Křtiny can be supported by monitoring of visit rate, which was carried out in the year 2015 at five chosen localities in months from June to October. Table 3 presents characteristics of monitored forest roads. 130

131 Economic insight into forest enterprises in the context of regional development Table 3. Characteristics of monitored forest roads Forest road Road surface Width of road (m) Total number of visitors Hourly average Forest road 1 mineral aggregates 4 8,643 2 Forest road 2 mineral aggregates 4 19,295 5 Forest road 3 mineral aggregates 4 36, Forest road 4 macadam pavement 3 10,036 3 Forest road 5 mineral aggregates 4 14,784 4 The selected localities were visited by 88,812 visitors. The most frequented road is a forest road No. 3. It is primarily due to its morphology, distance from Brno, transport infrastructure, surface, and possible destination. The locality is closest to Brno, it is perfectly accessible by means of transport, because close to it there is also a train station and it has offers numerous parking services. The surface of this four meter road consists of threshing-floor. There is a bike trail, green touristic trail as well as nature trail. The most frequent group of users are cyclists, and the second one are hikers. Division of users in individual locations in the year 2015 is presented in Figure 1. The category others includes horses, scooters, motorbikes, prams, in-line, wheelchairs etc. The user structure corresponds to the road type. However, there are differences among individual categories as it is shown in Figure 1. In three localities, that is, in localities No. 2, 3 and 4, cyclists prevail. In the case of the locality No. 4, cyclists are significantly prevailed. This is given by the fact that the important local bike trail passes through these localities. In the case of the locality No. 1, the ratio of hikers and cyclists is almost equal. However, in case of locality No. 5, hikers strongly prevail. There is a dense network of touristic trails for hikers in this part of the TFE Křtiny. Figure 1. The structure of users of selected forest roads in

132 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The recreational load of the individual localities, that is, forest roads and cycle paths, leads to the increased expenses for repairs and maintenance of these trails, or other elements of the recreational infrastructure (i.e. benches, rest areas) and to the so-called forest aesthetic. Costs on forest aesthetic in case of the TFE Křtiny include expenses for treatment of meadows and lookouts, the removal of branches from trees which extend into the trail, planting exotic trees and shrubs, running an arboretum etc. These expenses are recorded separately in the TFE Křtiny bookkeeping, and can thus be found directly. Unfortunately, these expenses cannot be assigned to the individual forest roads. Their structure in individual forest districts is shown in Table 4. Table 4. Structure of forest aesthetic costs and revenues Item Material consumption Vranov forest district Habrůvka forest district Bílovice forest district , Other services Staff costs 62,646 61, , ,859 28,251 87, ,475 79,312 Compulsory social insurance Other operating expenses 20,325 20,448 33, ,895 9,236 28,504 34,364 25,784 15,460 23,174 20, ,107 8,408 10,688 13,152 7,588 Internal costs 35,171 38,189 38,244 33,209 30,785 58,023 80,642 84,492 55,557 Total costs 133, , ,007 33, , , , , ,241 Revenues operating subsidy 0 56,351 31, ,515 9,927 10,202 The overall costs have an increasing tendency only in the Vranov forest district, in case of other two forest districts, that is Habrůvka forest district and Bílovice forest district they are decreasing. Table 4 also shows revenue, which is represented by operating grants from operational programs of the European Union and regional grants. It is clear from the Table that this revenue is very low in comparison with costs and it does not cover costs incurred by the performance of forest aesthetics. The item material consumption and other services which include work by external firms are negligible items. Figure 2 presents the ratio of individual costs to the overall costs. 132

133 Economic insight into forest enterprises in the context of regional development Figure 2. Cost items in the individual forest district of the TFE Křtiny The largest cost item of aesthetics of forests is in the majority of forest regions created by personal costs, which include wages of employees, eventually rewards for work on agreement, which is carried out outside of permanent employment, and costs related to compulsory health and social insurance. The second largest item is the internal costs regarding the activities within the enterprise or services from other economic centres. Aside from the forest aesthetic costs, which are a separate accounting item in the bookkeeping, the expenses for repairs and maintenance of forest trails also enter into the costs for ensuring the recreational functionality of forest ecosystems. Table 5 states the length and density of forest road network in the TFE Křtiny divided according to individual forest regions. Forest classes 1L and 2L were taken into account. Road class 2L contains classes 2L1 and 2L2. Table 5. The density of the forest road network Road class TFE Křtiny length (m) density (m/ha) Vranov forest district length (m) density (m/ha) Habrůvka forest district length (m) density (m/ha) Bílovice forest district length (m) density (m/ha) 1L 105, , , , L 95, , , , Total 200, , , , Source: Douda According to the research of optimal accessibility of uplands carried out by Beneš (1986), the required density of transport roads moves in the range of m/ha. The average density of transport roads should be 20 m/ha. On the basis of this research, Hayati et al. (2012) recommends the optimal density of transport roads for uplands to be 21.5 m/ha. The experimental area belongs 133

134 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 to category of uplands. The forest road density is 19.8 m per hectare and thus approaching to the optimum. To secure suitable local material for the repair and construction of forest roads, TFE Křtiny runs a quarry (TFE 2016). Forest roads maintenance can be divided into summer and winter maintenance, which are entered into the bookkeeping as a total for all forest roads; additional expenses for individual roads are further laid out, allowing for direct assignment to each road. The comparison of expenditures for winter and summer maintenance for individual forest district is presented in Figure 3. Figure 3. The expenditures of the winter and summer maintenance of the TFE Křtiny The TFE Křtiny spent approximately 1.2 mil. CZK for repairs and maintenance of forest roads in % of these expenditures were expenditures for winter maintenance, 41% were for summer maintenance. In the year 2014 there was spent only approximately 413 thousands CZK, 42% of which accounted for winter maintenance. In the year 2015 the enterprise spent 786 thousand CZK, and winter maintenance caused 51% of these expenditures. Figure 4 states the percentage ratio of individual expenditures for repair and maintenance of roads for years 2013 to 2015 cumulated for the TFE Křtiny. 134

