Version 12.0

INNOVATION STRATEGY OF THE TARTU REGION

2004-2008

INTRODUCTION

The aim of preparation of this strategy document is to contribute to the development of the competitiveness of local companies in Tartu and in South Estonia. The target region of the strategy consists of the Jõgeva, Põlva, Tartu, Valga, Viljandi and Võru counties, which have been referred to hereinafter briefly as the Tartu region due to historical and functional reasons.

This strategy was prepared on the basis of the current problems and needs of companies of the Tartu region. Major action lines were selected and measures were developed for meeting these needs and for finding solutions for the problems. Thus the preparation of the Innovation Strategy of the Tartu region has been a so-called “bottom-up” strategy process, focused on the local entrepreneur with his concerns and strivings.

The strategy proceeds from the assumption that innovation capacity is one of the main factors, which determine the competitiveness of businesses today and through that also the economic development of both countries and regions. In the context of this strategy, innovation consists in activities of entrepreneurs which result in bringing new or improved products and services to the market.

Although companies of the Tartu region can also exceed the average level of Estonia and be in a leading position with several of their innovation indicators, such as the proportion of innovative companies, general level of innovation, etc., they often remain below the average level of Estonia with their general macroeconomic indicators, such as the volume of investments, profitability of labour and employment rate. Thus innovation is not yet the main component of competitiveness of the Tartu region and has yet to become that. Therefore the following major innovation needs have been identified in the strategy process to ensure the growth of the competitiveness of the region: moving further up in the subcontracting chain, development of production processes and increase in efficiency, technology transfer and expansion of the competence base, development of clusters and cooperation networks, continuing and further training of employees, an increasingly innovative and enterprising way of thinking.

Implementation of the activities and measures suggested in the strategy has to ensure meeting the above-mentioned innovation needs and an increase in the competitiveness of the companies of the Tartu region. The speed and sustainability of the latter will determine whether the Tartu region can rise to the position of one of the most competitive regions in Estonia and in the European Union.

The strategy suggested is a framework plan which has to be implemented with support from other national, regional and local basic documents, such as the National Development Plan and its programme complement, the Research and Development Strategy of Estonia “Knowledge-based Estonia”, development plans and operating strategies of counties and local governments, etc. On the other hand, this strategy has to become a source for the development and implementation of new thematic or sectoral action plans, which would proceed from the strategic goals and priorities presented below.

The planned time horizon of the strategy is five years in the period 2004-2008. The total estimated cost of measures included in the strategy is 635 million Estonian kroons, which consists of 75 million kroons of investments in human capital, networking and key sectors and 560 million kroons of investments in infrastructure. For the financing of measures it is necessary to develop and implement an integral financing scheme. The strategy can be fully implemented clearly only with joint and co-ordinated use of the funds and investments of the European Union, the Estonian state and the Tartu region and with joint efforts of the public sector and companies. This will be only way to achieve the goals of this strategy.

METHODOLOGY

This strategy was prepared with the support of the EU 6th Framework Programme and followed the methodological framework and policies of the EU programme „Innovating Regions in Europe“ (see The strategy process consisted of three main stages. The first stage of preparatory work was in 2002. It focused on the achievement of a consensus concerning the basic principles and goals of the strategy and consisted of brainstorming sessions with entrepreneurs of all six counties of the Tartu region and the work of thematic working groups in the key areas selected. The second stage, which consisted in the conduction of surveys and preparation of the strategy, took place in 2003. Preparation of the strategy was based on the results of four surveys conducted to identify the current role of innovation in the companies of the region and the main obstacles and needs in the innovation process of companies (see tris.tartu.ee/taustmaterjalid.php). The strategy was prepared by working groups, which focused mainly on the development of specific action lines and measures. The third stage, which has been planned until the end of August 2004, includes the approval of the strategy and launching of the pilot activities selected.

Very many organisations and experts participated actively in the development of the strategy. We should mention here separately the Tartu City Government, University of Tartu, county governments of the six above-mentioned counties and the TartuSciencePark. The role of foreign partners should be pointed out separately – regional development agency Shannon Development from Ireland and the Uppsala County Government from Sweden, which brought to the TRIS Project their experience and knowledge gained from the preparation of similar strategies in their region and helped to make strategic choices in the context of the Tartu region. In addition, the conclusions and conceptions based on the results of the Estonian biotechnology and IT horizon scanning performed in 2003 have been used in the preparation of the strategy. All in all, more than a hundred entrepreneurs, officials and experts made an invaluable contribution to the strategy process.

The measures suggested in the framework of the strategy are based on the needs identified with surveys and on the collective work of working groups and experts. The measures included are not and cannot be comprehensive and do not constitute a final closed list. It is logical and probable that the list of measures suggested will be supplemented with new ones during the implementation of the strategy and that existing measures may be modified according to changes in circumstances. The Innovation Strategy of the Tartu Region is not a static and unchangeable document but a dynamic framework which requires constant additions and modifications to take into account changing needs and new emerging opportunities.

