RIS3 Final document ENG final...2018 (as a result public sources for domestic enterprises accounted for 15% in these enterprises, while in the case of foreign-controlled enterprises,

Final document

Complex analysis of barriers of applied and oriented research, experimental development and innovation in the Czech Republic and proposal for implementation of suggested measures in the programming period 2021-2027 for the National RIS3 Strategy 2021+

31. 3. 2020

Complex analysis of starting points and proposal for implementation of revised measures of National RIS3 Strategy 2021+ - Final document 1

Content

Introduction ................................................................................................................................... 3

Summary of implemented activities and following steps .............................................................. 5

1st phase (May–June 2019) ................................................................................................... 5

2nd phase (July–December 2019) .......................................................................................... 5

3rd phase (January–March 2020) ........................................................................................... 7

Updating the starting points of the RIS3 strategy ........................................................................ 8

Macroeconomic background of the Czech Republic ............................................................. 8

Knowledge intensity and innovativeness of the Czech economy ........................................ 13

Knowledge intensity ........................................................................................................ 13

Innovative performance ................................................................................................... 15

Selected indexes of competitiveness .............................................................................. 16

Megatrends .......................................................................................................................... 21

Demographic change ...................................................................................................... 21

Economy .......................................................................................................................... 22

Globalization .................................................................................................................... 22

Climate and environment ................................................................................................ 23

Politics and government .................................................................................................. 23

Society ............................................................................................................................. 23

Health .............................................................................................................................. 23

Resources ....................................................................................................................... 24

Technology ...................................................................................................................... 24

Analytical section ........................................................................................................................ 25

Research, development and innovation for business .......................................................... 26

Conclusions of performed analyses ................................................................................ 26

SWOT analysis ................................................................................................................ 31

Public research and development ....................................................................................... 34


SWOT analysis ................................................................................................................ 40

People and smart skills ........................................................................................................ 43


SWOT analysis ................................................................................................................ 48

Digital agenda ...................................................................................................................... 51

Conclusions of performed analysis ................................................................................. 51

SWOT analysis ................................................................................................................ 56

Strategic section – key areas of change .................................................................................... 58

Vision and Objectives of the National RIS3 Strategy .......................................................... 58


Key areas of change ............................................................................................................ 60

Research, development and innovation for business ..................................................... 60

Public research and development ................................................................................... 66

People and smart skills ................................................................................................... 70

Digital agenda.................................................................................................................. 76

Relationship of the National RIS3 Strategy to other strategic documents and programmes ..... 81

Innovation Strategy of the Czech Republic 2019-2030 ....................................................... 81

National Research, Development and Innovation Policy of the Czech Republic 2021+ ..... 82

EU Funds ............................................................................................................................. 82

Link of the National RIS3 Strategy to the OP Technology and Applications for Competitiveness ............................................................................................................................ 82

Link of the National RIS3 Strategy to the OP Jan Amos Comenius ................................ 85

Link of the National RIS3 Strategy to the Integrated Regional Operational Program ..... 89

Link of the National RIS3 Strategy to the OP Employment Plus ..................................... 89

National RDI Programs ........................................................................................................ 89

Community programs of the European Union ..................................................................... 93

Index of figures Figure 1 Share of GVA and employment in industry .............................................................................. 8

Figure 2 The share of exports of goods from the manufacturing sector in GDP Source: Eurostat ....... 9

Figure 3 Exports by selected destination countries in 2019 Source: CZSO ......................................... 10

Figure 4 GDP growth and GDP versus EU average between 2010-2018 Source: Eurostat ............... 10

Figure 5 Overview of the employment and unemployment rate in the CR Source: CZSO .................. 11

Figure 6 Labour productivity growth in the CR and the difference compared to the EU-28 Source:

Eurostat ................................................................................................................................................. 12

Figure 7 Foreign Value Added in gross exports of manufacturing........................................................ 12

Figure 8 GVA by type of ownership and sector .................................................................................... 13

Figure 9 Comparison of countries by knowledge intensity of economy and R&D expenditure per capita

in purchasing power parity in 2017 ....................................................................................................... 14

Figure 10 Share of R&D expenditure in GDP by sector Source: Eurostat .......................................... 14

Figure 11 Performance of innovative systems of EU member states in 2018 Source: European

Commission........................................................................................................................................... 15

Figure 12 Overview of sub-indicators in the European Innovative Scoreboard .................................... 16

Figure 13 Overview of the Czech Republic´s position according to selected international

competitiveness indices ........................................................................................................................ 17

Figure 14 Ranking of V4 countries within GCI 2019 – selected sub-indicators Source: WEF ............. 17

Figure 15 Selected sub-indicators of the Ease of Doing Business Index Source: World bank ............ 18

Figure 16 Overview of selected sub-indicators in the Talent Attractiveness Index by population groups

Source: OECD ...................................................................................................................................... 19

Figure 17 Overview of selected sub-indicators in the Social Progress Index ....................................... 20

Figure 18 Overview of megatrends ....................................................................................................... 21


Index of abbreviations BERD Business R&D expenditures

GCRDI Government Counsil for Research,

Development and Innovation

CTO

CZSO

Czech Telecommunication Office

Czech Statistical Office

DESI Digital Economy and Society Index

DIH Digital Innovation Hubs

EDP Entrepreneurial Discovery Process

EIS European innovation scoreboard

EC European Commission

EOSC European Open Science Cloud

ESIF European Structural and Investment Funds

ESPAS European Strategy and Policy Analysis System

EU European Union

GERD Gross domestic expenditure on R&D

GDP Gross domestic product

HPH Gross value added

ICT Information and communication technologies

ITIF Information Technology and Innovation

Foundation

KET Key enabling technologies

MIT Ministry of Industry and Trade

SME Small and medium enterprises

MEYS The Ministry of Education, Youth and Sports

NSP National Sustainability Program

NÚKIB National Cyber and Information Security Agency

OA Open Access

OECD Organization for Economic Cooperation and

Development

TA CR Technology Agency of the Czech Republic

TC CAS Technology Centre of the Academy of Science

of the Czech Republic

TiVA Trade in Value Added

R&D Research and Development

RDI Research and development and innovation

WEF World Economic Forum


Introduction

Project „Complex analysis of barriers of applied and oriented research, experimental development and innovation in the Czech Republic and proposal for implementation of suggested measures in the programming period 2021-2027 for the National RIS3 Strategy 2021+“ is executed on the basis of a contract between the Ministry of Industry and Trade (hereinafter referred to as “MIT” or “Contracting Authority”) and Ernst & Young, sro (hereinafter referred to as “EY”) dated 20 May 2019.

The Final document is the last report of the Project. The report summarizes all the outputs produced during the project in a structure similar to the current National RIS3 strategy.

The Final document contains the following chapters:

• Summary of implemented activities

• Updating the bases of the RIS3 strategy

• Analytical part

• Strategic part - key areas of change

• Link of the national RIS3 strategy to other strategy documents and programmes

The Report also includes annexes containing the analytical documents of the Project.

Annex 1. Analytical part - description of thematic areas

Annex 2. SWOT analysis - detail

Annex 3. General opinion on areas of specialization


Summary of implemented activities and following steps

1st phase (May–June 2019)

Between the contract signing in May and the end of June 2019, EY and MIT jointly implemented the following activities:

• Initial meeting of the EY project team and the MIT team on 24 May 2019.

• Other meetings of the EY project team with the MIT team.

• On the 18th of June 2019, a meeting of the Expert Working Group was held, which included representatives of the relevant implementation structure of the current and upcoming programming period, representatives of national support providers and representatives of the business and research sphere. These representatives discussed the results of an international comparison of RIS3 strategies, a proposal for the structure of the new National RIS3 Strategy 2021, an evaluation of the fulfilment of the long-term vision of the National RIS3 Strategy, a proposal for a new vision and a proposal for further action. In addition, cooperation with members of the Expert Working Group was agreed during the preparation of the National RIS3 Strategy 2021+.

EY has prepared analytical documents for the above-mentioned meetings.

The output of the first stage was document Preliminary concept in a given structure prepared as of 30. 6. 2019. This document contained in particular:

• methodology for approaching the creation of a comprehensive analysis and a work schedule

• summary of desk research strategic documentation and foreign RIS3 strategies

• draft structure of the updated National RIS3 Strategy

• evaluation of the fulfilment of the long-term vision of the National RIS3 Strategy.

2nd phase (July–December 2019)

At this stage, the following activities were implemented jointly by EY and the MIT:

• Individual meetings with members of the Expert Working Group and other actors of the innovation ecosystem. During this period, nine separate meetings with members of the Expert Working Group were held, where expectations of the new National RIS3 strategy, its orientation, weaknesses of the Czech innovation system and barriers to its development were discussed. Furthermore, the measures and key tools needed to further develop the innovation environment were discussed.

• Revision of the existing Chapter 3 of the National RIS3 Strategy Starting points for the Smart Specialization Strategy in the CR and drafting new text for evaluating competitiveness, the macroeconomic framework and an expanded overview of global megatrends (social and technological trends). The main source documents were:

• Country Report 2019

• EIS a RIS 2019

• Ease of doing business

• Global Innovation Index (World Bank)

• Global Competitiveness Report (World Economic Forum)

• Science, Technology and Industry Scoreboard (OECD)

• Analysis of the R&D state 2018

• Macroeconomics data from CZSO, EUROSTAT, OECD, CNB


• Megatrend analysis – e.g. Global megatrends for the updated strategic framework of sustainable development (Environment centre and TC CAS), OECD Science, Technology and Innovation Outlook 2018 (OECD), What’s after what’s next? (The upside of disruption, Megatrends shaping 2018 and beyond, EY), Table of radical innovation breakthroughs (European Commission) etc.

• Revision of the existing SWOT analysis, draft of a new SWOT analysis and its prioritization.

• The main inputs for preparing the SWOT analysis were desk research of strategic and analytical documents, supporting documents for development of Starting point for the Smart Specialization Strategy, interviews with members of the Expert Working Group and materials for preparation of the new operational programmes provided by representatives of the MIT and MEYS.

• The first version of the SWOT analysis was commented primarily by the members of the Expert Working Group. For this purpose, so-called focus groups were organised during august and september (e.q. with representatives of the Industry and transport association, Association of research organizations and representatives of regions).

• Based on the comments, the SWOT analysis was subsequently completed, and individual points of the analysis were prioritized. Prioritization was based on sending the SWOT analysis to members of the Expert Working Group in an online questionnaire, where each point of the SWOT analysis was evaluated in terms of relevance to the National RIS3 strategy (a scale of 0-10 was set for evaluating, where 0 = point should not be included in the analysis, 1 = less priority for addressing the National RIS3 strategies, 10 = one of the key priorities of the National RIS3).

• SWOT analysis was discussed at the round-table meeting in September 2019 with members of the Expert Working Group, including the results or prioritization (for each point, an average evaluation by all members of the Expert Working Group was given).

• After discussion with the contracting authority, to increase the informative value, the SWOT analysis was subsequently sent to other selected respondents for prioritization, e.g. to representatives of regions and NIP members. The points of the SWOT analysis listed below were ordered according to the prioritization results (median of the points earned).

• Describing problematic areas. Based on the already created analytical documentation and in relation to the SWOT analysis, a description of four main problematic areas/ key areas of change was drawn up (in the current National RIS3 Strategy Chapter 4 - Analytical Part).

• In particular, the source documents mentioned in Chapter 4 of the Preliminary Concept in the given structure were used (created as of 30.6.2019). Description of the problematic areas was created following the SWOT analysis structure (i.e. four main problematic areas).

• Preparing a set of objectives and measures. Based on prepared analytical documentation, interviews with experts and representatives of departments preparing the new EU FUNDS programming period, the first draft of strategic and specific objectives, key instruments and set of measures of the new National RIS3 strategy was drawn up. The draft of set of objectives was subsequently discussed and commented by members of the Expert Working Group.

• Linking the draft set of objectives with the intervention logic of operational programmes. By analogy to the current concept, the link of objectives to the intervention logic of new operational programs has been incorporated (in less detailed version also link to national support programmes, departmental and community programmes).

• Drawing-up other parts of the National RIS3 Strategy. Other required parts of the strategy, such as the relation of RIS3 to other policy and strategy documents chapter 6 in the current document), sub recommendation on smart specialization based on the revision of the existing chapter 8.1 - Areas of smart specialization in the Czech Republic and chapter 10.2 - Priorities of research, development and innovation identified through the EDP process within the National Innovation Platforms have been completed.

• Negotiations with the Expert Working Group and other actors. At this stage, two round-table meetings with members of the Expert Working Group were realized. At the September meeting, the SWOT analysis was finalized and the draft vision, set of objectives and measures were discussed. During the December meeting the Preliminary final document was introduced and discussed.


• Furthermore, a meeting with representatives of the regions took place, where the course and current outputs of the National RIS3 Strategy development were presented and also approach to the preparation of regional strategies was discussed.

Further negotiations were also held with representatives of the Ministry of Education, Youth and sport (MEYS) and MIT preparing the new programming period. In October, EY attended a round table with representatives of the European Commission, where the approach to developing the National RIS3 Strategy was presented.

3rd phase (January–March 2020)

At this stage, EY and MIT implemented the following activities:

• external examination (commenting) of the preliminary final document by the contracting authority, the members of the Expert Working Group and, where appropriate, other stakeholders

• focus groups with representatives of the Expert Working Group and other relevant experts to discuss the proposed objectives and measures of the National RIS3 Strategy. A total of 3 focus groups were implemented:

• February 5, 2020 at 10:00 am Focus Group covering key areas of change Research, Development and Innovation for Business and Public Research and Development

• February 5, 2020 at 1:00 pm focus group covering the key area of change People and Smart Skills

• February 10, 2020 at 9:30 am Focus Group covering the key area of change The Digital Agenda, where private sector and digitization institutions were invited in addition to the expert group members

• On 27 February 2020, the last round table with an Expert Working Group was held, during which the results of the focus groups and the vision of the National RIS3 Strategy were discussed.

• After the meeting of the Expert Working Group, the texts (especially the analytical part, strategic part, links to operational programs and analytical annexes) were commented by its members. The comments received were settled and incorporated into the Final document.

• As of March 31, 2020, the final version of the study was submitted, including the shortened version, executive summary and presentation (all in Czech and English).


Updating the starting points of the RIS3 strategy

In the following sections we present the final draft of updated texts for chapter 3 of the current RIS3 strategy. The texts are based on the background analyzes elaborated within the RIS3 strategy update.

Macroeconomic background of the Czech Republic

• We are an industrial country!

Even at the end of the second decade of the 21st century, nothing has fundamentally changed about the basic characteristics of the Czech economy, and the Czech Republic is also an economy significantly depending on the industrial sector. In 2018, the proportion of people employed in the industrial sector reached almost a quarter of the total number of people employed, and since the global economic crisis has subsided, this ratio has been slowly rising to pre-crisis levels. A similar situation and development prevail also in the case of gross value added, where the share of production and industry in the Czech Republic reaches approximately 30 %, although this figure has been slowly decreasing since 2015. Nevertheless, in the context of the European Union, we are considered to be one of the most industrialized countries, where a higher proportion of industrial sector in the gross value added has only Ireland.

Figure 1 Share of GVA and employment in industry Source: Eurostat, CZSO

Manufacturing industry is also crucial for the CR in terms of innovative activities and progress of research and development. In particular, companies from the sectors of electrical engineering and electronics are often part of multinational corporations with highly developed R&D activities. In engineering we can find in the Czech Republic a number of domestic companies with ambitions to play a more significant role in adapting to technological changes or creating new markets due to the

development of new solutions.1

The orientation of the Czech economy to the industry is explained, among other things, by the high inflow of foreign direct investment in the second half of the 1990s as a result of favourable cost conditions. At present, the volume of foreign direct investment continues to grow, and in recent years it has been at a rate exceeding the GDP growth. The ratios between the individual components of

1 Technology Agency of the Czech Republic; Analysis of macroeconomic and microeconomic data (INKA 2 -

Mapping of innovation capacities).


investment, i.e. equity capital, reinvested earnings and other capital, are stable, with equity investments representing 50 % and reinvested earnings representing 43 % of total investments.

The high impact of foreign direct investment, especially of strong multinationals, on shaping the character of the Czech economy has had many positive impacts up to now, as stated below, but has led to preservation Czech Republic's position as an industrial country and "assembly plant" and it has been more difficult to change the course towards a knowledge and innovation economy.

• With large export…

High share of industry also brings a strong export orientation (in a simplified way, strong exports can be illustrated by the ratio of exports to GDP, which currently reaches more than 80 %). Reflection of the character of the Czech economy, as described above, can then be observed in the commodity structure of exports, with the main component of exports being machinery and means of transport accounting for more than 55 % of the total volume. In addition to machinery and means of transport, semi-finished products and materials or industrial and consumer goods can be identified as the main items of export.

Figure 2 The share of exports of goods from the manufacturing sector in GDP Source: Eurostat

The structure of exports in terms of traded commodity groups has changed only slightly over the past ten years, while the volume of traded goods and their value have increased considerably. The share of foreign trade in GDP has long been rising and it illustrates the growing openness of the Czech economy. In the last decade, the share of export of goods to GDP increased by about 20 %. A higher degree of openness of the economy on the one hand allows for greater participation in global production and marketing chains, on the other hand, it means greater openness and greater sensitivity to external economic shocks.


Figure 3 Exports by selected destination countries in 2019 Source: CZSO

These parameters describing the openness of the Czech economy are further supported by the strong

dependence on trade relations with Germany, which accounts for almost a third of total exports. Thus,

cooling of the German economy may lead to a significant reduction in exports and to a deterioration of

the trade balance. However, experiences have shown that the development of exports in the Czech

Republic follows the economic situation in Germany with some delay.

In 2008 and 2010, the Czech Republic had a negative balance of foreign trade, since 2011 the balance has been positive. The total value of exports of goods in the first quarter of 2019 reached CZK 937.9 billion, which is 37.4 billion more than in the same period last year. Exports of all key articles grew year-on-year. However, imports grew faster than exports, which also led to a slight deterioration of the trade balance surplus by CZK 1.8 billion to 54.3 billion.

• … and maybe that's why we're doing so well...?

From the perspective of basic macroeconomic indicators, the current economic situation of the Czech Republic is very good. In addition to the aforementioned exports of goods and services, the gross domestic product is growing, albeit for the period 2013-2018, after the unwinding of effects of the economic crisis, the Czech Republic ranked 11th among EU28 countries in terms of average real GDP growth. However, the high growth rates of 2015 and 2017 are often attributed to one-off effects and the data for 2018, together with an outlook for 2019, predict a rather gradual slowdown.

Figure 4 GDP growth and GDP versus EU average between 2010-2018 Source: Eurostat

However, the Czech economy is currently in a good shape and according to the recent forecast it will continue to grow. Growth will be driven mainly by household consumption, which is enabled by

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Exports of the CR by Destination Countries, 2019

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increasing their income. In addition, growth will be supported by overall investment. Government investment spending will continue to grow due to the use of European funds and corporate investment will continue to be driven by rising demand and by an increasingly manifesting lack of available labour force.

In terms of GDP per capita, in recent years, respectively since the effects of the economic crisis have finally disappeared, the Czech Republic is gradually reducing the EU lead (EU28 average). In 2012, GDP per capita lagged by around 18 % compared to the Union average, in 2018 only by less than 10 %.

Forecasting of economic growth is becoming more complicated due to persisting and deepening uncertainties of the external environment, in particular the threat of a further slowdown in the German economy, where projected GDP growth rates for 2019 are gradually decreasing. And since growth in the Czech Republic is to a certain extent driven by growth in Germany due to the strong interdependence of the Czech and German economies, this is undoubtedly the most significant external risk. The expected slowdown of the Chinese economy, which is one of the most important export markets for German companies and thus also for Czech companies, should not be overlooked.

Figure 5 Overview of the employment and unemployment rate in the CR Source: CZSO

Situation on the labour market is also positive, as both the unemployment rate and the employment rate reach record values over the existence of the independent Czech Republic. The current outlook for 2019 then anticipates a continuing drop in the unemployment rate and stagnation or a slight decline in the employment rate. In 2018, the unemployment rate in the Czech Republic was even the lowest of all EU member states.

• However, some problems persist

However, this situation is manifested in particular by a general shortage of a skilled workforce, which has resonated in the public environment for several years. Also, representatives of companies in the Czech Republic perceive this lack of power as one of the most significant barriers to the development of RDI, resulting from the mentioned inquiry INKA conducted in the years 2017-2018. In addition to being unable to find workers, it is about their quality and their willingness to learn new things, which are generally perceived prerequisites for success of innovation.