135 Economic insight into forest enterprises in the context of regional development Figure 4. The percentage of expenditures on maintenance of forest roads of the TFE Křtiny Figure 4 clearly shows the trend of costs in time. In the year 2013 the majority of repairs and maintenance (approx. 84%) was provided by own resources, the second biggest item was the costs for employees. In the year 2014 and subsequently in 2015, the enterprise started to use external suppliers for this activity, which caused increase of costs for other services by 98% in 2015 in comparison to Discussion Currently, the survival of enterprises depends not only on the economic performance but also it is necessary to demonstrate a positive attitude of enterprises to various stakeholders who are affected by the activities of the enterprise. In other words, enterprises are facing increasing pressure from their environment to act in a socially responsible way (Bučiúniene, Kazlauskaité 2012). The changes in the social and economic area in the late 1990s have led to a greater appreciation for natural beauty and living in the nature. Today, however, the consumerist society allows welfare due to which people can visit nature as they please. The direct everyday experience of nature has disappeared; however, so has the thinking of nature in terms of its benefits a tree is no longer just wood for fuel, but also an aesthetic object (Stibral 2005). In addition, the understanding of forest roads has changed. Nowadays, forest roads serve, aside from activities related to growing wood, lumbering, and transportation of wood, also for a variety of other purposes, such as recreational ones (e.g. Forman et al. 2003). In the CR business entities in forest management more likely concentrate on larger units, but there are also numerous business entities of local significance, the activities of which can markedly contribute to the development of the region. The TFE Křtiny is one of the enterprises that were selected as the case study analysis. This enterprise brings many benefits to the region as well 135

136 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 as to the local economy. One of them is also fulfilment of the recreational forest function, which is the most socioeconomic function of forests here. The reason is that forest lands are located close to the second largest city in the Czech Republic Brno. By ensuring the ability to use the forests for recreational purposes, TFE Křtiny contributes to the development of the region from the economic and social perspective. The recreational use of the area brings also the impact on the forest economy in this area. The increasing importance of recreation has the impact on all activities of the forest enterprise. Apart from benefits in the form of development of the region, the recreational function results in higher costs for forest managers especially due to usage of forest roads and fulfilling the aesthetical forest function. According to Chan et al. (2012), recreation function concretely provides many important benefits and contributions to physical and psychological well-being. Forest aesthetic values are linked directly to how we as humans perceive the forests. This agrees with the theories and research on environmental psychology (White et al. 2010; Buchecker, Degenhart 2015, etc.). The importance of the forest aesthetics can be illustrated by the publication of the German forester and politician, Heinrich von Salish (1902). The Training Forest Enterprise Masaryk Forest Křtiny is developing the aesthetic functions of forests, particularly through maintaining lookouts into the surrounding areas, tending to forest meadows, planting exotic trees and shrubs, building forest wells, monuments, memorial plaques etc. (TFE 2016). The enterprise understands, that the recreational use is tied to the use of forest roads and trails, which must thus fulfil certain qualitative and quantitative requirements of the users; therefore, resources are being expended yearly to provide repairs, maintenance and innovation to the forest trails. To understand recreational requirements we need the detailed information about area usage and the preferences of different target groups (Chiesura 2004). Monitoring and analysing the flows of visitor in areas provides a clue to understanding visitor behaviour which, in turn, is needed for effective management of these areas (Mckercher Lau 2008; Muhar et al. 2002). The visit rate in the interest area was monitored on the most important forest roads. Monitoring of the visit rate proved high recreational load on forest roads in the area of the TFE Křtiny. The current increased requirements for forest roads and trails used for recreational purposes are documented by a number of studies. For instance, Dvorščák (2004) states, that the population s requirements for recreation in the forest environment grow, since a stay in the forest environment in their free time has become an indispensable component of people s lives, and forest roads and pathways allow daily recreation and relaxation in the forest landscape. Hay 136

137 Economic insight into forest enterprises in the context of regional development (1998) notes that good quality of forest roads can significantly increase the recreational potential of a region. Quality forest roads allow easier walking and cycling in previously inaccessible parts of the forest and facilitate the implementation of gamekeeper measures (Hay 1998). In the territory of the TFE Křtiny, the users utilize roads from categories No. 1 and No. 2L for recreation, as these are regularly maintained, equipped with aesthetic elements and recreational infrastructure. Benefits of forest enterprises for a local economy are combination of social and economic benefits. The major effects of roads on local economies, however, would be expected to result from the economic activity those roads support by providing access to the national forest and to communities in or near it. That activity includes logging, silvicultural operations, and recreation, among others. Conclusions Forests as a part of the human environment represent areas used for recreational activities of a great number of people. Forest communications (especially forest roads) are necessary for the management of the forests but nowadays they are increasingly used for recreational purposes. There exist many methods, which try to evaluate the recreational forest function of ecosystems, however, the majority of them are based only on a theory and it is not possible to use the importance of the enterprise for development of the region. The paper brings the bases for the support and assessment of the benefits of forest enterprises for local economy and regional development. There is an effort to find an alternative approach, which would enable quantification of benefits of a forest enterprise for a local economy. The presented research is based upon a case study carried out in the area of the Training Forest Enterprise Masaryk Forest Křtiny and investigating the extent of the impact of the enterprise localization on economic results, specifically what expenditures are connected with it. The area of the TFE Křtiny is a very attractive place thanks to its location and facilities. However, fulfilment of the recreational and aesthetical function brings the enterprise increased costs for their assurance. The paper suggests a possibility of new methodological approach to evaluation of benefits of a forest enterprise for a local economy. The approach is based on identifying the cash flows in the area of interest and benefits of forest, enterprises and forestry for the local economy development. The paper brings a possibility for further research in the given area. For example, if the visit rate was monitored for several years and as well as costs for the recreational and aesthetical function, it would be possible to find out dependency of the visit rate on costs for repairs and maintenance of forest roads and the ratio of costs for this function by the regression analysis and historical data from the accounting system. 137

