Estonia’s place in the European Innovation Scoreboard has improved greatly in recent years and we have become one of the innovation followers. At the same time, we have clearly still room for improvement in order to become one of the innovation leaders. To set goals for the future, it is important to look back. The aim of this study is to obtain an overview of the factors that encourage innovation in Estonian enterprises and which would helps our companies to improve their competitiveness on the international level.

There is still significant proportion of innovative enterprises in Estonia which is close to the level in Finland and about twice as high as in Latvia.“ – Risto Kaarna

Revealed results bore witness to the trend continuity of our companies’ behaviour, both in good and bad sense. We can mention for example a relatively high level of general innovation activity and close cooperation between the companies during the innovation process. But we can also mention the lack of radical innovation and companies’ little cooperation with universities and research bodies.

The main innovation system failures are divided into four categories:

  • Capacity failure manifests in the lack of organisational and marketing updates, smaller businesses’ low involvement in innovation activities and in low capacity of human resource.
  • Institutional failure manifests in little cooperation between universities, local governments and small enterprises.
  • Network failure manifests in little knowledge transfer form universities to enterprises.
  • Framework failures are, for example, domestic market demand during the boom and a certain stagnation of innovation activities.

In further innovation supporting activities the innovation policy should be reviewed and focused regularly. Due to different scenarios for Estonian economy, the following recommendations are given:

  • The government should support enterprises moving to so-called key markets in order to increase the part of new markets.
  • More attention should be paid to organisational and marketing innovation
  • Broader innovation strategies that would make companies less dependent on the recession should be adopted.
  • Supporting start-ups with high added value in new and emerging sectors should be continued and their investment options should be increased.
  • Knowledge transfer to business sector should be increased by providing flexible and independent mediators who would bring together enterprises, professionals, research bodies and higher education institutions.
  • Recruitment of innovation leaders should be supported more actively.