Innovation.bg Report

Policies for Science and Innovation

Innovation.bg is a flagship of the Applied Research and Communications Fund to support the national policy in the domain of science, technologies and innovations. It offers expertise, an own political framework and know-how for impact assessment.

Since 2004 the annual report presents an exhaustive assessment of the national innovation policy, the national economy’s innovation potential, the performance of innovative Bulgarian companies and the state, opportunities and future trends for development of the Bulgarian innovation system. The report provides recommendations on the improvement of the public policy on innovation in Bulgaria and the EU, building on the latest international theoretical and empirical studies and taking into account the specific economic, political, cultural and institutional framework of the innovation system in Bulgaria. The report targets leaders and decision-makers in the public and private sector in the country and abroad.

Methodologically, the report is based on several existing models for measuring and comparison of innovation systems:

1) the European Innovation Scoreboard of the European Commission;

2) the OECD Science, Technology and Industry Scoreboard;

3) the U.S. National Innovation Initiative and

4) the Executive Index of the Massachusetts Innovation Economy.

The report is reviewed and approved annually by the Expert Council on Innovation at the Applied Research and Communications Fund and is presented during the National Innovation Forum.

In the last 18 years Innovation.bg made on an annual basis a series of specific recommendations for improvement of the national innovation policy and practice in the country, which were supported by the business and academic communities.

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On Focus

The Innovation.bg 2021 topic is the dynamics of foreign direct investments (FDI) between 2014 and 2019. The report makes conclusions and recommendations for their preservation and growth. The dynamics of the R&D in the private and public sector, of the human capital development and the ICT sector achievements are assessed.

On the figure: Number and volume of the FDI at the end of the year (Source: National Statistical Institute – NSI).

A unique set of opportunities emerged in 2021, including the new European Union (EU) priorities, the recovery from the Covid crisis and public attitudes favouring an overhaul of the political status quo, which Bulgaria can use to overcome its innovation gap based on smart digital and green transformation.

Bulgaria had similar expectations and opportunities in 2007, but failed to materialize them for the first two programming periods of EU membership. Therefore, the country now needs a qualitatively different approach and breakthroughs to ensure the attraction of high value-added investment from the US and EU private sectors and the birth of the first unicorn:

a consensual political vision with clear priorities and national funding for the development of innovation, technology and talent by 2050,
a complete reform of the public institutional infrastructure for science, technology and business and economic support,
an annual political cycle of budgetary evaluation of the innovation investment opportunities and services provided by the public administration (taxes, regulations, legislation, etc.).

The FDI in non-financial corporations in Bulgaria is subject to dynamic changes related to economic factors (crises in the source countries of investment), and transformations (value chains, digitalization, labour migration), administrative changes, etc. The number of companies with FDI has been significantly reduced by about 4300, or more than 23% in five years. On the other hand, there has been an increase of 17,4% of the total volume of investments for the same period, which reached EUR 25 billion in 2019.

However, there are positive internal dynamics. The sectors in which FDI is channeled marked low research and innovation intensity. These are real estate and construction (these two sectors account for 78% of the decline in FDI companies), hotels and restaurants, which has a 39% decline in the number of FDI companies, manufacturing and distribution of electricity, heat and gaseous fuels by 37%, agriculture and manufacture of wood, paper, and related products by 32% each. This flight is expected but it also enables local entrepreneurs to innovate through the value chain.

At the same time, there has been an increase in FDI companies engaged in research. And although this growth is modest (only 38), the growth in the investments in 2014-2019 is significant – over 2.5 times. Investments in FDI companies which report to the NSI that they carry out research and development increased from 5.5% in 2014 to 13.17% in 2019. The FDI of most companies engaged in R&D comes from Germany – 10%, but in terms of volume the investment is from Austria (19%).

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The report provides independent assessment of the national innovation system on the basis of own methodology in the following five dimensions:

Innovation Product

The gross innovation product, or the innovativeness of an economy, is assessed by the new products and services introduced, the new technologies created and the scientific outputs. It involves and results from the interaction of the innovative, technological and scientific products of a country.

Entrepreneurship

Entrepreneurship is one of the binding elements of the national innovation system. It is embodied in newly established companies and in the means of interaction and exchange of information, know-how and technologies among stakeholders in the innovation economy.

Investment and Financing

Spending on research and innovation is a measure of the investment in the creation, use and dissemination of new knowledge in the public and private sectors. It is considered an indirect indicator of the innovation capacity of the national economies. A high ratio of R&D financing to GDP is a factor fostering dynamic economic growth and competitiveness.

Human Capital

Staff engaged in R&D together with those employed in scientific and technological activities comprise the human resources directly responsible for the creation, application and dissemination of new knowledge in the area of technologies. The indicator of employment in high-tech sectors characterizes the country’s specialization in sectors with a high level of innovation.

Information and Communication Technologies (ICT)

The current status of infrastructure in the field is analysed, considered being an engine for the innovation activity in all the other sectors of the economy.