The above-mentioned shortage of workers is related to the growth of nominal gross wage, which increased the growth rate from 2014 until the first quarter of 2019, when this value stopped at around 7.5 %. Nevertheless, the Czech Republic remains the 10th cheapest EU country in terms of labour costs and unit wage costs amounted to approximately 46 % of the EU-28 average in 2018, although this rate is one of the fastest growing countries in the EU.

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Figure 6 Labour productivity growth in the CR and the difference compared to the EU-28 Source: Eurostat

However, significant wage growth is not yet accompanied by labour productivity growth, which has not been close to the EU-28 average over the past nine years. In 2005, this indicator reached only 73.7 % and compared to 2010 in the Czech Republic, this value increased by 11.7 p.p. in 2018, which indicates convergence towards the EU average, but the pace of convergence is significantly slower than in region of Central and Eastern Europe with the exception of Slovenia.

This problem is related to the industrial character of the country described in the introduction of the analysis and also to the large export orientation, supported by the strong position of foreign firms in the Czech economy and the position of Czech companies in global supply chains, when the main part of the added value created by activities at the beginning and the end of the chain is imported and in the CR, the added value is generated mainly within the production.

Figure 7 Foreign Value Added in gross exports of manufacturing Source: OECD

These aspects are manifested, for example, by the origin of added value in the volume of exports, where in the Czech Republic, as in similarly oriented countries such as Slovakia and Hungary, the largest share of exports is value added created and imported from abroad. In the manufacturing industry, for example, this figure accounts for more than 44 % of exports in the Czech Republic, and although this is not the highest figure in the EU, this indicator shows the relatively large dependence of

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the Czech economy on foreign factors. The following chart shows a comparison of the situation with selected Central European countries and the development over time. There is a significant difference especially in the German economy, which significantly decreased the share of imported value added in exports in the last 10 years.

Figure 8 GVA by type of ownership and sector Source: CZSO

Strong influence of foreign companies is illustrated also in their share in total gross value added, respectively GDP, when the data of the Czech Statistical Office for 2016 report this share just below 30 %. In some sectors, however, this ratio is significantly higher, except for the processing industry, it is mainly information and communication activities, banking and insurance. While in the manufacturing industry the share of foreign companies is stable and rather slightly growing, in the other two mentioned sectors this share has declined markedly since 2008, which indicates the growing activity of domestic companies.

Foreign-owned firms are also an important part of the innovative ecosystem, in addition to their GVA share, as they help to develop the technical know-how and modernize the industry-oriented enterprises. They are also often significant investors in R&D&I, although the real impact of these investments on the Czech Republic is questionable (possible negative effects include, for example, draining labour from domestic SMEs, reducing the autonomy of domestic businesses approaching “wage labour”, building halls on arable land, etc.).

Knowledge intensity and innovativeness of the Czech economy

Knowledge intensity

Knowledge intensity of the Czech economy, expressed e.g. by the share of total R&D expenditures in GDP (GERD), shows a rather average position of the country in international comparison. With a ratio of investments into R&D of 1.93 % of GDP, according to preliminary Eurostat data, the Czech Republic ranked 10th in the EU in 2018, and especially in comparison with the strongest innovators who spend more than 3 % of GDP, the difference is significant. Thus, in 2018, the overall spending on research and development reached almost the level of 2014, when the historically best values were achieved.

Position of the Czech Republic is slightly worse in case of using a more generally accepted combination of the GERD indicator with the amount of expenditure on R&D per capita in purchasing power parity. As we can see below, although the knowledge intensity of Norway differs by about a quarter of a percentage point compared to the CR, R&D&I expenditure per capita is twice as high. R&D expenditure per capita in the Czech Republic is slightly below the EU average, although it is relatively close to

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advanced economies such as Canada or the United Kingdom. On the upper rungs we can find countries such as Israel, South Korea, Switzerland and Sweden.

Figure 9 Comparison of countries by knowledge intensity of economy and R&D expenditure per capita in purchasing power parity in 2017 (Note MX and IE data from 2016) Source: OECD

The knowledge intensity itself should be also supplemented by the structure of R&D expenditure according to the area of financing. In the case of business expenditures on research and development, measured e.g. by the so-called BERD indicator, the Czech Republic shows an increasing trend in comparison with the western EU countries, but it is significantly losing its dynamics compared to its Central and Eastern European competitors. Even so, most R&D&I investments are made in the private sector, which is good news for the Czech Republic due to the relative stagnation of the share of other sectors (government, university).

Figure 10 Share of R&D expenditure in GDP by sector Source: Eurostat

However, the share of business sector expenditure in total expenditure on research and development is still lower than in established market economies. Most R&D expenditures are realized by foreign-controlled enterprises and according to the Czech Statistical Office data their share in total R&D expenditures even increases. This fact is also confirmed by data from Eurostat, where the share of foreign sources of funds for R&D&I between 2016 and 2018 increased from 24 % to almost 32 %. By contrast, the share of private resources in 2018 probably decreased and reaches similar level as a share of government funding, i.e. one third of all spending. The example of countries ranked as

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innovative leaders (Holland, Sweden, Finland, Denmark) then shows that there is significant scope in the Czech Republic for increasing private investment in R&D&I, as these countries show a share of private expenditures ranging from 50 % - 60 %.

Innovative performance

A specific area is the competitive position in terms of innovative performance, which is usually measured by the professionally recognized European Innovation Scoreboard (EIS), whose edition for 2018 ranks the Czech Republic (again) among medium-innovative economies and 14th among the EU-28. This presents it as the most successful country in Central and Eastern Europe. Of the countries that joined the EU after 2004, only Estonia, which is already in the "Strong innovators" category, ranked higher. However, in comparison with the most innovative countries (Sweden, Finland, Denmark, et al.), the Czech Republic achieves one-third to even half lower values.

Figure 11 Performance of innovative systems of EU member states in 2018 Source: European Commission

Taking a closer look at the individual components of the EIS, the best results are in the areas of Employment Impacts, Innovators and Company Investments, where the CR achieves score above the EU average (first mentioned area), respectively is approaching more than 94 % (the other two areas).

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Performance of Innovation Systems in 2018


Figure 12 Overview of sub-indicators in the European Innovative Scoreboard Source: European Commission

In terms of historical development, the CR shows the greatest progress in comparison with the result of 2011 in the areas of Innovative Environment and Research Systems. In the first-mentioned area, the relative position of the CR against the EU average worsened in 2018 compared to 2011, which shows that other countries achieved higher growth dynamics in this indicator. In research systems, both the largest shift compared to the situation in 2011 and the relative position of the CR vis-à-vis the EU

average improved. Overall, both Financing and Support2 and Innovators (with a relatively good position

against the EU average) are showing a negative trend in both directions.

Selected indexes of competitiveness

The initial situation of the Czech Republic can also be supplemented by the view of selected indices of international competitiveness, which often address topics and areas relevant to R&D&I in individual pillars and thus offer a comprehensive view of the situation in the country.

The Global Competitiveness Index is one of the most widely used tools for measuring the country's international competitive position. In addition, if we look on the position of the Czech Republic in terms of its position in more specific indices of Doing Business, Indicators of Talent Attractiveness and Social Progress Indexes, then we will get a picture of a country with a relatively high quality of life, not too business-friendly conditions and with rather average ability to attract talented students, highly qualified employees or businesses. In fact, human resources are an essential part of innovation capacities of the economy. Recruiting and, above all, retaining talented individuals plays a crucial role in the future prosperity of the country. Creating favourable conditions for residents in a given country allows the company to move forward, including the area of research and development, innovation, use of new technologies, increasing productivity, etc.

The following figure summarizes position of the CR in the most recent issue of index and the change from the last measurement.

2 However, this indicator is fundamentally affected in 2018 by the unnaturally low value of the Venture Capital

Expenditure indicator, which significantly distorts and undermines the interpretation of this area. By contrast, in the second indicator in this area, i.e. public expenditure on research and development, the Czech Republic recorded a relative improvement in its position vis-à-vis the EU compared to 2011.

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Development of Sub-indicators in the CR in Comparison with the EU in 2011

Summary Innovation Index Research systems Finance and support

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Dopady zaměstnanosti


Figure 13 Overview of the Czech Republic´s position according to selected international competitiveness indices Source: Mentioned indexes, own elaboration

In 2 of the above-mentioned indexes, the Czech Republic recorded a drop-in placement in the last measurement (Talent Attractiveness was released for the first time in this form). A closer look at the individual indices then reveals specific areas where the CR stands out, or vice versa lags behind other developed countries.

• Global Competitiveness Index

In terms of international competitiveness, summarized for example through the Global Competitiveness Index, which is prepared annually by the World Economic Forum, the Czech Republic ranked 32nd in 2019 Report.

This is in comparison with the previous year by 3 rungs below. This index is based on 4 main pillars - the necessary environment, human capital, markets and innovative environment - further divided into dozens of sub-indicators. The Czech Republic achieves the best results in the areas of Macroeconomic Stability, Health and Infrastructure. Among the areas with significant potential to improve then falls the Innovative Capability, Institutions or Product Market

Figure 14 Ranking of V4 countries within GCI 2019 – selected sub-indicators Source: WEF


Within the Visegrad Group, the Czech Republic (32nd) performs the best in terms of this index, followed by Poland (37th), Slovakia (42nd), and Hungary (47th) hit worst in 2019. When evaluating within the group, the Czech Republic was not ranked first in only three areas - Adoption of ICT, Product Market and Market Size.

Regarding the aforementioned low innovation score, the median of these values remains very low worldwide (38 out of 100), and the CR is evaluated weakly as well. Only 4 countries score more than 80 b.p. These are Germany, the USA, Switzerland and Taiwan (China). This fact is not surprising, given that creating a functioning and efficient innovative ecosystem requires a complex approach and action in many different areas. The innovative environment in the Czech Republic is assessed negatively mainly due to the aversion of Czech companies towards taking business risks, low diversity of the workforce, weaker growth of innovative companies or low sophistication of Czech consumers.

• Doing Business Index

The development and growth of existing and new companies require a favourable business environment. Besides, as already mentioned, foreign companies play an important role in the Czech economy, including in R&D. Whether a foreign company enters or relocates to the Czech market, it is very closely related to the conditions and ease of doing business in the target country. In the assessment of conditions of Doing Business Index according to the World Bank criteria, the Czech Republic ranked 35th this year. Compared to 2013, when it ranked 65th, it is a significant shift. The level of resolving insolvency and trading across borders was rated the best. The historical development of selected categories can be seen in the figure below.

Figure 15 Selected sub-indicators of the Ease of Doing Business Index Source: World bank

The Czech Republic even occupied the first place in cross-border trading, which can be seen as one of many proofs of openness of the Czech economy. Most of the exports go to EU countries. The ability of companies to establish themselves in foreign markets, especially in those which are demanding - where there is a higher rate and quality of competition - is one of the main factors of successful economies. However, this is only a constituent area of this index. A significant shift up the ranking can be observed also in the area of tax payments, where the Czech Republic currently holds the 45th position, which is an improvement of 75 positions since 2013. The Czech Republic improved sharply in 2017, after the electronic evidence of revenues was introduced.

Conversely, in the evaluation, there was noticed a slump in the building permits process, in the process of starting a business or in the enforceability of contracts. In all areas, the Czech Republic is rather deteriorating. For example, in the case of the building permits process, the Czech Republic ranks 156th out of 190 countries and the score in this indicator is worse than in 2013. A similar situation and

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Development Evaluation of the CR in the Ease of Doing Business Index(desirable level = 100 on a scale of 0-100)

2019 2017 2015 2013


deterioration compared to 2013 is evident in the enforceability of contracts, which is an area important for the inflow of foreign investments with higher added value and for the development of domestic business.

• Talent Attractiveness

According to the Indicators of Talent Attractiveness index, which examines the ability of countries to attract foreign entrepreneurs, students or university-educated employees, the Czech Republic does not excel too much, rather the opposite. Out of 36 member states of the Organization for Economic Cooperation (OECD), the CR ranked in the sub-indicators worse than 30th in five cases in total.

Figure 16 Overview of selected sub-indicators in the Talent Attractiveness Index by population groups Source: OECD

For all types of examined target groups, i.e. educated employees, students and entrepreneurs, the Czech Republic received a negative assessment in the area of family background and inclusion. This indicates unfavourable living conditions for family members as well as the overall low number of foreign students or workers in the Czech Republic and their kind acceptance by the Czech society. The data also show that the Czech Republic is one of the most unattractive countries for foreign students. By contrast, foreign entrepreneurs in the Czech Republic will appreciate the favourable situation in the area of income and taxes, thanks to a stable price level and low wage costs. For highly educated workers, the Czech Republic offers opportunities to obtain a quality job matching their qualifications.

• Social Progress Index

According to the social progress indicator Social Progress Index, which measures the overall quality of life, the Czech Republic belongs among the developed countries. This is confirmed by the high annual position in international rankings. In most of the sub-indicators we improve every year and in the area of nutrition and basic health care, personal rights and access to advanced education, there has been a jump-shift of more than 10 points from the total number of 100 points in the monitored period. However, not all aspects of the quality of life are improving in the Czech Republic. Deterioration can be observed in access to information and in environmental quality, which has seen a dramatic decline in the current year.

The overall score of social development improved in the examined period, i.e. between 2014 and 2019, but in the overall ranking of 146 countries we did not move, which is suggesting an overall positive international development in this field. In 2019, in the last monitored period, it was possible to compare the Czech Republic with countries with similar GDP per capita and thus obtain a relative overview. The

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development

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Evaluation of the CR according to the Talent Attractiveness Index(desirable level = 1 on a scale of 0 - 1)

Tertiary-educated workers Entrepreneurs University students


data show an above-average high proportion of students at internationally recognized universities. By contrast, in the area of online government or GHG, the CR exhibits below average results.

Figure 17 Overview of selected sub-indicators in the Social Progress Index Source: Social Progress Imperative

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Development Evaluation of the CR in the Social Progress Index - Selected Sub-indicators

(Desired level = 100, on a scale of 0 - 100)

2014 2016 2018 2019


Megatrends

The external factors that influence or may affect the competitiveness of the Czech Republic in the future include the so-called megatrends. The approach to their definition, the number and the degree of impact vary widely through literature, but in general, a total of 24 basic trends can be identified in the 9 broader areas, illustrated in the figure below. Trends are often interconnected with each other, support each other and balance each other out. At the same time, trends cannot be unequivocally classified as opportunities or threats, as most trends carry a hidden opportunity to discover new economic models of functioning, accelerate technological progress or demand for more effective solutions to current issues. At the same time, a major threat to the competitiveness can be no or insufficient response to changes, whether in terms of direct impact of the trends or the relative lagging behind its neighbouring countries, which will be in new sectors and new markets more successful.

Figure 18 Overview of megatrends

For the purposes of the RIS3 strategy, we summarize the main expected impacts of these trends on the Czech Republic below, with particular emphasis on the business environment, science, research and innovation. Given the nature and objectives of this strategy, the view which prevails is opportunities identification, presented by megatrends, although the main threats are not completely forgotten.

Demographic change

In the area of demographic change, the Czech Republic is particularly facing an aging population and the proportion of elderly people in the population will increase rapidly. This process will have two major consequences. The first is the increasing pressure on public budgets, which may eventually even lead to a threat to public funding for science and research. The gradual search for alternative financing models based mainly on private funds is therefore one way to counter this threat. The second consequence of an aging population will be a change and increase in demand for new types of services

for the elderly, especially in the health and social services sectors. The World Economic Forum3 then

mentions, as one of the possible impacts, an increased risk aversion observed in the elderly population, which may contribute to lower overall innovation and entrepreneurial activity, which is generally one of

3 https://www.weforum.org/agenda/2019/10/ageing-economics-population-health

https://www.weforum.org/agenda/2019/10/ageing-economics-population-health


the existing problems of the Czech innovation and research environment.

The second aspect related to the demographic change is also urbanization, which in the Czech context entails the opportunity for the development of small towns built on the concept of "smart city" or "smart region" at higher territorial administrative units, which use advanced and intelligent technologies, including innovative solutions that enable significant energy savings, improve the living standards of their population, minimize the environmental impact, optimize transportation or enable efficient data usage for public purposes. At present, however, support for these concepts is rather fragmented and under the responsibility of individual cities. Greater coordination and support for the development of smart solutions, e.g. in a similar way to the “Smart Czech” project, can speed up and streamline the whole process.

Economy

Trends in the global economy are very difficult to estimate or generalize, given the unpredictability of economic crises. However, what the current studies agree is the growth of the middle class and the shift of the world´s economic centre of gravity. In the Czech Republic, the proportion of the population belonging to the middle class is relatively high and its wealth is growing at an above-average pace. Thus, we can expect an increasing demand especially for more luxurious goods, but also a demand for more efficient, environmentally friendly solutions and innovations, which are generally associated with the growing importance of the middle class.

The increasing wealth in developing countries and their significant increases in R&D&I spending then pose a risk to some of the research activities of large multinational companies of being shifted from the Czech Republic further to the east, especially to China or India. Increasing competition in the market for innovation and new technologies requires higher patent protection of domestic products, which is an area where the Czech Republic also lags behind the competition from more developed countries. Greater openness and easier mobility then increase competition for domestic researchers and entrepreneurs in international research teams and on foreign markets; on the other hand, it may be an opportunity to motivate quality researchers from developing countries to work in the Czech Republic and thus support the internationalization of Czech research.

Globalization

In a way, globalization is a superior megatrend, as it affects all other areas mentioned in the text. The specific consequences related to greater interconnection, coherence and dependence of individual economic, socio-cultural, financial, production, environmental and other systems are the emergence and growth of new players and increasing human mobility.

In particular, transnational, non-governmental or other organizations are new actors that are rapidly gaining momentum on a global scale compared to the 20th century. These can significantly affect e.g. the demand for a certain type of solution or technology (the impact is particularly visible in the area of environmental improvement) and be initiators and drivers of innovation in the country. Their involvement, for example in the development of public policies to support research and innovation, can thus bring about positive synergies. In the Czech Republic, there is generally a significant impact of large multinational companies on both the economy and the R&D&I environment. Increasing globalization can further strengthen this influence, but it can also be an impulse and an opportunity for the rapid development of new domestic firms.

The disappearing borders and the reduction of distance between people, thanks to digital technologies, then, in addition to the aforementioned competition from developing countries, provide an opportunity for Czech companies and research institutions to support internationalization and make the working environment more attractive thanks to greater flexibility, e.g. by supporting teleworking, and thereby ensure greater productivity.

Antiglobalization tendencies, such as Brexit or the current policy of US President Donald Trump, have the opposite direction. These two facts are connected by their anti-globalization character. The United Kingdom is one of the key foreign trade partners of the CR and its departure from the EU will affect


Czech companies and economy, especially the automotive industry, for which the potential trade war between Europe and the United States could have a devastating impact.

Climate and environment

On the one hand, climate change is a major threat to a significant part of the world's population, but on the other hand, it brings the opportunity of a strong accent on this area by the European Union (latest such activity being for example the “Green Deal”) and other major players on the world market, especially China. This emphasis is manifested by a radical increase in expenditure to prevention and climate change mitigation and to environment promotion in general. These means present an opportunity for the CR to focus on research and development in the sectors affected by this trend, namely bioeconomy, circular economy, low-carbon technologies, energetics etc.

In the context of the ongoing degradation of ecosystems, loss of biodiversity and the problems of soil contamination is another key area of agriculture, where there will be huge scope for the development and implementation of innovative, environmentally friendly processes. Due to the intensive nature of agriculture in the Czech Republic and high average size of farms, adaptation to new trends in agriculture will be a key factor for its successful development, given the increasing support for smaller farms.

Politics and government

In the area of politics and governance is the expected continuing polarization of society that can be supported in the Czech Republic mainly by the estimated loss of jobs due to automation and robotics. This threat may lead to the strengthening of extremist political movements, weakening the existing ruling elite and pressure against innovation, technological progress and globalization in general.

Politics is also related to the way war conflicts are fought these days. An increasingly hybrid form of conflicts in the international field and thus places new demands on national defence, especially in the area of cyber security. Even in the CR, there is a steep rise in the number of cybercrime cases, while cyber-attacks can be registered across sectors, including health care. The development of new means of defence against these threats and strengthening the security of the whole economy is thus a critical issue for the state.

A specific part of modern conflicts is the fight in the field of information, where the state is exposed to a targeted onslaught of deliberately false information, the so-called disinformation. Increasing the information and IT literacy of the population, as well as supporting and promoting a scientific approach and evidence-based policy, can act as appropriate tools for preventing such conflicts.

