The aim of the project is to analyze in a comparative perspective the government support for innovation by first examining the main existing instruments of financial support for innovation in Turkey and Poland, and secondly to assess their effectiveness by applying recent econometric techniques to firm-level data for both countries obtained from the Community Innovation Survey (CIS).Comparing Turkey to Poland is both meaningful and promising from the policy-analysis point of view. Both countries are comparable in terms of level economic development and technological capabilities, i.e. the ability of their economies to create knowledge and exploit it commercially. Both have undergone deep market-oriented reforms in the last decades, Turkey since 1980, Poland since 1989, resulting in significant catching-up of their economies. However as the possibilities for further growth based on structural change and eliminating obstacles to business are shrinking, the problem of building a knowledge-based economy comes to the fore.
In Turkey, one can observe the growing popularity and the generous practices of public incentives in industrial R&D and innovation, in addition to the recent trends in public policies to support technological entrepreneurship and commercialization of research output. Since 2004, significant changes and improvements that have taken place in Turkey concerning science and technology policy schemes have actually influenced the national innovation system in a number of ways: important increase has been observed in public support provided to private R&D; diversification of direct support programmes for private R&D and innovation occurred, which was tailored to the needs of potential innovators; widening of the scope of existing fiscal incentives for private R&D activities and implementation of new ones occurred; implementation of new call-based grant programmes targeted to technology areas and industries based on national priorities. Considering the large resource allocation for the government involvements, there is a growing and urgent need for systematic monitoring and evaluation of R&D and innovation policies in Turkey.In Poland the science, technology and innovation (STI) policy has been made second-best during economic transition, lacking funding, co-ordination and vision. The institutional architecture has evolved implying lack of continuity and short institutional memory. A major breakthrough occurred after 2004 when considerable funds for innovation were release from the EU structural funds. Three principle areas of support can be distinguished: the creation of technologies, technology absorption and indirect support. However with respect to public programmes targeting firms, technology absorption dominates all other instruments. Consequently it is legitimate to ask, whether the EU-funds are being spent in the best possible way, and in particular, whether they contribute to an enhanced innovation performance of economy.To assess the efficiency of public support the same econometric methodology is applied to the Turkish and Polish 2008-2010 editions of the Community Innovation Survey for manufacturing firms. Two models are estimated: one following the now classical CDM model and assessing the role of innovation spendings, but assuming government support exogenous; and another controlling for the endogeneity of support but assuming a simplified version of the innovation performance equation. Depending on data availability, extensions of the analysis for both countries are offered: for Turkey the estimation of a full-fledged CDM model; for Poland the analysis of panel data for 2006-2010 and an assessment of the efficiency of specific kinds of public support.The evidence indicates that government support contributes to higher innovation spending by firms and this in turn improves their chances to introduce product innovations. The positive impact remains valid even when a possibly non-random selection of firms for government support programmes is controlled for. Extended analysis for Turkey proved a positive relationship between innovation and firm productivity.On the other hand, substantial differences between various kinds of public aid were identified. In particular, the support from local government proved inefficient or less efficient than the support from central government or European Union. Moreover in Poland, the grants for investment in new machinery and equipment and human resources upgrading proved to contribute significantly less to innovation performance than the support for R&D activities in firms.In terms of policy recommendations, the report supports an increase in the volume of innovation support and in the number of instruments used in Turkey, however a more specific analysis is needed to explain the inefficiency of support from local government. The recommendation for Poland is to redesign the innovation support schemes for firms so as to put more accents on R&D activities and the development of truly new products and technologies.