After three years under the rule of the right-wing Law and Justice, the Polish innovation ecosystem is doing fine. Even better than one might expect. This is the first of two articles about the Polish innovation ecosystem.
WARSAW, 17 November 2018 – It was supposed to be a model transaction. Orlen, a Polish state-owned fuel company and one of the largest enterprises in Central Europe, began a cooperation with a start-up called Just Drive. As a result, an app for mobile payments at Orlen’s petrol stations was launched. Start-up media in Poland widely spread the word about the partnership. Within 24 hours, the app was downloaded by 2,000 users. Success seemed to be guaranteed.
Until recently, this kind of cooperation between a huge Polish company and a start-up was unimaginable. The last few years, however, have been a time of dynamic changes in Poland’s innovation ecosystem. This process had already started under the previous government of the Civic Platform (PO) and Polish People’s Party (PSL), when grants were poured into companies to run R&D projects, into founders to set up start-ups, and into universities to build state-of-the-art R&D infrastructure. When the right-wing Law and Justice (PiS) party came to power in 2015, the country already had all the elements of an innovation ecosystem, some of them better developed, and some of them less so. Unfortunately, the system as a whole didn’t work properly.
It’s the Innovation, stupid
The new government has made the word “innovation” one of its flagship slogans. However, the beginnings were rather unfortunate. On the one hand, an inter-ministerial Council for Innovativeness was established. Both the Minister of Development and the Minister of Science and Higher Education became deputy prime ministers, and after the government reconstruction in 2018, a separate Ministry of Entrepreneurship and Technology was formed. It was certainly the first time in Poland’s history that R&I policies had had such a prominent position on the government’s agenda.
Nevertheless, some actions led to the belief that the existing elements of innovation policy would become a victim of the revolutionary impulses of the ruling party and its tendency to centralise the economy: the government cancelled some programmes regarding innovation; heads of the main agencies supporting R&D projects were changed; and politicians began announcing initiatives to create national innovation, such as Electro Mobility, a programme with the goal of Poland becoming a European leader in electro-mobility, with one million electric cars on the roads and its own model of electric car to be designed and built from scratch by 2025. These are stunning expectations, considering that today, Poland is among the countries with the lowest number of electric cars and charging stations in the EU.
Evolution, not revolution
However, after three years under PiS rule, it has turned out that despite these brash announcements, Poland’s innovation policy has not experienced a revolution. To the contrary, it has kept on going like before.
“Many positive elements of the innovation policy from the previous government are now continuing. R&D projects are still supported with grants and financial instruments. Support for start-ups has been intensified. Government agencies responsible for supporting research and innovation projects still use objective criteria and standards developed in previous years,” says Krzysztof Klincewicz, professor at Warsaw University and a European Commission expert.
Moreover, the process of creating an innovation ecosystem has sped up, as the PiS government has started patching it up.
“It is extremely important to ensure a proper framework for innovation by implementing friendly regulations to support innovations and constantly removing obstacles to innovators,” says the press office of the Ministry of Entrepreneurship and Technology about Poland’s priorities.
Tax incentives were the first to be fixed. Introduced in the last year of the PO-PSL government, R&D tax relief was very modest, thus only 528 companies used it. The PiS government has twice increased it significantly. Today all entrepreneurs leading R&D works are allowed to make a double deduction of R&D-related expenditures from the tax base, and the catalogue of costs eligible for deduction is broad. The result? The number of companies using the incentive doubled and it seems that this year it will increase even more.
Furthermore, the work on Innovation Box has started
“It will consist of more favourable fiscal treatment of income from IP commercialization which is a result of R&D works conducted by the taxpayer,” explains the press office.
The detailed regulations are under consultation at the moment and should enter into force at the beginning of 2019.
Support for companies
Another Achilles’ heel of the Polish innovation system is a lack of cooperation between industry and academia. Under PO-PSL government, multiple steps were taken to enforce the cooperation, including innovation vouchers, grants for R&D projects performed by scientific- industrial consortia or R&D funding schemes proposed by the business sector. As a result, the largest part of the NCBR budget (the main R&D funding agency in Poland) was distributed to consortia.
The PiS government refocused its attention on support for individual companies. Old instruments were limited and the new ones were added. For example the programme “Top 100 Innovators of the Economy” was launched, which enables firms’ R&D staff to visit foreign research institutes and companies in order to improve their R&D management skills; the programme of industrial doctorates was introduced, which enables companies to hire a PhD candidate and the candidate can carry out doctoral projects at the enterprise. It’s a novelty in Poland as previously PhD could be developed only in academia.
The biggest change, however, is the cooperation with start-ups. The new funds were established to co-finance the Venture Capital funds or to create corporate VC within the large companies.
“We’ve discovered that we need innovations in Poland. Even people at the top have started to believe in it. I must admit it was difficult to speak about innovations with some people from the previous government. They seemed to distrust that the ability of the economy to be innovative matters. I expect that with the new incentives from the next year we will have a large number of R&D centres or international companies that start to move their R&D expenditure to Poland. It may turn out Polish innovation rockets ”, says Krzysztof Klincewicz.
(This is the first of two articles about the Polish innovation eco-system)
Katarzyna Zachariasz-Podolak is a Polish journalist and editor in chief of InnovateCEE.
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