STRATEGIC GOAL

The main strategic goal of this strategy is to increase the competitiveness of the companies of the region. This requires the creation of a joint functioning innovation system (environment) of the Tartu region, which aims at the improvement of the competitiveness of companies of the region on the regional, national and the international level. Increased competitiveness of companies will create preconditions also for an increase in the quality of life and general welfare of the region, which is the general goal of regional development. The competitiveness of the region is above all manifested in such indicators as labour productivity, employment structure and employment rate, added value created and volume of exports, level of incomes, tax base, adaptability, etc.

The competitiveness of companies, countries and regions largely consists in their ability to be innovative, i.e. to learn to make use of new opportunities and develop the existing ones further, at the same time building up local industry, which is able to make a breakthrough in export markets.Thus, innovation is a key to increasing the competitiveness of the region and therefore favouring of innovation constitutes the backbone of this strategy.

Four action lines have been suggested in this strategy for favouring innovation: development of human capital, support to networking, development of key sectors and improvement of infrastructure. These action lines are the four main components of the strategy.

Proceeding from the above-mentioned strategic goals and components, the following diagram presents figuratively the main parts of the Tartu Innovation Strategy and the links between the parts.

ACTION LINES

Consequently, the most important components of the innovation strategy are the four action lines, shown as the three columns and the foundation in the figure above. The innovation capacity and through that the competitiveness of the region as a whole directly depend on their development.

Human capital

Innovation on the level of companies depends on the nature and quality of the knowledge, skills of its employees and on the technological base. Only the existence of an up-to-date educational and research system creates preconditions for the appearance of top-level human resources and the resulting development of high export-oriented added-value industry. The quality of human capital, which is one of the main factors of the innovation capacity of companies, therefore depends very directly on the educational and research system.Thus, according to the logic of this strategy, the development ofhuman capital is one of the most important strategic components in supporting innovation.

Networking

Favouring of cluster-based economic development can be regarded as equally important. Here even a failed project may create new contacts between companies, researchers and officials. A new entrepreneur can make use of all that, since a part of risks has been born by the public sector for him and also for his competitor. Thus, favouring of cluster-based economic development with its main component – networking – is another important activity in supporting innovation.

Key sectors

The third action line is focused on areas of activities, which are currently the main engines of regional economic development, and areas which will have an increasing role in securing both short-term and long-term economic development. The selection of economic sectors which are or may become engines of competitiveness of the region, and the areas of activities, which may brake and stop the development is a strategic issue. Therefore it is extremely important to make the right strategic choice and focus on the key sectors that economic growth and development will depend on.

Infrastructure

Obviously, implementation of the measures of the above-mentioned action lines assumes the existence of both physical and institutional infrastructure, which will serve as a basis for the development of human capital, clusters and key sectors. Without adequate infrastructure the development of remaining action lines may remain short-term and insufficiently effective, since the planned activities cannot become anchored, just like a building without a foundation generally does not last long.

Supporting activities

In addition to the action lines mentioned and the specific measures contained in them there are a number of decisions and activities necessary for economic development that do not belong to the competence of the region and the organisations in the region. But local governments and regions can constantly point out bottlenecks that should be removed to considerably improve the innovation environment. Therefore it is important in the context of this strategy to focus also on certain proactive activities on the level of national government, in order to ensure support to the action lines covered by the strategy and for the development of the related activities.

Action lines

The following four action lines have been presented with their submeasures. For each measure, the implementing organisation(s), estimated cost, time span and indicators, which allow to evaluate the effectiveness of the measure, have been defined. With respect to the cost of measures the need for so-to-say additional funds or investments has been estimated that would be in addition to the existing budgetary and other regular funds.

DEVELOPMENT OF HUMAN CAPITAL

We can state as a result of the surveys that human capital has a leading role in the innovation process of a company. A team that is open to innovation and comes along with the development vision is one of the key factors of innovative activities. Development activities supported by the entire team are often more effective and proceed more from the needs of the client. On the other hand, in most companies of the Tartu region, innovation is still directly related to the knowledge, personal characteristics and the vision of the leader, therefore development of human capital is very important with respect to both top management and employees.

Results of surveys confirm the opinion that the Estonian society is higher education oriented and that the humanities are more popular fields. Although there are two universities in Tartu, they cannot cover sufficiently the need for labour in (particularly) technical specialities in the companies of the region. The level of vocational education is considered to be low, which is partly due to the low popularity of vocational education among young people. Both larger companies in Tartu and the industrial enterprises located outside cities stated that enterprises lack technologists most of all – both technologists of certain specialities and more broadly people with a technical background. The acute lack of engineers impedes the implementation of innovative projects. It is necessary to find opportunities for the development of applied technological higher education. The main concerns of the EstonianAgriculturalUniversity which provides technological education are the ageing staff and the weak material and technical facilities.

In the opinion of entrepreneurs, technologists of certain specialities are increasingly less willing to work in their speciality. This is among other things caused by the underdevelopment of the material and technical facilities of educational institutions and the insufficient practical training opportunities in the course of studies.