138 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Acknowledgements The paper was prepared with the support of the Internal Grant Agency project of the Faculty of Forestry and Wood Technology, No. LDF_VT_ and , Mendel University in Brno, Czech Republic. References Armstrong, H., Taylor, J. (2000), Regional economics and policy, 3 rd ed. Oxford: Blackwell. Bateman, I.J., Mace, G.M, Fezzi, C., Atkinson, G., Turner, K. (2011), Economic analysis for ecosystem services assessment, Environmental and Resource Economics, 48: Beneš, J. (1986), Optimalizace lesní dopravní sítě, Lesnictví, 32(12): Buchecker, M., Degenhardt, B. (2015), The effects of urban inhabitants nearby outdoor recreation on their well-being and their psychological resilience, Journal of Outdoor Recreation and Tourism, available at: org/ /j.jort (accessed 12 August 2015). Bučiúniene, I., Kazlauskaité, R. (2012), The linkage between HRM, CSR and performance outcomes, Baltic Journal of Management, 7(1): Chan, K.M.A., Satterfield, T., Goldstein, J. (2012), Rethinking ecosystem services to better address and navigate cultural values, Ecological Economics, 74: Chiesura, A. (2004), The role of urban parks for the sustainable city, Landscape and Urban Planning, 68(1): Czech Statistical Office (2015), Database. Czech Statistical Office. (2016), Key macroeconomic indicators, available at: (accessed 20 May 2016). Damborský, M., Wokoun, R. (2010), Lokalizační faktory malého a středního podnikání v podmínkách ekonomiky ČR. E+ M Ekonomie a management, 2: Douda, P. (2007), Geoinformační aspekty dopravního zpřístupnění lesních porostů, The diploma thesis, Brno: Mendel University. Dvorščák, P. (2004), Minimalizácia nevhodných zásahov do lesných ekosystémov pri výstavbe lesných ciest. In: Zborník referátov z medzinárodnej konferencie: Lesnícke stavby a meliorácie vo vzťahu k prirodnému prostrediu, September, Zvolen: Lesnícka fakulta Technickej univerzity vo Zvolene. Forman, T.T.R., Sperling, D. et al. (2003), Road ecology science and Solutions, Island Press. Hay, R. (1998), Forest road design, In: Proceedings of the Seminar on Environmentally Sound Forest Roads and Wood Transport, Sinaia (Romania), June Hayati, E., Majnounian, B., Abdi, E. (2012), Qualitative evaluation and optimization of forest road network to minimize total cost and environmental impacts. iforest. Journal of Biogeosciences and Forestry, 5: , available at: iforest/contents/?id=ifor (accessed 21 April 2016). 138

139 Economic insight into forest enterprises in the context of regional development Hotelling, H. (1929), Stability in competition, Economic Journal, 39(153): Klč, P. (2009), Zpřístupněnost lesů v České republice, Lesnická práce, 88(10): Lösch, A. (1954), The economics of location, New Haven: Yale University Press. Maier, G., Tödtling, F. (2012), Regional- und Stadtökonomik 1: Standorttheorie und Raumstruktur, 5 th edition, Vienna: Springer. Map of TFE Křtiny, available at: (accessed 15 May 2016). Mckercher, B., Lau, G. (2008), Movement patterns of tourists within a destination. Tourism Geographies: An International Journal of Tourism Space, Place and Environment, 10(3): Muhar, A., Arnberger, A., Brandenburg, C. (Eds.) (2002), Methods for visitor monitoring in recreational and protected areas: An overview. Monitoring and management of visitor flows in recreational and protected areas, Vienna. Ninan, K.N., Inoue, M. (2013), Valuing forest ecosystem services: What we know and what we don t, Ecological Economics, 93: North, D.C. (1955), Location theory and regional economic growth, Journal of Political Economy, 63(3): Pearce, D. (1993), Economic values and the natural world, London: Earthscan Publications. Sacks, J. (2002), The money trail: measuring your impact on the local economy using LM3, London: New Economics Foundation. Salop, S.C. (1979), Monopolistic competition with outside goods, The Bell Journal of Economics, 10(1): Shuman, M. (2000), Going local: Creating self-reliant communities in a global age, New York: Routledge. Stibral K. (2005), Proč je příroda krásná? Estetické vnímání přírody v novověku, Praha: Dokořán. TFE (2016), Training Forest Enterprise Masaryk Forest Křtiny, available at: (accessed 13 May 2016). Von Salish, H. (1902), Forstästhetic, available at: org/item/61362#page/12/mode/1up. (accessed 13 May 2016). White, M., Smith, A., Humphryes, K., Pahl, S., Snelling, D., Depledge, M. (2010), Blue space: The importance of water for preference, affect, and restorativeness ratings of natural and built scenes, Journal of Environmental Psychology, 30(4):

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141 THE IMPORTANCE OF VENTURE CAPITAL FINANCING OF START-UP COMPANIES Monika Burżacka 1 monika.burzacka@gmail.com Warsaw University of Technology, Branch in Płock, Poland Elżbieta Gąsiorowska ela_gas@vp.pl State Higher Vocational School in Ciechanów, Poland 1 Corresponding author. Abstract. Venture capital due to its specificity may successfully finance companies in all stages of business, even those extremely specific and difficult. Start-up as a first phase of the development of the company is such a case. The risk of failure of the project is extremely high and the costs are significant. Funds expect extremely high profits in such a situation, but unfortunately the market offers relatively rare projects which guarantee satisfying rate of returns to the investors. This is the main reason why the development of the venture capital market is so sluggish. Only complex government programs can effectively support the development of this form of financing start-up innovative companies which often face with a real problem of lack of the capital. Given these facts, the paper analyses the financial needs of start-ups and an presents the role of venture capital compared to the other sources of capital. Key words: start-ups, financing gap, venture capital, innovation, SME sector. Introduction The role played by small and medium sized companies in the development of the economy seems to be obvious. This is an issue that is becoming a frequent subject of discussion between the theorists of economics, but also on the basis of economic practice. It has been proved that these entities take an active part in reducing the problem of long-term and excessive unemployment. A special group that can be distinguished in this area, which is the subject of this analysis are newly created companies struggling with a wide range of various difficulties, including access to effective source of financing. As the effect, the lack of adequate funding can effectively discourage people to develop their own business (Atherton 2012: 28), causing a fundamental obstacle on way to success. Therefore the purpose of this article is to analyze the financial needs of start-ups and indicate the role of venture capital compared to the other sources of capital. For this purpose, we used the results of the research from known research centers.

142 Forum Scientiae Oeconomia Volume 4 (2016) No The specificity of start-ups business and their positioning in the sector of small and medium size companies Definition of start-ups existing in the literature is not precise (Zelek 2013: 7). From a formal point of view, these are firms which have been already registered and operate on a small scale or a while before sales on a larger scale. The most frequently this is a micro or small enterprise. In other words, they are certainly young companies in the early stage of their development. The concept of start-up reveals the relationship of the development phase in the classic life cycle of the company, based on the marketing life-cycle concept (Figure 1). Figure 1. The life cycle of the company and the level of turnover generated from the sale in relation to earnings Source: Zelek 2013: 9. The start-up is the phase of a company s development from its initiation until the actual selection of its actual presence in the market. It may also be understood as a project that has a product ready for the market, and therefore this phase of development lasts until acceptance of the company by the market, which usually expresses a clear recovery in sales, understood as a phase of early expansion (Zelek 2013: 12). The group of small companies has a significant impact on the economy of each country, activating innovative processes and contributing to the creation of new jobs. The essential characteristic of small businesses is the ability to respond quickly to the changing needs and preferences of the consumers. They are definitely an important element of the market economy. The quantity of entities in this group over the years is presented in Table