Society

There are several changes in society connected to the megatrends, of which the growing influence of individuals and small groups of people can be mentioned. More and more information is freely available as a result of more intensive promotion of so-called open access and evidence-based approaches which, among other things, enable faster dissemination of new knowledge and skills. A related effect is then the empowerment of women in the labour market or the composition of households and families. There is a relatively large gap between the employment rate of women and men in the CR, and thus an increase in female participation in the labour market could at least partially offset the future loss of the economically active population as a result of population aging. The role of women in R&D&I, increasing their numbers in research teams and especially in managerial positions in Czech science, is a challenge for the future and a means of increasing the number of high-quality research and development workers in general.

Health

The health status of the population is currently affected by factors other than in the past, which is leading to an increase in lifestyle diseases. These require a different method of treatment and in particular provide an opportunity to strengthen prevention. New technologies then provide an opportunity for the food industry to develop healthier foods and supplements, but also for the health sector in the context


of increasingly effective health monitoring, forecasting and detecting the causes of diseases such as cancer, diabetes or heart disease.

These problems then put pressure on the sustainability of current healthcare funding, which is largely in the hands of the state. Increasing efficiency, cost savings and strengthening prevention and citizens' interest in their health with the help of modern techniques and digital technologies are thus opportunities to prevent this threat.

Resources

Dwindling resources are a global issue, and in the Czech Republic, the problem lately resonates particularly in relation to energetics, water supplies and precious raw materials. The support declared by the European Union to renewable energy sources is thus an essential opportunity to change the Czech Republic's energy mix towards greater diversity. The development of technologies, particularly for the storage of energy from renewable sources, is then a key sector that will set the trend in this area in the future. In view of the fundamental role played by the automotive industry in the CR, the challenge of gradual switching to electric vehicles and ensuring sufficient energy for their operation (ideally from renewable carbon-free sources) there is an opportunity to be an important player in this field in the future.

More efficient use of existing resources, ecological recycling of raw materials, reduction of water consumption and tools for its capture are then trends across sectors of the economy, which may also encourage economic growth through innovation.

Technology

The dynamics of technological change evince an increasing trend, but at present, it is possible to observe shortening of their diffusion and acceptance by the majority society. Therefore, anticipating the advent of new technologies is becoming an increasingly difficult task, although advanced projection techniques, based e.g. on artificial intelligence, are nowadays available. Therefore, it is necessary to monitor and evaluate technological trends across sectors on an ongoing basis to adjust their reasonable state support. With digital innovations and other forces, the borders between different areas of the economy are dissolving; so basically, new industries are created, which cannot be properly or can be very difficultly incorporated into conventional sectoral categories.

The common denominator of new technologies is, in particular, digitalization, which permeates across sectors and will indicate the future direction of development. The cost of equipment and computer technology will continue to decline, while the increase in the use of methods of "open source" development will provide greater opportunity for success of new businesses, individuals and entrepreneurs in emerging markets. In the CR, the public sector has responded to this subject with the strategy „The Digital Czech Republic“, which represents a comprehensive concept of the digitalization of the Czech Republic for years to come.

Nowadays, there are plenty of technological trends, far beyond the scope of this chapter. Therefore, it is necessary to set up a system for their monitoring and anticipation, which should be an integral part of the RIS3 strategy itself. The initial parameters may be approaches to categorization of technologies applied by OECD (4 basic categories - digital technologies, biotechnologies, advanced materials, energy and environment) or by the European Commission through the concept of KETs (materials and nanotechnologies, photonics and micro- / nano-electronics, science technology, artificial intelligence, digital security and connectivity) and FET (Future emerging technologies) within the Horizon Community program (e.g. graphene, human brain, quantum technology…).


Analytical section

The analytical section is divided into four key areas:

• Research, development and innovation for business

• Public research and development

• People and smart skills

• Digital agenda

The objectives of the National RIS3 strategy are also divided into the same key areas. This breakdown is partly based on the previous version of the National RIS3 Strategy for 2014-2020 and also on the priorities of the European Commission for the new programming period 2021+.

This chapter is based on dozens of different data sources and existing analyses. In particular, more than 70 documents were used. The resulting text is, to a certain extent, a meta-analysis and summary of existing analyses, which in one part works with the source data and in other one takes over texts from already existing analyses. At the same time, it has to be noted that a number of measures have been taken recently or are currently being prepared, so that some statements may become invalid.

The analytical section contains a summary and a SWOT analysis for each of the four key areas. A detailed description of each of the key areas is, given the scope of the text, set out in Annex 1.

Approach towards creation of SWOT

• What is meant by strength and weakness, opportunity and threat:

• generally, strengths and weaknesses describe the current state (and are rather internal, influenced by us - in the sense of public administration) while opportunities and threats relate to the future, with a 5 - 7-year perspective (and are rather external, i.e. we don’t always influence their occurrence)

• strengths and weaknesses are based on resources, data and statistics (it is not a complete list of documents where the same information can be found), opportunities and threats on the other hand only in some cases (there is more space for expert judgment)

• however, the boundary between assessment of the current situation and future development is not sharp; some points can be classified in different ways, depending on the point of view – for example, the point “promoting start-ups and services for the SME growth“ may be a weakness but also an opportunity – if we want to emphasize that some activities in this area are already being realized, they are positive and it is desirable to further develop them.

• Elaboration:

• the aim was to define the key characteristics of the areas on the basis of available background documents, information and data

• our intention was to capture everything essential, but at the same time keep the SWOT analysis sufficiently brief and clear (i.e. not to focus on capturing as much detail as possible)

• the aim was also to maintain a similar level of detail for individual points, which was not possible in all cases, so some points are more detailed than others

• within the SWOT analysis, we focused mainly on the weaknesses (barriers for development of the given area), these were the basis for creating the set of horizontal objectives and related measures

• the individual points of SWOT analysis are ordered according to priorities, which came from the survey among the members of the Expert Working Group and other stakeholders; detailed results of prioritization are listed in Annex 2.


Research, development and innovation for business

Conclusions of performed analyses

Supporting research, development and innovation activities is crucial for every country, not only in terms of supporting economic growth and development, but also in terms of societal development and its ability to respond to current trends and challenges.

Government policy is very important in this regard, as the state creates both conditions for business and economic development, and through its innovation policy also defines its focus and the way in

which research, development and innovation is supported. 4

However, it is necessary to have a very good knowledge of the current state for proper innovation policy targeting. A more general characteristics of the Czech economy is contained in previous chapter. Nevertheless, it is also important to focus more closely on the innovation performance of Czech businesses, which is low in international comparison.

There are several reasons for this. The more general and beyond the scope of the companies themselves are mainly insufficient performance and quality of public research and development, insufficient quality of education (these areas are discussed in the following chapters) and business environment containing many barriers. Barriers for business mean, in particular, unfinished transport infrastructure, lack of stable and motivating business environment as well as poor efficiency and performance of public administration and relatively high administrative burden.

The causes of low innovation performance of companies coming from the business sector itself have historical roots. The Czechia has a strong industrial tradition dating back to the times of the Austro-Hungarian empire, which, however, was disrupted by the Second World War and subsequent political and economic development (communist dictatorship linked with the nationalization of Czech companies and centrally planned economy). The transition from a centrally planned economy after 1989 was characterized by privatization, the inflow of foreign direct investments and a gradual transition to an export-oriented economy model with cheap labour, but also low added value.

Thus, the Czech economy gradually turned into a traditional market economy, which was in the long run growing. At the same time, however, the current state of the Czech economy can be characterized by an inadequate performance of the endogenous entrepreneurial sector, the position of Czech companies at the lower levels of global supply chains, the dominant position of foreign companies and the position of Czech branches within multinational corporations. Meantime Czech companies do not have sufficiently developed market competences, and, to a certain level, they have only low aspirations

and are distant from the end-customers within international markets.5

As a result, Czech companies are focusing on lower-order innovations, they have low productivity and added value compared to other developed countries. Compared to the rest of the world, business sector generally spends less on research and development activities, and these investments are mostly made by large (foreign) companies.

It is necessary to react to this situation. With the increasing industry digitalization and robotization as well as the technological development of non-European countries (e.g. South-East Asia), the model of economic competitiveness based on cheap and qualified labour is gradually depleted, which may result in foreign investors leaving and relocating production to other countries. This would have a significant impact on whole economy, its growth, the level of unemployment etc. In addition to the necessary change on focusing on activities associated with higher added value, it is crucial to respond to current technological and social trends.

Based on the analyses, researches and negotiations with stakeholders (the key players), the following four main problem areas were identified:

4 Marianna Mazzucato; Mission-Oriented Research & Innovation in the European Union

5 Technology Agency of the Czech Republic; Analysis of macroeconomic and microeconomic data (INKA 2 -

Innovation capacity mapping)


1. Low added value and focus on lower-order innovations

2. Inadequate performance of the endogenous entrepreneurial sector

3. Inadequate entrepreneurial environment

4. Necessity to react to technological and social trends

Problem area 1: Low added value and focus on lower-order innovations

The Czech Republic is a highly export-oriented country, due, among other things, to the abovementioned transition of centrally planned economy and the associated significant foreign investment inflow. Foreign companies have been using the Czech Republic as a production base serving primarily the European market. Foreign controlled enterprises are also often among the most important exporters in the key sectors of our economy.

Related to the information above is the fact that despite the ongoing changes and development of the Czech economy, our economic model is still based on the use of cheap and at the same time qualified labour. Compared to advanced economies focusing on knowledge-intensive activities and activities with high added value, we achieve lower added value and lower productivity. It was localisation of production capacities of foreign investors and their subcontractors (both Czech and foreign) on one hand, that led to employment growth and overall economy performance, but on the other hand, these companies are in lower positions within global value (supply) chains, which has several consequences – including lower added value, innovation activity and productivity.

Specifically, in terms of productivity, we reach 79% of the EU average and 75% of the OECD average, which indirectly refers to the low knowledge-intensity of our economy. In the case of added value in 2016, only 62% of the value of exported products was created in the Czech Republic. Countries such as Germany or Austria create much larger share of the added value of exported products directly within their own economy (e.g. in the case of Germany, this represents more than 80% of value of exported products). This reason is, among other things, that companies in these countries have functional specialization much more focused on the activities at the beginning and the end of production chains,

where the major part of the added value is generated.6

Higher-orders of technical innovations are poorly represented in Czech companies, respectively, Czech companies focus on lower-order innovations. The weak demand of companies for higher-order innovations (or insufficiently intensive use of R&D results) is indirectly evidenced by a significantly lower share of enterprises in total research and development expenditures. In 2018, according to a comparison of the European Innovation Scoreboard, business R&D expenditure in the Czech Republic

reached 83% of the EU average.7

Also, the mapping of innovation capacities carried out by the Technology Agency of the Czech Republic confirmed that many companies belonging to the Czech Republic as a leader in innovation do not need extensive R&D activities. They focused on the implementation of lower-order innovations, often by adopting foreign innovations of technical nature and adapting them to special markets or optimizing

them and using them more efficiently at lower costs.8

The weak representation of higher-order technological innovations is also evidenced by data on the export of knowledge-intensive services, which include sale revenues of patents and licenses for the use of industrial property. These data show that in 2018 the Czech Republic accounted for only half of the

EU average in terms of its share of knowledge-intensive services in total services exports.9

6 Technology Agency of the Czech Republic; Macroeconomic and Microeconomic Data Analysis (INKA 2 -

Innovation Capacity Mapping), page 28-36 7 European Commission; European Innovation Scoreboard 2019

8 Technology Agency of the Czech Republic; Macroeconomic and Microeconomic Data Analysis (INKA 2 -

Innovation Capacity Mapping), page 173-174 9 Technology Agency of the Czech Republic; Macroeconomic and Microeconomic Data Analysis (INKA 2 -

Innovation Capacity Mapping), page 168-169


Problem area 2: Inadequate performance of the endogenous entrepreneurial sector

Total expenditure on research and development in enterprises has been increasing in recent years, reaching almost CZK 58 billion in 2018. However, the vast majority of these expenditures were made by foreign-controlled enterprises, while the share of foreign-controlled enterprises in R&D expenditure is increasing (in 2013 the share of foreign-controlled enterprises in total enterprise R&D expenditure was 56%, compared to 66% in 2018). The lower level of own R&D investment in domestic companies is also evidenced by the different ratio of R&D public co-financing, where almost two thirds of public sources went to domestic companies in 2018 (as a result public sources for domestic enterprises accounted for 15% in these enterprises, while in the case of foreign-controlled enterprises, public funds accounted for only approximately 1% of R&D

expenditure)10

. This situation poses a threat that corporate R&D will be dominated by foreign-controlled companies and thus the desired development of endogenous companies, their knowledge intensity and added value will not thrive. The main threat is the fact that the activities, focus and business model of foreign-controlled enterprises are decided by parent companies abroad, which may also decide to withdraw their activities from the Czech Republic. At the same time, however, the presence of foreign concerns, the development of their R&D activities and investment in activities with higher added value are opportunities for the Czech Republic.

The most important players in business research and development are large companies, which, thanks to their size, can afford extensive R&D capacities. As a result, unlike SMEs, they can focus more on future technologies that have no immediate commercial benefit. At the same time, R&D activities with a low level of market readiness are associated with higher orders of technical innovation and there is also greater scope for cooperation between the business and research sector. In addition, the Czech specificity is the concentration of research capacities in a relatively small number of large companies that are often under foreign control (for example, Škoda Auto represents a significant part of corporate R&D expenditure). Thus, the Czech Republic does not have a broader base of high-tech companies in

higher value-added positions in global value chains.11

The lack of strength of the endogenous business sector is also illustrated by the difference in added value between domestic and foreign-controlled enterprises. For example, in the manufacturing sector, foreign-controlled enterprises generate approximately two thirds of added value, while in the automotive industry this share exceeds even 90%. Foreign-controlled companies have 25% higher costs per employee, but also significantly higher labour productivity and turnover. Moreover, the differences in labour productivity and added value between domestic and foreign-controlled companies have hardly

changed since 2008.12

The main obstacles to strengthening the endogenous business sector are insufficient market competencies (for example, a lack of ability to identify new business opportunities), underdeveloped entrepreneurial skills and the entrepreneurial spirit itself. Czech companies are less aware of the needs of end customers in relation to their position within multinational corporations as well as within global supply chains (where they focus primarily on production), which is a barrier to a greater focus on higher

order innovations. 13

The problem (and at the same time a barrier to the development of the endogenous business sector) is also the not fully developed system of venture capital and start-up financing and not always clear and complex rules for creating spin-off companies.

Problem area 3: Unsatisfactory business environment

10

Czech Statistical Office; Research and Development in 2018, page 15-16 11

Technology Agency of the Czech Republic; Macroeconomic and Microeconomic Data Analysis (INKA 2 - Innovation Capacity Mapping), page 177-178 12

European Commission; Country Report 2019, page 38 13

Technology Agency of the Czech Republic; Macroeconomic and Microeconomic Data Analysis (INKA 2 - Innovation Capacity Mapping), page 167-171


An important barrier to innovation and entrepreneurship in general is the lack of efficiency and effectiveness of public administration, as well as significant administrative and regulatory burdens. It is in these aspects that the Czech Republic fails to improve significantly. According to a flash Eurobarometer survey in 2018, 69% of Czech companies perceive administrative and regulatory

burdens (other than costs) as a significant obstacle to investment.14

Another problem related to insufficiently functioning public administration is the lack of a stable, predictable and motivating business environment. In the assessment of conditions for Doing Business according to World Bank criteria, the

Czech Republic ranked 35th in 2019, so it is below the OECD average.15

There is also scope for improvement in reducing fragmentation of support for SMEs. According to a World Bank study, the method of managing support for small and medium-sized enterprises in the Czech Republic is complex, marked by considerable fragmentation and overlapping activities. Several ministries and agencies, as well as local and regional authorities, have a role in policymaking towards

SMEs.16

Another barrier to the dissemination of innovations is the lack of infrastructure enabling testing of research and development results for further use in the final production. Although there are established centres in the Czech Republic, for example, under the Operational Program Research and Development for Innovation, and various science and technology parks, SMEs, in particular, have limited access to this infrastructure which is often linked to personal contacts. The openness of the existing infrastructures, their offerings and awareness in general is still insufficient. Furthermore, there is a lack of comprehensive specialized services for innovative enterprises, both in terms of the mentioned availability of the test infrastructure and in terms of expert services. For example, in the area of digitisation, it would be beneficial for a small company if it could use the expert services to analyse the company and its processes in terms of digitisation and subsequently propose customise solutions (these services are relatively easy to access in developed innovative countries).

Problem area 4: The need to respond to technological and societal trends

Czech companies and the economy as a whole need to respond to global development in many different aspects. The model of economic competitiveness based on the cost differential (primarily low wages) has been exhausted, moreover, the Czech Republic and Europe are increasingly threatened by the

technologically and industrially expanding countries of Southeast Asia.1718

The further growth and development of the Czech economy is to some extent hampered by the lack of labour and production capacities. Investing in technology is thus one way of compensating for the lack of work capacity, but at the same time it is also a way to increase the needed productivity.

Robots and automation are one of the most important technologies that can reverse the global trend of decreasing productivity growth. Productivity improvement in many industries will depend on much better and cheaper robots. Companies all around the world are investing in automation and robotics. Although Czech companies invest more in automation than the EU average, we are still lagging behind the world

industry leaders (such as South Korea, Germany and Japan).19

It is therefore a necessity to capture relevant technologies and technological trends (in addition to

14

European Commission; Report on the Czech Republic 2019, page 39 15

https://www.doingbusiness.org/en/reports/global-reports/doing-business-2019 16

World Bank; Czech Republic: Assessment of the SME Policy Mix, strana 52-55 17

Technology Agency of the Czech Republic; Analysis of macroeconomic and microeconomic data (INKA 2 - Innovation capacity mapping) 18

European Commission; Re-finding Industry, Defining Innovation; 2018 19

Information Technology and Innovation Foundation; Which Nations Really Lead in Industrial Robot Adoption?, strana 1-5


robotics, automation and digitalisation, such as artificial intelligence, machine learning, blockchain, virtual reality, the internet of things and others), whose application is both in industry and in addressing current societal challenges (such as climate change, population aging, circular economy, etc.). These investments in the most advanced technologies are also not on sufficiently high level in the Czech Republic, as described in the Digital Agenda section below. The need for a focus on new technologies, trends and breakthrough innovations is also underlined by the European Commission's 100 Radical Innovation Breakthroughs for the future, which summarizes

key technological trends and challenges.20

Capturing and utilizing technological trends is not only a necessity for the Czech Republic, but also a great opportunity for further development of the economy and society as such.

Summary of main barriers to innovation dissemination in the area Research, development and innovation for business

• Lower innovation performance of domestic companies

• Inadequate efficiency and effectiveness of public administration, administrative burden

• Low added value of Czech companies and their position in global supply chains, a non-shrinking deficit in the high-tech trade, the lack of a plan to move in global supply

• Focus on lower-order innovations and lower control of international markets

• Research, development and innovation activities of foreign-controlled companies are often carried out outside the Czech Republic

• Lack of stable, predictable and motivating business environment

• Difference in labour productivity and added value per employee compared to developed

economies, lower productivity of domestic companies

• The overall share of R&D expenditure in the business sector is lower than in established market economies

• Insufficient market competence and underdeveloped business skills

• Absence of modern infrastructure for testing operations and R&D results in terms of their applicability to production, limited access of companies to this infrastructure and reduced availability of services for SMEs in the area of digitisation and new technologies

• Compared to other countries, relatively low level of robotization and automation, insufficient implementation of high technology in SMEs

• Fragmentation of SME support

20

https://ec.europa.eu/info/files/100-radical-innovation-breakthroughs-future_en


SWOT analysis

Strengths

1.1.5 Industrial and technical tradition combined with technical creativity supporting technical incremental innovations

1.1.3 Openness of the economy and strong export

1.1.6 Investment in automation (5% above EU average)

1.1.1 Economic / GDP growth based on investment activity

1.1.7 Convenient geographical location in the centre of Europe

1.1.4 Sound and stable banking system

1.1.2 Good state of public finances

Weaknesses

1.2.8 Lower innovation performance of domestic enterprises, investment in RDI mostly realized by foreign companies

1.2.5 Insufficient efficiency and performance of public administration, administrative burden

1.2.6 Low added value of Czech firms and their position in global supply chains, non-decreasing deficit in trade in high-tech goods, lack of a plan to move in global supply chains

1.2.13 Weak representation of higher orders of technical innovation (or focus on lower order innovations) and lower control of international markets

1.2.10 Concentration of enterprise R&D in a small number of large companies, absence of a broader base of technologically advanced companies

1.2.4 Undeveloped transport infrastructure

1.2.19 Lack of stable, predictable and motivating business environment

1.2.9 Difference in labour productivity and value added per worker compared to developed economies, lower productivity of domestic companies


1.2.11 The overall share of R&D funding by the business sector is lower than in established market economies

1.2.18 Insufficient market competence and underdeveloped business skills

1.2.17 Lack of modern infrastructure for testing pilot plants and R&D results in terms of their applicability to production, limited access of companies to this infrastructure and reduced availability of services for SMEs in the area of digitization and new technologies

1.2.7 Undeveloped venture capital system and start-up financing, low number of globally successful start-ups

1.2.14 Compared to other countries, relatively low levels of robotization and automation, insufficient implementation of high technology in SMEs

1.2.1 Lack of working and production capacities

1.2.15 Low internationalization / international cooperation of SMEs

1.2.12 Low share of corporate and government R&D funding by enterprises

1.2.2 Uneven economic growth in individual regions, including different intensity of R&D expenditure and different maturity of innovative ecosystems

1.2.16 Fragmentation of SME support

1.2.3 High dependence on exports and foreign investments

Opportunities

1.3.4 Growth of globally successful domestic companies

1.3.5 Investing in technology to compensate for labour shortages and leading to higher productivity

1.3.7 Utilization of new technologies and technological trends (e.g. artificial intelligence, machine learning, blockchain, augmented and virtual reality, the Internet of Things, robotics and autonomous machines, etc.), implementation of the Industry 4.0 Initiative principles

1.3.2 Expanding research and development activities of multinational and domestic companies

1.3.6 Responding to megatrends, using an interdisciplinary / multidisciplinary approach, using creative industries and using technologies to address societal challenges, using bioeconomics

1.3.8 Supporting SMEs in their development and increasing added value, developing support for start-ups and services for the growth of the MLSA

1.3.1 Shift from quantitative to qualitative phase of foreign direct investment (focus on R&D and higher added value)


1.3.3 Improving the position of Czech branches within multinational corporations

1.3.10 Higher use of the R&D tax deduction system

1.3.12 New trends in the automotive industry and related opportunities (CO2 reduction, autonomous driving, electromobility, etc.)

