Model of the Entrepreneurship

Motivation and Innovation

Culture programme

22 March 2007
Valdis Avotiņš, Agnese Griņeviča, LIAA
Rene Tõnnisson & Wolfgang Drechsler, Tartu
 Operational Programme 2007-2013
Strand III support Competency Centres

TTOs & LiOs PPP Concept

2004-2006 Pre-Seed Foresight
Business
New products and technologies incubators Riga NIP
Inno-Culture

Risk capital scheme Skills Centre Innovation-

Risk Capital System Created
Shared laboratories
Qualified personnel
Monitoring System
Training, consultancies Business Angel
networks Need analysis
Techo-consultancies

New product scheme

EU networks
TI – VCF scheme
 Culture
Usually culture is understood as a diversity of values,
norms and traditions which are reflected as common value
of tools and environment of creative process. Culture
always has been supposed as a result of people’s activity.
It is fulfilling the role of society’s social memory and
provides connection of centuries and continuity of
generations values.

In the economic aspect the term of culture is used quite

recently. First of all, as common understanding of industrial
relationships inside of collective economic subject
(company). It’s possible to describe the stable employees
relationships with the culture of business administration in
the company with the goal to elaborate and define the
decisions about effective use of limited resources in the
production.
 Innovation Culture
An entrepreneurship and innovation culture
means an environment where people can
explore and express their creative, innovative
and business acumen. It is an environment
whereby entrepreneurs and innovators are
the norm in society rather than an exception.
The management of Innovation culture is defined
by the elaboration of the Innovation strategy in the
company together with access to all the necessary
analytical information.
 Innovation culture in the company
• Components which describes the innovation competence of
managers and are related to their professional knowledge and
experience during the innovation processes in the company;
• Motivation for value, which describes the motivating power of
innovatin culture – common sense of demand factors, values,
motives and stereotypes, which encourages the manager to
implement the particular model of behavoiur during the innovation in
the company. This level reflects the manager’s personal motivation.
• Behaviour, which includes all practical managerial activities in all
innovation elaboration and implementation phases.

It’s possible to divide the particular terms “entrepreneur” and “intrapreneur”. The
entrepreneur is a person who establishes and run the new private business –
company, while the intrepreneur is a person who starts new activities in the
company owned by others.
 2. CULTURE FOR
INNOVATION
in the sense of an
innovation conducive
climate within a certain
location (“innovation
3. milieu”)
Innovat
INNOVATION
CULTURE
ion
in the sense of &
an innovation- Culture
1. INNOVATION AND
conducive EXISTING CULTURE
habit or (especially regional /
system or best local) as it exists
practise within
 Market defficiences
• Lack of a visible, open enterprise culture;
• Lack of National and individual self-confidence;
• Lack of coherent, cohesive national vision in relation to
entrepreneurship, innovation, and enterprise culture;
• Poor understanding of enterprise in civil and public sectors;
• Low Risk taking;
• Low levels of R & D;
• Training for enterprise not developed;
• Emigration of youth and educated workforce to other
economies;
• Low levels of partnership
 Only external barriers
Increase national market share and/or detection of new markets
nationally Latvia

Optimisation of operations to decrease costs Sweden

Development of new products

Increase of internal production capacity

To increase competence inside the enterprise

Increase of technological competence

Increase of market share and/or detection of new markets in EC

To increase ability to react on market changes

Increase of market share in other markets

Collaboration with other enterprises

Purchase of products / licences / technologies

Diversification of existing products

To attract external experts

0% 25% 50% 75% 100%

 Assimmmetry of information (308 firms
intervied)
Riga Stradina University

Service is known
Service used
I will use again
Latvia University of
Agriculture

Riga Technical University

University of Latvia

0 20 40 60 80 100 120 140

RIS Latvia, 2003

 Share of innovative firms, %, 2002-2004
60 53,6

50
40
27,2
30
20 14,1

10
0
10-49 50-249 >250

17,5% innovative firms gave 42,3% of

total turnover in 2004
Only 4,7% product innovative
Only 3,5% high-tech in manufacturing
 Competitive companies
R&D performance in business sector shows positive pace
Intramural R&D in business sector by research type, EUR mill.

19,1

13,3

9,8 10,2

6,8
5,6
5,0
4,0

2002 2003 2004 2005

Applied research Experimental development

Source: Central Statistics Bureau, 2006.