143 The importance of venture capital financing of start-up companies Table 1. Structure of enterprises by size in 2011 and 2012 Enterprises by size class Share in the number of enterprises Share of employment in the enterprises sector The share of value added in the business sector Poland UE-27 Poland UE-27 Poland UE Micro 95,7 95,2 92,2 92,1 37,4 35,6 29,6 28,7 16,6 15,2 21,2 21,1 Small 3,0 3,5 6,5 6,6 11,9 13,1 20,6 20,4 13,0 13,2 18,5 18,3 Medium 1,1 1,1 1,1 1,1 18,9 19,6 17,2 17,3 21,9 22,1 18,4 18,3 Total SME 99,8 99,8 99,8 99,8 68,2 68,2 67,4 65,5 51,5 50,5 58,1 57,6 Large 0,2 0,2 0,2 0,2 31,8 31,8 32,6 33,5 48,5 49,5 41,9 42,4 Total 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 Source: SBA, 2014: 2. Table 1 shows a constant dominance of small and medium size (SME) group. The share of the SME sector in GDP is significant. It is confirmed by the Statistical Office (GUS) survey, according to which, in recent years it reached the level of 47-48%. Only a micro companies in this group declined in this area. During the years , upward trend of the share of large companies in GDP in Poland was observed (from 21.9% in 2004 to 24.5% in 2010). When verifying medium and small businesses it is difficult to identify clear trends. Their share in the GDP in increased from 10.1% to 10.4% (medium-size enterprises) and from 7.7% to 7,9% in the case of small companies. The last group of microenterprises recorded a downward trend - from 30.4% in 2009 to 29.4% in 2011 (PARP 2013: 16). Additionally, in contrast to the most of the EU countries, the SME sector in Poland is very shredded, with predominance of family businesses. However, according to Eurostat, the SME sector is very important for the economy as it generates nearly 75% of jobs, and small and medium-size enterprises produce over 60% of total EU GDP. 2. The financial needs of companies in various stages of development Selection of sources of business activities financing is determined by a wide range of different factors. The company with a stable position on the market has different possibilities of raising capital. That is caused by its history, reputation among business partners, etc. For confirmation, Table 2 shows the stages of financing innovative companies that have different characteristics in terms of the objectives of the company, its market position, the stage of development of an innovative project, needs of the capital and abilities to obtain external financing (Lis 2016: 4). 143

144 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Table 2. Life cycle of innovation Stages of development of the entity Sowing stage Start stage (start-up) Early stage of expansion Step growth / expansion Objectives of funding Feasibility Study Financing Creation of the project idea and its continuous improvement Analysis of market potential Analysis of legal conditions Final stages of research activity Test production / technology Activities related to the certification and admission to trading Financing activities related to the entering the market Launching the production and presentation of the product /service to the market Intensive marketing activities Creation of an initial organizational structure Key areas of business Financing activities focused on building a market position Intensive marketing activities Increasing production capacity Effective distribution strategy Team building workers Financing activities related to expansion of the business: Expanding the product range Expansion into new markets (including foreign ones) Implementation of the new technologies The inputs are normally directed to market measures - promotion, brand and distribution channels building The specificity of funding The most difficult to secure financing High technical risks associated with new or upgraded technology High market risk associated with lack of market experience with a new product High risks associated with management and those relating to the management team The need for funding is relatively small The need for significant funding Moment of verification of business model acceptance or rejection of the project by the market High level of risk of project financing Expenditures for financial development still considerable high Financing risk is much lower (moderate) achieving operating profitability Financial position of the company is stable Funding with relatively minimal risk Source: Own study based on Matusiak 2013: 10. Table 2 presents the four main stages of development: the sowing stage, start-up stage, early stage of development and expansion (Głodek 2006: 13), and is used mainly for analysis carried out on funding. One can see that the various stages of financing of the companies have different characteristics, which is caused by different parameters at every stage of development. Seeding stage (seed-up, seedcorn) a concept phase of the project that includes financing of activities initiating the existence of the market, and building a business model. The final effects of this phase are: ready management team, 144

145 The importance of venture capital financing of start-up companies product prototype, ready business plan preceded by market research (Matusiak 2008: 367). Start-up stage (start-up) includes the financing of operational activities aimed at launching the production and presentation of the product / service on the market, supported by intensive marketing activities and therefore requires a large financial investment. This is an extremely important and risky time moment for the company. Early stage of development needs funds for stabilisation of the market position. For the new company, this is time of intensive market activity, capacity expansion and further recruitment to build and expand the sales network. The risk in funding of this step is much lower than in the previous stages (Sobańska, Sieradzan 2004: 17). Expansion stage includes funds for introducing new products, entering new markets (including foreign ones) or implementation of the new technologies. The last stages of the life cycle of the company, like maturity and decline are not so significant from the point of view of this analysis. The lack of acceptance of the business model by the market does not mean abandoning the project for the majority of entrepreneurs, as rotation is a characteristic feature of the start-up project. Product/service evolves, its key elements like business model, distribution channels or the product, are improved constantly during the life of a start-up. Experience shows that due to the high risk of such projects, only 10% will survive on the market with the perspective of further development. Despite the dynamic development of the financial market, problems associated with raising capital to finance start-up companies are, however, constantly existing. Key capital needs of young companies are presented in Table 3. Table 3. Key capital needs of young companies Constant capital Start-up Expansion and development Innovation Financing Private capital incubation and development Personal Investments VC / PE The resources of the public sector Source: Zelek 2013: 11. Key capital needs of young companies Working capital Assets Vulnerability in the current Technologies liquidity Fixed assets Seasonal fluctuations Intangible assets The bridge financing Short-term measures Types of capital Short-term financing up to 3 years Sources of capital Banks clearing Financial houses Factoring companies Leasing companies The resources of the public sector Medium long term financing Banks clearing Financial houses Factoring companies Leasing companies The resources of the public sector 145

