European Trend Chart on Innovation Annual Innovation Policy for Iceland

Transcription

European Trend Chart on Innovation
Annual Innovation Policy for
Iceland
Covering period: September 2003 – August 2004
European Commission
Enterprise Directorate-General
A publication from the Innovation/SMEs Programme
Innovation is a priority of all Member States and of the European Commission. Throughout
Europe, hundreds of policy measures and support schemes aimed at innovation have been
implemented or are under preparation. The diversity of these measures and schemes reflects the
diversity of the framework conditions, cultural preferences and political priorities in the Member States.
The ‘First Action Plan for Innovation in Europe’, launched by the European Commission in 1996,
provided for the first time a common analytical and political framework for innovation policy in Europe.
Building upon the Action Plan, the Trend Chart on Innovation in Europe is a practical tool for
innovation organisation and scheme managers in Europe. Run by the Innovation policy Unit of DG
Enterprise, it pursues the collection, regular updating and analysis of information on innovation policies
at national and European level.
The Trend Chart serves the “open policy co-ordination approach” laid down by the Lisbon Council
in March 2000. It supports organisation and scheme managers in Europe with summarised and
concise information and statistics on innovation policies, performances and trends in the European
Union (EU). It is also a European forum for benchmarking and the exchange of good practices in the
area of innovation policy.
The Trend Chart products
The Trend Chart on Innovation has been running since January 2000. It now tracks innovation
policy developments in all 25 EU Member States, plus Bulgaria, Iceland, Israel, Liechtenstein, Norway,
Romania, Switzerland and Turkey. It also provides a policy monitoring service for three other nonEuropean zones: NAFTA/Brazil, Asia and the MEDA countries. The Trend Chart website
(www.cordis.lu/trendchart) provides access to the following services and publications, as they become
available:
•
•
•
•
•
•
•
a database of innovation policy measures across 33 European countries;
a news service and related innovation policy information database;
a “who is who” of agencies and government departments involved in innovation;
annual policy monitoring reports for all countries and zones covered;
all background material for four annual policy benchmarking workshops;
the European Innovation Scoreboard and other statistical reports;
an annual synthesis report bringing together key of the Trend Chart.
The present report was prepared by Arnold Verbeek, Technopolis Brussels. The information
contained in this report has not been validated in detail by either the Member States or the European
Commission.
Contact: entr-trendchart@cec.eu.int
This document originates from the European Commission’s “European Trend Chart on Innovation”
(Enterprise Directorate-General).
Copyright of the document belongs to the European Commission. Neither the European
Commission, nor any person acting on its behalf, may be held responsible for the use to which
information contained in this document may be put, or for any errors which, despite careful preparation
and checking, may appear.
CONTENTS
Executive Summary...................................................................................................................................i
1.
National Innovation System in Iceland ....................................................................................... 1
1.1 Innovation performance.............................................................................................................. 1
1.2 Innovation governance system................................................................................................... 6
1.2.1
The national innovation system ......................................................................................... 6
1.2.3
Regional innovation systems and policies ....................................................................... 15
2. Innovation policy in Iceland ............................................................................................................... 16
2.1 Innovation policy framework ..................................................................................................... 16
2.2 Policy events & policy debates ................................................................................................. 18
2.3 Key developments in innovation policy measures ....................................................................... 19
3. Implementing innovation policy in Iceland......................................................................................... 21
3.1 Fostering an innovation culture ................................................................................................ 21
3.1.1.
Education and initial and further training ......................................................................... 21
3.1.2.
Mobility of students, research workers and teachers ...................................................... 21
3.1.3.
Raising the awareness of the larger public and involving those concerned.................... 22
3.1.4.
Fostering innovative organisational and management practices in enterprises.............. 23
3.1.5.
Public authorities and support to innovation policy makers............................................. 23
3.1.6.
Promotion of clustering and co-operation for innovation ................................................. 23
3.2. Establishing a framework conducive to innovation ..................................................................... 24
3.2.1.
Competition...................................................................................................................... 24
3.2.2. Protection of intellectual and industrial property ..................................................................... 24
3.2.3.
Administrative simplification............................................................................................. 25
3.2.4.
Amelioration of legal and regulatory environments ......................................................... 25
3.2.5.
Innovation financing ......................................................................................................... 25
3.2.6.
Taxation ........................................................................................................................... 26
3.2 Gearing research to innovation ................................................................................................ 27
3.3.1.
Strategic vision of research and development................................................................. 27
3.3.2.
Strengthening research carried out by companies .......................................................... 27
3.3.3.
Start-up of technology-based companies ........................................................................ 28
3.3.4.
Intensified co-operation between research, universities and companies ........................ 29
3.3.5.
Strengthening of the ability of companies, particularly SMEs, to absorb technologies and
know-how…………............................................................................................................................ 29
4.
List of TREND CHART measures ............................................................................................ 31
5.
Bibliography and sources ......................................................................................................... 32
Executive Summary
1. Snapshot of innovation performance
According to the OECD (Economic Survey, 2003) Iceland’s economic performance has improved
significantly over the past decade. The per capita income exceeds the OECD average by around onefifth, as compared to one-tenth in 1995. Major imbalances and tensions were corrected in a short time
span, highlighting the economy’s enhanced adjustment capacity. This favourable performance is to a
large extent attributable to the shift in policy towards financial stability and market liberalisation during
the 1990s. Average GDP growth has slightly fallen back from 5,7 percent in 2000 (average between
1995-2000 of 5,1 percent) to 4,3 percent in 2003. The average growth between 2004 and 2006 is
expected to be about five percent, whereas over the period 2007-2010 a lower average growth of
2,75 percent per year is expected (Ministry of Finance (Ný þjóðhagsspá fyrir árin 2004-2010), 2004).
Since 1955, Iceland has achieved an annual GDP growth of 3,8 percent. The most important
economic sectors in terms of contribution to GDP are the services sector. The more traditional fishing
and fish processing sectors accounted for almost ten percent of GDP formation in 2003. Part of the
increased growth could be explained by openness in financial transactions as well as emerging of the
stock exchange and participation in the EEA agreement.
Whereas Icelandic industry has been quite aware about the role of innovation in building up
competitiveness, resulting in extensive efforts towards increasing its innovation performance, on the
science and technology policy level, innovation has only recently become an important issue.
Iceland’s industrial innovation performance has been quite strong the last years. Based on the
summary innovation index reported in the EIS in 2004 (EC, 2004), Iceland is strongly ‘moving ahead’
with an above EU-average change in the major trend indicators (almost 25 percent) and with an
above EU-average summary innovation index (SII) of approximately 0,54 (EU-average is 0,44). For
comparison, we find leading nations such as the Netherlands and France ‘loosing momentum’ with an
SII of 0,45 and 0,46 respectively. In the 2002 EIS report (EC, 2002) Switzerland and Iceland are
above the EU mean for 10 and 11 indicators respectively, comparable to the EU innovative leaders.
It is generally accepted that economic performance in modern growth theory is to a large extent
based on scientific and technological development turned into innovation. When looking at the relation
between GDP per capita and the Summary Innovation Index (SII) - (see EC, 2004) for Iceland, a
strong correlation between economic performance and innovation performance is reported,
suggesting that Iceland, and more precisely Icelandic industry, is performing well in ‘directing’ its
innovation efforts towards economic return. Already in 2001, Iceland had met the target agreed at the
2002 Barcelona Summit of the European Council of spending 3 percent of its GDP on R&D (3,09
percent), thereby recognising the importance of R&D for economic development. From an innovation
policy perspective there are several challenges to be met, one of the biggest being the achievement
of the objectives set out in the resolutions of the Science and Technology Policy Council in 2004.
Moreover, developing a long-term innovation policy plan from a more ‘holistic’ perspective would be a
significant step forwards. Strengths and opportunities need to be combined while weaknesses and
threats need to be well anticipated.
i
National Innovation SWOT overview
Strengths

Highly (internationally) educated and skilled
workforce with the possibility of lifelong
learning

3 percent Barcelona target fulfilled in 2001

Close proximity between innovation system
actors (short communication lines)

Favourable (business) environment for
science based industries (e.g. biotech, in
future: nanotech)