 Two policies

Promotion of new
Entrepreneurship innovative SMEs policy
policy

Encouraging Birth phase Start phase After-start phase Growth

phase (upon 42 months) management
phase
Division of business education in Education
system in Finland

Business values and attitude

Business related knowledge

Business and management knowledge

Pre- Vocational education Life-long

schools High schools Universities
learning
Lujo Brentano
1844-1931
“When I climbed out of the boat that had
brought us back … to Naples, and gave to
one of the boys lying on the pavement my
briefcase to carry, he shook his head with
the words: I have already eaten!” (Brentano)
Mistakes come from lack of
experiences and experiences
come from mistakes
WHAT ARE INNOVATIONS AND HOW DO THEY
WORK?
Innovations are new products, •INNOVATIONS ARE NOT
processes, or distribution or INVENTIONS
financing mechanisms that are
succesfully brought into the •innovation is an economic term
economic process (market) •innovation is lucrative

AND WHAT PROPELS INNOVATION?

The ENTREPRENEUR
in search of a SHORT-TERM • because at least for a time, the
MONOPOLY, which only an novelty that marks the innovation
innovation - except if there are makes it impossible for
laws to the contrary - provides competitors to get “into the action”
 But this is just half of the story...

There are innovations that are only good

for the entrepreneur, and there are
innovations that are also good for state,
society, and economy. And while
entrepreneurship is nice as such, the
interest for the state side and regions
lies in promoting it in precisely those
areas that have a “snowball effect” to
produce a general increase in
production and wealth.
Therefore, the question or challenge
implied in asking about regional
innovation culture is
not so much, or not only, about creating
an innovation-friendly culture,
but tocreate a set of innovation
incentives which are in line
with the existing culture!
Regional culture can ATTRACT innovation:
During economic globalization, which is marked
by a divorce of value-addition and physical
product, life remains “real” and must be lived.
Thus, to attract innovative business, as or
more important than tax advantages etc. may
be LIVING ENVIRONMENT and quality of life
for the innovators and their families…
… which are partially cultural, partially
infrastructural, partially natural (landscape and
climate), but they ARE promotable and should be a
focus of any regional innovation strategy.
Tartu Software
Micro Cluster
• There are about 50 software companies who
are employing about 1000 software
engineers in Tartu
• Skype thought that it is a good place to
recruit new people
• But people did not want to move so it was
forced to set up an software developement
office in Tartu, which became catalyst for
most succesful Cluster Initiative in Estonia
Therefore it is actually one of the best
strategies for a region that wants to
attract innovative enterprises and
entrepreneurs to create an environment
in which those people feel happy and
actually want to live.
 The basic description
 7 years programme 2007 - 2013
 The budget needed is 7 MEUR;
• National programme
• Part contracted out (50-70%)
• Potential applicants – universities, local
governments, NGOs, TTOs involving
private intermediates
 The main objectives

• To increase local interest and involvement in Education

and Research as a source for innovation;
• To promote conductive climate for innovation in Latvia;
• To increase investment in R&D and Innovation at both
regional and national levels;
• To use available resources to support and attract young
highly skilled professionals to strengthen Latvia’s
innovative capacity;
• To create a new and dynamic culture to existing
companies.
 Short term goals
• To promote an enterprise culture though educational
programmes and competitions at each of the three levels
of education;
• To develop a greater understanding of the importance of
enterprise creation among public and civil servants;
• To assist the formation and sustained development of
high potential start up businesses;
• To put infrastructure in place to support enterprise
creation.
 Existing SME Entrepreneurship Awareness
building

Creativity as a part of work Entrepreneurial education Regional innovation days

schools
Learn technology approach Innovation circus
Students’ business trainings
Best practices & championing PR campaign
Business plan competitions
Empower employees to take Internet
initiative Pre-seed pilot facility
Info – News
Promote investment in R&D Support to pre-incubators
Self Assessment tools,
IPR legal platform Investment readiness for handbook
researchers and engineers
Promote training culture Innovation Award:
Masterclass programme
Promote innovation bonus -Best innovative firm
systems in companies Train – trainers approach
-Best innovative product
Design pilot project
-Best article in mass media
SAP promotion