1.3.13 Re-industrialization - return of production activities to traditional regions, incl. Europe

1.3.9 Support of multilateral cooperation of companies

1.3.11 Reducing "dependency" on subsidies and switching to financial instruments

Threats

1.4.9 Increasing competition of East Asian countries in industries based not only on cheap labour, but also on knowledge and technology intensive activities

1.4.7 Dependence of economy in terms of limited business autonomy (many companies do not decide on the subject, customers or price of their production)

1.4.6 Increasing dominance of foreign R&D companies, increasing "leakage" of knowledge / intellectual property created by workers from the Czech Republic abroad and increasing percentage of added value realized outside the Czech Republic

1.4.5 End of economic competitiveness model based on cost differential versus developed economies (rising labour costs) and the associated risk of production shifting abroad

1.4.1 Stagnation or new economic crisis

1.4.8 Higher share of co-financing of projects funded from EU Funds, not adapting to the trend of decreasing volume of EU Funds supporting R&D in the next programming periods

1.4.2 Global political uncertainty, risk of trade wars and instability of economic systems

1.4.3 Threats to industry, energy and agriculture by climate change

1.4.4 Increasing economic and social disparities between regions


Public research and development


The existence of a functioning public R&D system producing high quality results is one of the main conditions for the functioning of the innovative ecosystem needed to develop a knowledge-based economy, added value and the ability to respond to current technological and social trends. At the same time, public research and development can not only work for itself but should benefit whole society. Therefore, its main priority should be to inform as wide spectrum of society as possible about the state of knowledge and newly acquired pieces of knowledge. Another possible benefit of public research and development is the transfer of concrete knowledge (know-how, technology) into practice, including commercial use. Therefore, there should be an effective cooperation between the research (academic) and application spheres, while application sphere should not be limited only to the commercial and business sense.

Although several positive changes can be observed in the area of public research and development, its overall performance and quality is still inadequate, even when compared to abroad. There are number of reasons for this, such as the small size of research teams and fragmentation of research implementation (many projects, teams, workplaces and institutions, but lack of critical concentration of peak capacities). Furthermore, an improperly set up R&D management system that is too complicated and fragmented. At the same time, it is burdened by a high administrative work and the need for modernization of related legislation. Management systems at the level of research organizations themselves are also insufficient, which is particularly striking in the area of human resources management and development.

The problem of insufficient R&D performance is also the inadequate cooperation of the research and the business sphere (respectively with the application sphere in general). This is related to low innovation demand of companies, but also to different ideas about cooperation and mutual distrust. The cooperation is therefore often of a short-term nature and focuses on testing. As a result, research and development results are underutilized in practice and revenues from the commercialization of results are also low.

Another problem is a constantly low level of research internationalisation. This is related to the insufficient involvement in community programmes (Horizon2020 and others) and the low number of foreign researchers in the Czech Republic. The reason for the insufficient involvement in the community programmes is mainly poor motivation of Czech institutions and teams and also high competition associated with the low success rate in international programs. There is also lack of administrative support capacity, thus, a lot of administration has to be handled by researchers themselves. Weak administrative support, together with insufficient quality of human resource management and lack of support tools (e.g. in the form of welcome office, kindergartens, low salaries, etc.) is also the reason behind the low number of foreign researchers in the Czech Republic.

Another reason for the inadequate performance and quality of public research and development are the shortcomings in the education system and the lack of quality researchers as described in the next chapter (key area of change People and Smart Skills) as well as the lack of high risk / high gain projects. One reason for this is the setting up of grants, where it is often required to meet predefined objectives and results.

It is necessary to work on elimination of the above-mentioned shortcomings or improvement of the current situation of the Czech public research and development. Otherwise, in spite of the increasing volume of research funding, these funds will not be spent efficiently and effectively and will not have the desired benefits. As stated in the introduction, a well-functioning public R&D system producing high quality results is a prerequisite for the whole innovation ecosystem, whose functioning and innovation performance of the whole economy also needs to be improved (see previous key area of change Research, development and innovation for business).

In the light of the carried analyses, research and discussions with stakeholders (key players), the


following four main problem areas were identified:

1. Insufficient quality of public research

2. Insufficient cooperation between the research and the application spheres

3. Low degree of internationalization

4. Inappropriate management system of R&D system and research organisations

Problem area 1: Insufficient quality of public research

One of the main weaknesses of public research and development is its inadequate quality and performance, which has various manifestations and causes. One way to evaluate the quality of research is to compare publication activities. For example, if we focus on the international comparison of the quality of publishing discipline groups in the Czech Republic and confront it with size-comparable European countries Austria, the Netherlands, Denmark, Belgium and also with the EU15 average, we are below the average.

Similar conclusions were reached by the governmental Council for Research, Development and Innovation (GCRDI). In 2018 it carried out an Impact Analysis of the grant support of the Czech Science Foundation (GA CR), which, among other things, tried to find out, whether GA CR interventions lead to excellent results and whether there is a difference between individual groups of grant projects in this area. The conclusion of this analysis was, that in most important fields in the Czech Republic, the interventions of the Czech Science Foundation do not lead to the implementation of frontier research and highly cited works as well as articles in the most prestigious journals in the relevant fields are created in insufficient numbers, which leads to support of mediocrity. In the international context, even in the case of excellent grants, the difference results would not significantly exceed the average of all

results in Austria or Belgium.21

It should be added that the quality and performance of the Czech research is above average compared to the EU13 countries.

The insufficient quality of Czech research is partly captured in the latest European Innovation Scoreboard 2019, where one of the monitored parameters in the attractiveness of the research system is the number of publications in the most cited publications. In this category we reach only 44% of the

European Union average (a positive fact is that since 2011 we have improved from the original 37%).22

One of the reasons for the lack of research performance and quality may be the insufficient size of research teams and the fragmentation of research implementation (in terms of fragmentation of the thematic focus of research, a large number of small research projects). Contrary to the original expectations (formulated, for example, in the Operational Program Research and Development for Innovation 2007-2013 and also in other strategic documents), the planned concentration of research capacities into excellent workplaces and establishment of critical mass in individual fields did not occur for various reasons. Sometimes, on the other hand, capacity fragmentation, duplication and further

fragmentation of the system have occurred - particularly in public universities.23

Interviews with the experts also showed that another problem of Czech public research is the lack of risk research (or the realization of research projects with already known and expected results). This means that new, risky ideas appear in grant competitions only on a small scale and risk research is carried out to a very limited extent. There is no interest in realizing long-term research projects, that are risky (implemented in a new area, with a new approach, etc.), time-consuming and financially demanding, but subsequently with the potential of much higher benefits, in terms of the creation of

21

Research, Development and Innovation Council; Analysis of the state of research, development and innovation in the Czech Republic and their comparison with abroad in 2017, page 101-112 22

Evropská komise; European Innovation Scoreboard 2019 23

EACE; Ex-post evaluation of the 2007-2013 programming period in the area of research and development, page 67


unique results, know-how and in terms of subsequent commercialization.

Last but not least, the problem is also the uneven performance of research across regions and the lack of development of regional innovation systems. Specifically, most R&D funding is spent in Prague, but the South Moravian and Central Bohemian regions also account for a significant share of total expenditure in the Czech Republic. On the other hand, the smallest share is in the Karlovy Vary Region,

the Vysočina Region and the Usti Region.24

Differences in regional innovation performance are also illustrated by the European Commission's Regional Innovation Scoreboard. The results for 2019 show that the strongest region is Prague, which belongs to the category of strong innovators. Other regions (NUTS II category) are average innovators. The weakest in this respect is the Northwest region (Karlovy

Vary and Usti regions).25

Despite the considerable development of the infrastructure for the implementation of quality research and development, according to the Ministry of Education, Youth and Sports, this infrastructure is still not sufficient to satisfy its current and upcoming needs, especially when compared to progress in the Europe and other top countries in the world.

Problem area 2: Insufficient cooperation between research and application spheres

The lack of cooperation between the research sector and business is to some extent the “evergreen” of Czech research policy, which has lasted for many years. The low cooperation between the research and application spheres can be illustrated quite well by the financial flows (or expenditures) that were spent on R&D activities of public research organizations by the business sector. Entrepreneurial financial resources were almost exclusively used in the business sector, support of the public R&D sector from domestic business resources was very small, on average the university and government

sectors reached almost CZK 2.7 billion (i.e. CZK 0.75 billion and 1, CZK 9 billion).26

Also according to data of European Innovation Scoreboard 2019 we are lagging behind the European Union average in the area of cooperation between the business sector and the academic world. Specifically, in the

parameter Private co-funding of public R&D exp. to 71% of the EU average.27

On the other hand, the share of corporate funds that finance research carried out by universities and non-university research institutions (e.g. the Academy of Sciences) in relation to the total private-sector research expenditure is fully comparable, for example, to Germany. The problem from this point of view is rather lower corporate R&D expenditure compared to developed countries.

Insufficient cooperation of the research sphere with the business is also confirmed by insufficient utilization of R&D results in practice and low revenues from the results commercialization. According to data from the Czech Statistical Office, total revenues from license fees for patents reached a significant decrease of CZK 1.4 billion in 2017. Also, license revenues from new (i.e. newly concluded) licenses are relatively low. One of the main problems behind the low utilization of R&D results in practice is, according to some experts, the fact that the phase between research results and related activities

leading to its commercialization is not sufficiently supported.28

Another determining factor may be the length of the process of transferring knowledge into practice (e.g. the length and complexity of patent procedures, “pre-caution” when entering into the risks associated with knowledge transfer and reliance and waiting for subsidy titles supporting knowledge transfer and the associated short-term cooperation between specific academic and application subjects). Problems are also caused by not always clear state aid rules, which discourage both types of entities from intensifying cooperation, and the economic and non-economic activities of universities and research organizations, which discourage them from commercial cooperation.

24

CZSO; Research, development and advanced technologies in numbers, page 5 25

European Commission; Regional Innovation Scoreboard 2018 26


European Commission; Regional Innovation Scoreboard 2019 28

Czech Statistical Office; Industrial Property License, page 7


The role of individual public administration bodies is important for strengthening cooperation between the research and application spheres. Abroad (for example in the US), one of the major actors in the innovation ecosystem is the state and state (public) agencies, both in terms of demand for exploitation of R&D results and in terms of demand for innovative solutions. From this perspective, the opportunity for further development of cooperation between research organizations and public administration institutions is important in the Czech public space, for example by increasing demand for innovative solutions by public administration and using R&D results in public administration and public space (including strategic planning, regional development and social innovation).

Another problem is generally low level of patent activity (especially in the business sector). In the Czech Republic, in comparison with the most developed countries, the instruments of protection of intellectual property are insufficiently used, which is reflected in the low number of granted national and foreign

patents.29

The opportunity is thus to further develop intellectual property protection tools, including, among other things, raising awareness of intellectual property protection (through cooperation with the education system, commercial activities), increasing the use of intellectual property protection, in particular patents with commercial potential, and scientific, research and innovative projects. From this perspective, the role pof state in promoting and supporting open access is also critical.

Prior to the development of the Methodology for the Evaluation of Research Organizations and Programs for the Purpose Support of Research, Development and Innovation (Methodology 17+), applied research carried out in the public research sector was not adequately evaluated. The concrete method of implementation (or application) of the 17+ Methodology in the University sector and the evaluation of the experience and benefits of this methodology is yet unknown, as this process is beginning in 2020 only. The lack of adequate evaluation of applied research results and their use remains a risk to some extent. This absence could result in not only low cooperation between the research and industrial sectors, but also low patent activity, low utilization of results in practice and other shortcomings described above. The opportunity is therefore to use the new Methodology 17+ in such a way that research organisations and individual actors (leaders of research organizations, research teams and researchers themselves) are motivated in their societal roles to a long-term cooperation with the commercial (or application) sphere, to technology transfer and to use the R&D results in practice.

Problem area 3: Low degree of internationalization

Although there is a gradual improvement, Czech public research is still weakly involved in Community programs and also shows less involvement in the international research cooperation, compared to other developed countries. This is mainly reflected in the low utilisation of resources from the European Community programmes (currently the Horizon 2020 programme). This may be due, for example, to the poor quality of the research projects submitted, the lack of systemic incentives to participate in international programmes (at the level of the entire system and individual institutions) or sufficient funding for R&D from national and European Structural and Investment funds, which are at the same time easier to achieve.

Another reason of low success in the calls is often an insufficient capacity and a small knowledge base of administrative workers at Czech R&D institutions, who provide support to researchers in submitting the projects to framework programmes. The Czech Republic thus contributes more to the Horizon 2020 program than it draws from it. In this respect, we are among the six worst countries of the European

Union.30

The Czech success in both Horizon 2020 and its predecessor to Framework Programme 7 has

not changed substantially in recent years.31

One of the causes of this situation may be the fact that it is difficult for Czech research teams to penetrate into established (West) European networks of research consortia, which are repeatedly awarded these projects.

29

https://vedavyzkum.cz/blogy-a-rozhovory/cesky-statisticky-urad/patentova-stastika-za-rok-2017-ii 30

https://www.nature.com/articles/d41586-019-01566-z 31

EACE; Ex-post evaluation of the 2007-2013 programming period in the area of research and development, page 24


Given the generally low level of involvement in Community programs, it is an opportunity to make use of the funds available for these instruments in the new budget period. Since the new Horizon Europe R&D program is expected to have a budget of up to EUR 100 billion, it is appropriate to motivate Czech researchers and businesses not only to participate in the programme as much as possible, but also to participate in preparation of its future focus within relevant international structures. The aim is not only to use the available financial resources, but also to establish a stable international partnership and thus generally contribute to increasing the quality of research and the subsequent application of RDI results in practice. The key benefit of internationalization at the level of involvement in international project consortia is regular contact with European research partners in the field and thus a direct link to current European research. The actual financial benefit may be secondary.

Another indicator of research internationalisation and at the same time an important measure of the quality of publications is the influence of Czech authors in the international collectives producing scientific publications. Over the past five years, the share of quality publications produced by an international team of authors has increased, compared to exclusively Czech publications. However, according to the European Innovation Scoreboard 2019, we are still at 91% of the European Union

average in the International scientific co-publications parameter.32

However, it should be noted, that statistics on publishing activities in this area can be problematic, mainly due to the so-called large collaborations.

The weak internationalization of Czech research is also reflected in the relatively low number of foreign researchers working in the Czech Republic. According to the latest data of the Czech Statistical Office, in 2018, 10% of workers from abroad worked in the university sector, while in the government sector it was 16% (at the same time it is necessary to add that the largest group of foreign researchers are

workers from Slovakia).33

The reasons for this situation include the lack of readiness of research institutions to work with foreign workers, whether it concerns language skills (internal communication is mostly in Czech, support staff often cannot speak foreign languages, etc.), salary level, quality of human resource management or foreign support workers on arrival (searching for housing, schools and kindergartens, employment for a partner, etc.).

Problem area 4: Inappropriate management system of R&D system and research organisations

The current RDI management system is characterized by a relatively confusing situation in the role and responsibilities of individual state administration bodies for individual aspects of management and implementation of research and innovation policy. This is a problem that has been named several times and which the National Research, Development and Innovation Policy of the Czech Republic for the

years 2016 - 2020 wanted to solve.34

However, as is apparent from the evaluation of its fulfilment, the state of complicated and fragmented system of management and financing of RDI continues and needs

to be further addressed.35

A similar view is also taken by the European Commission, which states in its Report on the Czech Republic 2019 that, as a result of recent institutional changes, responsibility for research and innovation has been subdivided between different government bodies and the overall

coordination is limited.36

Interviews with experts also revealed the weakness of the whole area of public research and development, as insufficient quality of management of research organisations themselves. One of the reasons could be an earlier way of evaluating research organisations, which did not give enough emphasis to the quality of results (but rather to quantity) and indeed the overall concept was insufficient to improve the strategic management of research organisations (in terms of long term conceptual

32

European Commission; European Innovation Scoreboard 2019 33

Czech Statistical Office; Research and Development in 2018, page 26 34

Office of the Government of the Czech Republic; National Research, Development and Innovation Policy of the Czech Republic for 2016 - 2020, page 34-36 35

Research, Development and Innovation Council; Report on Evaluation of Implementation of Measures of the National Research, Development and Innovation Policy of the Czech Republic for 2016 - 2020, page 4-6 36

European Commission; Report on the Czech Republic 2019, page 42


development) but also in terms of developing the institutional environment of the organization. The research organizations perceived as a significant problem a very high degree of dependence of individuals and entire teams on targeted funding. This is related to the practical impossibility of setting and applying career rules and working systematically with human resources. Insufficient management of research organisations (or rather in this case underdeveloped institutional environment) is also reflected in the administrative burden for researchers and in human resource management.

Outdated legislation and high administrative burden across the entire R&D system are also a significant problem. According to the latest information, the preparation of a new law that would allow the modernization of the entire RDI support system including, for example, reducing time to grant or reducing administrative burdens, has recently started (and it is also one of the objectives of the Innovation Strategy of the Czech Republic 2019-2030).

In addition to the outdated legislation, the high administrative burden also results from the often-formalistic approach of a number of actors (providers of subsidies, but also research organisations themselves) and from the aforementioned complex and fragmented system of management and financing of RDI.

Summary of main barriers to innovation dissemination in the area of Public Research and

Development

• Outdated legislation, high administrative burden and formalistic approach

• Insufficient cooperation of the research sphere with the business sector (funding, joint R&D results, cooperation in general, insufficient involvement in the technology transfer system), few cases of long-term partnership of the research and business sphere

• Insufficient use of R&D results in practice, low income from commercialisation of results and knowledge transfer, low level of patent activity

• Weak involvement in the Community programmes, poor internationalisation

• Insufficient support tools for researchers

• The complexity and fragmentation of the RDI management and funding system

• Poor quality of management of research organisations

• Low number of high-risk research (high risk-high gain)

• Insufficient (critical) size of Czech research teams, fragmentation of research implementation and a large number of research organisations

• Unbalanced research performance across regions, lack of development of regional innovation systems and lack of robust "soft infrastructure" activities to support its development


SWOT analysis

Strengths

2.1.1 Existence of high-quality research facilities and infrastructure built or upgraded in recent years (both public and business)

2.1.3 Existence of excellent research teams and workplaces

2.1.2 Dynamic development of the research sector - relatively fast growth of R&D expenditures and the number of researchers in the public sector

Weaknesses

2.2.3 Obsolete legislation, high administrative burden and formalistic approach

2.2.7 Insufficient cooperation of research sphere with business (financing, joint R&D results, cooperation in general, insufficient involvement in the technology transfer system), few cases of long-term partnership of research and business sphere

2.2.8 Insufficient use of R&D results in practice, low income from commercialization of results and knowledge transfer, low level of patent activity

2.2.6 Weak involvement in Community programs, weak internationalization

2.2.1 The complexity and fragmentation of the RDI management and funding system

2.2.5 Insufficient quality management of research organizations

2.2.12 Low risk-high gain, realization of research projects "for sure"

2.2.2 Insufficient (critical) size of Czech research teams, fragmentation of research implementation and a large number of research organizations

2.2.4 Mostly insufficient performance and quality of research


2.2.9 Lack of experts in research, development and innovation and specifically in the areas of key technologies (ICT, etc.)