SME involvement in innovation

Excellent ICT infrastructure and access to
digital channels

High impact/quality scientific output in biotech
related research

Strong
performance
in
non-technical
innovation

Receptive to new and advanced technologies
Weaknesses
•
Limited (financial) resources in absolute terms
•
Fragmentation of research efforts leading to a
limited ‘overall’ research capacity
•
Limited interaction between the different
actors in the innovation system leading to
sub-optimisation
•
Multiple ‘funding’ channels (see innovation
policy) and decision boards (budget-based)
•
Lack of ‘think tanks’
Opportunities
•
Further stimulate educational and scientific
quality by conclusion of performance-related
contracts (in progress)
•
Increasing importance of the ‘knowledge’
based economy
•
Consolidate
and
increase
specialised
knowledge available in e.g. medical
technology
•
Increase visibility on innovation matters by
being (more) active in international (Nordic
and European) projects
•
Aims agreed upon at the at the Lisbon
Council meeting in 2000 could provide a
useful ‘starting point’ for further optimizing
innovation performance
Threats
•
Low share of companies being ‘strategic
innovators’, but instead a large share of
‘technology adopters’
•
Regional destabilisation in view of the
‘attractiveness’ of the capital area
•
Strong dependency on a limited number of
sectors (i.e. companies) in the national
innovation performance; skewed distribution
•
Uncertainty and fuzziness due to the
introduction of the new STPC
2. National objectives for innovation
The long-term goal of the science and technology strategy is to enhance the cultural and economic
strength of Iceland in a competitive international environment, to ensure that Iceland’s economy and
quality of life continue to rank at the forefront of nations. This will bring the nation new knowledge and
competence useful for the following purposes:
Increasing sustainable utilisation of resources, creation of wealth, and generation of attractive
job-opportunities in a knowledge society.
Improved health and social security and encouraging maturation of a civil society where
freedom of enterprise and social equity reign.
Reinforcing the economic and cultural independence and thus the foundations for living in
Iceland.
Enhancing the influence of Iceland in the international arena and facilitating the adaptation of
Icelandic society to variable external conditions.
3. Appraisal of the policy process
The major turnaround in innovation policy in Iceland has been inspired by Finnish practice, and is an
example of a ‘good practice’ to Iceland. The policy process is to a large extent a combination of a
‘bottom up’ and a ‘top down’ approach. The two commissions of the Science and Technology Policy
ii
Council (STPC), representing different actors of the innovation system, are the instruments to this
approach. Iceland’s policy making seems to be ‘evidence based’, meaning that many policy actions
are based on monitoring the evolution of different indicators (provided by international and national
organisations), even though further improvement could take place. The resolutions of the STPC are
the foundation for the new innovation policy in Iceland. Major steps have already been taken towards
implementation, but many remain to be taken.
Innovation policy seems to be in touch with scientific, technologic and economic reality through the
short communication lines with relevant actors in the innovation system. Regardless of the seemingly
good fit between several policy measures and objectives, the intensity at which different objectives
are dealt with in the innovation policy varies, i.e. choices have to be made. On the one hand, the
development of an overall view on innovation policy as well as a long-term perspective may be useful
for all parties involved. On the other hand, on a short notice, a further prioritisation among the
measures together with a realisation and evaluation plan would help in the roll out and control of the
proposed measures.
4. Implementing innovation policy – what’s new !
Since the last innovation Trend Chart report a number of significant developments have taken place.
First of all, the new STPC Council has formally been installed, and the technology and science
commissions within the council have been put in place. Secondly, two STPC resolutions have
highlighted Iceland’s ambitions towards innovation. Concrete actions are proposed and financial
means (budgets) for the coming years have already been allocated.
Different ministries have taken initiatives to merge institutions in order to increase economies of scale
and innovation potential by stimulating intense collaboration and interdisciplinarity in research. Some
of the planned mergers have already been realised or are in an advanced stage. Iceland is also more
active in international collaborative projects, especially in the Nordic region. Several seminars have
taken place in Iceland on new and challenging topics such as technology foresight and technology
development. Protection of intellectual property rights in universities, research institutes and
companies has been a major issue leading to the entrance of Iceland to the (PCT) Patent
Cooperation Treaty in November 2004. Slowly but surely, awareness of the necessity of evaluation of
performance in innovation is increasing.
In 2004, Iceland has been chairing the Nordic Council of Ministers. Several propositions and actions
have been initiated by the Icelandic chair. In relation to innovation, ways will be sought to narrow the
gap between scientific research and innovation in business and industry. Emphasis will be placed on
increasing the co-operation of Nordic institutions working to improve the Nordic and international
industrial environment. Efforts will be made to further co-operation between Nordic universities and
centres of excellences, with the aim of improving the quality of research training.
iii
1. National Innovation System in Iceland
1.1 Innovation performance
Iceland’s innovation policy framework and national innovation system, were significantly restructured
by the beginning of the 1990s as a result of several external and internal developments (e.g. OECD
evaluation of S&T policy early 1980s; evaluation of the environment for innovation and
entrepreneurship early 1990s) a process that continued in 2003 when the new S&T Policy Council,
based on new laws, was created. The long process of rethinking S&T policy in Iceland, which is
ongoing, seems to be resulting in a more effective national innovation performance, to a large extent
due to industry’s commitment to innovation.
As a result of the latter, economic development has also been strong over the last decade bringing
Iceland and its citizens at the top of the list of countries with the highest living standard. That it is the
innovation performance that plays an important role in this achievement is also confirmed when we
look at the relation between GDP per capita and the Summary Innovation Index (SII) - (see EC,
2004). For Iceland a strong correlation between economic performance and innovation performance
has been found, suggesting that Iceland is performing well in ‘directing’ its innovation efforts towards
economic return. Already in 2001, Iceland had met the Barcelona target of spending 3 percent of its
GDP on R&D (3,09 percent) thereby recognising the importance of R&D in economic development.
However, in 2001, we find that the share of industry in national R&D expenditure is lower that the EU
average (46,16 percent of total R&D by industry; 55 percent EU-average), while government spending
on R&D is the highest within the OECD.
Iceland’s innovation performance has been impressive over the past years (the 2002 European
Innovation Scoreboard points out that Iceland performs well above the EU mean for most of the
innovation indicators). Based on the summary innovation index reported in the EIS in 2004 (EC,
2004), Iceland is strongly ‘moving ahead’ with an above EU-average change in the major trend
indicators (almost 25 percent) and with an above EU-15 average summary innovation index (SII) of
approximately 0,54 (EU-average is 0,44). For comparison, we find leading nations such as the
Netherlands and France ‘loosing momentum’ with an SII of 0,45 and 0,46 respectively. The underlying
innovation parameters and related indicators that have lead to this strong performance relate to an
ongoing strong evolution in the ‘business and public R&D spending’ (see also the policy measures in
this area), the growth in ‘employment in high tech sectors’, the policy and implementation of measures
on ‘lifelong learning’, and finally the measures and the results with respect to ‘tertiary education’. More
in detail, in the area of ‘human resources’ we find a strong trend (index of 267; average being 100 for
EU-25) in ‘lifelong learning’. In the 2002 EIS report (EC, 2002) Switzerland and Iceland are above the
EU mean for 10 and 11 indicators respectively, comparable to the EU ‘innovative leaders’.
An above EU-15 average performance can also be found with respect to ‘USPTO/EPO hi-tech
patents’ (index of 228/164) and public and private R&D spending in relation to ‘knowledge creation’1.
With respect to ‘transmission and application of knowledge’ we find a strong trend in ‘SMEs
innovation co-operation’ (index of 176), which possibly points towards the effect of the measures
taken to stimulate SME involvement in innovation (12,5 percent of manufacturing and service SMEs
are involved in innovation co-operation). Despite the strong performance, there is also space for
further improvement. One of the areas requiring further attention is the level of innovation expenditure
by enterprises when looking at the full range of possible innovation activities (index 0,79). Similarly,
accounts for the level of hi-tech venture capital available which based on the latest available figures,
has an index of 69 - see also the policy measures taken on this subject).
1
In a recent study carried out by Verbeek & Finnbjörnsson (2004) it was shown that based on USPTO patent
data Iceland’s technological output (based on patents) is concentrated around telecommunication (due to the
role and presence of the U.S. company ‘Conexant Systems’ in this area), medical technology, and
pharmaceuticals. Based on the EPO data, we find the areas of pharmaceuticals, medical technology and
agricultural and food processing.
1
Another important aspect in innovation performance is the quantity and quality of scientific research,
the science base. According to ISI Essential Science Indicators (Thomson-ISI), among the 149 topperforming countries in all fields, Iceland ranked 53rd for citations, 75th for the number of papers, and
8th for citations per paper (worldwide). Iceland has recently been named ‘most-improved’ in the field
of Engineering and a new entrant in the multidisciplinary fields. The most intensive research fields are
clinical medicine, geosciences, molecular biology and genetics, as well as pharmacology and
toxicology. The most innovative sectors for Iceland are machinery and equipment, and electrical and
optical engineering. In terms of manufacturing specialisation, Iceland is specialised in medium-hightech and medium-low-tech. Furthermore, business services are the most innovative service sector.
Least innovative are non-metallic mineral products, transport equipment and fabricated metal
products2. In the food and beverages sector we find 52 percent of all firms innovating in-house, the
highest share among the benchmark countries. The same applies for textiles and textile products (59
percent), chemicals (89 percent), basic metals (62 percent), machinery and equipment (73 percent),
and business services (76 percent).
Not all approaches to innovate rely on R&D as the most important innovation driver. Firms can for
example buy in critical know-how or adopt new technologies developed by other firms, the latter
calling upon a specific capacity, the ‘absorptive’ capacity, which is the potential that a sector or a
country has for absorbing scientific and technological findings developed elsewhere. Looking at the
importance of the different types of innovation modes for Iceland, we find ‘technology adopters’
playing an important role in the innovation landscape (over 35 percent), followed by ‘intermittent
innovators’ where innovation is not regarded as a core activity; innovation is a core activity for less
than five percent of all innovative firms, the so-called ‘strategic innovators’.
Furthermore, in relation to non-technical innovation, which is an important pre-condition to successful
innovation, Iceland is performing well in comparison to the main EU and Nordic countries. Looking at
the percentage non-technical change within SMEs we find Iceland to be ranked fifth with 54 percent
(compared to Germany 65 percent) of its SMEs to have realised non-technical change; 36 percent of
all SMEs have changed their organisational structures (Iceland is ranked seventh). Concerning the
implementation of advanced managerial techniques we find a share of 24 percent, and finally, with
regards to implementation of significant changes in aesthetic appearance (also important for product
commercialisation) we find Iceland in fourth place with 32 percent of its SMEs having paid attention to
this aspect of non-technical innovation. Finally, by looking at the percentage of enterprises with
access to the Internet, in 2003 Iceland had the third highest penetration rate after Denmark and
Finland.
The relation to economic performance
How does Iceland’s innovation performance translate into economic performance? According to the
OECD (Economic Survey, 2003), economic performance has improved significantly over the past
decade. The per capita income exceeds the OECD average by around one-fifth, as compared to onetenth in 1995. Major imbalances and tensions were corrected in a short time span, highlighting the
economy’s enhanced adjustment capacity. This favourable performance is to a large extent
attributable to the shift in policy towards financial stability and market liberalisation during the 1990s.
Average GDP-growth has slightly fallen back from 5,7 percent in 2000 (average between 1995-2000
of 5,1 percent) to 4,3 percent in 2003 (see table 1). On average, since 1955 Iceland has realised an
annual GDP growth of 3,8 percent. The average growth between 2004 and 2006 is expected to
around five percent, whereas over the period 2007-2010 a lower average growth of 2,75 percent per
year is expected (Ministry of Finance (Ný þjóðhagsspá fyrir árin 2004-2010), 2004). The most
important industries in terms of contribution to GDP are private services with 25,6 percent in 2003,
2
In the EIS 2004, it is mentioned that due to a lack of data the results of the analysis of the sectoral innovation
performance should be interpreted with care.
2
also a strongly innovative sector as discussed previously, followed by producers of government
services with 22,0 percent contribution to GDP in 2003, indicating the strong presence of the services
industry in Iceland’s economic landscape. The more traditional fishing and fish processing sector
accounted for almost ten percent of GDP formation in 2003 (source: Statistics Iceland).
Foreign Direct Investment (FDI) is a generator of technology and knowledge transfer between
countries and as such contributes to increasing competition and economic growth. The Government
has actively encouraged foreign direct investment in power-intensive industries. Iceland is also known
for its net outward FDI, especially in sectors such as food processing, the fishing industry, chemicals
industry - mainly pharmaceuticals - banking, retail and properties. Measured in terms of Foreign
Direct Investment Intensity (average value of inward and outward investment divided by GDP) a value
of 1,7 percent is found for Iceland in 2003, whereas the EU-15 average amounts to 1,2 percent. In
comparison to the year 2000 this means a decline of 1,6 percent for Iceland compared to an average
decline of 2,1 percent in the EU-15 (see table 1). This is the result of a worldwide economic
recession. As the preliminary statistics indicate, outward FDI increased strongly in 2004.
In 2003, export of goods from Iceland amounts to 182,600 million ISK3 and import about 199,500
million ISK. Thus there was a trade deficit of 16,900 million ISK, compared with a surplus of 13,100
million ISK in 2002. Exports decreased by 11 percent at current prices while imports increased by four
percent. Marine products constituted 62 percent of all exports, decreasing in value by 12 percent from
the year before, at current prices. Manufacturing products amounted to 34 percent of total exports,
decreasing in value by eight percent. The largest import categories were industrial supplies
accounting for 27 percent of total imports, capital goods (except for transport) with 23 percent of total
imports and consumer goods with a 20 percent share. Measured in ISK, the increase in imports was
largest in the area of capital goods. The share of the EEA countries was 77 percent in exports and 64
percent in imports. The United Kingdom was the largest trading partner buying Icelandic exports in
2003, or 18 percent of total, while the largest share of imports to the country came from Germany with
12 percent.
Table 1: Comparable indicators of economic performance
Indicator
National performance in percent
EU 15(25) average - in
percent
2000
5,7
2003*
4,3
2000
3,6 (3,6)
2003*
0,8 (0,9)
Public Balance ( percent of
GDP)
Export (annual volume
growth - constant prices
2003)
GERD (Gross domestic
expenditure on R&D as a
percent of GDP)
Graduates in S&T (total) per
1000 of population aged 2029
Foreign Direct Investment
intensity (avg. value of
inward and outward
investment divided by GDP)
Inflation rate
2,5
-1,4
1,9
-2,7
3
11
11,8 (12,1 )
0,5 (1,0)
EC Economic data
Pocket book (3, 2004)
2,75
3,09
(in 2001)
1,93 (1,88)
1,99
Eurostat (Structural
Indicators)
8,4
9,2 (in 2002)
11(10,2)
10,9(11,9)
Indicators)
3.3
1.7
3.3
1.2
Indicators)
4,4
1,4
1,9 (2,4)
2,0 (1,9)
General Government Debt
(GDP as denominator)
42
44,1
64,1 (62,9)
62,7 (61,6)
Indicators)
Eurostat
(Structural
Indicators)
Real GDP growth rate
(constant prices 1995)
3
Source
Statistics Iceland
(www.hagstofa.is),
Indicators)
Indicators)
1 Mio ISK amounts up to approximately € 12.000 (source: http://www.xe.com/ucc/)
3
Venture Capital Investment
(early stage) as a percent of
GDP
Venture Capital Investment
(expansion and replacement)
as a percent of GDP
* 2003 or latest available year
0,40
0,024
0,075
0,021
Eurostat
Indicators)
(Structural
0,749
0,118
0,154
0,088
Eurostat
Indicators)
(Structural
The general government debt of Iceland is far below the EU-15 and EU-25 average (GDP used as a
denominator). Whereas the EU-15 average amounts to 62,7 percent of GDP in 2003, Iceland’s
government debt in 2003 amounts to 44,1 percent. Iceland reports above-average performance in the
public sector (relation between public sector performance and efficiency), but this is achieved at a
disproportionately high cost in terms of public expenditure (European Competitiveness Report, 2004).
It is expected that there will be a significant expansion in power-intensity industry, which, together with
the associated investments, will have an enormous economic impact. Official estimates indicate that
economic growth could reach five to seven percent in 2005-2006 and that the unemployment rate
could drop to below one percent (OECD, 2003).
Based on the previous discussion it is clear that, although Iceland has booked significant successes
by reorganising and by re-emphasising it’s innovation policy, there is still space for improvement by
either considering new opportunities or thoroughly examining the existing weaknesses or
imperfections in the system. Table 2 provides insight into the major strengths and weaknesses of the
innovation system in Iceland, without intending to be exhaustive.
Table 2: National Innovation SWOT overview
Strengths