In vocational education the cooperation between vocational training centres and practical training bases should be favoured. The current successfully functioning relationships are based on the sense of mission of entrepreneurs. Large investments have been planned to the infrastructure of the vocational education system with the support of EU Structural Funds. In order to attain a maximum effect from the use of investments it is necessary to look for opportunities for the enhancement of long-term private-public partnerships.

On the level of top and middle management it would be necessary to pay more attention to the organisation of e.g. quality management training. A small percentage of companies of the Tartu region have currently certificates of conformity with ISO standards. The latter, however, gives advantages in the tough competition of the EU common market.

It is planned to implement the following measures in the period 2004-2008 and their total cost is 20 million Estonian kroons.

Measures, performance indicators, time schedule, cost and implementers

Measure 1. Relating the curricula of vocational education to the needs of the region
One of the biggest problems in the region is the lack of skilled workers with relevant qualification and practical experience.
Activities / Performance indicators / Time schedule and budget for the attainment of results / Responsible implementers
Encouragement of local entrepreneurs to offer stipends / Number and monetary value of stipends from entrepreneurs[1] / 2004-2007 salary and operating expenses of project manager 150 000 EEK per year
In total 600 000 EEK / Institutions of vocational education
Bringing the teaching of skilled workers into conformity with the needs of the region / Results of business surveys, i.e. increased satisfaction of entrepreneurs with labour
Labour survey
Number of new curricula / 2005: business survey 300000 EEK
2006-2008 development of curricula 500 000 EEK per year
In total 1 800 000 EEK / Institutions of vocational education
Improvement of practical training opportunities in vocational and higher education / Number of long-term practical training contracts between schools and companies / 2005-2007
Fund for partial covering of practical training supervision fees:
1 500000 per year
In total 4 500 000 EEK / EnterpriseEstonia, INNOVE
Total activities / 6900000 EEK
Measure 2. Improvement of the quality of management of the companies of the region
A relatively small percentage of companies of the region have introduced up-to-date quality and environment management methods.
Activities / Performance indicators / Time schedule and budget for the attainment of results / Responsible implementers
Introduction of innovative management methods and best management practice, advocation of management awards / Number of seminar courses, number of participating individuals and enterprises
Number of companies of the Tartu region who participate in national competitions / 2004-2007
training and seminars 250 000per year
In total 1 000 000 / Local governments, universities, Estonian Quality Association
Consultations on the implementation of quality, environment and integrated management systems / Number of ISO 9000, ISO 14000 certified companies / 2004-2008
400 000 per year
In total 2 000 000 / Estonian Quality Association
Issue of business awards for the Tartu city and county and South Estonia / Number of regional business competitions /

2004-2007

Public relations costs 100 000per year
In total 400000 / Local governments
Total activities / 3400000 EEK

Measure 3. Improvement of the quality of labour

Improvement of the mobility and quality of labour assumes consistent application of the principles of lifelong learning in the region.
Activities / Performance indicators / Time schedule and budget for the attainment of results / Responsible implementers
Favouring of studies in foreign countries / Number of students who have gone abroad
Number of students who have returned from abroad / 2005-2008
salary and activities of the project manager 150 000 per year
In total 600 000 / Institutions of vocational education,
local governments
Improvement of retraining and further training opportunities / Expenditures of enterprises on retraining and further training
Number of further training groups in the educational institutions of the Tartu region / 2005-2007
100 000per year
In total 300 000 / Employment office,
institutions of vocational education
Favouring of taking professional examinations that conform to national professional standards / Number of persons who have passed professional examinations or raised their qualification / 2005-2008
Training 500000 per year
In total 2000000 / Institutions of vocational education,
INNOVE
Total activities / 2900000 EEK
Measure 4. Alleviation of the lack of engineers in enterprises of the Tartu region
Lack of engineers and technical staff hampers the development of many companies in the region and the realisation of innovative ideas.
Activities / Performance indicators / Time schedule and budget for the attainment of results / Responsible implementers
Survey of the needs for engineers of different specialities according to the information of the Tartu region / Completed survey /

2005

Cost 200 000 kroons / Universities, Ministry of Education and Research, local governments
Development of curricula for engineering studies / Number of new curricula / 2006-2008 development of curricula
500 000 kroons per year

IN TOTAL: 1 500 000 kroons

/ Universities, Ministry of Education and Research
Total activities / 1700000 EEK
Measure 5. Popularisation of technological specialities and the schools that are offering them
One of the problems of the region and whole Estonia is the low popularity of technological specialities, particularly institutions of vocational education, among potential students.
Activities / Performance indicators / Time schedule and budget for the attainment of results / Responsible implementers
Excursions to enterprises and schools / Competitions for study places of technological specialities.
Number of introductory articles, programmes in the media and events / 2005-2008
per year 150 000 kroons
In total 600 000 kroons / Vocational education centres
Support to the AHHAA Centre / Achievement of the strategic goals of AHHAA / 2005-2007
Cost 1 500 000 kroons per year
In total 4 500 000 kroons / Foundation AHHAA
Total activities / 5100000 EEK

SUPPORT TO NETWORKING