2.2.11 Unclear / complex rules for creating spin-offs

2.2.10 Unbalanced research performance across regions, lack of development of regional innovation systems and lack of robust "soft infrastructure" activities to support their development

Opportunities

2.3.1 Using high-quality and well-equipped research infrastructure for economic transformation, establishing international cooperation, increasing the quality and effectiveness of public research and linking research with the demand of companies and society for innovation

2.3.4 Development of megatrend research, KET research, new technologies and technological trends (e.g. artificial intelligence, machine learning, blockchain, augmented and virtual reality, the Internet of Things, robotics and autonomous machines, etc.)

2.3.2 Developing the demand for innovative solutions by the public administration and the use of R&D results in public administration and public space (including strategic planning, regional development and social innovation), development of the third role of universities

2.3.8 Establishment and development of technological and innovative gravity centres / hubs around research centres of (above) national importance) - establishment / arrival of technology companies and related services

2.3.10 Development of marketing / PR results of R&D and activities of research organizations

2.3.6 Use of funds and tools of Community programs

2.3.5 Use of Methodology for Evaluation of Research Organizations and Programs of Targeted Support for Research, Development and Innovation 17+ for adequate evaluation of basic and applied research and utilization of R&D results in practice

2.3.9 Development of tools to support intellectual property protection

2.3.7 Using the principle of open access / open science

2.3.3 Linking social sciences and humanities and arts with technical disciplines, promoting interdisciplinarity


Threats

2.4.5 Inappropriate setting of new R&D support instruments (EU Funds and national programs)

2.4.6 Insufficient coordination and cooperation of all R&D actors

2.4.4 The closedness of the Czech research environment in the event of marginalization of international cooperation and general lack of human resources

2.4.2 Demanding maintenance and further development of the research infrastructure

2.4.3 Reducing the relevance of research to addressing the needs of society and the business community

2.4.1 Higher share of co-financing of projects funded from EU FUNDS, not adapting to the trend of decreasing volume of EU FUNDS supporting R&D in the next programming periods


People and smart skills


The availability of a sufficiently qualified workforce is a prerequisite for increasing the innovation performance of companies and increasing the quality of research and development. However, with regard to the current state of the labour market, demographic development and also a poor-quality education system, there is a shortage of high-skilled labour.

Lack of skilled labour is linked to many factors. These include low share of university educated people, low availability and relevance of flexible forms of further education, low interconnection of education system with practice and so far, insufficient development of competences needed for 21st century labour market.

The availability of a skilled R&D workforce is influenced by the low representation of women in research, the lack of motivation for young people to engage in research, which is also related to low number of research doctoral graduates and insufficient conditions for foreign and Czech researchers.

One of the main causes of this situation is the under-financing of the Czech education system at all its levels, which leads, among other things, to a lack of interest in teaching practice. Along with the persisting traditional forms of teaching, unsystematic work with gifted students and considerable differences in the quality of education between regions and between schools, the Czech educational system has poor results at all levels, compared to abroad.

An important problem is the poor results of the Czech education system, which in comparison with abroad achieves only average results (as indicated, for example, by the results of the international comparison of PISA). Czech universities are also of low quality and prestige in international comparison. This situation is largely due to the overall under-financing of the Czech education system and also insufficient adaptation to modern trends.

From the perspective of the labour market and the development of the economy as a whole, the education system needs to be able to develop the competences needed to work in a changing labour market. The labour market also awaits changes related to new technologies (and not just the impact of automation and robotics), which will entail an increase in educational demands throughout the whole career and life.

Therefore, it is necessary to respond to identified barriers and weaknesses - without a skilled workforce it will not be possible to strengthen our innovation performance, which would have an impact on the economy and the development of our society as a whole.

Based on the performed analyzes, research and discussions with stakeholders (key players), the following four main problem areas were identified:

1. Poor results of the Czech education system

2. Low quality and prestige of Czech universities in international comparison

3. Lack of skilled labour in terms of the labour market needs

4. Lack of skilled labour in research and development

Problem area 1: Poor results of the Czech education system

Overall, the Czech education system has poor (or at best average) results. This assessment is based, for example, on the International Comparative Survey PISA (Program for International Student Assessment) as well as on the comparison of digital literacy or language skills. According to OECD data and PISA results, the Czech results are generally average within the OECD, moreover in mathematics

and science the results worsened between 2006 and 2018 and more or less stagnate in reading.37

37

http://www.oecd.org/pisa/data/


A survey of the World Economic Forum among business leaders shows that the subjective assessment of the state of the Czech education system is not good and the Czech Republic is considered to be a

below-average country in the European context.38

We are also only average in the European Union in terms of assessing digital literacy. In terms of language skills, we are significantly lagging behind in the percentage of people who speak at least one foreign language fluently.

One of the causes of this situation is the fact that the Czech education system is largely underfinanced at all levels. Eurostat data show that in 2016 the Czech Republic spent 3.8% of its gross domestic

product on education, while the EU average was almost 5%.39

The lack of funding, of course, has a lot of consequences - especially in terms of the salaries of the staff and the associated quality, over the number of students per teacher and interest in the teaching profession.

One of the causes of poor results is the fact that the Czech education system still largely uses classical educational methods (e.g. frontal teaching and emphasis on memorizing knowledge) and, on the other

hand, it only makes low use of modern methods of work (e.g. interactive work in smaller groups).40

At the same time, the Czech education system cannot systematically work with gifted pupils and students. Compared to the education of children and pupils with special educational needs, this area is less accentuated and much less sophisticated in school practice.

In the Czech Republic, there are also significant differences in educational outcomes between regions, or in the quality of individual schools. Within the OECD, we are the country with the ninth largest difference in school quality. This is due both to socio-economic differences between regions and to the

parallel existence of primary schools and multi-year grammar schools.41

Practically this means that the pupil receives a different quality of education depending on the region. At the same time, the Czech education system cannot systematically work with gifted pupils and students. Among the reasons are,

besides the ineffective conceptual work with talents, also insufficient education of teachers in this field.42

Problem area 2: Low quality and prestige of Czech universities in international comparison

Czech universities are of low quality and prestige in international comparison. For example, according to QS World University Rankings 2020, we have only three universities in the top five hundred world universities. Czech universities have the weakest results in the rate of scientists’ citation and also in the share of foreign employees. The best in terms of evaluation is the parameter of share of foreign students. Charles University remains the best rated Czech university. However, her example shows that there is no major improvement in the longer term. In 2014, the university was still in this ranking on the

233rd place, until 2019 it gradually dropped to the 317th place to improve slightly afterwards.43

In addition to the already mentioned under-financing of the Czech education system, one of the reasons for the state of Czech universities is the fact that the way of their management does not support their progressive development. The Czech Republic can be characterized as a country with significant school autonomy and an overall decentralized system of school management. At the same time, however, in the case of university institutions, the governance system is multilevel, involving many actors and very sensitive to cases where some actors paralyze decision-making processes. Consequently, in case of major changes and progressive measures, it is very complex and difficult to enforce these changes.

38

https://www.evropavdatech.cz/clanek/11-ceske-rucicky-a-hlavicky/ 39


IDEA; Impact of educational methods on pupils' results and socio-emotional abilities: classics vs. class. moderna,page 3 41

Eduzměna; Analysis of educational challenges in the Czech Republic, page 12 42

Czech School Inspectorate; Thematic Report: Education of gifted, talented and exceptionally gifted children and pupils, page 30 43

https://vedavyzkum.cz/ze-zahranici/ze-zahranici/devet-ceskych-vysokych-skol-se-umistilo-mezi-tisicovkou-nejlepsich


Reduced or dispersed among many authorities is also the responsibility for quality and economy, which is not associated with adequate powers. A significant problem of higher education is the failure to study. In relation to research and development, the low PhD completion rate is also problematic, it is around 45% (that is more than half of PhD students who do not complete it). The study failure rate and the

associated inefficiency are also burdensome for bachelor and master’s degrees.44

Problem area 3: Lack of skilled labour in terms of the labour market needs

From the perspective of the labour market and the development of the economy as a whole, the education system needs to be able to develop the competences needed to work in a changing labour market. The current education system does not fulfil this task sufficiently, education does not sufficiently reflect the various needs and demands placed on it. The current education system does not fulfil this task sufficiently, education is not diversified to the required extent, nor does it reflect the various needs and demands placed on it. One of the possible reasons is the low level of cooperation with representatives of practice in the preparation of study programs and in the actual implementation of

teaching.45

It is the weak connection of the Czech education system with practice what is its main weakness. At the same time, the close interconnection of the academic and private sectors within the education system is one of the conditions for its successful development, improving quality and responding to the needs of employers. Business-based education can better bring students closer to practice. This statement applies both to universities and to lower levels of education.

The labour market awaits changes related to new technologies (and not just the impact of automation and robotics), which will entail an increase in educational demands throughout the whole career and life. The current offer of various forms of education (from part-time study to lifelong learning courses) is quite wide, but at the same time their form and availability do not always correspond to the interest and needs of the candidates or the labour market. The offer of in-service training related to new technologies and changes resulting from the transition to Industry 4.0 is limited.

Another weakness of the Czech Republic resulting from its education system is the low share of university educated people, which is 24% of the population aged 25-64, while the OECD average is 37% (in the 25-34 age group we have a share of university educated people 33%, while the OECD average is 44%). On the other hand, we have the largest proportion of people with completed secondary education among OECD countries (almost 70% of the population aged 25-64 compared to the OECD

average of 42%).46

At the same time, employment forecasts suggest that the need for highly skilled workers will increase, while demand for low- and medium-skilled workers will fall. Qualified workers

adapt to the changing environment while increasing resistance to automation.47

In terms of the labour market, the problem is a general lack of skilled labour, both for the needs of companies and for research organizations. For example, although the number of ICT specialists continues to grow, as do science and technology specialists, their age structure suggests that more

than a quarter of the specialists are 50 years of age or older.48

On the other hand, the number of students of science, technology and ICT fields is decreasing (similarly to the total number of university students, which is a consequence of demographic changes) and the share of these fields in the total

number of university students is stagnating.4950

A similar picture is also for graduates of these fields.

44

Center for Higher Education Studies; Doctoral Study in the Czech Republic, page 4-8 45


https://data.oecd.org/eduatt/population-with-tertiary-education.htm#indicator-chart 47

OECD; Economic Surveys, Czech Republic, pages 41-43 48

Czech Statistical Office; Research, development and innovation in statistics and analyzes, page 15, 18, 20 49

Czech Statistical Office; Changes in the age structure of the population, Development of the age structure of the Czech Republic in 2001–2017, page 11 50

Performance indicators (MEYS, universities)- https://dsia.msmt.cz/vystupy/vu_vs_f2.html


Furthermore, in view of the above, support is needed for SMEs in terms of upgrading the skills of their employees, or by supporting training and retraining, with a focus on digital skills, skills needed for industrial transformation and skills in the fields of smart specialisation. Some aspects of the labour market are assessed as not fully satisfactory - tools to facilitate return to work, the development of pre-school childcare and a more flexible working environment need to be strengthened to increase labour market flexibility.

Another aspect related to education, innovation and entrepreneurship is the entrepreneurial spirit, respectively the entrepreneurial mindset. In this respect, the Czech Republic does not excel, which is also based on our history. Adequate attention has not yet been given to this topic, or the development

of education (at all levels of the education system) in this area needs to be focused and strengthened.51

Problem area 4: Lack of skilled labour in research and development

In the area of human resources in the area of research and development, it can be stated that the growth of the number of researchers, both in public research and development and in the corporate sector, is a long-term positive trend. In 2018, a total of 113,000 people and 75,000 FTE were employed

in the research. However, several positive factors threaten this positive trend.52

One of them is the lack of motivation of young people to engage in research, which is related, among other things, to the aforementioned low academic success of PhD students. If PhD studies are largely a precondition for a research career (at least in public research), then the failure of PhD studies is actually an expression of the lack of motivation of young people to engage in research or continue their

academic career.53

Attracting talented students and highly skilled workers from abroad is an opportunity and a possible solution to the current tensions in the labour market (high employment rates and low unemployment rates associated with shortages of skilled workers) and demographic trends and population aging, for this purpose, among other things, it is necessary to use the newly built top research centres. However, for the ability to attract researchers from abroad, or to retain those already working, it is crucial to remove the existing weakness, which is insufficient conditions for foreign and Czech researchers (salary level, missing welcome office, kindergartens, etc.) but also other barriers of administrative nature (for example long visa procedures).

A negative characteristic of the Czech research environment is the low representation of women in research, both in research teams and in the management of these institutions. Czech research has long been unable to give opportunities to qualified women. We are thus unnecessarily losing the potential that would move us as a company. The proportion of women among researchers has been declining for a long time, the values from 2016 and 2017 were the lowest since 2000, when data in gender differentiation began to be collected. In an international comparison, the level of female representation

among researchers in the Czech Republic is among the lowest of all EU countries.54

The weakness of the whole area of public education and public research and development is the insufficient quality of management of universities and research organisations. Human resources management is a separate and problematic area where most universities and research organisations have their weaknesses. This is reflected both in the not well-set career rules, the ability to attract and

retain young researchers, researchers from abroad or Czech researchers returning from abroad.55

51

European Commission; 2018 SBA Fact Sheet & Scoreboard, page 7 52


Czech Association of PhD Students; Doctoral studies in the Czech Republic 54

http://genderaveda.cz/zeny-ve-vede/ 55

INSEAD; The Global Talent Competitiveness Index, strana 11


Support for long-term professional development, insufficient conditions for reconciliation of work and

private life and the issue of academic inbreeding are also assessed as insufficient.56

In connection with the lack of human resource management at universities and research organizations, it is an opportunity to use the motivation to earn the HR Excellence in Research Award to truly improve human resource management in research organisations.

Summary of main barriers to innovation dissemination in the area People and smart skills

• Unsystematic work of schools with gifted pupils and students

• In international comparison, poor (only average) results of the Czech education system at all levels of schools, e.g. in the areas of digital literacy, language skills, soft skills, or generally PISA, PIAAC results

• Poor linking of the education system with practice

• The education system does not sufficiently develop competences directly relevant to the 21st century labour market

• The way of university management does not support their progressive development

• Lack of motivation for young people to engage in research

• Underfinancing of the Czech education system and consequently low attractiveness of teaching practice

• General shortage of skilled labour (quality and creative workers) for entrepreneurship, R&D and innovation activities, especially in the ICT sector

• Insufficient conditions for foreign and Czech researchers (salary level, missing welcome office, kindergartens, etc.)

• Low degree of completion of doctoral studies and its inadequate efficiency and, in some cases, quality

• Not a widespread entrepreneurial mindset / entrepreneurial spirit

• Insufficient human resource management at universities and research organisations, low mobility of researchers, academic inbreeding

• Low prestige of Czech universities on an international scale

• Flexible forms of education are scarce and not relevant to potential learners

• Significant differences in educational outcomes between regions and schools

• Low representation of women in research, especially in leadership positions. Barriers to return after parental leave and insufficient attention to this problem from the level of research institutions and government

• Low share of university educated population compared to developed countries

56

Tůma F., Knecht P.; Academic inbreeding as a cancer of higher education or necessity? Foreign Research and Implications for Czech Higher Education Policy, page 21-22


SWOT analysis

Strengths

3.1.3 Increasing share of researchers in the private sector

3.1.2 The number of researchers shows a long-term upward trend

3.1.1 A high proportion of doctoral students studying technical or natural sciences

3.1.4 Very low percentage of young people outside education, employment or training (NEETs)

Weaknesses

3.2.5 Unsystematic work of schools with gifted pupils and students

3.2.1 In international comparison, poor (only average) results of the Czech education system at all levels of schools, e.g. in the areas of digital literacy, language skills, soft skills or generally PISA, PIAAC results

3.2.4 Weak connection of education system with practice

3.2.12 The education system does not sufficiently develop competences directly relevant to the labour market of the 21st century

3.2.15 The way of management of higher education institutions does not support their progressive development

3.2.16 Lack of motivation of young people to engage in research

3.2.2 Under-financing of the Czech education system and consequently low attractiveness of teaching practice

3.2.11 General lack of skilled labour (quality and creative workers) for entrepreneurship, R&D and innovation activities, especially in the ICT sector

3.2.14 Insufficient conditions for foreign and Czech researchers (salary level, missing welcome office, kindergartens, etc.)


3.2.7 Low degree of completion of doctoral studies and its low efficiency and in some cases quality

3.2.17 Not a widespread entrepreneurial mindset / entrepreneurial spirit

3.2.10 Insufficient human resource management at universities and universities, low mobility of researchers, academic inbreeding

3.2.8 Low prestige of Czech universities on an international scale

3.2.13 Flexible forms of education are scarce and relevant to potential learners

3.2.3 Significant differences in educational outcomes between regions and schools

3.2.9 Low representation of women in research, especially in managerial positions. Barriers to return after parental leave and insufficient attention to this problem from the level of research institutions and government

3.2.6 Low share of university educated population compared to developed countries

Opportunities

3.3.2 Higher interest of talented foreign researchers and gifted students in employment and study in the Czech Republic (brain gain)

3.3.9 Utilization of newly built top research centres for acquiring talent from the Czech Republic and abroad for work in the fields of activity of these centres

3.3.8 Improving a practice-based approach in VET and in a higher education system that promotes links between schools and businesses

3.3.7 Supporting SME growth through specific training and retraining for smart specialization and innovation management, and administrative capacity building (with a particular focus on digital skills and industrial transformation)

3.3.5 Freeing up human resource capacity for more creative work with higher added value of human labour due to greater automation and robotization

3.3.3 Increasing the participation rate of the 55+ age group in economic and social life

3.3.4 Harnessing the potential for changing preferences of the emerging Y / Millennium generation, focusing on value-added intellectual work and innovation


3.3.1 Development of active employment policy facilitating return to work, development of pre-school childcare, more flexible working environment (adopting reforms aimed at increasing labour market flexibility)

3.3.6 Utilizing the motivation to earn the HR Excellence in Research Award to improve human resource management in the RO

Threats

3.4.3 Brain drain and inability to acquire foreign talent

3.4.1 Implementation of thoughtless reforms and changes in key systems - education and higher education, pension system

3.4.5 The destabilization of the labour market and the need for new competences due to technological changes. The related threat of lack of such a skilled workforce for the needs of (not only) the industry of the future

3.4.2 Uncontrolled increase in social spending (e.g. on the pension system) at the expense of R&D investment

3.4.4 Continuing decline in the number of students and university graduates due to demographic changes


Digital agenda

Conclusions of performed analysis

The massive development of digital technologies is an opportunity to streamline the functioning of the public and private sectors, or individual institutions and companies. These include technologies such as artificial intelligence, blockchain, cloud computing, big data, robotics, the Internet of Things, quantum computing, modelling and simulation, virtual reality, etc. All these technologies (even those that do not exist and have not yet been named) have considerable disruptive potential. The opportunity (but also a necessity) is to use these technologies for more efficient functioning of the economy and society as a whole.

The current state in the digital agenda is not unproblematic, both in the business and public spheres. In particular, it is clear for businesses that they are not yet sufficiently exploiting the opportunities of new technologies and the potential of digitization and investment in new technologies. The reason for this is the level of investment needed by businesses themselves to purchase new technologies, concerns about the return on investment, as well as the lack of qualified staff. The reasons for low investment in new technologies are (in the key area of research, development and innovation for entrepreneurship) the position of Czech companies within global supply chains leading to low autonomy in decision-making and the still functioning model of economic competitiveness based on cost differential (low wages and low added value) costly investments in technology).

In the field of eGovernment, the Czech Republic lags far behind the developed countries. Although we have long had a functional basic infrastructure in the form of basic registers and data boxes, the level of electronization of public administration is still low. As a result, there is also a low rate of use of e-services both by citizens (which is partly related to the low rate of Internet use) and by the authorities themselves. Insufficient coverage of households, schools and companies with high-speed internet is also hindering faster development.

If we fail to remove the identified barriers and respond to current trends, there is a risk in the corporate sector that it will not be able to maintain its competitiveness, develop its innovation performance and face many threats - such as shifting production abroad, maintaining a model based economy on the cost differential etc. On the side of the state (or public administration), without the development of electronation, there is a risk that the opportunities to reduce bureaucracy, reduce the demands placed on citizens and companies and increase the efficiency of the activities carried out by the state and thus the money spent.