Highly (internationally) educated and skilled
workforce with the possibility of lifelong
learning

3 percent Barcelona target fulfilled in 2001

Close proximity between innovation system
actors (short communication lines)

Favourable (business) environment for
science based industries (e.g. biotech, in
future: nanotech)

SME involvement in innovation

Excellent ICT infrastructure and access to
digital channels

High impact/quality scientific output in biotech
related research

Strong
performance
in
non-technical
innovation

Receptive to new and advanced technologies
Weaknesses
•
Limited (financial) resources in absolute terms
•
Fragmentation of research efforts leading to a
limited ‘overall’ research capacity
•
Limited interaction between the different
actors in the innovation system leading to
sub-optimisation
•
Multiple ‘funding’ channels (see innovation
policy) and decision boards (budget-based)
•
Lack of ‘think tanks’
Opportunities
•
Further stimulate educational and scientific
quality by conclusion of performance-related
contracts (in progress)
•
Increasing importance of the ‘knowledge’
based economy
•
Consolidate
and
increase
specialised
knowledge available in e.g. medical
technology
•
Increase visibility on innovation matters by
being (more) active in international (Nordic
and European) projects
•
Aims agreed upon at the at the Lisbon
Council meeting in 2000 could provide a
useful ‘starting point’ for further optimizing
innovation performance
Threats
•
Low share of companies being ‘strategic
innovators’, but instead a large share of
‘technology adopters’
•
Regional destabilisation in view of the
‘attractiveness’ of the capital area
•
Strong dependency on a limited number of
sectors (i.e. companies) in the national
innovation performance; skewed distribution
•
Uncertainty and fuzziness due to the
introduction of the new STPC
4
As highlighted in table 2, Iceland has several strengths in innovation and innovation policy, something
that could contribute to further (economic) growth. At the same time there are several issues that
need to be addressed, issues which policy makers should and probably are aware of. One of them is
the fragmentation of research funds which affects the capacity of carrying out large high-impact
research projects. At the same time, Iceland’s innovation system consists of many actors, which call
upon effective communication channels to avoid duplication of R&D efforts, but also to stimulate
(interdisciplinary) collaboration and generation of new knowledge. Considerable efforts have been
undertaken to stimulate research and technology development in several biotechnology areas, and
this has been done with success.
In view of these strengths, there are a number of opportunities for Iceland to increase its innovation
performance. One of them is to consolidate on and to increase specialised knowledge available in
several science intensive fields, like biotechnology, in which Iceland already has a strong position.
Looking at the threats to Icelandic innovation and further economic development, we find a strong
dependence on a limited number of (inter-)national companies and their innovation potential; a further
spread of innovation activity is needed. Furthermore, in the long run, the ability to internalise and
adopt existing technology may affect the true technological and scientific innovation capacity, also in
view of the limited available research budgets in absolute terms. Another potential threat to short term
innovation policy is the newly installed STPC, which needs its time to find the best possible way to
function as well as create visibility and trust in industry and research institutes.
A final weakness or threat that should be pointed out is that Iceland lacks innovation policy research
institutions or ‘think tanks’ like the public ones in Sweden, Finland and Denmark (Vinnova, VTT and
Fora), or private ones in Sweden and Norway (IKED and STEP). Although RANNÍS has now
established a permanent working group on innovation policy studies consisting of twelve people from
relevant universities and institutes, this remains an issue of concern and attention.
5
1.2 Innovation governance system
1.2.1
The national innovation system
The concept of national innovation systems rests on the premise that understanding the linkages
among the actors involved in innovation is central to improving technology performance. The
innovative performance of a country depends to a large extent on how these actors relate to each
other as elements of a collective system of knowledge creation and use as well as the technologies
they use. These actors are primarily private enterprises, universities, public research institutes and
the people within them. Important is the web of interaction or the system.
R&D institutions in Iceland are organised by sectors under various ministries (Ministry of Fisheries,
Ministry of Agriculture, Ministry of Industry and Commerce, Ministry of Health, Ministry of Environment
and Ministry of Education, Science and Culture). Currently, the following organisations play an
important role in the national innovation system in Iceland.
Universities
Research Institutions
Other (related) institutions
University of Iceland
University of Akureyri
Reykjavík University
Hólar College
Iceland University of Education
Hvanneyri Agricultural University
Iceland Academy of Arts
Icelandic Horticultural College
Bifrost School of Business
Technical University of Iceland
IceTec
IceTec-IMPRA
Marine Research Institute
Icelandic Institute of Natural History
Institute of Regional Development
Nordvulk
National Energy Authority
Iceland GeoSurvey
Icelandic
Building
Research
Institute
Icelandic Fisheries Laboratories
Agricultural Research Institute
Icelandic Forest Research Station
Icelandic Meteorological Office
Institute of Freshwater Fisheries
Directorate of Freshwater Fisheries
National Land Survey of Iceland
National Gallery of Iceland
Myvatn Research Station
Educational Testing Institute
Environment and Food Agency
Occupational Safety and Health
National Museum of Iceland
National University Hospital
Key: bold=institutes will be fully or partially merged in 2004/2005
Source: www.rannìs.is
The institutions in bold are or will in due course be part of a merger. To be precise, the following
combinations will be formed:
1. Technical University of Iceland - University of Reykjavik
2. IceTec - Agricultural and food part of the Environment and Food Agency, scheduled for 2005
to form the Food Research Institute
3. Holar College - Hvaneyri Agricultural University - Icelandic Horticulture College - Agricultural
Research Institute, to form the Agricultural University
4. Nordvulk - University of Iceland (Geology and Geophysics department), to form the Institute
of Earth Sciences
5. Building Research Institute and part of IceTec into Technology research institute
Their position within the national innovation system and the relation between each other can be
visualised in figure 1, followed by a more detail description of the actors involved (focus will be on
research institutes). The innovation policy-making process as well as the way the policy is
implemented in practice is described in section 1.2.2. In the remainder of this section we will discuss
the main research institutions of Iceland.
6
Figure 1. Organisation of the innovation system in Iceland
Source: RANNÍS (2003)
The Technological Institute – ICE TEC (www.iti.is)
IceTec is an Icelandic research and technological institution. Its primary function is to transfer
technology and expertise to business and industry, and to assist companies in innovation, productivity
and research and development. The main services IceTec offers to the industries pertain to the fields
of materials technology, production engineering, biotechnology, food technology, education and
training, consultation, environmental technology and chemical analysis. Entrepreneurs and SMEs are
provided with qualified information and guidance.
IceTec is an independent institute, operating under the Ministry of Industry. In recent years IceTec's
non-grant income increased considerably. Today 75 percent of overall revenues are privately derived.
IceTec employs around 75 people and emphasises continuous education. To further maintain its
competence and to be able to service a wide range of technologies, IceTec maintains a wide range of
co-operative networks locally as well as internationally.
IceTec has an undertaking to stimulate the participation of Icelandic companies in international
technological co-operation. Foreign companies can also turn to IceTec for technological assistance in
fields such as research, technological development, measurement and testing. In co-operation with
the University of Iceland and the Icelandic Research Council, IceTec runs a Biotechnology science
Park.
7
ICETEC - IMPRA (Service Centre for Entrepeneurs and SMEs) (www.impra.is)
IMPRA (Service Centre for Entrepreneurs and SMEs), part of the Icelandic Technological Institute,
assists entrepreneurs in evaluating business ideas and provides counselling for the start-up, growth
and management of companies. Its role is to intermediate between individuals, companies and public
agencies. IMPRA co-operates with the New Business Venture Fund (see below), managing numerous
support projects intended to encourage innovation among entrepreneurs and SMEs. It also operates
an Incubator for innovative business ideas, and can house up to nine companies based on innovation
and new business ideas. Furthermore, IMPRA operates an Innovation Relay Centre established to
encourage co-operation between Icelandic and European companies concerning technology transfer.
The centre is part of a co-operative network of sixty centres under the auspices of the European
Commission.
The Building Research Institute – IBRI (www.rabygg.is)
The Building Research Institute is an independent institution responding to the Ministry of Industry
and Commerce and operating since 1965 according to statutes on research in the interests of industry
and commerce. It is divided into a number of departments. The role of the institute is to provide
assistance and advice on construction matters. To this end wide-ranging theoretical and applied
research is conducted in various fields of construction. The main emphasis is on technical areas, but
work is also done in the areas of financing and planning. Besides research material testing, quality
control, certification of products and dissemination of technical information play an important role in
IBRI's activities.
IBRI currently has 42 employees, 27 holding a university degree. The institute is financed partly by
the State but its own income has been increasing in recent years and is now approximately 67
percent of the budget. IBRI takes an active part in European co-operation in its field. Iceland
represents the extreme in Europe as to harsh climatic conditions and the geology is different from that
of most European countries. This fact heavily influences research priorities where durability,
performance criteria and utilisation of domestic materials are of prime concern. The main research
fields are in concrete, building technology, including an acoustic laboratory and road construction.
The National Energy Authority (www.os.is)
Orkustofnun, The National Energy Authority, was formally established in 1967 with the passing of the
Energy Act. The institute has the following main areas of responsibility to advise the Government on
energy issues and related topics, to carry out energy research, and provide consulting and services
relating to energy development and energy utilisation. Orkustofnun consists of two main
organisational units; one in charge of energy information, advice and management and the other
responsible for research. The Energy Management Unit contracts and supervises energy research
projects financed under the national budget. It also monitors the energy consumption in Iceland and
publishes forecasts for the energy market. The Unit operates in two departments, one for resources
research management, the other for statistics and analysis. The United Nations University
Geothermal Training Programme is operated as an independent entity within the unit.
The Energy Research Unit carries out research on a contract basis, either with the Resources
Division, with power companies, or with others. The Unit is divided into the GeoScience Divison and
the Hydrological Service.
8
The principal objectives of Orkustofnun are:
• Acquiring and collate basic information on the country’s energy resources and have the
necessary research carried out;
• Energy administration and advice on energy affairs;
• Dissemination of information on energy issues;
• Collecting and maintain statistical data on the country’s energy utilisation;
• Making energy consumption forecasts and prepare plans for further utilisation of the energy
resources;
• Assisting in development by operating the United Nations University Geothermal Training
Programme;
• Making Icelandic experience and expertise in geothermal utilisation and development available to
other countries;
• Providing research services to Icelandic energy utilities, municipalities and the private sector in
areas of Orkustofnun’s expertise.
Orkustofnun employs about 90 people, including around 65 experts in geology, geophysics, hydrology
and geochemistry; moreover it has close ties with numerous international science institutes and
societies in the field of earth sciences, energy research and administration.
The Agricultural Research Institute (www.rala.is)
The Agricultural Research Institute is an independent institution founded according to statutes from
1965 and responsible to the Ministry of Agriculture. The institute is departmentalised and operates
several experimental stations throughout the country, both on its own and in co-operation with other
institutions.
The Agricultural Research Institute is responsible for all governmentally sponsored research in the
following areas:
•
Research and experimentation for the expansion of theoretical and practical knowledge and
experience in the fundamentals of land cultivation and animal husbandry.
•
Research into the reasons for the deterioration and decreased productivity of land and into
methods to reverse such developments.
•
Research aimed at the optimal utilisation of agricultural products.
•
Services to agriculture through research.
•
The publication of the results of projects and other work of the institute in scientific journals.
The main aims of the institute are to enhance the quality of agricultural production while reducing
costs, to increase the use of local material and products, and to encourage the correct use of the
land's resources and to facilitate the work of the farmer.
Icelandic Forest Research Station (www.skogur.is)
The Forestry Research Station is the research branch of the Iceland Forest Service, with its own
governing board and operating under regulations set by the Ministry of Agriculture. Its headquarters
are located at the base of Mount Esja, north of Reykjavík, but an office is also operated in Akureyri.
Furthermore, it maintains many series of long and short-term field experiments that are distributed
throughout Iceland.
The main focus and mission of Icelandic Forest Research is to conduct applied and basic research
and to accumulate knowledge pertaining to deforestation, forest management, forest protection and
carbon sequestration in forests and forest soils in Iceland. The Forestry Research Station employs 20
people, 12 of whom have a university degree. Currently, the main research fields are in silviculture,
land reclamation, forest genetics (including genecology and tree breeding), forest site research, forest
ecology, carbon sequestration and entomology.
9
The Marine Research Institute (www.hafro.is)
The Marine Research Institute in Reykjavík was established in 1965, when it took over the duties of
the Fisheries Department of the University Research Institute dating from 1937. Institutional marine
research in Iceland has thus been around for over half a century. The Marine Research Institute is a
governmental institute responding to the Ministry of Fisheries and is financed through the national
budget.
The primary objective of the Marine Research Institute is to obtain knowledge of the sea around
Iceland and its living resources. Research is carried out in most disciplines of modern oceanography,
namely the physical and chemical properties of the sea, morphology and nature of the sea floor,
environmental conditions and life history of algae, zooplankton, benthos and fish. Furthermore,
studies in mariculture have recently been initiated. The greatest effort, however, is put into research
pertaining to the exploitation of marine resources, including analysis of stock abundance and
recommendations of catch quotas, fishing gear research and study of species as yet unexploited.
The Icelandic Fisheries Laboratories (www.rfisk.is)
The Icelandic Fisheries Laboratories is an independent research institute under the Ministry of
Fisheries. It was founded by law in 1965 but has operated since 1934. The board of directors
represents the Ministry of Fisheries and fish industry associations. The institute has no official quality
control function.
The mission of the institute is to stimulate progress in the fish industry through research and
development. About half of staff time is devoted to R&D projects, including some basic research
areas: fish meal and fish feed, shelf life of fresh fish, distribution of pathogens in processing
