South European Countries' Systems of Innovation in Hard Times

Is there anything that South European Countries (SECs: Greece, Italy, Spain and Portugal) share in terms of innovative performances? What has been the impact of the international crisis and austerity policies on the attitudes and behaviours of public governments and private companies? Have SECs adopted a pro-active behaviour -investing more resources in research and innovation and in the related policies- or have they taken a more defensive attitude -reducing the resources invested and waiting for a recovery in the demand? In other words, have SECs deployed a counter-cyclical strategy based on innovation and policies aimed to support long-term growth? And if so, what kind of results have they obtained?

We know that the international crisis has had a negative effect on the European economies, and on those of Southern Europe in particular . What we don't know, instead, is which kind of impact the crisis has had on economic innovation.

Only recently, some studies have dealt with this issue:

a)    International organisations have carried out analyses using aggregated macro-level data (European Commission 2014, 2013, 2012, 2011; OECD 2012).

b)    Some economists have instead used micro-level data on either national or regional cases, analysing samples of firms operating in a plurality of industries and countries: United Kingdom (Archibugi et al., 2012); Emilia-Romagna-Italy (Antonioli et al., 2011);  European Union (Archibugi and Filippetti 2010); Latin America (Paunov 2010); Russia (Kuznetsov and Simachev 2010).

What have we learned from this research? Basically, four lessons.

a)    Firms’ investments in innovation have been pro-cyclical.

b)    Governments' policies to support innovation have been counter-cyclical.

c)     The crisis has had a diversified impact on firms:

1. some economic sectors have responded better than others;
2. large companies (especially the most innovative ones) have continued to invest in research and innovation;
3. SMEs have suffered the most (due to the credit crunch).

d)   The two models of innovation described by Schumpeter - the “creative destruction” model and the “creative accumulation” model – have coexisted during the crisis.

However, despite these four lessons, the specific features of the SECs’ National Systems of Innovation and the impact that the crisis has had on them deserve further research.

What have these countries in common?

The first element shared by SECs is the weakness of their National Systems of Innovation. In fact, according to the 2014 Innovation Union Scoreboard – which gives a comparative assessment of the strength of EU27 Member States’ innovation systems – all of them belong to the group of the “Moderate Innovators”. The latter includes the European Countries whose innovation performances are below the EU average.

The second aspect is that firm investments (especially business R&D expenditure) and patenting intensity are below the European average: reaching, respectively, the 53% and 40% of the UE average.

The third aspect is that SECs are under-specialised in high tech industries. Both employment in knowledge–intensity activities (in manufacturing and services), and knowledge-intensive services exports are below the UE average.

Looking at the firm behaviours, however the picture seems less gloomy. In fact, both the percentage of SMEs introducing product or process innovations and the share of sales related to newly introduced products are similar or even superior to the EU average. So we have a sort of paradox: the firms of the Mediterranean countries seem able to innovate despite the limitations of their national systems and the deficit of resources invested in R&D.

How can this SECs’ Paradox be explained? We will try to answer this question focusing on two dimensions: 1) the specific characteristics of their National Systems of Innovation, highlighting not only their similarities but also their differences (among and within SECs), and 2) the behaviour of firms during the international crisis.