Based on the performed analyzes, research and discussions with stakeholders (key players), the

following three main problem areas were identified:

1. Insufficient electronization of public administration

2. Insufficient communication infrastructure

3. Insufficient use of digitalisation potential by companies and low investment in new technologies

Problem area 1: Insufficient electronization of public administration

In terms of conditions for the development of eGovernment, the Czech Republic may bounce off the existence of basic infrastructure, which was completed in recent years. The basic pillar is the Data Mailbox Information System, which was launched in 2009. In addition, the so-called basic registers provide up-to-date and legally binding reference data on inhabitants, legal entities, public authorities and other entities. These registers form the core of eGovernment, and their functionality is therefore a


prerequisite for its further development.57

However, in addition to the relatively good condition of the basic eGovernment infrastructure, the Czech Republic is losing considerably in other parameters. The blame is generally low computerization of public administration and low use of these services within individual offices. In 2019, the European Commission ranks the Czech Republic in the part of the index describing the level of digital public services in the Czech Republic to the 20th place on the basis of the summary index DESI (Digital Economy and Society Index). In the use of eGovernment services (share of electronically completed

forms) is even in 22nd place.58

The share of public administration acts performed purely electronically is very low - it is 38% for municipalities and 29% of all acts for central administration. This is also connected with the volume of duplicate work (i.e. both electronically and "manually") - in the case of self-government it is 31% of all

operations, in the case of central administration 51% of operations.59

The poor situation regarding the availability of eGovernment services also leads to their low use by citizens, given the low supply of these services by the public administration. According to the European Commission report for the European Semester 2019, only 52% of Czech Internet users usually send

filled-in forms via the Internet to public authorities, which is below the EU average of 64%.60

The opportunity for further development of eGovernment is the adoption of the Digital Rights Right. This law should guarantee citizens the possibility to communicate with public authorities in a purely electronic way and can thus be an important motivating element for the introduction of new eGovernment services. Even without this law, many activities have already been implemented;however, it is necessary to follow them through and start new initiatives. Examples of such initiatives include the digital map, e-health in the context of the forthcoming e-Health Act, the Smart Cities concept, support for open data activities, etc. However, it is necessary to rationalise processes and operations of the public administration to achieve overall better effectivity, ensure interoperability of relevant technologies and systems and minimize the threat of never-ending ICT public procurements.

In addition to purely public administration activities, it is necessary to develop cooperation with the private sector to develop digitalisation. One of the current examples is the SONIA project, whose aim is to enable, in cooperation with the state administration and banking houses, authentication and thus access to eGovernment services via Internet banking. If successful, this project can significantly raise awareness and access to digital eGovernment services among citizens.

For the further development and use of digital technologies, the condition is to eliminate a certain reluctance of the public sector to innovations stemming, for example, from concerns about the possible consequences of failed projects or from the overall rigidity of the state administration. The weak innovation demand from the public sector is, to a certain extent, a barrier to innovation in this area, because without it the necessary stimulation of the innovation ecosystem cannot take place.

In the context of the development of digital technologies, it is also necessary to address the increasing

risk of cyber security attacks and the increased incidence of cybercrime.61

Cyber security intersects both the public and private sectors and is part of national security. However, the Czech Republic suffers from a shortage of cyber security experts and specialists.

57

https://www.mvcr.cz/clanek/zakladni-registry-a-sprava-zakladnich-registru.aspx 58

European Commission; Digital Economy and Society Index (DESI), Country profile - Czech Republic, 2019 59

CEEC Research; Public Administration Study, 2019 60

European Commission; Report on the Czech Republic 61

NÚKIB, Report on the State of Cyber Security of the Czech Republic - 2018, pp. 8, 57-58


Problem area 2: Insufficient communication infrastructure

The state of the underlying digital communications infrastructure is crucial for the entire Digital Agenda.

In the Czech Republic, 4% of the territory is covered by 4G networks 62

, which puts us in third place in the EU. However, the use of the 4G network is only 82%, well below the EU average of 96%. It can be assumed that lower utilization of the 4G network is caused mainly by higher data prices, which are among the highest in Europe.

In view of the relatively high 4G signal coverage, it is also a great opportunity to achieve the necessary parameters when building next generation 5G networks. Nowadays, the development of 4th and 5th generation mobile networks promises, besides higher speeds, stability and lower connection latency, also new possibilities of interconnection of equipment and services of all sectors of the economy. The development of 5G networks will allow the emergence of new features and applications with high added value, both on economic and social level.

While the coverage of the Czech Republic with 4G signal is relatively strong, for fixed high-speed internet statistics show opposite results, coverage of households, companies and schools as well as for example major transport corridors is still insufficient. According to Eurostat data, 83% of households in the Czech Republic had a fixed broadband connection in 2017, which is below the EU average. The CZSO also states that in 2018 98% of enterprises (with more than ten employees) had internet access. However, only 35% of companies were connected to high-speed internet (> 30Mbps), i.e. by more than

8 pp. below the EU28 average (while being the fifth lowest in the European Union).63

In the Czech Republic, there are currently approximately 7,000 so-called white spots (i.e. places where high-speed Internet access can be provided at less than 40% of addresses), which accounts for approximately one

third of the residential units.64

The pace of building high-speed internet infrastructure is insufficient.

Thus, sparsely populated areas or areas that are not very attractive from the investors' perspective could be excluded from economic development in the long term due to insufficient access to high-speed internet, which would negatively affect the economic potential of the Czech Republic as a whole. Consequently, peripheral areas could lose attractiveness for new and existing residents due to lack of coverage and the negative impact on the territory would be further exacerbated.

Problem area 3: Insufficient use of digitalisation potential by companies and low investment in new technologies

A positive trend in the Czech Republic is the growth in the number of ICT entities and their share in the business sector. Between 2012 and 2017, the number of ICT business entities increased by almost 10 thousand from 42.5 thousand to 52 thousand. At the same time, their share in the Czech business sector in general increased from 3.7% to 4.4%. The share of domestic ICT companies in the total

number of ICT entities reaches 96%.65

The Czech Republic is also doing well in comparison with EU countries with a similar population size. In selected countries, the Czech Republic ranks second in terms

of the total number of ICT businesses.66

At the same time, there are many examples of globally successful companies in the new fast-growing industries in the Czech Republic. Specifically, for example, in the gaming and cybersecurity sectors, there are many examples of domestic companies in the Czech Republic that have become globally successful and can serve as an example for potential followers.

62

Opensignal; The State of Mobile Network experience; 2019 63

CZSO; ICT infrastructure 64

https://www.mpo.cz/cz/rozcestnik/pro-media/tiskove-zpravy/dostupnost-vysokorychlostniho-internetu-v-cr-se-musi-zvysit--mpo-vyhlasi-novou-vyzvu-na-pokryti-bilych-mist-a-chysta-dalsi-formy-podpory--248763/ 65

CZSO; Information economy sector in the Czech Republic, 2005 - 2017 66

CZSO; ICT sector in EU countries, 2008 - 2016


Despite these positives, the Czech Republic has a number of weaknesses in this area. Among the most important is the inability of companies to fully exploit the potential of digitization. While the start-ups have been able to respond quite flexibly to this change and find their place in the international environment, classic companies, especially manufacturing companies, are not yet able to use the potential of these new technologies by far. According to a survey focused on Industry 4.0 in the Czech Republic, Czech companies are approaching the development of digitization in their environment too limited. In particular, Czech companies perceive the lack of skilled labour as the main obstacle to the

implementation of new technologies, as well as the lack of return or total investment.67

Changes resulting from digitization and automation can also lead to changes in the production (supply) chains (for example, if the potential for digitization and new technologies is underutilized). Companies that are unable to adapt to modern trends and their customers' requirements will lose their positions. This threat affects both individual businesses and individual regions or countries as such.

Furthermore, Czech companies are lagging behind in the digitization of business transactions. According to CZSO data from 2018, 14.4% of Czech companies sent electronic invoicing enabling

automated data processing, i.e. 9 pp. below the EU average.68

One of the reasons is the fact that the Czech Republic lacks a legal obligation to use electronic invoicing for B2B transactions. Also, the utilization rate of secure intranet and extranet for communication inside and outside the company is not very high in the Czech Republic.

Czech companies focus primarily on so-called low digitization (purchase of new technologies, modernization of user interfaces and training of employees). Businesses are thus insufficiently committed to the "higher level of digitization", i.e. more complex and deeper in the functioning and overall structure of the business, which is crucial for future development. Projects in this area can thus influence the design of entire business models and greatly increase the potential for streamlining business processes, which cannot be achieved simply by upgrading websites, presence on social networks or renewing information systems. Businesses usually think of digitalization as the transfer of documentation from paper to digital, but this is only the first phase of this process. In the long term, this

approach may prove quite inadequate.69

Only a higher level of digitization transformation brings noticeably higher added value, both for businesses and their customers. The acquisition of digital technologies, their implementation and effective use, especially in the small and medium-sized enterprises (SMEs) sector, will be of key importance for the Czech economy. Declining competitiveness of Czech SMEs could have fatal consequences for the whole economy. However, there is currently a lack of systematic support in the digital field for SMEs. The Digital Czech Republic document states that there is only a "heterogeneous network of research and innovation support in the Czech Republic that can mean very unequal access to digitization centres and consultancy for many SMEs" and no templates for standardized digitization

across industry sectors.70

67

EY; Survey Industry 4.0 from the perspective of Czech practice, 2018 68

CZSO; Information technology in the business sector, https://www.czso.cz/eng/czso/business_sector 69

Digital Czech Republic - Government Digitalization Program of the Czech Republic 2018+, 2018 70

Digital Czech Republic - Government Digitalization Program of the Czech Republic 2018+, 2018


Summary of main barriers to innovation dissemination in the area Digital agenda

• Low electronization of public administration and low use of these services within individual offices

• Low use of eGovernment by citizens

• Weak innovation demand of the public sector

• Inability of companies to fully exploit the potential of digitization, low investment in artificial intelligence, machine learning, large data or blockchain

• Lack of systematic support in the digital field for SMEs

• High prices for mobile services incl. mobile data

• Insufficient coverage of households, businesses and schools by high-speed internet

• Low digitization of business transactions


SWOT analysis

Strengths

5.1.5 Existence of successful companies active in fast growing digital industries (cyber security, gaming industry)

5.1.3 Permanently increasing number of ICT enterprises and their share in the business sector, incl. strong positions in international comparison

5.1.2 Relatively high coverage of the Czech Republic with 4G signal

5.1.1 High use of eGovernment services by companies

5.1.4 Communication infrastructure of public administration information systems, functionality of basic registers and data boxes

Weaknesses

5.2.6 Low degree of electronization of public administration and low use of these services within individual offices

5.2.4 Inability of companies to fully exploit the potential of digitization, low investment in artificial intelligence, machine learning, large data or blockchain

5.2.7 Lack of systematic support in the digital field for SMEs

5.2.2 High prices for mobile services incl. give

5.2.1 Insufficient coverage of households, businesses and schools via fixed high-speed internet

5.2.5 Low use of eGovernment by citizens

5.2.3 Low digitization of business transactions

Opportunities

5.3.6 Development of 5G networks

5.3.1 Increasing demand for innovation in both public and private sectors


5.3.9 Development of electronization of public administration and public space (e.g. digital map, electronization of health in connection with the forthcoming Act on electronization of health, concept of Smart Cities, support of open data activities, etc.)

5.3.7 Supporting the integration and deployment of digital technologies in SMEs, including infrastructure and services

5.3.2 Creation of endogenous companies using digitization and new technologies to create new products and services (e.g. blockchain, data analytics, robot process automation, etc.)

5.3.3 The advent of IT technologies enabling more efficient organization and functioning of the economy and society

5.3.8 Possibilities to support innovative and digital infrastructure (e.g. Digital Innovation Hubs) from European and national sources

5.3.10 Prioritizing the Digital Agenda through National Strategies (Digital Czech Republic, National Artificial Intelligence Strategy) and the possibility of funding from programs at European level to further develop the Digital Agenda (Digital Europe)

5.3.5 Public-private cooperation on digitization (SONIA project)

5.3.4 Adoption of the Digital Services Right Act

Threats

5.4.5 Increasing risks in cybersecurity / cybercrime

5.4.6 A change in production chains resulting from the upcoming digitization and automation

5.4.2 High risk of prolonging and expensive public ICT contracts

5.4.3 Risk of uncontrolled development of digital services in the public sector without ensuring interoperability

5.4.1 Weak innovation demand of the public sector

5.4.4 Accent on enhanced personal data protection in the context of the adopted EC Regulation (GDPR) with the potential to hamper the development of digital services


Strategic section – key areas of change

As well as background analysis and SWOT analysis, the objectives of the National RIS3 Strategy are

also divided into four key areas of change – Research, Development and Innovation for Business, Public

Research and Development, People and Smart Skills, and the Digital Agenda.

This breakdown is partly based on the breakdown of the previous version of the National RIS3 Strategy

for 2014-2020 and also reflects the priorities of the European Commission for the new programming

period 2021+.

Below we present the vision of the National RIS3 strategy and the structure of strategic and specific

objectives. Subsequently, we present a strategic objective and specific objectives for each key area of

change, including an intervention logic summarizing what problems need to be addressed and what the

National RIS3 strategy focuses on. In addition, instruments and supported activities as well as indicators

are listed for each specific objective.

Vision and Objectives of the National RIS3 Strategy

Following the Innovation Strategy of the Czech Republic 2019-2030, the vision of the National RIS3

Strategy is:

Significantly improve the Czech Republic's innovation performance and move closer to Europe's

innovation leaders.

Evaluation of the fulfilment of this vision is simple - it will be based on the European Innovation

Scoreboard issued by the European Commission every year. In the current edition for 2019, the Czech

Republic is in the third of the four groups called ‚Moderate Innovators ‘.

This vision should be achieved through the realization of the following strategic objectives:

1. Increasing the innovation performance of companies

2. Improving the quality of public research and the environment for research

implementation

3. Increasing the availability of skilled workforce for research, development and innovation

4. Increasing the use of new technologies and digitization

These strategic objectives are interrelated. It can be stated that the conditions for increasing the

innovation performance of companies include increasing the quality of public research, increasing the

availability of skilled labour, but also the emphasis and focus on digitization and new technologies in

general. Similarly, to increase the quality of public research, it is necessary to increase the availability

of skilled labour.


Structure of objectives of the National RIS3 strategy


Key areas of change

Research, development and innovation for business

The current model of economic competitiveness based on the cost differential against the developed

economies has been exhausted. This entails the risk of shifting production abroad as well as increasing

competition from, for example, East Asian countries in industries based not only on cheap labour, but

also on knowledge and technology-intensive activities. Therefore, a response from the state is needed

in its innovation policy.

In relation to the above and following defined problem areas (low added value and focus on lower-order

innovations, weak endogenous business sector, unsatisfactory business environment and the need to

respond to technological and social trends), the research, development and Strategic goal to increase

the innovation performance of companies with the aim of increasing their added value and

productivity of enterprises, changing their focus to higher-order innovations, improving their position

within multinational corporations and global supply chains and supporting the exploitation of new

opportunities and thus the creation and development new companies. At the same time, the endogenous

business sector should be strengthened.

Improving the functioning of innovative ecosystems (at national and regional levels) and improving the

business environment in general are essential for improving the innovation performance of companies.

Similarly, it is necessary to respond to industrial transformation and current technological and social

trends.

Strategic objective Increasing the innovation performance of companies will be achieved through the

implementation of three specific objectives:

1. Increasing the added value of existing companies and responding to industrial

transformation, technological and social changes

This objective is aimed at supporting the development of existing enterprises in terms of

increasing their innovation performance, increasing investment in research, development and

innovation activities and focusing on increasing added value. The idea is to support businesses

in the development of non-productive value chain activities, to promote their position within

global supply chains and, in the case of foreign-controlled enterprises, within their multinational

corporations.

Support should be primarily for small and medium-sized enterprises, under some instruments

support may also target so-called mid-caps (i.e. enterprises no longer formally SMEs, but from

the perspective of global markets they are not large enterprises) and in justified cases also to

large businesses.

Investment in new technologies will also be supported as part of the necessary response to the

ongoing industrial transformation (in particular digitalisation, automation and robotization). At

the same time (especially small and medium-sized) Czech companies will be supported in their

efforts to penetrate foreign markets and strengthen international cooperation.

This objective should lead to an increase in sales and thus to the economic growth of the Czech

Republic, an increase in added value created in the Czech Republic and an improvement in the

position within the value (supply) chains.

2. Establishment and growth of new companies and use of new opportunities

This objective is aimed at ensuring appropriate conditions for the creation and development of

(not only) technology companies in areas with high growth potential, higher added value and

also responding to new opportunities related to current technological and social trends. Starting

a business, especially in technology, is often more investment-intensive and risky, and founders


of these companies need a variety of specific services and conditions to realize their business

plan. They are trying to create practically all developed countries in the world in various ways.

The objective will therefore be to support the development of a system of financing innovation

and address the need for a nationwide system of support for a functional environment for the

creation and growth of new firms, start-ups and spin-offs. The establishment and development

of companies with global ambitions aimed at penetrating foreign markets will also be supported.

The expected result will be an increase in the level of new entrepreneurial activity and a larger

number of new companies in technological fields. This change is an important prerequisite for

the future larger number of large Czech companies that will drive economic growth.

3. Improving the functioning of innovative ecosystems at national and regional levels

Improving the functioning of national and regional innovation ecosystems is a prerequisite for

increasing the added value of existing firms and their response to technological trends, as well

as the creation of new firms and exploiting new opportunities (i.e. the first two specific

objectives).

For the successful development of small and medium-sized companies, the development of

support services is necessary, including support for the necessary infrastructure and services

enabling, for example, testing the results of research and development. It is also necessary to

develop cooperation between enterprises and between business and research (academic)

spheres and to promote the transfer of technology and R&D results into practice.

On the state side, it is necessary to unify and simplify the system of support for SMEs, to support

the use of R&D tax deductions and also to support innovative demand from the public

administration. Last but not least, it is important to promote market competences and other

business skills.

This objective should support the fulfilment of the other two specific objectives and thus

contribute to a higher innovation performance of the Czech Republic (as measured, for

example, by the European Innovation Scoreboard).

These specific objectives imply that the emphasis is on developing existing companies, increasing

added value, improving their positions within global supply chains and possibly also within their parent

multinationals. At the same time, these companies need to respond to current developments, industrial

transformation, technological and social changes.

On the other hand, it is also necessary to emphasize the creation, growth and development of new

companies that will respond to new opportunities by developing new products and services or develop

new business models and look for niches or niches.

We see the future of the Czech economic model as a combination of the development of the old (existing

company) and the creation of a new (new company and opportunities). For both, it is essential to develop

and improve the functioning of innovative ecosystems, both at national level and at the regional

(regional, local) level.


To evaluate the fulfilment of this strategic objective, we propose the following indicators:

• Gross value added per worker (source: European Commission)

• Export by value added sources (source: OECD)

• Share of business R&D expenditure on GDP (source: CZSO)

• Share of SMEs in R&D expenditures and their total amount (source: CZSO)

• Number of robots per 10 thousand workers (source: ITIF)

• SME internationalization rate (source: SBA Factsheet)

• Number of companies in the ranking of the fastest growing technology companies (source: Deloitte, Technology Fast 50)

• Increasing innovation performance at national and regional level (source: European Commission, European / Regional Innovation Scoreboard)


Intervention logic scheme


Overview of objectives, instruments, activities and indicators

Strategic objective 1. Increasing the innovation performance of companies

Specific objective 1.1 Increasing value added of existing companies and reaction on

industrial transformation, technology and social changes

Instruments and model activities Indicators

Support for investment in technology, support for robotics

and automation, use of new technologies and

technological trends, implementation of Industry 4.0

principles (apart from industry also in other sectors - such

as energy, transport, construction, agriculture, etc.)

Support for enterprise research, development and

innovation activities and increased investment in RDI by

enterprises

Support for improving the position of Czech companies in

global supply chains

Support for improving the position of Czech branches

within multinational corporations (including, for example,

support for cooperation with endogenous SMEs,

cooperation between the state and multinational

corporations on selected topics, etc.)

Support of development of R&D activities particularly of

SMEs

Supporting increased internationalization and international

cooperation particularly of SMEs

Support of innovation (products, services, processes and

organizational innovations)

Supporting the development of non-productive value

chain activities (i.e. activities with higher added value)

Promoting interdisciplinary approaches, creative industries

and linking social and human sciences with technology

The current draft of operational

programs did not include indicators. To

be completed according to the current

versions of the operational programs.