environments, ripening of salted herring, sensors for on-line measurement of fish quality, sensory
parameters of sea foods, toxic chemicals in fishery products, utilisation of fish-by-products and new
processing methods. About 60 scientists, in chemistry, microbiology, food science, engineering and
aquaculture science and office staff are employed at the institute of Reykjavík and in the four branch
laboratories in different parts of Iceland.
Institute of Freshwater Fisheries Research (www.veidimal.is)
Institute of Freshwater Fisheries (IFF) is a research institute. The researches are conducted on rivers
and lakes and their biota. Furthermore it does research on freshwater fisheries. It also does
consulting works regarding fisheries management and environmental assessments for construction
projects affecting freshwater ecosystems. The main research field is salmonid ecology both in
freshwater and at sea. There are also research activities in the field of aquaculture and salmon
ranching. The Institute is financed through governmental funds; research grants and projects sold to
rivers associations, hydropower companies and municipalities and so on. In addition to the
headquarters in Reykjavik the Institute maintains three branches in the rural areas of Iceland.
The Institute of Regional Development (http://byggdastofnun.is)
The Institute of Regional Development is a public body under the Ministry of Industry and Commerce,
with the aim of contributing to the regional development of Iceland. The Institute co-finances
investments, gives grants and assists the local authorities in planning. Two types of loans are
available to commercial companies: investment loans on ordinary market terms, and high-risk loans to
highly innovative projects.
10
Icelandic Institute of Natural History (http://www.ni.is/english/about.phtml)
Founded in 1889 by Hið Íslenzka Náttúrufræðifélag (The Icelandic Natural History Society) and
managed by the Society until 1947 when acquired by the State.
The Institute conducts basic and applied research on the nature of Iceland in the fields of botany,
geology and zoology with an emphasis on biology, taxonomy and ecology; maintains scientific
specimen collections; holds data banks on Icelandic nature; assembles literature on the natural
history of Iceland; operates the Icelandic Bird-Ringing Scheme, prepares distribution, vegetation and
geological maps; assists in environmental impact assessments; advises on sustainable use of natural
resources and land use, and assesses the conservation value of species, habitats and ecosystems.
Nordvulk (www.norvol.hi.is)
The Nordic Volcanological Institute was established in 1974. The initiative, which eventually led to the
inter-Nordic political decision came from a group of Nordic geoscientists including Professors Gunnar
Hoppe and Franz Eric Wickman in Sweden, Professor Tom Barth in Norway, Professor Arne Noe
Nygaard in Denmark and Professor Sigurður Þórarinsson in Iceland. The basic idea behind the
proposal was to strengthen the already well-established earth science community in the Nordic
countries by jointly exploiting the research opportunities evident in the active volcanism and tectonics
of Iceland.
The institute is a non-profit organisation, with a Board of Directors appointed by the governments of
the respective Nordic countries. Day to day administration is in the hands of a director who is selected
by the Board of Directors. The basic annual funding is provided by the Nordic Council of Ministers in
the amount of about US$ one million. Additional funding comes from national and international
science funding organisations.
In addition to a permanent scientific and technical staff the institute has five positions for young
visiting scientists from the Nordic countries. These positions are given for a period of one year with a
possible renewal of contract for two additional years. Candidates for these positions are graduate
students working towards a Ph. D. degree or postdoctoral fellows. Around 70 Nordic scientists have
held these rotating positions.
Iceland GeoSurvey (www.isor.is/page/profile)
ÍSOR, Iceland GeoSurvey, was established on 1 of July 2003. ÍSOR is a service and research
institute providing specialist services to the Icelandic power industry, the Icelandic Government and
foreign companies, in particular in the field of geothermal sciences and utilisation. When it was
established ÍSOR took over all responsibilities of the former GeoScience Division of Orkustofnun, the
National Energy Authority of Iceland.
Research on Iceland’s indigenous energy resources goes back to the eighteenth century. Systematic
energy research by Icelandic government institutes started in 1944 and has been carried out
continuously ever since. ÍSOR and its predecessor have from the start played a key role in this work.
This research and the activities of the Icelandic power industry have resulted in over 50 percent of the
primary energy use in Iceland at present having its source in geothermal energy.
New Business Venture Fund
In 1998 the New Business Venture Fund began its operations. It is an independent company owned
by the Icelandic Government. Overall supervision of the Fund is under the Minister of Industry and
Commerce. The Fund is the outcome of a more thorough reorganisation of the banking sector in 1997
where four sectoral credit funds were merged into the Icelandic Investment Bank and New Business
Venture Fund. (In April 2000 the Icelandic Investment Bank merged with the private bank
Islandsbanki.). The purpose of the Fund is to strengthen the Icelandic economy and further its
internationalisation. This is to be achieved through participation in innovation-orientated investment
projects and support for development and marketing projects. The Fund provides start-up capital and
invests in early stage and expanding companies. Also grants and loans are given.
11
The activities of the Fund are divided into four:
•
The Core Fund invests in new business ventures, supports research and development projects
and awards venture capital loans for specific projects. The capital base of the Core Fund is ISK
four billion (approximately EUR 50 million).
•
The Product Development and Marketing Department offers funding for product development
and marketing projects.
•
The Information Technology Fund supports new business ventures and job creation in the
fields of information technology and high technology, focusing on rural regions. The capital base
is ISK one billion (approximately EUR 13 million).
The Export Credit Guarantee Department guarantees loans, investments and so on related to
exports and activities by Icelandic parties overseas.
•
1.2.2
Innovation policy making and delivery structures
Research policy in Iceland has a long history. Government funded research in support of economic
development was first started with the establishment of the University Laboratories in 1937. A policy
body – the National Research Council (NRC) – was established in 1940. Up until the early 1980s the
overwhelming preoccupation of the R&D effort was the study and exploitation of natural resources on
land and in the sea. In 1981 the NRC started to formulate policies which were more technology and
human capital orientated. At the same time the essential role of business enterprise involvement in
R&D was recognised. The result of these policies in the late 1980s and 1990s has been rapidly
increasing interest and a growing industrial share in the national R&D effort.
In 1994 the Icelandic Research Council was established to replace the previous Council of Science
(basic research) and National Research Council (applied R&D). The Icelandic Research Council
advised Government and Parliament on all aspects of science, technology and innovation. It also had
a funding function. The Icelandic Research Council reported to the Minister of Education, Science and
Culture. A new legislation on the organisation of science and technology policy and the funding of
research and technological development in Iceland was enacted by Parliament (Althing) at the end of
January 2003. The legislation is composed of three separate laws:
Law on the Science and Technology Policy Council under the Office of the Prime Minister.
Law on Public Support to Scientific Research under the Ministry of Education, Science and
Culture.
Law on Public Support to Technology Development and Innovation in the Economy under the
Ministry of Industry and Commerce.
This resulted in the new Science and Technology Policy Council (SPTC) headed by the Prime
Minister replacing the Icelandic Research Council (from 1994). The Council provides for the
permanent seat of three other ministers, the Minster for Education and Science, the Minister for
Industry and Commerce and the Minister for Finance. Two other ministers with research in their
portfolio can be added to the council at the discretion of the Prime Minister. Fourteen other members
are appointed to the Council through nominations from higher education institutions (four members),
labour market organisations (two representing Employers and two representing Employees) and other
resort ministries (six members).
12
To be precise, the nomination of the STPC members is as follows:
a. Four nominated by the coordinating committee of higher education institutions (representing 8
higher education establishments).
b. Two nominated by the Icelandic Association of Labour.
c. Two nominated by the Association of Icelandic Industries (Employers).
d. One nominated by the Minister of Education and Science.
e. One nominated by the Minister of Industry.
f. One nominated by the Minister of Fisheries.
g. One nominated by the Minister of Agriculture.
h. One nominated by the Minister of Health and Social Security Affairs.
i. One nominated by the Minister for the Environment.
The mission of the STPC is to strengthen scientific research, scientific training and technology
development in the country in support of Icelandic cultural development and increased economic
competitiveness (see also the innovation specific measures further on in this report). The SPTC
issues periodic guidelines (declarations) for public policies on science and technology. The policy
declarations will be prepared by the Science Board and the Technology Board respectively. The Law
on Support to Scientific Research establishes the Research Fund through fusion of the previous
Science Fund and the Technology fund of the Icelandic Research Council. The Research Fund is
governed by a board whose chairman is also the chairman of the Science Board. Linked to the same
board is also the Instrument Fund financed by 20 percent annual levies on the University Lottery net
income. Similarly the Law on the Support to Technology Development and Innovation has lead to the
establishment of a Technology Development Fund which is governed by a board chaired by the
Chairman of the Technology Board.
Thus the link between policy and implementation through funding is achieved. This law also provided
for the establishment of an Innovation Centre, IceTec (see previous section). The chief responsibility
for assistance in preparing policy-orientated papers is to be provided by the Ministry of Education,
Science and Culture and the Ministry of Industry and Commerce for the two respective boards.
Overall co-ordination is provided by a secretary to the Science and Technology Policy Council to be
placed within the Ministry of Education and Science. The administrative services to the operational
level of the whole structure are provided by the Icelandic Centre for Research – RANNÍS which is the
secretariat of the previous Icelandic Research Council. Its mission is to give administrative and
operational support to the boards and funding bodies, to manage the international connections,
monitor the effects and impacts of policies and to provide intelligence and informed advice to the
STPC and its boards and sub-committees. Thus RANNÍS administers all the funding bodies set up by
the new legislation including the Research Fund, the Technology Development Fund, the Instrument
Fund, the Graduate Training Fund and other funding bodies for science that the Government may
want to assign to it. It maintains the National Contact Point Coordination and support network to the
EU Framework Programme, the Nordic NOS - organisations and other international bodies in science
and technology. RANNÍS functions as the operational arm of the new council structure. The current
structure can be visualised in figure 2.
13
Figure 2. Current STI policy structure in Iceland
PARLIAMENT
GOVERNMENT
Science and Technology Policy Council
(Four ministers and 14 members from ministries, research community and
industry - PM Chair)
Ministry of Education, Science and Culture
Science Committee
Ministry of Industry and Commerce
Technology Committee
Technological Development
Fund
Research Fund
The Icelandic Centre for R&D RANNÍS
Fund for Equipment
Centre for Technological
Innovation IceTec
Fund for Research Training
and Graduate Education
Source: RANNÍS (2004)
14
1.2.3
Regional innovation systems and policies
An area that generates much policy concern in Iceland is the depopulation of rural areas, which is
occurring at a high and increasing rate. The migration has its roots in a very uniform occupational
structure outside the Capital area. One of the main targets of the Institute of Regional Development is
to focus on this issue, and to be instrumental in dealing with this problem.
As an answer to this concern, a RITTS-project has been carried out in Iceland led by the Institute for
Regional Development (http://www.innovating-regions.org/download/Iceland.pdf). As a result of the
previously mentioned new laws, the Institute for Regional Development was moved to the Ministry of
Industry and Commerce to increase synergies with the Regional Development Agencies and the
Technological Institute IceTec. Furthermore, the Regional Development Agencies have been
strengthened (from two persons to six) to better fulfil their tasks.
One of the innovation policy measures that is partly directed towards this problem is the Act on the
New Business Venture Fund that specifies that special emphasis shall be put on rural development
when the Technology Fund invests in innovative projects within IT technologies. Apart from this, there
are ten regional development organisations which assist corporations and municipalities by infusion of
capital for further development, and provide consultation in terms of finance, technology and
management. Industrial investment funding also comes from the Fisheries Fund, the Agricultural
Fund, local banks, New Business Venture Funds, holding companies, and investment funds.
On a transnational ‘regional’ level, Iceland has also been a member of the SAIL thematic network
(Strengthening Academic and Industrial Links), which had 15 members from across Europe and the
Associated States and was directly funded by the EC (see http://www.innovatingregions.org/download/SAIL percent20final percent20report.pdf). The objective was to facilitate the
transnational exchange of knowledge and experience on academic and industrial co-operation
between regions.
Iceland is also involved in several projects within the framework of the Northern Periphery
Programme. The Northern Periphery Programme falls under a Community Initiative which aims to
stimulate interregional cooperation in the European Union between 2000-2006. It is financed through
the European Commission’s European Regional Development Fund (ERDF). The Northern Periphery
Programme is one of thirteen programmes aimed at encouraging and supporting transnational cooperation between the regions of Europe. It provides the opportunity for organisations from the
programme area to work together on joint projects concerning common issues and problems.
15
2. Innovation policy in Iceland
2.1 Innovation policy framework
Research policy in Iceland has a long history, but innovation policy from a more overall perspective is
a recent phenomenon. With the installation of the new STPC and the first resolutions, a major building
block for a well developed and targeted innovation policy in Iceland has been created.
During the last 12 months, two major policy documents containing the vision of Iceland on innovation
and innovation related issues for the next years have appeared. The first one is the result of a
meeting by the STPC held on December 18, 2003, the second, a resolution, by the STPC dated 8
June 2004. The underlying ambitions with S&T policy have been formulated as follows:
‘The principal function of scientific and technological policy is to express the priorities set by
the Government and inform of the improvements to be made in the support structure for
research and development. It also serves to guide those who participate in implementing the
policy in selecting appropriate strategies towards established goals. It is important to provide
appropriate framework for cooperation among the public actors in science, technology and
innovation and to strengthen their links to business life and society at large, which benefit
from their activities. These actors can either be in a state of competition, co-operation, or both
at the same time.’ (STPC, 2004a)
The long-term goal of the science and technology strategy is to enhance the cultural and economic
strength of Iceland in a competitive international environment, and to ensure that Iceland’s economy
and quality of life continue to rank at the forefront of nations. This will bring the nation new knowledge
and competence useful for the following purposes (STPC, 2004a):