146 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 At first sight, one can see many obstacles which include: low level of regulation and thus high costs of financing. Furthermore, some segments of the market are not able to develop without the public support. 3. Sources of financing of the companies Selection of the most optimal sources of financing often determines the possibility of survival in a highly demanding and volatile market. Due to the unique characteristics, each sector or even each company may present extremely different needs in this area. As indicated by all available studies, microenterprises have more problems to reach external resources of financing compared to other SMEs. It should be clearly marked, that methods of financing have been widely described by experts in economic theory. According to Paul et al. (2007), among the factors that determine preferences for the type of financial capital in small business start-ups, one can find the approach to financial security or preferences for the risk taken. Experience from the market evidently shows, that in first step the companies in the analyzed group choose the informal capital, belonging to the owner or co-workers where no one can interfere into the business, allowing them to feel independent and satisfying their ambitions. Besides, the investment of own funds demonstrates commitment and a strong desire to get succeed. When they find a financing deficit, they decide for alternatives methods like venture capital financing. Lack of assets, liquidity or information asymmetries make bank loans inaccessible in this stage of the SMEs development. Statistical Office in Poland (GUS) confirmed in 2014 that 72% of the new companies used only own funds, regardless of the legal form, employment and basic type of activity. Bank credit, as a source of investment, was indicated by every sixth active company. Given these facts, venture capital through provision of capital and other value added services should play a significant role in fostering economic growth (Snieska, Venckuviene 2011: 157). This stem from the POH theory (Pecking Order Hypothesis) developed by Paul et al. (2007). What s more, they show that companies which do not use a suggested sequence of selection of the sources of financing, fell out of the market. Examining startup sector companies and the ways of their financing allow us to find doubts and questions about the effectiveness of all potential sources. Though equity gap is not a directly important condition of efficient functioning and development of business start-ups in the market, bad proportions in the structure of start-ups financing is the real problem (Atherton 2012: 28). 4. Venture capital in financing of start-ups Venture capital is dedicated for financing various types of projects which, give the possibility of above-average chances of success and profits, taking into account a huge risk (Gompers, Lerner 2001: 145). Venture capital institutions 146

147 The importance of venture capital financing of start-up companies specialize in financing of all sorts of new economic projects with significant growth potential, but on low level of economic maturity. As a rule, venture capital is burdened with at least five types of risk: risks in the development and implementation phase, risk in the production phase, i.e. whether it is possible to manufacture, risk in the sales phase marketing, i.e. whether the product finds a buyer, the risk of profitability, i.e. whether the product can be sold with profit, the risk of rising: will it be possible to increase the production and development of the project? Venture capital funds are created by public investors (government agencies, local authorities) and private ones (banks, insurance companies, corporations, pension funds, universities, individuals). Most frequently, however, this method of financing investment applies to companies with insufficient financial liquidity (often unlisted on stock market). In Poland, target of venture capital funds are companies offering a good product with fist success on the market, and obviously the lack of capital for faster development and increased production capacity (Tamowicz, Rot 2002: 6). The image of Polish reality in this area compared to selected European countries is presented in Table 4. Table 4. Investment venture capital in relation to GDP in selected countries Greece Germany Denmark France Poland Source: Own calculations based on Eurostat, On the basis of this statement, it is obvious that Poland doesn t have specific results in the use of VC in relation to GDP, although there is a noticeable positive, upward trend in this regard. Countries such as France, Denmark and Germany are significantly ahead of us. In the literature one can even meet with the statement that development of the company, because of shortages in VC takes an entire generation (Akim 2011: 296). There is a very important question: does a limited access to venture capital funds effectively reduce the creation and development of start-up companies? The answer is not so obvious. The financing gap, understood as a lack of funding opportunities for companies in the early stages of development, certainly is a factor strongly limiting or even excluding the activities of start-ups. At the same time, it doesn t mean that the role of the VC is so exceptional. Geronikolaou and Papachristou (2012: 458) proved a dif- 147

148 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 ferent relationship: the development of financing needs in innovative start-ups provokes a development of VC but the development of start-ups is definitely not the result of the activity of VC funds. In 2012, risk investment funds in Europe reached 36.5 billion Euros, of which 3.2 billion was related to investment of Venture Capital funds in the seed stage, start-up and later venture stage. On the other hand, in Central and Eastern Europe, the value of all investments in 2012 amounted to 1 billion, but only a little over 100 million Euros were invested in companies in a seed stage, start-up and later venture stage (seed and start-up - 99 million). Almost half of the capital invested in this part of Europe was invested in Poland (478 million Euros). This is presented in Figure 2. According to the data the European Venture Capital Association (EVCA), 2012 was another period of decline in the value of investments held in this part of the continent (Zelek 2013:121). Figure 2. The value of investments made in Poland with the participation of VC in the years (in million Euros) Source: Zelek 2013: 121. Conclusions Venture capital is a form of financing the development of private enterprises of the equity medium or long term, which gives the company the financial stability and allows to focus on business projects. Through the acquisition of shares of private or privatized companies, venture capital funds share the risks associated with business, not expecting additional guarantee or security. Becoming co-owner of the company and bearing in mind the fact that the invested capital is saddled with a serious risk, financial investors are counting on cooperation with both entrepreneurs and other shareholders of the company, trying to contribute to increasing the company s value and to maximize long-term benefits. In principle, venture capital is not involved in direct management of the company, but retain control over through the participation of their representatives in the supervisory boards. For this reason, venture capital should 148

149 The importance of venture capital financing of start-up companies occupy an important place in funding innovative projects by small and medium-sized enterprises. In practice, the situation seems to be, however, quite different. The share of VC in Poland is growing, but still not significant enough, as a result of wide range of various conditions, including the unfavorable regulations. Many scientists agree that the government can foster the economy by creating efficient frameworks for venture capital support (Cumming 2007). References Akim, M.S. (2011), Does venture capital spur patenting? evidence from state-level cross-sectional data for the United States: Atherton, A., (2012), Cases of start-up financing. An analysis of new venture capitalisation structures and patterns, International Journal of Entrepreneurial Behaviour & Research, 18(1): Cumming, D. (2007), Government policy towards entrepreneurial finance: Innovation investment funds, Journal of Business Venturing, 22(2): Eurostat, available at: (accessed 21 June 2016). Fourati, H., Affes, H. (2013), The capital structure of business start-up: Is there a pecking order theory or a reversed pecking order? evidence from the panel study of entrepreneurial dynamics, Technology and Investment, 4: Geronikolaou, G., Papachristou, G. (2012), Venture capital and innovation in Europe, Scientific Research, available at: ME _ pdf (accessed 21 June 2016). Głodek, P., Gołębiowski, M. (2006), Finansowanie innowacji w małych i średnich przedsiębiorstwach, Vol. 2, Warszawa: Vademecum Innowacyjnego Przedsiębiorcy. Gompers P., Lerner J. (2001), The venture capital revolution, The Journal of Economic Perspectives, 15(2): GUS (2014), Warunki powstania i działania oraz perspektywy rozwojowe polskich przedsiębiorstw powstałych w latach , Warszawa, avaiable at: (accessed 21 June 2016). Juchniewicz, M., Grzybowska, B. (2010), Innowacyjność mikroprzedsiębiorstw w Polsce, Warszawa: Polska Agencja Rozwoju Przedsiębiorczości. Lis, A. (2016), Innowacja w przedsiębiorstwach - Klub innowacyjnych przedsiębiorstw. Dostępne źródła finansowania działalności innowacyjnej w firmach, avaiable at: Adrian_Lis.pdf (accessed 21 June 2016). Matusiak, K.B. (ed.) (2008), Innowacje i transfer technologii słownik pojęć, Warszawa: Polska Agencja Rozwoju Przedsiębiorczości. PARP (2011), Jak zostać i pozostać przedsiębiorcą. Informator dla nowopowstałych firm, Warszawa. Paul, S., Whittam, G., Wyper, J. (2007), The pecking order hypothesis: does it Apple to start-up firms?, Journal of Small Business and Enterprise Development, 14(1):