Specific objective 1.2 Creation and growth of new companies and utilization of new

opportunities


Developing a nationwide system to support the

environment for the creation and growth of new

businesses, start-ups and spin-offs (e.g. support for

quality services from entrepreneurship support to fast

growing young firms; support for the development of a

system of financing innovation (risk capital and other

financial instruments)






Support for business, its development and

entrepreneurship development

Supporting the exploitation of new opportunities

responding to societal challenges and technological

trends

Support of penetration of new markets and support of

international activities of Czech companies

Promoting interdisciplinary approaches, creative industries

and linking social and human sciences with technology

Specific objective 1.3 Improvement of functioning of Innovation ecosystems on both national

and regional levels


Supporting the development of services for SMEs

Promoting multilateral cooperation between companies

(including cooperation within clusters and technology

platforms)

Promotion of business cooperation with academia,

including support for technology transfer

Support of infrastructures and services for testing R&D

results (e.g. testbeds, living labs, etc.)

Unification of support to companies by public

administration and support for national innovation

ecosystem development activities (including support for

Entrepreneurial Discovery Process, technology

assessment and technology foresight)

Supporting the development of regional innovative

ecosystems

Supporting the development of market competences and

business skills

Supporting the innovative demand of smart solutions by

the public administration

Support for extending the use of the system of tax

deductions to R&D (or other indirect forms of support) and

support for financial instruments






Public research and development

Improving the quality of public research is one of the main conditions for the successful development of

the whole innovative ecosystem. If we want to emphasize increasing the innovation performance of

companies, we cannot do without a functioning and efficient research sphere producing quality results.

But there is also a need for functional cooperation between both worlds (i.e. research and application

spheres). Increasing the quality of public research is not possible without improving the conditions for

its implementation.

In particular, the strategic objective Improving the quality of public research should lead in particular

to an increase in the number of publications among the most cited publications, an increase in the

number of participations in international publications and a greater involvement in Community programs.

As a result of improved collaboration between the research and business sectors, the share of business

spending on public research should increase, the revenue generated by the commercialization of results

should increase, and the (and more efficient) use of intellectual property instruments should be

increased.

In terms of the quality of the environment for the implementation of research, the administrative burden,

legislative changes and the whole system of management of public research and development, including

the system of management of the implementation of the National RIS3 itself, should be improved. It will

be necessary to focus on new trends related to the availability of R&D results in the Open Access regime,

and to support the implementation of the European Open Science Cloud (EOSC) initiative and access

to other information sources for RDI in line with the principles of Open Science. At the level of research

organizations, the quality of their management should be improved, with an emphasis on improving

human resources management and developing tools to support researchers.

Strategic objective Improving the quality of public research will be achieved through the implementation

of two specific objectives:

1. Improving the quality and social relevance of public research

This objective focuses on the identified weaknesses and aspects of public research, the

elimination of which should lead to both an increase in the quality and output of research and

an increase in its social relevance.

In particular, the instrument for achieving this goal is to support the increase in the

internationalization of Czech research (both in terms of greater participation in international

programs and projects and in the sense of increasing the number of foreign researchers in the

Czech Republic). with an emphasis on the development of long-term cooperation) and

technology transfer.

It will also support strengthening the profiling of research focus using already built research

infrastructures (in terms of greater thematic focus of research and reduction of a large number

of small research projects) r. It will also be important to focus not only on promoting research

excellence, but also on supporting high-risk / high-gain projects.

Fundamental investments have been made in the past programming period for the development

and development of research organizations, but due to the rapid advancement in technology,

equipment needs to be constantly upgraded, upgraded and adapted to new trends. The Czech

Republic's ambition to get among the countries with the highest scientific and research

performance in Europe can only be fulfilled if the infrastructure for excellent research and

cutting-edge research applicable in practice meets the demanding requirements for the

timeliness of technologies. The core infrastructure should then be maximally usable across

Open Access research organizations. Due to the efficiency and concentration of hay in the

priority area it is necessary to maintain in the long term a completely unique knowledge and

technological level of the so-called large research infrastructures requiring continuous

modernization so that they reach the internationally competitive level in the long term.


This objective should lead to an increase in the quality of R&D results, their relevance

internationally and from the perspective of society.

2. Improving the quality of the environment for public research

This objective is aimed at ensuring appropriate conditions for the development of public

research and improving its quality. Within this objective, attention will be focused both on the

research, development and innovation management system itself (at national and regional level)

and on improving the quality of the environment in the research organizations themselves.

From the point of view of the R&D and innovation management system, it is necessary to

support activities leading to its simplification and also to reducing the administrative burden

(these activities are related), together with the necessary modification of existing legislation,

including (clarification and clarification) support. Among other things, the aim is to ensure

predictability of rules interpretation, their harmonization across providers, simplification of rules

and reduction of formalism in project documentation / reporting.

As part of the creation of a functional management system of the National RIS3 Strategy, the

Enterpreneurial Discovery Process at national and regional level and other activities of the

development of innovative ecosystem (e.g. analytical and evaluation activities, technology

foresight, etc.) will be supported.

Research organizations will support a wide range of activities aimed at improving the quality of

management, developing the institutional environment of universities and research

organizations (supporting, for example, knowledge transfer and collaboration with businesses,

creating spin-offs, developing a culture of working with intellectual property, etc.)

internationalizing the environment (e.g. through a welcome office for foreign workers) or building

the necessary administrative capacities to support research teams (so that researchers can

explore and do not have to spend less on administration). It will also support the transition to a

new way of making R&D results available in the Open Access regime and support the

implementation of the European Open Science Cloud (EOSC) initiative and make available

other sources of information for RDI in line with the principles of Open Science.

The expected result will be a reduced administrative burden, an efficient and functional system

of management of research, development and innovation supported by well-established

legislation. Furthermore, the quality of management of research organizations themselves

should be improved.

Both specific objectives are interconnected, respectively the second specific objective aimed at

improving the quality of the environment for the implementation of public research is one of the main

conditions for the very improvement of the quality and social relevance of public research.


• Increasing the number of publications among the most cited publications (source: R&D analysis)

• Increase in participation in international publications (source: R&D analysis)

• Increased involvement in Community programs (source: R&D analysis)

• Increase in the share of corporate expenditure on public research (source: Czech Statistical Office)

• Increase in income from commercialization of results (source: Czech Statistical Office)

• Number of spin-offs generated with a turnover of EUR 1 million after five years of operation

• Growth in the number and share of foreign researchers in the total number of researchers in public research (source: Czech Statistical Office)





Strategic objective 2. Improving the quality of public research and the environment

for research implementation

Specific objective 2.1 Improvement of the quality and social relevance of public research


Promoting international cooperation, international mobility

and participation in Community programs

Support for increasing profiling and concentration of

research and increasing the size of research teams

(stronger thematic focus of research as well as creation of

critical size teams)

Support for knowledge transfer and commercialization of

results including support for new spin-offs

Supporting research on megatrends (societal challenges

and technological trends)

Promoting interdisciplinary approaches and linking social

and human sciences with technology

Support of demand for innovative solutions by public

administration and use of R&D results in public

administration

Support of development of the third role of universities

Support for modernization and further development of

R&D infrastructure of research organizations, including

backbone infrastructure in the form of large research

infrastructures

Supporting the emergence and development of

technological and innovative gravity centres / hubs around

research centres

Support for cooperation between the research and

application spheres, in particular support for long-term

cooperation

Support of cooperation between research and application

spheres specifically focused on digital technologies and

digitization

Promoting excellence in research

Support for high-risk / high-gain projects





Specific objective 2.2 Increase in quality of the public research environment


Reducing administrative burdens in research The current draft of operational



Simplification of the RDI management system

Modification ("modernization") of legislation

Building administrative capacity to support research teams

Support to increase the quality of management of

research organizations and development of the

institutional environment (including support for creating

conditions and motivation for the establishment of spin-off

companies and cooperation with enterprises, development

of culture of work with intellectual property, etc.)

Supporting the internationalization of the environment of

research organizations

To create a functional system for effective management

and coordination of the implementation of the National

RIS3 Strategy

Support and development of EDP at national and regional

level, strengthening cooperation between business,

academic and public spheres

Support for national innovation ecosystem development

activities (including support for the development of

analytical and evaluation activities, technology

assessment and technology foresight)

Supporting the transition to a new way of making available

R&D results in the Open Access regime, etc. Supporting

the implementation of the European Open Science Cloud

(EOSC) initiative and making available other sources of

information for RDI in line with the principles of Open

Science

Promotion of research and development results in the

Czech Republic and abroad



People and smart skills

Ensuring available skilled labour is a key condition for the successful development of the economy, an

innovative ecosystem and for the development and improvement of public R&D performance. To ensure

a qualified workforce, it is necessary to have a quality and functioning education system that responds

to current trends (technological and social) and can respond to the needs of the labour market.

In particular, the strategic objective of increasing the availability of skilled labour for research,

development and innovation should in particular lead to the modernization of the education system

and its ability to prepare human resources for research, development and innovation.

It should also develop staff training in skills needed for smart specialization, industrial transformation

and the introduction of new technologies. In this context, flexible forms of education should be

developed, entrepreneurial skills increased, entrepreneurial mindset expanded, and market skills

developed.

Furthermore, the professional potential of researchers should be increased, for example by generally

developing the internationalization of the environment of universities and research organizations,

increasing the ability to attract (and retain) talent and skilled workers, and also by increasing the

proportion of women in research.


In general, this objective should lead to an increase in the share of GDP expenditure on education, an

increase in the share of the population with higher education and an increase in the quality of education

(internationally).

Strategic objective Increasing the availability of skilled labour for research, development and innovation

will be achieved through the implementation of three specific objectives:

1. Improving the ability of the education system to prepare human resources for research,

development and innovation

This objective is aimed in particular at supporting the modernization (and digitization) of the

education system with an emphasis on developing key competences of pupils and students

relevant to long-term employment in the 21st century labour market.

Support will be given to the development of STEAM skills strengthening the priorities of smart

specialization and the development of digital and business skills. The aim will also be to improve

the management system of higher education institutions, to increase their internationalization,

to reduce the high drop-out rate and to increase interest in pedagogical fields and subsequent

practice.

Linking schools and practice within the education system will also be supported. The system of

work with gifted pupils and students will be developed. At the same time, it is necessary to

support secondary schools and universities in their participation in lifelong learning.

This objective should lead to an improvement in the results of the international PISA survey, an

increase in the quality of higher education institutions in an international comparison, an

increase in the proportion of the population with basic digital skills, an increase in the proportion

of firms involved in vocational education and more.

2. Skills development for smart specialization, industrial transformation and

entrepreneurship

This objective aims at developing flexible forms of education, including the need to increase

their accessibility and relevance (i.e. to make education available in areas where labour market

demand exists). Related to this is the need to support the training of corporate employees in

skills for the introduction of new technologies, and industrial transformation and smart

specialization.

It will also support the development of all skills needed for entrepreneurship, including market

competences and the development of the business mindset in general.

The expected outcome will be increased skills in the business sector in the areas of smart

specialization, as well as improved skills needed for the introduction of new technologies,

industrial transformation and entrepreneurship.

3. Increasing the potential and motivation of workers in research organizations

This objective is aimed at ensuring and retaining high-quality researchers who are a prerequisite

for improving the quality and performance of the entire public research system. This requires

improving the institutional environment in research organizations and thus improving the

conditions for the work of researchers. Similarly, it is necessary to work towards increasing the

internationalization of the environment of research organizations (in terms of involvement in

international cooperation and research projects, but also in terms of increasing the number of

foreign researchers in our country). It is also necessary to create suitable conditions and

environment (e.g. communication in English, the existence of the so-called welcome office,

competitive salary conditions etc.) and also to motivate research institutions and researchers

themselves to develop internationalization.

However, the aim is not only to attract new researchers and retain existing ones, but also to

increase their expertise – for example by promoting mobility (abroad, but also into the business


/ commercial sphere). It is also necessary to focus on the emerging research generation, to

support the change in the position of PhD students, and generally to increase the motivation of

young people to engage in research and then stay in the research sphere.

The expected result will be an increase in the ability to attract and retain talent and skilled

workers, an increase in the share of foreign researchers and an increase in the share of women

in research.

The first specific objective focuses in particular on improving the education system and its capacity to

prepare human resources for research, development and innovation, while the second specific objective

aims more at supporting activities linking education and labour market needs (such as supporting the

development of flexible forms of education, and the third specific objective then focuses on the

development of workers and their skills directly in research organizations.

In this chapter, the objectives, tools and measures in the field of education are linked mainly to the

Strategy of Educational Policy of the Czech Republic until 2030+ and to the Strategic Plan for Higher

Education 2021+. The National RIS3 Strategy is only of a recommending nature in the field of education

and focuses only on partial aspects of education in areas relevant to the National RIS3 Strategy mission.

Thus, education interventions (which have a broader scope and respond to the above educational

strategies) can only partially contribute to the achievement of the NRIS3 objectives.


• Share of GDP expenditure on education (source: CZSO, OECD)

• Share of the population with higher education (source: CZSO, OECD)

• Share of students of pedagogical disciplines in the total number of university students (source: MEYS)

• Share of university educated people fluent in at least one foreign language (source: Eurostat)

• Successful completion of university studies (source: MŠMT)

• Quality of universities in international comparison (source: QS World University Rankings)

• PISA results (source: OECD)

• Differences in PISA results between regions (source: OECD)

• Share of population with at least basic digital capabilities (source: Eurostat)

• Share of firms involved in vocational training (source: Eurostat)

• Share of total employment by labour intensity (source: OECD)

• Share of foreign researchers (source: CZSO)

• Share of women in research (source: CZSO)

• The ability to attract talent and skilled workers (source: IMD World Talent Ranking)

• Use of part-time employment (source: Eurostat)





Strategic objective 3. Increasing the availability of skilled workforce for research,

development and innovation

Specific objective 3.1 Improvement of the education system’s capacity to train human

resources for RDI


Support for the modernization of the education system

with an emphasis on the development of key

competences of pupils and students relevant to the labour

market of the 21st century

Supporting the development of key pupils’ competences in

the area of STEAM strengthening the priorities of smart

specialization

Supporting the development of digital competences of

pupils, students and teachers

Strengthening entrepreneurial competences of pupils and

students

Promoting interest in pedagogical practice and supporting

the development of teachers' competences

Supporting the linking of schools and practice

(enterprises, research organizations) within the education

system

Promoting the mobility of pupils, students and teachers

(private sector, abroad).

Supporting the involvement of secondary schools and

universities in lifelong learning

Support of interconnecting formal and non-formal

education, support of innovative forms of teaching

Supporting the development of systematic work with gifted

pupils and students

Supporting the improvement of the university

management system

Support for the internationalization of universities

Support to improve the quality of doctoral studies and the

success of its completion






Specific objective 3.2 Development of skills for smart specialization, industrial

transformation and entrepreneurship


Support for vocational training of corporate employees in

skills for the introduction of new technologies and

industrial transformation, including transfer of knowledge

from public sphere

Support for the activities of the Digital Innovation Centers

(or institutions with expertise in the digital agenda) aimed

at developing digital skills

Supporting improvement of strategic management,

acceleration of growth and management of innovation in

the business sphere

Supporting the development of entrepreneurial mindset,

development of market competencies, skills for

entrepreneurship

Supporting the development of flexible forms of education,

increasing their availability and relevance

Supporting the involvement of secondary and higher

education institutions in lifelong learning





Specific objective 3.3 Increasing professional potential and motivation of employees in



Supporting the recruitment and retention of quality

researchers, including their professional development

Support of internationalization of research organizations,

including environment for foreign (and Czech) researchers

(welcome office, etc.)

Promoting the mobility of researchers (private and

international).

Encouraging increased representation of women in

research.

Supporting changes in the position of PhD students and

increasing the motivation of young people to participate in

research






Digital agenda

In accordance with the document Digital Czech Republic (or its part Digital economy and society), it can

be stated that the digital transformation for the Czech Republic is a chance for internal modernization,

transition to the educational economy and the emergence of domestic innovative enterprises with high

added value.

Therefore, the National RIS3 Strategy includes the strategic objective of Increasing the use of new

technologies and digitization. This objective should lead companies to invest in technology, robotics

and automation and implement Industry 4.0 principles. Furthermore, to develop systematic support for

SMEs in this field, including the necessary infrastructure and services, support for the building and

development of Centres for digital innovation (Digital innovation hubs) and investments complementary

to the European Digital Europe program. Furthermore, this objective should lead to the emergence of

endogenous companies using new technologies to create new products and services.

In the area of public administration, eGovernment should be developed and the electronization of public

administration increased, and consequently the increase in the use of electronic services by citizens,

companies and authorities themselves. Increasing broadband Internet coverage is also crucial, again

for citizens, businesses and other entities (schools, transport corridors, etc.).

In general, the fulfilment of objectives and activities related to the Digital Czech Republic - Government

Program for Digitization of the Czech Republic 2018+ will be supported under this strategic objective,

and investments complementary to the Digital Europe Program will be supported.

Strategic objective Increasing the use of new technologies and digitization will be achieved through the

implementation of two specific objectives:

1. Support digitization and use of new technologies in business

Given the still lack of investment in new technologies, this specific objective is aimed at

supporting the development of digitalisation (including investment in technology), supporting

robotics and automation, responding to new technological trends and implementing the

principles of industry 4.0 (not only in industry but also in other sectors) and sectors - such as

energy, transport, construction, agriculture, etc.).

In this context, it is also necessary to focus on developing support for the integration and

deployment of digital technologies in SMEs, including related infrastructure and services. At the

same time, it will also endeavour to use the possibilities of supporting innovative and digital

infrastructure (such as Digital innovation hubs - DIH) from European and national sources. Given

the current rather fragmented state support for digital SMEs, the aim is to systematize this

support.

In connection with dynamic technological changes and shorter diffusion time of new

technologies, the creation and development of endogenous companies using digitalisation and

new technologies (eventually open data of public administration or data of mobile operators) for

the creation of new products and services (e.g. blockchain, data analytics) , robotics, automation,

etc.).

The result of all the above activities will be an increase in the number of ICT-oriented companies

and an increase in their share of the business sector and, in general, an increase in the use of

digital technologies in the business sector.

2. Support of digitization and use of new technologies in the public sphere

This specific objective is aimed at supporting the development of e-government and public space

in order to increase both the offer of eGovernment services by public institutions and the demand

of citizens for these services. Generally, increased demand for innovative solutions based on

digital technologies and artificial intelligence, such as Smart Cities, open data, etc., will be


supported related to cyber security. It will also be key to simplify and modernize public

administration processes (i.e. not to electronise existing procedures, but also to modify and

simplify them, possibly together with relevant legislation).

The expected result will be a higher rate of Internet usage in relation to public administration by

companies and citizens, but also an increase in electronic communication and use of electronic

services between authorities. In addition, the share of households and companies with high-

speed internet connections should increase.

Both specific objectives are similar, differing mainly in their focus - the first on the business (commercial)

sector, while the second focuses on public administration. In addition, the first specific objective is linked

to objectives in the key area of change Research, Development and Innovation for Business.


• Results of the Digital Economy and Society Index (source: European Commission)

• Number of ICT entities and their share in the business sector (source: CZSO)

• Digitization of business transactions (source: CZSO)

• Internet usage rate in relation to public administration by companies (source: CZSO)

• Rate of Internet usage by individuals in dealing with public administration (source: CZSO)

• eGovernment Development Index (source: United Nations)

• eParticipation Index (source: United Nations)

• Share of households and companies with high-speed internet connection (source: CZSO)



4.1 Supporting digitalization and

uptake of new

technologies in business sector

4.2 Supporting digitalization and

uptake of new

technologies in public sector

CAUSES PROBLEM SPECIFIC OBJECTIVES

Insufficient

digitization and

use of new

technologies

by public

administration

and companies

4. Increasing

the use of

new

technologies

and

digitization

STRATEGIC OBJECTIVES

The emergence of endogenous

f irms using digitization and new

technologies f or the

dev elopment of new products

and serv ices

Support of the integration and

deploy ment of digital

technologies in SMEs, including

inf rastructure and serv ices

Dev elopment of electronization

of public administration and

public space, cooperation of

priv ate and public sector

OPPORTUNITIES

Low electronization of

public administration

The absence of systematic

support in the digital

environment for SMEs

Increasing risks in cy bersecurity

/ cy bercrime

THREATS

Low digitization of business

transactions

DIGITAL AGENDA

A change in production chains

resulting f rom the upcoming

digitization and automation

Risk of uncontrolled

dev elopment of digital serv ices

in the public sector without

ensuring interoperability

Insuf f icient coverage of

households, businesses and

schools with f ixed high-speed

internet

Inability of companies to f ully

exploit the potential of

digitization, low inv estment in

new technologies

Low use of eGovernment

by citizens

Low use of electronic

services within individual

offices

Low internet usage

Lack of qualif ied personnel

Amount of investments and

their return



Strategic objective 4. Increasing the use of new technologies and digitization

Specific objective 4.1 Supporting digitalization and uptake of new technologies in business

sector


Developing systematic support for companies in the digital

industry, including infrastructure and services

Supporting the building and development of a network of

Centres for digital innovation (Digital innovation hubs)

Supporting the emergence of new and development of

existing endogenous companies using new technologies

to create new products and services

Support for the development of digitization (including

investment in technology), support for robotics,

automation and artificial intelligence, use of new

technologies and technological trends, implementation of

Industry 4.0 principles (not only in industry but also in

other sectors and sectors - e.g. energy, transport,

construction, agriculture, etc.)