Increasing sustainable utilisation of resources, creation of wealth, and generation of attractive
job-opportunities in a knowledge society.
Improving health and social security and encouraging maturation of a civil society where
freedom of enterprise and social equity reign.
Reinforcing the economic and cultural independence and thus the foundations for living in
Iceland.
Enhancing the influence of Iceland in the international arena and facilitating the adaptation of
Icelandic society to variable external conditions.
So as to provide even more favourable grounds for such development, in co-operation with
stakeholders in this arena the Icelandic Government intends to take the following actions during its
term of office:
1. Increase the public resources intended for allocation from competitive funds and co-ordinate
their operation to insure their optimum use for scientific and technical research and support to
innovation in the Icelandic economy.
2. Strengthen the role of universities as research institutions by building and encouraging
diversity in research at Icelandic universities through competition between individuals and
research teams for research grants from competitive funds.
3. Review the organisation and work-methods of public research institutes, with the objective of
uniting their strengths and co-ordinating their activities more closely with the universities and
business sector.
16
Furthermore, the Government will introduce a variety of supporting measures aimed at strengthening
the infrastructure for science and technology in the country and the status of Iceland as a leading
knowledge based society. More specifically the objective is to:

Establish strong research teams for working in an international environment by giving priority
to the most competent individuals, institutions and firms.
Increase the co-operation between research institutes, universities and business enterprises
in forming knowledge clusters capable of attaining a strong international competitive position.
Make research and development attractive to business enterprises, supporting the
emergence of high-technology firms which to a large extent rely on research for their growth.
Give increased weight to research training of young scientists in an internationally competitive
research environment.
Assure open public access to the results of publicly financed research, databases and other
scientific and scholarly information, promoting the utilisation of these for added value to
society.
Pass laws encouraging scientists to protect their intellectual property rights through patents,
and institutions and firms to introduce measures to properly manage the intellectual property
of their employees.
The Government has decided that Iceland will accede to the European Patent Convention, expecting
accession to take place in November 2004. A resolution has also been agreed by the Icelandic
Parliament to confirm the EEA Joint Committee decision to make the European Parliament Council's
directive no 98/44/EC part of the EEA agreement. To fulfil these obligations some changes to the
Icelandic Patent Act will be made.

Regularly assess the quality of research conducted by universities and research institutes, by
subject areas or fields of employment or knowledge clusters, and take the results of these into
account when deciding on appropriations and priorities.
Subsequent initiatives and measures on innovation policy will be deployed within this framework set
out by the STPC. A more elaborated discussion on each of the above-mentioned objectives can be
found in the Resolution text of the Icelandic STPC (2004a).
A description of the formal policy framework can be found in section 1.2.2.
Table 3: main policy documents since 2000
Title of document
Date
Organisation
responsible
Science
and 18
December Prime
Minister’s
Technology
Policy 2003 (published Office, The Science
Iceland
2004)
and Technology Policy
Council
Resolution of the 8 June 2003
Science
and
Science
and
Technology
Policy
Technology
Policy
Council
Council
Legal status
Strategy
paper
Resolution
Resolution
Main issues
/ Innovation
strategy/policy for the
next years
Follow-up
on
innovation
strategy/policy for the
next
years
(refinement)
The above-mentioned key documents discussing innovation policy in Iceland can be found under the
section ‘innovation policy information’ on the Cordis Innovation Policy Trendchart website (at:
http://trendchart.cordis.lu/tc_policy_information_overview2.cfm), as well as on the website of the
Icelandic
Ministry
of
Education,
Science
and
Culture
(http://eng.menntamalaraduneyti.is/publications/).
17
2.2 Policy events & policy debates
In 2004 Iceland leads the Nordic collaboration with the theme ‘Nordic Resources’. The theme is broad
in scope and includes measures such as the structure of society, cultural heritage as well as natural
and human resources. The Ministry of Industry in Iceland focuses on improving the environment for
business development within a borderless Nordic region. For this purpose it has stressed the
importance of harmonising Nordic policy emphases within the fields of science and innovation. The
objective is to obtain a greater synergy between these two main contributors to the competitiveness of
the region and the social well-being of the Nordic citizens.
(http://www.norden.org/naering/sk/summary_conference_innovation.pdf).
‘The Nordic region as a frontrunner in research and innovation’ was the theme of the conference
hosted by the Nordic Council of Ministers, Iceland (its chair) and the Nordic Innovation Centre on 10
June 2004. Delegates included decision and policy makers in the Nordic innovation system. An
important aim of the conference was to discuss and generate feedback to the newly presented policy
document: ‘Proposals for a collaborative Nordic programme on innovation policy 2005-2010’.
Of particular importance and influence to future policy making in the Nordic area, and thus also to
Iceland, are the following force lines:

The need for strong political commitment and involvement in developing the innovation and
research policies of tomorrow.
The need for a horizontal innovation and research policy – nationally and at Nordic level.
Priority for targeted interventions in areas where the Nordic countries have achieved global
excellence.
Underlying the above-mentioned force lines and the above-mentioned conference is the White Paper
on Nordic research and innovation, which will affect Iceland’s future innovation policy. Some
background on this White paper (http://www.norden.org):
‘In June 2002, the Nordic Council of Ministers for Education and Research (MR-U) presented a White
Paper proposing measures for promoting development of the Nordic region as a world-class research
and innovation player at global level. The proposals cover organisation, funding, incentives and other
aspects of Nordic cooperation on research. The White Paper also identifies ways of encouraging
closer collaboration between universities, research institutions, businesses, national ministries and
other official bodies.’
A major effort will be made to follow up on the conclusions of the White Paper on the Nordic countries
as a region of excellence for research and innovation. The most prominent of these are proposals to
develop effective links between universities, research institutes and funds supporting research,
technological development and innovation. Efforts will be made to co-ordinate actions and strengthen
the co-operation between Councils of Ministers and institutes working in these fields. Innovation in
Nordic business and industry ways will be sought to narrow the gap between scientific research and
innovation in business and industry.
18
2.3 Key developments in innovation policy measures
In comparison to the last Trend Chart report a significant number of measures have been announced
through the publication of the STPC resolution of December 2003 (see section 2.1). In this section, an
overview will be provided of the concrete announced measures and/or revisions that either have been
implemented in the period under review, or will be implemented after August 2004 (will be discussed
in detail in the next Trend Chart report).
Table 4: New and revised Innovation Policy measures over last 12 months
N°
Title
Main
Action
plan Secondary
action
category addressed
category addressed
IS 4
The New Business
Venture Fund
IMPRA - extension
II.5.
Financing
of
Innovation
I.6.
Promotion
of
clustering
and
cooperation for innovation
II.5.
Financing
of
Innovation
II.5.
Financing
of
Innovation
IS 15
IS 16
IS 17
Enlarging the
Competitive Funds
Research Fund
IS 18
Technical
Development Fund
IS 19
Fund for Equipment
IS 20
Fund for Graduate
Research Training
Added Value from
Seafood (AVS)
IS 21
plan Degree
novelty
Medium
-
High
II.1. Competition
Medium
Ministry of
Industry & Trade
Ministry of
Industry and
Trade
RANNÍS
Medium/High
RANNÍS
Medium/High
RANNÍS
Medium/High
RANNÍS
Medium/High
RANNÍS
High
Ministry of
Fisheries
High
Ministry of
Education,
Science and
Culture
Ministry of
Education,
Science and
Culture
Ministry of
Education,
Science and
Culture
Minister for
Education,
Science and
Culture
Minister for
Education,
Science and
Culture
I.6 Promotion of clustering and
co-operation for innovation; III.4
Intensified cooperation between
research,
universities
and
companies
II.5.
Financing
of III.3. Start-up of technology
Innovation
based companies
III.5. Strengthening the ability of
SMEs to absorb technologies
and know-how
II.5.
Financing
of I.6 Promotion of clustering and
Innovation
co-operation for innovation; III.4
Intensified cooperation between
research,
universities
and
companies
I.1. Education and initial and further training
III.2.
Strengthening III.5. Strengthening the ability of
research carried out by SMEs to absorb technologies
companies
and know-how
I.6.
Promotion
of
clustering
and
cooperation for innovation
IS 22
Strengthening
University research:
clustering
IS 23
Evaluation of
universities
II.1. Competition
IS 24
Public Access to
research and
innovation results
I.3.
Raising
public
awareness and involving
those concerned
High
IS 25
Installation of a
national Committee
on Equality
IV. Other objectives
High
IS 26
Increasing the
number of students in
Science and
Engineering
programmes
EDUCATE Iceland
I.3.
Raising
public I.1. Education and initial and High
awareness and involving further training
those concerned
IS 27
of Agency
administering
I.1. Education and initial and High
further training
I.1. I.1. Education and I.6. Promotion of clustering and Medium
initial and further training co-operation for innovation
-
Key: bold = new measure, italic = revised existing measure, underlined: existing measure but omitted in the
previous TrendChart reports
19
The new and revised measures directly respond to the ongoing innovation debate in Iceland as
presented in section 2.1. A large proportion of these measures, IS 16 to IS 19, concern the
introduction of funds in order to stimulate innovation. IS 20 is also a financial impulse but now
specifically related to graduate training. Direct budget appropriations for universities and research
institutes create the general framework enabling them to obtain additional funding for their research
by competing for grants from domestic and foreign funds and by contracts with those who use the
results of their research.
The policy adopted by the Science and Technology Policy Council is that public support of research,
technological development and innovation should increasingly rely on competition for grants from
public funds, based on good ideas, well-defined projects and competent applicants, who might be
individuals, firms or institutions. In this context, the availability of additional research funds is
accompanied by a fundamental change in appropriation policy, namely a shift from the ‘budget’
thinking to a more ‘competitive’ approach towards fund allocation. Quality and ambition of the
proposals prevail. Iceland continues to allocate financial means for research purposes and acts in line
with the strategy it stipulated in its long term S&T policy.
A specific programme (IS 21) has been set up around one of Iceland’s main economic sectors:
fishery. The target of the programme is to increase the value of marine harvest (AVS-plan). The first
stage will last for five years. The programme has been prepared in co-operation with professionals
and stakeholders both in fisheries and fish processing industry.
The Icelandic Government is fully aware of the importance of ‘scale’ for carrying out breakthrough,
high quality research. As the current fragmentation of research activities and thus funding does not
contribute to the creation of this necessary scale, a number of steps have been taken to change this
situation (IS 22). Several mergers among research organisation have been initiated lately, like the
recent merger of the Nordic Vulcanological Institute and the Geology and Geophysics Department of
the University of Iceland Science Institute to form the Institute of Earth Sciences, which occurred with
the support of the Minister of Education, Science and Culture. The Minister for Agriculture has
initiated the reorganisation of agricultural research within the new agricultural university formed by the
merger of the Agricultural University, Hvanneyri, RALA and the Icelandic Horticultural College.
Moreover, the merger between the Reykjavik University and the Technical University of Iceland
(Tækniháskóla Íslands) is currently in progress. In 2005, IceTec and the Agricultural and food part of
the Environment and Food Agency will form the Food Research Institute. Not only the ‘economies of
scale’ objective has lead to these mergers but also the awareness that multidisciplinarity,
interdisciplinarity, close collaboration and spillovers play an important role nowadays in innovation
process.
Iceland also increases its efforts in maintaining and even improving the quality of human potential.
One of these new measures is related to the introduction of the Fund for Graduate Research Training
(IS 20). Another measure concerns the awareness creation aiming at increasing the number of
students in Science and Engineering programmes (IS 26), which has not risen much over the year
just like in many other European countries.
Another important measure is the evaluation of universities (IS 23), starting with the evaluation of the
University of Iceland, aiming at increasing research efficiency but moreover quality of scientific and
educational results. Two other measures (IS 24 and IS 25) ‘public access to innovation results’ and
‘installation of a national committee on equality’ have been introduced. The first aims at involving the
broader public in research by providing them access to scientific and technologic information, while
the second aims at stimulating and increasing the involvement of women in science by ensuring equal
opportunities.
20
3. Implementing innovation policy in Iceland
3.1 Fostering an innovation culture
3.1.1. Education and initial and further training
Three measures have been introduced in the period under review, IS 20, The Fund for Graduate
Research Training, which is a measure directly related to this area, and the measures IS 23 and IS
26 that also have an effect on this subject.
The Fund for Graduate Research Training (IS 20) has the purpose of disbursing grants to research
linked graduate education. Above all, this Fund has supported university graduates engaged in
research studies in Iceland toward the master's degree and fulfilled a significant function in the recent
rapid expansion of research-based graduate education. Nonetheless, the number of doctoral students
has increased over the past years. Since they play an especially important role in research, whether
in the public or private sector, the Science and Technology Policy Council emphasises that they ought
to be offered educational opportunities in Iceland comparable to those offered elsewhere. Already in
2004 the resources of the Fund will be increased by 25 percent, thus amounting to ISK 50 million.
Another measure, already introduced in 1998, but not mentioned in the previous TrendChart reports,
is ‘EDUCATE Iceland’ (IS 27). EDUCATE - Iceland is a co-operation forum between the educational
sector, the social partners, local authorities and others interested in education and training. The main
focus of the work of EDUCATE is to gather and disseminate information and to facilitate transference
of knowledge and competences. EDUCATE furthermore carries out projects related to education and
training and acts as a venue for discussion between the educational and employment sectors and
policy makers. Among the other objectives is to build trust between the various sectors involved in
education and training, ensuring their active involvement, the importance of co-operation, and
strengthening schooling, especially secondary-level vocational training. University education will be
strengthened too, putting greater emphasis on research and science. Distance learning will be
increased. Effects of these measures become visible when looking at Iceland’s performance in
‘lifelong learning’. Another action line influenced by this measure is I.6, ‘Promotion of clustering and
co-operation for innovation’. See also https://www.mennt.is/mennt/.
Education expenditure in Iceland has moved from well below average in the 1980s to the highest
among the OECD countries (OECD, 2003). According to the OECD (2003) the recent conclusion of
performance-related contracts with all higher education institutions should be helpful in stimulating
and strengthening educational output.
3.1.2. Mobility of students, research workers and teachers
No new specific measures have been introduced under this heading within the period under review.
An existing measure is the 'Out of drawers' programme (IS 9), which is a cooperative project
between the Research Liaison Office of University of Iceland and the New Business Venture Fund.
The main objective of the project is to encourage personnel from higher education and public
research institutions to bring forward their R&D results for further exploitation by industry. The project
has been in operation since 1998.
21
3.1.3. Raising the awareness of the larger public and involving those
concerned
Two new measures have been introduced. The first measure under this action line is IS 24, Public
access to research and innovation results.
The public sector fulfils an important role by funding studies on Icelandic nature and the monitoring of
the environment, resource exploitation, health and care for public welfare. The expenses for these
investigations are mainly paid via direct budget appropriations. In the long term, data gathered during
such research can become a valuable resource to be exploited by institutions as well as private
parties or through their co-operation. As a resource exploitable by scientific research and co-operation
among universities, research institutes and firms or among countries, such databases must be
managed in accordance with international standards and their utilisation should provide fair returns to
society. The Prime Minister has appointed a working group to prepare legislation to facilitate the freest
possible access by the public and by users to research documentation and results from work funded
by government appropriations. The goal is to ensure that the public has as much freedom as possible
in accessing this information, against fair service charges. The work in this area, which now
proceeding under the auspices of the OECD and the EU, will be taken into account in further
determining Government policy in this area.
The second measure is IS 26 aiming at increasing the number of students in Science and
Engineering programmes. The Science and Technology Policy Council’s policy notes that education
and achievement in the field of scientific research and innovation weigh heavily in the evaluation of a
country’s competitive standing. The number of man-years spent on research in Iceland is
proportionally high compared to other countries and that number is growing. In order to maintain the
trend, it is essential to ensure that industry always has access to a well-educated workforce with an
adequate level of specialist knowledge to conduct research of world-class quality. To this end, it is
crucial to increase young people’s interest in pursuing courses and careers in engineering, science
and technology. The Minister for Education, Science and Culture has therefore decided to appoint a
working group whose role will include proposing ways to stimulate interest among primary and
secondary school students in university courses that involve research; looking for ways to increase