150 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 SBA Fact Sheet Poland (2014), available at: file:///c:/users/monia/downloads/ poland_en%20(1).pdf (accessed 21 June 2016). Snieska V., Venckuviene V. (2011), Hybrid venture capital funds in Lithuania: Motives, factors and present state of development, Inzinerine Ekonomika Engineering Economics, 22(2): Sobańska, K., Sieradzan, P., (2004), Inwestycje private equity/venture capital, Warszawa: Key Text. Tamowicz, P., Rot, P. (2002) Informator. Fundusze venture capital w Polsce, avaiable at: (accessed 21 June 2016). Wang J. (2015), How do start-up companies explore the strategies to pursue market share and benefits take maotai-flavor liquor in Renhuai as an example, Modern Economy, 6: Wyżnikiewicz, B. (2013), Polskie MSP na drodze do nowoczesności, Leviatan, available at: (accessed 21 June 2016). Zelek, A. (Ed.) (2013), Nowoczesna inżynieria finansowa dla firm start-up w Polsce w latach raport z badań screeningowych, Wydawnictwo Naukowe Zachodniopomorskiej Szkoły Biznesu w Szczecinie, available at: (accessed 21 June 2016). 150

151 SURVEY ANALYSIS OF BUSINESS POTENTIAL AND APTITUDE FOR BUSINESS Iveta Kmecová The Institute of Technology and Business in České Budějovice, Czech Republic Abstract. The aim of this paper is to provide theoretical and practical bases for developing the spirit of enterprise, forming positive attitudes towards entrepreneurship and skills that are important for business. In this paper we present the preliminary results of a questionnaire survey focused on identifying entrepreneurial potential and talent for business. Key words: business, entrepreneurial potential, business aptitude, characteristics of entrepreneurs. Introduction Although business has not been on the social agenda for some time, business forms the basis for the progress of human civilization and culture. In the 18th century, the Irish-French economist, Richard Cantillon, who wrote many books on economic issues, was the first to mention the job of entrepreneur. The content of this position has remained the same i.e. to take the responsibility and risk for the realisation of entrepreneurial projects. For some people, the history of business is considered irrelevant and without practical value to the present day. However, more and more entrepreneurs concur, that their knowledge of theory, studies of problems and work experience has helped in their success. It should be noted that acquired knowledge is not a guarantee of business success, but it does help entrepreneurs to find the best way to success and how to cope with prospective problems. At present, the Czech Republic is the focus of interest of stakeholders from across the world. The reasons are simple. The improving economic conditions in the Czech Republic are decisive for stakeholders. The economic conditions are stable and there is a competent low cost workforce. Only a few other countries can compete on this level with this combination of factors. It is for this reason that the Czech Republic is consistently reporting increases in capital investments and the number of economically advanced companies. As a result, the Czech Republic is one of the fastest growing countries in the Central and East European region. Important economic reforms in the last two decades

152 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 have seen the standard of living in the Czech Republic rise. As Polák (2009) notes, there has been significant and rapid expansion in the service, industry and infrastructure sectors. These developments have supported the Czech Republic in creating the appropriate preconditions for further progress, especially in terms of the European market. Encouraging entrepreneurship among young people is very important. Specialists point to this issue with regards to generating and increasing employment opportunities within the countries of the European Union. The specialists do not only focus on relevant research, but also on the content of education. This involves how the issue is implemented in practice in schools and how to stimulate young people to retrieve the skills they have learned to extend their vocational opportunities. Stellner and Vokoun (2014) analyse the consequences of using the Internet in the teaching of economics and historical sciences. They deal with academic work and academic preparations at universities. They conclude that business has always been a means by which to motivate creative human potential and that is has always been driven by the need to innovate. Business therefore offers young people interesting opportunities to retrieve and use their knowledge, skills, experience and enthusiasm. A contribution suggests the implementation of upbringing to enterprise to the process of education, educational applications and projects to the support of upbringing to enterprise. 1. Business Businesses offer services to other people. The main condition for success is a satisfied customer. There are series of publications dedicated to dealing with problems in business. Fábová (2011) defines business as a systematic process, which is practised independently and under one s own name and responsibility with a view to making a profit. Veber and Srpová (2008) point to the interdisciplinary nature of business. They characterize business as an activity in which one uses their initiative, and which requires a creative and flexible attitude, to create value added. In turn, Pauličková (2012) suggests that business is not only about satisfying the needs of customers, but also about achieving the targets of the company, stimulating initiative and education, and contributing to social security. Timmons (2001) describes business as a specific way of deliberating, behaviour and thinking. He characterises the obsession of entrepreneurs as an opportunistic, holistic attitude, whereby leadership is a specific superstructure. Many economists have tried to develop a theory of business. This pursuit has been incessant since the 18th century. As a result, it is not possible to specify a single definition because every concept of business theory includes an element of truth in it. It is for this reason that authors ascribe to one, or more, of the three accepted basic concepts of business theory. These basic theoretical concepts, as listed below, are highlighted by authors such as Srpová and Řehoř (2010): 152

153 Survey analysis of business potential and aptitude for business business as an activity the creation of something new which may not necessarily have a financial value. Under this concept, the entrepreneur can fulfil six roles (owner, economist, manager, leader, producer, purchaser or seller); business as a process specific characteristics are driven by the competitive environment e.g. the creation of something new with added value, the search for opportunities to achieve targets, the appropriate use of own resources, who takes responsibility and the risk; Business as a value entrepreneurial spirit. Jünger (2007), uses the same concepts in his teaching materials for the University of Ostrava. People can look at business from many varying points of view. Veber and Srpová (2005) states that the concept of business depends on the terms in which it is perceived: economically how economic resources and other activities are combined to increase their original value; psychologically the need to achieve and earn something. It is a tool for self-realization; sociologically increasing the value of used resources to create job opportunities and improve the quality and standards of living; legally as an independent activity which is practised by people under their own name and responsibility with a view to generating profit. And finally, Dimitratos and Plakoyiannaki (2003), during more than last ten years, showed the great interest in business like a sphere of research. 2. Business education The majority of countries in the European Union have implemented specific educational programmes on business. These programmes include lectures, projects, case studies and training. These elements form part of the efforts to encourage young people to get directly involved in solving particular problems, and to offer them contacts to, and the opportunity to open up a dialogue with, companies and entrepreneurs (Lukeš 2004). Pávišová (2006), describes the efforts to innovate in the sphere of general and professional education in the Czech Republic, with a view to promoting an entrepreneurial culture and independent activity. The European Commission estimates that 5% of secondary school students (over 6,000 students) in the Czech Republic participate in the Mini-business programme. Jünger (2005: 11-18) states that the targets of educationalists are long-term ones and that to achieve them requires interdisciplinary skills. According to Solík and Somroň (2008) upbringing provides a significant tool and implements an innovation of education to entrepreneurship of educationists. Using these tools will help to solve crucial problems in the current system of education. 153