Supporting the development of business transaction

digitization and digital communication inside and outside

companies

Supporting the goals of government strategies aimed at

supporting the digital agenda (e.g. Digital Czech Republic

- Government Digitalization Program of the Czech

Republic 2018+)

Supporting complementary activities with Digital Europe

and other Community tools

Supporting research, development and innovation

activities in the field of the digital agenda





Specific objective 4.2 Supporting digitalization and uptake of new technologies in public

sector


Supporting the development of eGovernment, and the

electronization and rationalisation of processes in public

administration and public space (including, for example,

the Smart Cities concept, open data, the introduction of

artificial intelligence, etc.)

Supporting increased use of eGovernment by citizens and

between authorities

Supporting increased broadband coverage and availability

Output indicators:

30500 Number of acquired information

systems

Result indicators:

RCR 11 Users of new public digital

services products and processes


Supporting the development of cyber security

Supporting the development of public-private cooperation

on digitization

Support of research, development and innovation

activities in the field of digital agenda for the needs of

public administration

Supporting the goals of government strategies aimed at

supporting the digital agenda (e.g. Digital Czech Republic

- Government Digitalization Program of the Czech

Republic 2018+)

30515 New information system

functionality

30400 New or upgraded features to

ensure cyber security standards


Relationship of the National RIS3 Strategy to other strategic

documents and programmes

The national RIS3 strategy should form interventions and proposals aimed at making the use of research

and development (especially public) in innovation more effective. In this sense, it can be understood as

a national strategy of oriented and applied research. It is not a strategic document whose purpose would

be to influence the entire research, development and innovation (RDI) policy in the Czech Republic. The

National RIS3 Strategy is thus linked to other key RDI documents, namely the Innovation Strategy of

the Czech Republic 2019-2030 and the National Research, Development and Innovation Policy of the

Czech Republic 2021+.

The National RIS3 Strategy also formulates some interventions for education. This is because quality

education is considered the most important cross-cutting factor for the development of private and public

research, development and innovation. Interventions in the field of education are linked mainly to the

Strategy of Educational Policy of the Czech Republic until 2030+ and to the Strategic Plan for

Universities 2021+. The National RIS3 Strategy is only of a recommending nature in the field of

education and focuses only on partial aspects in education in areas relevant to the National RIS3

Strategy mission. Thus, education interventions (which have a broader scope and respond to the above

educational strategies) can only partially contribute to the achievement of NRIS3 objectives.

In the area of digital agenda, the National RIS3 strategy is in line with the government's digitalization

program of the Czech Republic 2018+ - The Digital Czech Republic. The National RIS3 Strategy is also

linked to the Regional Development Strategy 2021+ and its relevant objectives.

Given that the creation and implementation of the National RIS3 Strategy is a prerequisite for support

from the EU Funds under Objective 1 "A smarter Europe through support for innovative and intelligent

economic transformation", this document has a strong link to the relevant operational programs for

period 2021-2027, especially for the Operational Program Technology and Applications for

Competitiveness (Managing Authority Ministry of Industry and Trade) and Operational Program Jan

Amos Comenius (Managing Authority Ministry of Education, Youth and Sports).

The National RIS3 Strategy is also linked to the implementation of national programs for targeted

support for research, development and innovation and Community programmes.

Innovation Strategy of the Czech Republic 2019-2030

The Czech Republic's Innovation Strategy 2019-2030 was approved by the Government Resolution No.

104 of 4 February 2019. It is a strategic framework plan that predetermines government policy in the

area of research, development and innovation and is intended to help the Czech Republic move to

Europe's most innovative countries within the next twelve years.

The innovation strategy consists of nine interconnected pillars, which contain the starting points, the

basic strategic objectives and the instruments leading to their fulfilment. These are: R&D funding and

evaluation, Innovation and research centres, National start-up and spin-off environments, Polytechnic

education, Digitization, Mobility and construction environment, Intellectual property protection, Smart

investments and Smart marketing.

The Innovation Strategy was elaborated by the governmental Council for Research, Development and

Innovation in close cooperation with a team of over thirty members of entrepreneurs, scientists,

academics and public administration.

Part of the Innovation Strategy is the launch of the new brand:The Czech Republic: The Country For

The Future.

The National RIS3 Strategy is listed in the Innovation Strategy of the Czech Republic 2019-2030 (without

further information) as a tool for its implementation in the following pillars:


▪ Financing and Evaluation of Research and Development

▪ National Start-up and Spin-off Environment

▪ Digital State, Manufacturing and Services

▪ Innovation and Research Centres

National Research, Development and Innovation Policy of the

Czech Republic 2021+71

The National Research, Development and Innovation Policy of the Czech Republic 2021+ (NP RDI

2021+) is an umbrella strategic document at the national level for research, development and innovation.

It represents a strategic framework for the development of all components of research, development

and innovation in the Czech Republic (basic research, oriented and applied research, experimental

development and innovation) and leverages their joint action to develop the knowledge society and

support the Czech Republic's economic, environmental, cultural and social development.

According to the NP RDI 2021+ itself, the National RIS3 Strategy fulfils part of the tasks of the NP RDI

2021+ in terms of oriented and applied research and operates within its framework.

The NP RDI 2021+ sets six strategic objectives which are in line with the objectives of the National RIS3

Strategy:

1. Set up a strategically managed and efficiently funded research, development and innovation

system.

2. Increase the motivation of people from the Czech Republic and abroad to pursue a scientific

career across the entire spectrum of research, development and innovation in the Czech

Republic.

3. Increase the quality / excellence of research and development in the Czech Republic.

4. To support the expansion of cooperation between the research and application spheres in the

area of research, development and innovation.

5. To increase the openness and attractiveness of the Czech Republic as a place for international

research and development.

6. Increase the importance of R&D and innovation in enterprises and ensure State support.

EU Funds

The individual strategic and specific objectives of the National RIS3 Strategy have a strong link to the

objectives of the Operational Program Technology and Applications for Competitiveness (OP TAK) and

the Operational Program Jan Amos Comenius (OP JAK). Furthermore, the National RIS3 Strategy is

also linked to the Operational Program Employment plus and the Integrated Regional Operational

Program for the period 2021-2027. Specific linkages are shown in the following tables and schemes.

Link of the National RIS3 Strategy to the OP Technology and Applications for Competitiveness

Strategic

objective NRIS3

Specific objective

NRIS3

Priority of

OP TAK

Specific objective

OP TAK

1. Increasing the

innovation

performance of

companies

1.1 Increasing

value added of

existing companies

and reaction on

industrial

transformation,

1. Enhancing

business

performance in

R&D and

innovation and

1.1 Strengthening research and

innovation capacities and

introducing advanced

technologies

71

The National Research, Development and Innovation Policy of the Czech Republic 2021+ is still in preparation. This text is based on the version presented at the GCRDI meeting in September 2019.


Strategic

objective NRIS3

Specific objective

NRIS3

Priority of

OP TAK

Specific objective

OP TAK

technology and

social changes

their digital

transformation

2. Development of

business and

competitiveness of

SMEs

1.2 Realizing the benefits of

digitization for citizens, businesses

and governments

2.1 Enhancing SME growth and

competitiveness

1.2 Creation and

growth of new

companies and

utilization of new

opportunities

1.3 Improvement

of functioning of

Innovation

ecosystems on

both national and

regional levels

3. Increasing the

availability of

skilled workforce

for research,

development and

innovation

3.1 Improvement

of the education

system’s capacity

to train human

resources for RDI

1. Enhancing

business

performance in

R&D and

innovation and

their digital

transformation

1.3. Developing skills for smart

specialization, industrial

transformation and

entrepreneurship

3.2 Development

of skills for smart

specialization,

industrial

transformation and

entrepreneurship

3.3 Increasing

professional

potential of

employees in

research

organizations

4. Increasing the

use of new

technologies and

digitization

4.1 Supporting

digitalization and

uptake of new

technologies in

business sector

1. Enhancing

business

performance in

R&D and

innovation and

their digital

transformation

2. Development of

business and

competitiveness of

SMEs

1.1 Strengthening research and



technologies

1.2 Realizing the benefits of

digitization for citizens, businesses

and governments

1.3. Developing skills for smart


transformation and

entrepreneurship

2.1 Enhancing SME growth and

competitiveness


Scheme of links between National RIS3 strategy to the OP Technology and application for competitiveness


Link of the National RIS3 Strategy to the OP Jan Amos Comenius

Strategic

objective NRIS3

Specific objective

NRIS3

Priority of

OP JAK

Specific objective

OP JAK

1. Increasing the

innovation

performance of

companies

1.3 Improvement

of functioning of

Innovation

ecosystems on

both national and

regional levels

1. Priority focused

on policy objective

1

A smarter Europe

by supporting

innovative and

intelligent

economic

transformation

1.4. Skills development for smart


transformation and

entrepreneurship

2. Improving the

quality of public

research and the

environment for

research

implementation

2.1 Improvement

of the quality and

social relevance of

public research

1. Priority focused

on policy objective

1

A smarter Europe

by supporting

innovative and

intelligent

economic

transformation

1.1. Strengthening research and



technologies



transformation and

entrepreneurship

2.2 Increase in

quality of the

research

environment

3. Increasing the

availability of

skilled workforce

for research,

development and

innovation

3.1 Improvement

of the education

system’s capacity

to train human

resources for RDI

1. Priority focused

on policy objective

1

A smarter Europe

by supporting

innovative and

intelligent

economic

transformation




technologies



transformation and

entrepreneurship


Strategic

objective NRIS3

Specific objective

NRIS3

Priority of

OP JAK

Specific objective

OP JAK

3.1 Improvement

of the education

system’s capacity

to train human

resources for RDI

Priority 2 focusing

on policy objective

4

A more social

Europe through

the implementation

of the European

pillar of social

rights

2.2. Improve the quality, efficiency

and relevance of education and

training systems in the labour

market to promote the acquisition

of key competences, including

digital skills

2.3 Promote equal access to

quality and inclusive education

and training and their successful

completion, especially for

disadvantaged groups, from pre-

school education and care to

general education and vocational

education and training up to

tertiary level, as well as adult

education and study, including

facilitating educational mobility for

all

2.4 Promote lifelong learning, in

particular flexible skills expansion

and retraining for all with regard to

digital skills, better anticipate

changes and new skills

requirements based on labour

market needs, facilitate transitions

between jobs and promote

professional mobility

3.2 Development

of skills for smart

specialization,

industrial

transformation and

entrepreneurship

1. Priority focused

on policy objective

1

A smarter Europe

by supporting

innovative and

intelligent

economic

transformation



transformation and

entrepreneurship

3.2 Development

of skills for smart

specialization,

industrial

transformation and

entrepreneurship

2. Priority on the

policy objective 4

A more social

Europe through

the implementation

of the European

pillar of social

rights

2.2. Improve the quality, efficiency

and relevance of education and

training systems in the labour

market to promote the acquisition

of key competences, including

digital skills

3. Increasing the

availability of

skilled workforce

for research,

development and

innovation

3.3 Increasing

professional

potential of

employees in

research

organizations

1. Priority focused

on policy objective

1

A smarter Europe

by supporting

innovative and




technologies




Strategic

objective NRIS3

Specific objective

NRIS3

Priority of

OP JAK

Specific objective

OP JAK

intelligent

economic

transformation

transformation and

entrepreneurship


Scheme of links between National RIS3 strategy to the OP Jan Amos Komenský


Link of the National RIS3 Strategy to the Integrated Regional Operational Program

The National RIS3 Strategy has, through its strategic objective 4 Increasing the use of new technologies and digitization, linked to the Integrated Regional Operational Program for the period 2021-2017 (IROP 2021-2027) and its priority 1 Improving the performance of public administration.

Specifically, the specific objective of the National RIS3 Strategy 4.2 Support for digitization and the use of new technologies in the public domain is interrelated with the specific objective 1.1 IROP 2021-2027 Utilizing the benefits of digitization for citizens, businesses and governments.

Link of the National RIS3 Strategy to the OP Employment Plus

Through its strategic objective 3 Increasing the availability of qualified labour force for research, development and innovation, the National RIS3 Strategy is linked to the Operational Program Employment plus 2021-2027 (OP Z +) and its priority 2 Future of Work.

Specifically, the specific objective of the National RIS3 Strategy 3.2 Skills Development for Smart Specialization, Industrial Transformation and Entrepreneurship is interrelated with the specific objective of the OP Z + 1.4 “To promote the adaptation of workers, enterprises and entrepreneurs to change, active and healthy aging and a healthy and adequate working environment taking into account health risks”.

National RDI Programs

Individual Strategic and Specific Objectives of the National RIS3 strategies have a strong link to national

programs of targeted support for research, development and innovation. Specifically, these are

programs managed by the Ministry of Education, Youth and Sports, the Ministry of Industry and Trade,

the Grant Agency of the Czech Republic and the Technology Agency of the Czech Republic.

The following table gives an overview of the RDI targeted support programs with relation to the strategic

and specific objectives/other areas of the National RIS3 strategy sorted by providers. For each provider,

all current programs are listed, evaluated whether they are more thematically or sectorally focused and

then their relationship to the strategic and specific objectives of the National RIS3 Strategy is described.

The overview includes those programs that are planned to announce tenders (i.e., programmes, whose

projects are in progress, but no new competitions are planned were excluded).

The Grant Agency of the Czech Republic is not included in the overview because it announces public

tenders in research, experimental development and innovations to support grant projects in basic

research and subsequently provides support for solving these projects. Therefore, these are not

classical support programs as with other providers.

Při zpracování této podkapitoly jsme vycházeli zejména z veřejně dostupných informací a textu

samotných programů.



Links of national RDI targeted support programs to the National RIS3 Strategy

YES/NO Specific objective NRIS3 Comment

Ministry of Education,

Youth

and Physical Education

(MEYS)

ERC CZ NO YES

Specific objective 2.1 Increasing the quality and social relevance of public

research

Specific objective 3.3 Increasing the potential and motivation of workers in


- promoting excellence

- support for human resources

- promoting international cooperation and internationalization

INTER-EXCELLENCE NO YESSpecific objective 2.1 Increasing the quality and social relevance of public

research´- promoting international cooperation

Ministry of Industry and

Trade (MIT)The Country for the Future YES YES

Specific objective 1.1 Increasing the added value of existing firms and responding

to industrial transformation, technological and social change

Specific objective 1.2 Creation and growth of new firms and exploitation of new

opportunities

Specific objective 1.3 Improving the functioning of innovative ecosystems at

national and regional level


research

Specific objective 4.1 Promoting the digitization and use of new technologies in

business

- support for start-ups (hi-tech start-ups, their scaling)

- encouraging the emergence of digital innovation hubs

- support for innovation and support for knowledge transfer

and commercialization of results

- promoting cooperation between business and academia

Ministry of the Interior

(MI)IMPAKT 1 YES YES


research



- development of cooperation and integration of research

activities, creation of wider clusters

- support for human resources and young researchers

- promoting the internationalization of research

Ministry of Health (MH)Program to support

medical applied researchYES YES


research



- promoting international cooperation

- supporting the development of young researchers

Ministry of Agriculture

(MA)ZEMĚ YES YES


research



- development of cooperation and integration of research

activities

- support for technology transfer and practical application of

results

- support for young researchers

Provider Programme

Potential relation

with RIS3 vertical

objectives

Relation to RIS3 horizontal objectives


YES/NO Specific objective NRIS3 Comment

BETA 2 NO YESSpecific objective 2.1 Increasing the quality and social relevance of public

research

- support of demand for innovative solutions by public

administration and use of R&D results in public

DELTA 2 NO YESSpecific objective 2.1 Increasing the quality and social relevance of public

research´- promoting international cooperation

DOPRAVA 2020+ YES YES

Specific objective 4.1. Support for the digitization and use of new technologies in

business

Specific objective 4.2 Promoting digitization and use of new technologies in the

public domain

- supporting the development of digitization

- support for research, development and innovation activities

in the field of the digital agenda for public administration

needs

ÉTA YES YES



Specific objective 1.2 Creation and growth of new firms and exploitation of new

opportunities


research

- promoting interdisciplinary approaches and linking social

and human sciences and arts with technology

- promoting cooperation between the research and

application spheres

GAMA 2 NO YESSpecific objective 2.1 Increasing the quality and social relevance of public

research

- support for knowledge transfer systems and the use of

R&D results in practice

KAPPA NO YESSpecific objective 2.1 Increasing the quality and social relevance of public

research

- promoting international cooperation


application spheres

National Competence

CentersNO YES






research

- promoting long-term cooperation between the research and

application spheres

- encouraging cooperation between businesses and

academia, including support for technology transfer

- concentration of research capacities

Environment for life YESSpecific objective 2.1 Increasing the quality and social relevance of public

research

- supporting the demand for innovative solutions by the public

administration and the use of R&D results in public

administration


application spheres, in particular the promotion of long-term

cooperation

THÉTA YES YESSpecific objective 2.1 Increasing the quality and social relevance of public

research

- supporting the demand for innovative solutions by the public

administration and the use of R&D results in public

administration


application spheres, in particular the promotion of long-term

cooperation

TREND YES YES





Specific objective 4.1 Promoting the digitization and use of new technologies in

business

- strengthening the research and development capacity of

enterprises

- encouraging cooperation between businesses and

academia, including support for technology transfer

- development of new areas of digitization and new

technologies

ZÉTA NO YES


research



- promoting increased motivation of young people to

participate in research

- support for increased representation of women in

research

- promoting cooperation between research and application

sectors and know-how transfer

Technology Agency

Of the Czech Republic

(TA CR)

Provider Programme

Potential relation

with RIS3 vertical

objectives

Relation to RIS3 horizontal objectives


Community programs of the European Union

The current Community programs of the European Union will run until the end of 2020. New programs

are now under preparation. The national RIS3 strategy is linked mainly to the program focused on

research, development and innovation, Horizon Europe and Digital Europe Programme.

The upcoming Horizon Europe programme is to have three pillars - Excellent Science, Global

Challenges and European Industrial Competitiveness and Innovative Europe.

► Pillar 1 Horizon Europe Excellent science is linked mainly to strategic objective 2 of the National RIS3 Strategy Improving the quality of public research.

► Pillar 3 Innovative Europe is linked in particular to strategic objective 1 of the National RIS3 Strategy Increasing the Innovation Performance of Companies.

► Pillar 2 Horizon Europe Global challenges and European industrial competitiveness then focuses on supporting specific challenges and themes.

► Cross-sectional pillar Enlargement of the participation and strengthening of the European Research Area is linked mainly to the strategic objective 2 of the National RIS3 Strategy Increasing the quality of public research and also the strategic objective 3 of the National RIS3 Strategy Increasing the availability of skilled labor for research, development and innovation.

According to the information available, the Digital Europe Program will focus primarily on the promotion of supercomputing, artificial intelligence, cybersecurity, advanced digital skills and the wider use of digital technologies across the economy and society. From this point of view, it can be stated that a significant part of the National RIS3 Strategy objectives is linked to the Digital Europe Program. These are in particular the following objectives:

► Specific objective 1.1 Increasing the added value of existing companies and responding to industrial transformation, technological and social changes

► Specific objective 1.2 Creation and growth of new companies and exploitation of new opportunities

► Specific objective 1.3 Improving the functioning of innovative ecosystems at national and regional level

► Specific objective 2.1 Improving the quality and social relevance of public research

► Specific objective 3.2 Skills development for smart specialization, industrial transformation and entrepreneurship

► Specific objective 4.1 Promoting the digitization and use of new technologies in business

► Specific objective 4.2 Support for digitization and use of new technologies in the public domain.

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RIS3 Final document ENG final...2018 (as a result public sources for domestic enterprises accounted for 15% in these enterprises, while in the case of foreign-controlled enterprises,