the diversity and quality of science teaching material in primary and secondary schools; and
evaluating the quality of curricula, teaching methods and facilities for science teaching in primary and
secondary schools.
Already on this subject is measure IS 6. In co-operation with the Icelandic Trade Council, the
Research Council has been organising an annual Innovation Conference since 1994. In connection
with the conference an Innovation Award (IS 6) is awarded to a young innovative company having
demonstrated outstanding success based on technological development and marketing effort.
‘The Nordic region as a frontrunner in research and innovation’ was the theme of the conference
hosted by the Nordic Council of Ministers, Iceland (its chair) and the Nordic Innovation Centre on 10
June 2004. Delegates included decision and policy makers from the Nordic innovation system. An
important aim of the conference was to discuss and generate feedback to the newly presented policy
document: ‘Proposals for a collaborative Nordic programme on innovation policy 2005-2010’ (see
also section 2.2.
22
3.1.4. Fostering innovative organisational and management practices in
enterprises
Already in force is the Step Ahead project (IS 11) that is intended to facilitate leaders of small firms
(micro and spin-off) in seeking guidance on marketing, finance, environmental product management
and organisational matters in order to increase profitability of companies. The project started in 1998
and is expected to last at least until 2003. The overall budget is ISK 4 million (EUR 50,000).
3.1.5. Public authorities and support to innovation policy makers
However, re-examination of the existing actions on this topic learns that first of all RANNÍS, the
research institute of Iceland, itself fulfils the role of ‘think tank’ and as such provides support to
innovation policy makers with quantitatively and qualitatively based advices and opinions. Moreover, a
so-called high-level R&D group consisting of members of universities, research institutes and
industry, headed by an official of RANNÍS, has been put in place.
3.1.6. Promotion of clustering and co-operation for innovation
One new specific measure has been introduced under this heading within the period under review,
namely IS 22 ‘Strengthening university research: clustering’ (see also section 2.3). Measure IS 19
also has an effect on this action line through the explicit statement that those applications to the Fund
for Equipment involving co-operation among research bodies on financing and the use of the
equipment shall have priority. Measure IS 27 ‘EDUCATE Iceland’ also has a positive effect on this
action line.
Strengthening university research (IS 22) is by its mere nature a long-term undertaking. It involves
decisions about contributions to research and equally important decisions about strengthening
infrastructure and improving communication both internally and with other research institutions and
companies. The recent merger of the Nordic Vulcanological Institute and the Geology and
Geophysics Department of the University of Iceland Science Institute to form the Institute of Earth
Sciences, which occurred with the support of the Minister for Education, Science and Culture, has set
a precedent. It demonstrates how joining forces presents new opportunities. It is natural to look for
further areas for structural rationalisation, such as through the reorganisation and redefinition of work
practices of research institutions according to the proposals of the working group appointed by the
Prime Minister.
The Minister for Agriculture has initiated the reorganisation of agricultural research within the new
agricultural university formed by the merger of the Agricultural University, Hvanneyri, RALA and the
Icelandic Horticultural College. In this context, the new university is seeking closer cooperation and
collaboration with the University of Iceland regarding foundation courses in biology. The Minister for
Agriculture should investigate possibilities for further integration or mergers of other research work
that would benefit the agricultural sector and improve contact with other university-level educational
establishments. In full preparation is the merger between the University of Reykjavik and the
Technical University of Iceland.
As an extension or confirmation of the existing measure IS 15 (IMPRA) is the appointment of IMPRA
(see section 3.3.3) as an initiator of contacts among the different actors involved in funding for
research and innovation, Research Fund, the Technical Development Fund, the AVS Fund, the New
Business Venture Fund and other funds in the same field. Steps in this direction have already been
made with formal consultancy meetings involving the New Business Venture Fund, the Regional
23
Development Agency, the Agricultural Productivity Fund, the Agricultural Loan Fund and the
Campaign for the Creation of Employment. Previously announced and discussed measures (see
TrendChart 2003) are IS 7, IS 10 and IS 14. A brief summary is provided.
The mission of the Fisheries Technology Forum (IS 7) is to encourage co-operation between
fisheries and industry in order to reinforce the development of equipment that increases the
production values of fisheries. The Forum focuses on development of equipment in the entire value
chain from catching and processing to marketing. The Forum provides professional and financial
support. The annual budget is ISK 11 million (EUR 140,000). The intention of the 'Support to
entrepreneurs and SMEs' programme (IS 10) is to provide information and guidance on possibilities
for international cooperation for investors. The project was launched in 1998 and ended in 2000.
The Health Technology Forum (IS 14) was established in 2001 as an initiative of RANNÍS. The
objective of the Forum is to encourage firms, institutions and individuals to increase domestic and
foreign cooperation for development and marketing in the field of health technology. Besides
RANNÍS, Ministry of Health and Social Security, Ministry of Industry and Commerce, Federation of
Icelandic Industries, the New Business Venture Fund and the Icelandic Society for Biomedical
Engineering is involved in the project. The Forum evaluates and finances projects. The annual budget
is ISK 38 million (EUR 475,000).
3.2. Establishing a framework conducive to innovation
3.2.1. Competition
There is one new measure related to this line of action, IS 23 ‘Evaluation of Universities’.
The Ministry of Education, Science and Culture has decided to evaluate the status of research at the
University of Iceland. At the same time, in consultation with the Science Committee, the Ministry will
make an effort to define and select benchmarks both for the quality and output of research and for
broader contributions by the universities to the development of Icelandic society. The Science and
Technology Policy Council stresses that at all universities where research is conducted must undergo
evaluations in order to increase the quality of research and to stimulate competition.
Another measure having an indirect effect on this line of action is IS 16, the enlargement of the
competitive funds. The Government will create a general framework enabling universities to obtain
additional funding for their research by competing for grants from domestic and foreign funds and by
closing contracts with those who use the results of their research.
3.2.2. Protection of intellectual and industrial property
The Government has decided that Iceland will accede to the European Patent Convention, expecting
accession to take place in 2004. Also a resolution has been agreed by the Icelandic Parliament to
confirm the EEA Joint Committee decision to make the European Parliament Council's directive no
98/44/EC part of the EEA agreement. To fulfil these obligations some changes to the Icelandic Patent
Act will have to be made.
During Iceland's current Parliament session, the Government intends to present a bill to amend laws
regarding the inventions of employees, expecting the coming legislation to induce the further use of
knowledge to economic advantage and also to encourage universities and research institutes to
register patents more frequently. These institutions need to acquire the capacity to assess the
patentability of research findings and to market the patents obtained along with the knowledge lying
behind them.
24
3.2.3. Administrative simplification
3.2.4. Amelioration of legal and regulatory environments
In the past a great deal of effort has been put into the field of privatisation of former public companies.
The banking sector has been through a period of restructuring and is now in private hands. The
privatisation of the State's remaining shares in Landsbanki was brought to a conclusion in December
2002. The privatisation has been implemented in stages and the State now holds a 2.5 percent stake
in the bank. Sales of shares in Icelandic Telecom also started quite recently. More generally a
ministerial committee has been established to determine privatisation strategies and an Executive
Committee on Privatisation has been put in charge of the implementation of the privatisation
programme (for more information see http://brunnur.stjr.is/interpro/for/for.nsf/pages/wpp0050).
3.2.5. Innovation financing
A series of interrelated measures have been taken in the period under review (IS 16 to IS 19). All of
the measures are the result of the new innovation system in Iceland and the way innovation policy is
related to research and technology funding.
The Government intends to more than double the budget of public competitive funds by 2007. Two
new funds have been brought into operation. The Research Fund has assumed the roles of the earlier
Science Fund and Technical Fund. The Technical Development Fund, however, has no predecessor
in the old system; its role is the advancement of technological development, innovation and related
research in the interests of the nation’s economic and competitive capabilities. The inception of these
funds and the work of the New Business Venture Fund have brought about continuity in the financing
of innovation, which is a prerequisite for economic regeneration and growth. In addition, a new
programme of action has been created to increase the value of marine harvests: the so-called AVS
Plan (see IS 21)
IS 16, enlarging the Competitive Funds, is the result of the Government’s decision to increase the
importance of competitive funds in financing research. Appropriations to public funds for science and
technology sponsored by the Ministry of Education, Science and Culture, the Ministry of Fisheries,
and the Ministry of Industry, as well as appropriations for their administration, amounted to around
ISK 800 (EUR 10) million of the national budgets for 2003. This includes about ISK 700 (EUR 8.75)
million to funds within the Ministry of Education, Science and Culture.
The Government of Iceland has made efforts to raise appropriations for these funds and their
administration in the 2004 budget by about ISK 400 (EUR 5) million, of which approximately ISK 200
(EUR 2.5) million would be for funds within the Ministry of Industry and ISK 100 (EUR 1.25) million to
a programme, under the auspices of the Ministry of Fisheries, for increasing the value added the
fishing industry (AVS - IS 21). The Government intends appropriations to public funds for the sciences
and technology sponsored by the above-mentioned Ministries to rise by around ISK 250 (EUR 3.125)
million in 2005, about ISK 200 (EUR 2.5) million in 2006 and approximately ISK 100 (EUR 1.25)
million in 2007. Thus appropriations for competitive funds and their administration will be about ISK
1,750 (EUR 21.875) million at the end of this Government's term of office, i.e., around ISK 950 (EUR
11.875) million higher than at the beginning of the term thus more than doubling the appropriations.
25
Regarding measure IS 17 the enlargement of the Research Fund, which offers grants in
accordance with the priorities set by the Science and Technology Policy Council and the grants
strategy defined by the Science Board based on a peer review evaluation of research project quality,
the target is to raise the available resources of the Fund from ISK 420 (EUR 5.25) million in 2003 to
ISK 600 (EUR 7.5) million at the end of the current Government term of office.
The introduction of the Technical Development Fund (measure IS 18) and the improved financial
standing of the New Business Venture Fund have improved the opportunities for financing innovation
and related research. The Fund is intended to give support to spin-off ventures and innovative firms in
order to secure that economic benefits accrue to society from the scientific and technical knowledge
and the innovation arising from these new ventures. The available resources of this Fund are to be
ISK 200 (EUR 2.5) million in 2004, rising to ISK 500 (EUR 6.25) million towards the end of present
Government term. Two other action lines are affected by this measure, III.3 ‘Start-up of technology
based companies’ and III.5 ‘Strengthening the ability of SMEs to absorb technologies and know-how’.
The role of the Fund for Equipment (measure IS 19) is providing grants to universities and other
public research institutions for the purchase of expensive and specialised equipment for research.
The regulations for applying for a grant also have an effect on two other lines of action, namely I.6
‘Promotion of clustering and co-operation for innovation’, and III.4 ‘Intensified cooperation between
research, universities and companies’.
Applications involving co-operation among research bodies on financing and the use of equipment
purchases shall have priority. In this manner the Fund for Equipment can deeply influence the
economic returns and impact of investments, on the one hand by a faster improvement of facilities
and on the other hand by a reduction of unnecessary duplication in the purchase of scientific
apparatus.
One of the previous measures from the Trend Chart is directed to the establishment of the New
Business Venture Fund (IS 4). The Fund is the result of a merger between four public sector credit
funds. The aim is to promote innovation through better access to start-up capital for businesses.
Instead of having four separate funds specialised in their separate economic sectors, the new fund
can better allocate the financial means available not only between ‘old’ economic sectors but also
new ones. For more information on the NBVF please take a look at http://www.nsa.is.
3.2.6. Taxation
The Government has decided to present a bill to the Althingi that proposes a four percent reduction in