154 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 The need to develop entrepreneurship is driven by the needs of a society to progress and innovate. Entrepreneurial spirit lies in peoples basic dispositions and attitudes, which it is necessary to stimulate at a very early age. By doing so, it is possible to nurture the potential of every individual throughout their basic and higher education. Entrepreneurship in the European Union Entrepreneurship is one of the key ways identified by the EU for it to become the most competitive economy in the world. It is for this reason that this article is focused on this subject. It should not only be entrepreneurs that possess entrepreneurial skills, but also employees and every successful person. In France, three departments, so-called Observatories, were created to review and oversee business education at secondary schools and universities (Štúr 2013: 22-25). The aim was to gather broad based information from individual schools and to apply the new knowledge throughout the education system. In Holland, a special committee was established under the joint auspices of the Ministry of Education and the Ministry of Finance. The main mission of the committee was to develop a pilot project, in which students, parents, educationalists and entrepreneurs work together on entrepreneurial projects which can be applied in all schools. In Sweden, the PRO1 programme exists to stimulate cooperation between companies and schools in order to initiate, develop and implement business plans. In Scotland, a national programme was established that stipulates that every student over 12 years of age must have at least two experiences in/with business. In Spain, 2000 schools participate in a compulsory programme that focuses on how to establish a company. In Finland, there are even distance learning opportunities in business offered at secondary schools. Pávišová (2006) claims that the United Kingdom has invested approximately GBP 60,000 every year since 2005 in projects which are focused on business support. These projects focus on supporting entrepreneurial competence, risk-management, creativity, innovation, the ability to make one s own decisions and express opinions, as well as the impact of taking risks, all of which are relevant to business. 3. Entrepreneurial potential In the article published by the portal Management News (2010), it was revealed that, on the basis of research carried out on behalf of the European Commission by Eurobarometer, 45% of Europeans have the ambition to start their own business, but that only 10% would go on to do so. An article published in the Parliamentary Sheets (2014) describes how the company Amway instigated research in 38 countries around the world into entrepreneurial potential and entrepreneurial education. The main focus was on establishing each society s 154

155 Survey analysis of business potential and aptitude for business point of view with respect to business and the economic potential thereof. The study revealed that 30% of the inhabitants of the Czech Republic have a preference for independent business. This attitude was particularly strong among those people with higher salaries in the age group years. The study also showed that Germans have a similar attitude to business as Czechs, and that Scandinavian countries view business in a very positive light. The study also looked into whether it is possible to learn how to do business, or whether it is a question of inborn talent. In the Czech Republic, 59% believed that it was possible to be taught how to do business, but that there were insufficient appropriate educational opportunities. Over 50% of respondents felt that the implementation of business education at secondary schools and universities was appropriate. Ildiko Dikošová, Director of Amway Czech Republic, concluded by stating that there must be support for, and that there was a need for, a substantive discussion on the removal of obstacles to business. In the last few years, research into business has been extended and widened. Since 2011, GfK (international research agency based at the Technical University in Munich) has conducted extensive research into the attitudes of Czechs to business. The results reveal that approximately 37% of Czechs believe they have entrepreneurial potential, but that more than 90% of those won t start a business due to fear. Research conducted by Datank, which focused on existing entrepreneurs, showed that 90% of entrepreneurs enjoy their job and that 40% of the respondents would like to see their business develop. The Trade Register publishes the net total increase in the number of entrepreneurs in a given year. In 2007, there was an increase of 60,000. In 2011, only an increase of 25,000 and in the first half of 2012, only 13,000. Changes in legislation were the reason behind the decrease in the growth of the numbers of self-employed traders. Research shows that the changes in legislation and the increase in the administrative workload were perceived negatively by 70% of entrepreneurs. Characteristics of entrepreneurs Kong (2011) states that creative economies have developed in almost every advanced country. He suggests that the issue does not revolve around workers in organized companies, but around the self-employed. The author, as is also stated on the portal Ezinearticles, states that the characteristics required to achieve success in business depends on a person s ability to work hard, identify business opportunities and to prepare accordingly, their belief in themselves and the business project, as well as the ability to acknowledge potential failures and move on. The characteristics required for success are different for each entrepreneur. Veber and Srpová (2008) put forward a list of characteristics by which to identify successful entrepreneurs. According to the authors, every entrepreneur should be persistent, responsible, self-confident, take initiative, 155

156 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 be knowledgeable, continuously monitor what they are doing, place emphasis on success, show rational behaviour, respect their surroundings, and have a clear concept of price, quality and time. The general personal attributes of an entrepreneur were also described in publication by Synek (2002: 479). In addition to the aforementioned attributes, he suggests characteristics such as creativity and the ability to come up with new ideas and take advantage of opportunities, or create them. He also states that entrepreneurs are the driving force behind innovation and change. Table 1 shows which personal characteristics are typical for entrepreneurs. Table 1. Characteristics of an entrepreneur Specific characteristics Non-specific characteristics determined, conscientious, takes initiative, single-minded, persistent, independent, responsible, relates to their job, relates well to other people integrity, trustworthy, not corruptible, honest, scrupulous, thorough, polite, considerate, precise Source: Veber, Srpová 2008: 52. Success in business Jünger (2007) suggests that there are two possible ways of looking at success objectively or subjectively. The objective side of success is measureable, whereas the subjective side, which is based on the perception and experience of success, is not. Managing success is possible, but in order to do so requires knowledge of the factors and circumstances which affect success. Success in business can be defined as the achievement of set targets. Business activity loses its sense, if long-term success proves elusive. The results of research conducted in the last decade has led to the formulation of theory as we know it today. Jünger (2007) states that it is possible to determine the specific characteristics of an entrepreneur, but that it is impossible to determine which are decisive factors in making them successful. Trías de Bes (2009: 31-32, 155) states that independent business experience does not provide a guarantee for success. Entrepreneurs need to know why other entrepreneurs fail and understand the causes of those failures in order to avoid the same pitfalls. The most effective form of learning comes from making mistakes and learning from them. Kmecová (2015: 8) states that business education should be a subject of major interest within the educational system, and it is not only entrepreneurs that require business skills, but also employees and every successful person (Kmecová 2015: 3; Hesová, Zelendová 2011). From this point of view, the acquisition of business skills is therefore a crucial competence that should be learned during an individual s education and technical preparation. 156