~2.0 MEUR ~3.5 MEUR

~1.0 MEUR
(need analysis/ intrapreneurs (potential entrepreneurs surveys)
surveys) (Regular monitoring)
 Outputs of the programme
Number of
• enterprise courses delivered, persons engaged in training and skills development
programmes(i.e. Investment readiness, Masterclass, Self-assessment tools & other
short studies)
• promotional activities undertaken such as articles in newspapers, magazines,
Interviews in TV, radio, presentations in relevant seminars, conferences, workshops
• enterprise competitions organised (Competition on Innovation prize)
• innovation awards organised, marketing plans of future entrepreneurs designed,
business plans created, enterprises supported/created (Competition of Youth
innovative business ideas)
• student firms created (Innovation and Marketing training for students)
• enterprise awareness programmes for public and civil servants organised (Best
practices)
• Lean technology approach promoted (value concepts, productivity, efficiency, sales,
new products introduced etc.)
MIDDLE term target: 200; FINAL target: 500 events
MIDDLE term target: 1000; FINAL target: 3000 enterprises approached
 Beneficiaries
Private sector: manufacturing companies and
the ones providing services
Public sector: governmental institutions, local
authorities, NGOs
“Support infrastructure”: business incubators,
technology incubators, technology transfer
contact points, universities etc.
Society: potential entrepreneurs
 Benefits from the programme
• More innovative and high growth start-up businesses in knowledge and
technological based industries
• More innovation and creativity in existing industries
• More “intrapreneurs”
• More focus on Global market opportunities
• More productive and competitive enterprises
• More high value job opportunities for graduates
• More spin-out enterprises from research projects
• Closer linkages between
industry and Universities.
 Selection criteria
• Need for financial support;
• Value for money;
• Ability to reach programme and measure
objectives;
• Spillovers generated jump of high effectiveness;
• Cost effectiveness;
• Potential to reposition of attitudes
• Impact on Regional Development
• Skills and experience
 Pre-seed Facility
Programme Model
Early Stage Finance Availability in Latvia
The early stage equity market for knowledge based start
ups in Latvia suffers from:
lack of investor ready projects
the dimension of the market, not big enough to allow proper
risk pooling
the perception of the risk/profit ratio by the operators, due to
the lack of specialization (and consequent asymmetry of
information) and to the dimension of the market
the difficulties of way out

 Existing equity gap (“valley of death”)

between idea and investor ready business plan

 Role of State in Early Stage
• Existing equity gap between idea
and investor ready business plan
• Private investors not interested

State needs to interfere

Basic R&D Applied R&D Pre-seed Seed Start-up
Expansion

Private sector funding

Public sector funding

Pre-commercial financing Commercial financing

 Role of Pre-seed Facility Business and Technology Incubators
Real estate
Incubator
Innovation Culture and Premises
Entrepreneurship Motivation Industrial networks
Basic daily services
Professional services
Business Forming new
plan start-up
Operational
Funding
company
Equity Incubator
Idea Dev. plans registration company
Idea with Market plan
comm. stimulation /
business idea Organisation
Applied value plan Asset management
and basic formulation Market
analysis Financial plan Early stage
R&D Prospect Seed capital
Entrepreneu Risk capital
rship Competent
education, Business culture Product
management
training Social attitudes Protection
Understanding of Development
failures Value
Greenhouses Competition Licensing
Education License to
Business labs cooperation
Outflow of IPR existing
Pre-analysis company
Master, PhD Commercial
protection
Marketing
Fiscal Technology Transfer System
Royalty
agreement
incentive
environment
Pre Seed fund IPS fund Seed fund
 Pre-seed Facility Model
Fellowship and
mentoring: Voucher to participate: Expert consultation:
− For researchers and − For participation in − Consultations with
research groups training courses and selected
− For engineers in seminars specialists/experts
companies

4 month x 300 EUR

On average 1500 EUR On average 3000 EUR
 1200 EUR

Promotion and awareness building of the programme

• Operated by private service management

company
• 6 year programme
– Initially 3 year pilot phase
 Innovation Culture is thus not about
having more technological innovations
 ... but it is about the right attitude and
understanding how to make best out of
innovations in your specific situation
Thank You for attention!

Pērses iela 2, Riga, LV 1442, Latvia

Phone: +371 7039410 Fax: +371 7039401
E-mail: valdis.avotins@liaa.gov.lv
http://www.liaa.gov.lv