the personal income tax, the abolition of the net wealth tax on individuals and companies, and an
increase in child benefit payments by nearly half. This decision is in accordance with the
Government’s Policy Statement of June 2003. These changes will be implemented in phases during
the years 2005-2007.
26
In view of the present economic prospects and the timing of power project construction, the main
phase of the personal income tax cut will take place in 2007. Tight fiscal policy is an important
precondition for these measures, since the preservation of economic stability is considered of great
importance. It is expected that the tax cut will have a major effect in retaining the domicile of
successful high-tech companies in Iceland and possibly attracting foreign investment in technologybased industries. The first phase of the personal income tax cut will be implemented in 2005 when the
personal income tax will be cut by one percent, from 25.75 percent to 24.75 percent. All reference
sums in the personal income tax structure, as well as for the net wealth tax and child benefits, will be
increased by three percent.
The second phase of the personal income tax cut will take effect in 2006 when the tax will be cut by
another one percent, to 23.75 percent. The first half of the increase in child benefits will also take
effect at that time and will consist of a 25 percent increase in income thresholds and in child benefits
that are unrelated to income, and a ten percent increase in income-related benefits. The net wealth
tax of individuals and companies will be abolished as of the year 2005 which will be implemented with
the tax assessment in 2006. For more information see http://eng.forsaetisraduneyti.is/.
3.2 Gearing research to innovation
3.3.1. Strategic vision of research and development
3.3.2. Strengthening research carried out by companies
One new specific measure (IS 21) has been introduced under this heading within the period under
review: Added Value from Seafood program (AVS). The objective of this programme is to increase
the value added of Icelandic fishery and fish processing industry by calling upon new ideas and
research lines on the subject. At the same time this measure has an effect on action line III.5, the
ability of SMEs to absorb technologies and know-how.
In 1999 The Ministry of Education, Science and Culture initiated an Information and Environment
Research Programme (IS 5) to increase progress within information technology and environmental
technology, and to create synergies between the two areas. The programme is expected to continue
until 2006. Researchers and consortia can apply for grants for up to three years for projects within the
two areas. Applications are evaluated by experts from both public research and private companies.
The total amount allocated to the programme is ISK 580 million (EUR 7,3 million). Annual budgets for
2003 and 2004 will be EUR 1,2 million per year.
The programme also intends to intensify co-operation between research, universities and companies
(III.4).
27
3.3.3. Start-up of technology-based companies
Although no explicit new measures could be identified on the subject, there is one new measure that
also influences that line of action, being IS 18 (see action line II.5).
Several measures however are still in place (see also TrendChart Report 2003).
IMPRA Innovation Centre (IS 15), established in 2003 under new legislation on support for
technological development and innovation is to replace IMPRA Incubator Centre (IS 13), provide
support services to entrepreneurs and SMEs, as well as initiate and support regional development
agencies and local business advisers. A central goal is to coordinate national actions and initiate
cooperation between support agencies. Young people and women have been identified as special
target groups. The overall budget is ISK 100 million (EUR 1.25). The IMPRA innovation centre has
also been assigned the task of establishing cooperation between organisations which support
economic development in Iceland, and linking them to the public support system for scientific
research, technological development and innovation (STPC, 2004b). Under the IMPRA innovation
centre we find several initiatives aiming at stimulating innovation in Iceland. An example of such a
programme is the ‘Innovation Competition’, which is aimed at increasing knowledge about making
business plans as well as bringing out interesting ideas and projects. The measure includes seminars
about how to make a business plan. Another action under the IMPRA umbrella is the ‘Action for
Innovation and employment’. The objective of the action is to support SMEs and entrepreneurs in
Iceland. The initiative is aimed at increasing initiative, employment and production, and at improving
the competitiveness of Icelandic SMEs and entrepreneurs. The aim is also to obtain an effective use
of public funds for support initiatives on behalf of the Ministry of Industry and Commerce.
The 'Out of drawers' programme (IS 9) is a cooperative project between the Research Liaison Office
of University of Iceland and the New Business Venture Fund. The main objective of the project is to
encourage personnel from higher education and public research institutions to bring forward their
R&D results for further exploitation by industry. The project has been in operation since 1998.
The intention of the 'Support to entrepreneurs and SMEs' programme (IS 10) is to provide
information and guidance on possibilities for international cooperation for investors. The project was
launched in 1998 and ended in 2000. The Step Ahead project (IS 11) is intended to facilitate leaders
of small firms (micro and spin-off) in seeking guidance on marketing, finance, environmental product
management and organisational matters in order to increase profitability of companies. The project
started in 1998 and is expected to last at least until 2003. The overall budget is ISK 4 million (EUR
50,000).
The IMPRA Incubator Centre (IS 13), established in 1999, has a capacity to host simultaneously up
to nine companies. The companies must be founded on an innovative idea. IMPRA supports the
companies in the form of low rent housing and equipment, and other services. The overall budget is
ISK 7 million (EUR 87,500). Main indicator for success is the number of new jobs created by the
incubator companies. In connection with the new legislation on support for technological development
and innovation passed in 2003, the Incubator Centre measure was replaced by the IMPRA Innovation
Centre (see IS 15).
28
3.3.4. Intensified co-operation between research, universities and companies
However, measure IS 19, and specifically its implementation in practice is expected to have an effect
on the co-operation intensity between innovation actors (see IS 19).
Current measures within the context of this action line are:
The mission of the Fisheries Technology Forum (IS 7) is to encourage co-operation between
fisheries and industry in order to reinforce the development of equipment that increases the
production values of fisheries. The Forum focuses on the development of equipment in the entire
value chain from catching and processing to marketing. The Forum provides professional and
financial support. The annual budget is ISK 11 million (EUR 140,000). The 'Out of Drawers'
programme (IS 9) also has a stimulating effect on intensifying cooperation between actors of the
innovation system.
The Health Technology Forum (IS 14) was established in 2001 as an initiative of RANNÍS. The
objective of the Forum is to encourage firms, institutions and individuals to increase domestic and
foreign co-operation for development and marketing in the field of health technology. Besides
RANNÍS, the Ministry of Health and Social Security, the Federation of Icelandic Industries, the New
Business Venture Fund, the Icelandic Society for Biomedical Engineering and the Ministry of Industry
and Commerce is involved in the project. The Forum evaluates and finances projects. The annual
budget is ISK 38 million (EUR 475,000).
3.3.5.
Strengthening of the ability of companies, particularly SMEs, to absorb
technologies and know-how
However, measure IS 21 (action line III.2) is expected to have an effect on this topic too (see section
3.3.2). Value adding in the fishing and fish processing industry also focuses on the capability of
companies to absorb technologies and know-how.
Ongoing measures are the following:
Fisheries Technology Forum (IS 7) is to encourage co-operation between fisheries and industry in
order to reinforce the development of equipment that increases the production values of fisheries. The
Forum focuses on the development of equipment in the entire value chain from catching and
processing to marketing. The Forum provides professional and financial support. The annual budget
is ISK 11 million (EUR 140,000). The 'Out of Drawers' programme (IS 9) also has an effect on this
action line.
29
IV. Other Objectives
Besides the straightforward innovation related measures, the Government of Iceland also considers
other measures that in the long run will have a positive impact on innovation performance and new
knowledge creation.
When building a robust scientific community, it is vital to ensure that women play an active role in
research work. Iceland aims to develop a social structure in which human resources are the driving
force behind economic advancement. The development of a research environment in which gender
equality is of high importance serves both justice and science. The Helsinki Group is an EU standing
committee concerned with women in science. Committee members are appointed by EU member
countries and other countries that take part in the scientific and technological Framework
Programmes. The committee’s objective is to work towards the increased involvement of women in
science and to act in an advisory capacity concerning the position of women in research and scientific
services. Member countries also have national committees responsible for applying the conclusions of
the Helsinki Group in their respective countries and collecting statistical data about women in science.
The Minister for Education, Science and Culture has decided to appoint a national committee for
Iceland. In addition to the normal work of a national committee, the work of Iceland’s national
committee will include the implementation of the Women in Science project, which is part of the
government’s Equal Opportunities Strategy 2004-2008; the collection of internationally comparable
statistical information for Iceland; and its inclusion in the EU report ‘Women in Industrial Research’,
which proposes the objective to double the number of women in industrial research before the year
2010. The committee will also oversee the analysis of statistical data among other duties.
A previous programme on this subject was ‘AUDUR Creating Wealth with Women’s Vitality’. The
mission of the project AUDUR, which is both an Icelandic woman’s first name and a noun in Icelandic
meaning wealth, is to better utilise women’s resources by increasing their participation in enterprise
creation. The goal is to increase the number and growth of companies owned by women. The
programme ended in 2002.
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4.
List of TREND CHART measures
Code
Title
IS 3
The Icelandic Current Research Information
System (ICERIS)
The New Business Venture Fund
The Information and Environment Research
Programme
Innovation Award
Fisheries Technology Forum
Innovative Ideas
Out of Drawers
Support to Entrepreneurs and SMEs
Step Ahead
Regional Development Institute
IMPRA Incubator Centre
IS 4
IS 5
IS 6
IS 7
IS 8
IS 9
IS 10
IS 11
IS 12
IS 13
Start/end
dates
1998
Action
area(s)
I.3
1998
1999
II.5
III.2, III.4
1994
1994
1996/2003
1998
1998/2000
1998/2003
1998
1999
I.3
I.6, III.4, III.5
III.3
I.2, III.3, III.4
I.6, III.3
I.4, III.3
III.3
plan
Old/new/modi
fied/extended
Modified
Ended
Ended,
replaced
IS 15
by
IS 14
IS 15
Health Technology Centre
IMPRA Innovation Centre
2000/2003
2003
I.6, III.4, III.5
III.3
Modified
IS 16
IS 17
IS 18
IS 19
IS 20
IS 21
IS 22
IS 23
IS 24
IS 25
IS 26
Enlarging the Competitive Funds
Research Fund
Technical Development Fund
Fund for Equipment
Fund for Graduate Research Training
Added Value from Seafood (AVS)
Strengthening University research: clustering
Evaluation of universities
Public Access to research and innovation results
Installation of a national Committee on Equality
Increasing the number of students in Science and
Engineering programmes
EDUCATE Iceland
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
2004
II.5, II.1
II.5, I.6, III.4
II.5, III.3, III.5
II.5, I.6, III.4
I.6
III.2, III.5
I.6
II.1, I.1
I.3
IV *
I.3, I.1
New measure
New measure
New measure
New measure
New measure
New measure
New measure
New measure
New measure
New measure
New measure
1998
I.1., I.6
Old (omitted
previously)
IS 27
* IV = other objectives related to innovation
31
5. Bibliography and sources
Selection of websites consulted:
RANNÍS
Icelandic Government
IceTec
Central Bank of Iceland
New Business Venture Fund
Statistics Iceland
EDUCATE Iceland (Mennt)
IMPRA
Nordic council of Ministers
www.rannis.is
http://brunnur.stjr.is or www.government.is
www.iti.is
http://www.sedlabanki.is
http://www.nsa.is
http://www.hagstofa.is
http://www.mennt.is
http://www.IMPRA.is
http://www.norden.org
Documents consulted:
European Commission (2004), ‘European Innovation Scoreboard 2004 - Comparative Analysis of
Innovation Performance’, Commission staff working paper (http://trendchart.cordis.lu/)
European Commission (2002), ‘European Innovation Scoreboard 2002’, Commission staff working
paper (http://trendchart.cordis.lu/)
Verbeek, A. and T. Finnbjörnsson (2004), ‘Iceland’s technology base: strengths, weaknesses and
opportunites, RANNÍS, paper presented at a seminar at the Reykjavik University, 11-12 november
2004 (www.rannis.is/files/1604841437Arnold percent20- percent20pappír.doc)
OECD (2003), ‘Economic Survey of Iceland’, OECD Observer, www.oecdobserver.org
Ministry of Finance (2004), ‘Ný þjóðhagsspá fyrir árin 2004 - 2010’,
http://www.fjarmalaraduneyti.is/media/Thjodarbuskapurinn/Urthjodarbuskapnum011004.pdf
Nr.
6,
Science and Technology Policy Council (2004a), ‘Science and Technology Policy, Agreed at a
meeting of the STPC on December 18, 2003’, Prime Minister’s Office, Iceland
Science and Technology Policy Council (2004b), ‘Resolution of the Science and Technology Policy
Council’, Iceland
Statistics Iceland (2004), ‘External Trade’, Statistical series, http://www.statice.is/series
EC (2004), ‘Innovation in Europe - Results for the EU, Iceland, and Norway’, Eurostat, theme 9:
Science and Technology
32