157 Survey analysis of business potential and aptitude for business 4. Analysis of the research results 4.1. Partial results of the survey into entrepreneurial potential This article presents the partial results of two questionnaire surveys. The aim of the first questionnaire was to identify entrepreneurial potential and the second to determine aptitude for business. The surveys were conducted among students at the Institute of Technology and Business in České Budějovice through the use of electronic questionnaires. The first questionnaire into entrepreneurial potential consisted of 22 questions with simple YES or NO responses. The sample of students from the Institute of Technology and Business in České Budějovice consisted of 61 respondents. The partial results of the survey are presented in Table 2. The table includes the absolute and relative frequencies for 10 of the questions. Table 2. Responses of respondents to 10 randomly selected questions from questionnaire 1 AF YES RF (%) Were you brave at a young age and did you like adventure? Would changing your daily routines be a strong motive for setting up a business? Are you willing, if necessary, to work as long as necessary, without enough sleep? Would you be willing to devote your savings to set up a business? AF NO RF (%) Would you be willing to borrow money to set up a business? If you fail as an entrepreneur, should you immediately try to establish a new business again? If you fail as an entrepreneur, should you try to find a permanent job as an employee? Do you think being an entrepreneur is risky? Do you think you can handle money well? Are you an optimist? AF Absolute frequency RF Relative frequency Figure 1. If you went bankrupt as an entrepreneur, would you immediately start a new business? 157

158 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Figure 2. If you went bankrupt as an entrepreneur, would you try to find a permanent job as an employee? Figure 1 shows the responses of respondents to question 6 of the questionnaire. It is clear that the majority of respondents i.e. 90%, would not immediately establish a new business if they went bankrupt. On the contrary, as Figure 2 shows, 84% of respondents would try to find a permanent job as an employee. The results in Table 2 show that 66% of respondents feel that the desire to change their daily routines would be a strong incentive to establish a business, and that 67% of respondents are willing, if necessary, to work as long as necessary without sufficient sleep. However, as indirectly illustrated in Figure 1, only 10% of respondents would immediately seek to establish a new business after going bankrupt. The majority of respondents (95%) assessed being an entrepreneur as a risk which mutes the entrepreneurial quotient. In addition, 70% of respondents believe that they can handle money well, and 82% are optimists. On the basis of the overall evaluation of the results, it can be said that level of the entrepreneurial quotient is quite high. A high percentage of students can be successful in business, if they acquire the necessary business education and knowledge. Štúr (2013: ) also carried out research with a similar focus. In total 1153 respondents participated in the survey. The participating respondents were students drawn from different types of secondary schools in the Slovak Republic. The survey was conducted in three stages and in the school years 2009/2010, 2010/2011 and 2011/2012. Štúr concluded that out of the 1,153 respondents, 11.53% had entrepreneurial potential, 74.5% of respondents would have to try and educate themselves to compensate for their deficiencies so that they could cope better with challenges of entrepreneurship, and that 13.96% of respondents did not have any entrepreneurial potential. In a press release in the Parliamentary Sheets (2014) the following was mentioned: Amway (a direct sales company) has conducted research in 38 countries focused on entrepreneurial potential and business education. The survey involved 44,000 respondents. The results showed that the country with the highest entrepreneurial potential was Mexico 80% of people saw opportunities to start their own business. In Europe, Scandinavian countries are considered to be traditionally positive towards business, however this contrasts directly with 158

159 Survey analysis of business potential and aptitude for business the situation in the Czech Republic. Only 69% of Czechs perceive business positively, of which only 30% can imagine actually starting their own business. Research has also proved that German attitudes are similar to those of their Czech counterparts. The survey also examined how business friendly individual states are. The Czech Republic was considered by 78% of respondents to be (rather) friendly towards business and entrepreneurs. The worst country was perceived to be Portugal only 18% of respondents perceived the country as being friendly towards business and entrepreneurs Partial results of the survey into business aptitude The second questionnaire focused on the talent for business. The questionnaire consisted of 23 statements with three possible responses agree, partly agree, disagree. The survey was conducted among 41 students from the Institute of Technology and Business in České Budějovice. The responses to the questionnaire were evaluated and tabulated. The partial results of the survey are presented in Table 3. The table includes the absolute and relative frequencies for 10 of the questions. Table 3. Responses of respondents to 10 randomly selected statements from questionnaire 2 Agree Partly agree Disagree I can organize my work well I can perform to high standards even if no one is checking me. AF RF (%) AF RF (%) AF RF (%) I can easily put in more effort without making overtime I can easily make rational decisions under any circumstances. I can easily and responsibly handle higher amounts of finance. When facing problems, I can quickly mobilize forces and look for efficient solutions. I am a practical person, who can usually deal with most issues. I consider quality of work to be the basis of success in business. It is more important to focus on the needs of customers than my own. I am happy to find solutions and discover new and surprising contexts

160 Forum Scientiae Oeconomia Volume 4 (2016) No. 3 Figure 3. I can easily and rationally make decisions under all circumstances Figure 3 represents the responses of respondents to question 4 of the survey and shows that 32% of respondents agree and 56% of respondents partially agree with the statement that they can easily make rational decisions under all circumstances. Figure 4. It is more important to focus on customers needs than on my own As presented in Figure 4, only 3% of respondents disagree with the statement that it is more important to focus on customer needs than on their own. It therefore can be concluded from the results in Table 3 that the majority of respondents have a great aptitude for business and have a great chance to succeed in business. However, only 32% of respondents think that they are capable of easily and rationally making decision under all circumstances. It is worth mentioning that Štúr (2013: ) also conducted research into entrepreneurial talent. His survey was conducted under 786 respondents from different types of secondary schools in the Slovak Republic. The survey was carried out in three stages and in the school years 2009/2010, 2010/2011 and 2011/2012. He concluded that 84.1% of the respondents had a talent for business and 15.9% did not. Conclusions The aim of this research was to establish students perceptions of business. The research was focused on determining entrepreneurial potential and the characteristics required to be a successful entrepreneur. Our research confirms that the majority of respondents perceive business positively and that they can imagine starting their own business. We can therefore state that both the characteristics of entrepreneurship and the entrepreneurial quotient are relatively high. It is the opinion of the author that students have a relatively good chance of succeeding in business in the future. 160