GLOBSEC Danube Tech Valley Initiative (DTVI) Innovation Report: Building an Innovation Ecosystem in the region of Central and Eastern Europe (CEE

Bratislava, May 17, 2022. GLOBSECs Danube Tech Valley Initiative aims to accelerate the innovation potential of the Danube region. The new GLOBSEC’s report launched today outlines possible roadmaps toward building an innovation-driven economy within the Danube Valley.

Given the unprecedented spotlight placed on this region vis-á-vis the Russian aggression in Ukraine, the Report presents an increased potential for the Danube region to leapfrog and come out as a hotbed for innovation and cross-border collaboration.  In the context of the future EU integration, the discussion initiative wants to open following the launch of the Report should explore the ways how the DTVI could mobilize the innovation potential also within the broader EU neighborhood (Western Balkans, Ukraine).

In spite of the progress in the recent years, Central and Eastern European (CEE) countries are still outperformed by their Western EU counterparts in innovation rankings. Majority of the countries in the region (Slovakia, Austria, Czechia, Hungary, Bulgaria, Romania, Slovenia, Serbia) have scored among the Emerging or Moderate innovators.*  Also, the findings of the GLOBSEC Tatra Summit Insight Report 2021[1] put these countries into an unfavorable position. Most of the group is not performing well on the GLOBSEC’s Strategic Transformation Index (STI). The ranking is as follows: Slovenia (57.0), Czechia (56.0), Poland (51.9), Hungary (51.2), Slovakia (47.8), Croatia (41.1), Romania (40.3) and Bulgaria coming last (35.6). Yet, it must be highlighted that “Austria defends its top performer standing, with an overall score of 63.9 points.

However, the CEE-region’s shared endowments, core competencies and flagship industries present a policy opportunity on the path to tech-driven transformation. Based on the Report’s findings, the countries along the Danube Valley represent a unique combination of traditional industries and corporations as well as new technological startups, and possess economic, societal, and demographic circumstances highly compatible with next-generation technology and Industry 4.0.

According to GLOBSEC Chief Economist, Sona Muzikarova, who authored the report: “to leverage these favorable circumstances, the Danube region’s potential needs not to be limited by the typically small and limited CEE-market size. The Region can tap the scale – from product markets to labor markets, pools of talent, capital, and innovation culture – that DTVI cross-border coordination can facilitate.”

Based on the GLOBSEC’s report, access to appropriate and sufficient finance is one of the most important factors contributing to productive and sustainable innovation ecosystem.Strong innovation ecosystems need a range of financial institutions to provide various financial products and services for innovation businesses on their journey from idea to impact, or start-up to scale-up. These mostly include accelerators/incubators, angel investor networks, private foundations, impact investors, venture capital firms, private equity firms, crowdfunding platforms, public/semi-public funders and banks,” commented Vazil Hudak, Vice-Chairman of GLOBSEC.

Some CEE countries have limited access to traditional funding, particularly for innovative small and medium-sized enterprises (SMEs). Well-functioning capital markets are an important channel for allocating capital to firms with the greatest potential for productivity gains thanks to the roll-out of innovative processes and the commercialization of new technologies[2]. “But European capital markets remain fragmented and shallow, and CEE capital markets even more so. In some cases, moreover, the local political or legal context is not favorable, tending to discourage international investors,” explains Sona Muzikarova.

The ongoing conflict in Ukraine and the uncertainty it brings along can have a significant impact on the innovation potential in the region. Therefore it is important for the local governments to take ownership of the issue. After all, innovation from a long-term perspective – will be one of the main drivers of economic growth and thus will have a direct impact on national GDPs.” Vazil Hudak adds.

 

* Performance of the EU MS in Innovation (2014-2020)

Source: EIS, 21.6. 2021

According to the EU Innovation Scoreboard majority of the CEE countries are moderate or emerging innovators, performing below the EU average, with the exception of Austria with performing above the EU average.

 

[1] GLOBSEC. GLOBSEC Tatra Summit Insight Report 2021 Harnessing Disruption to Address Innovation and Skill Gaps in Central and Eastern Europe, 2nd Edition. 2021.

[2] Kerr, W. R., & Nanda, R. (2015). Financing Innovation. Annual Review of Financial Economics, 7(1), 445–462. https://doi.org/10.1146/annurev-financial-111914-041825