Tallinn Innovation Strategy 2009–2013

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Courtesy of www.tallinn.ee

Tallinn Innovation Strategy 2009–2013

Introduction

The aim of this innovation strategy is to create significantly improved opportunities for Tallinn's companies to develop in the mid-term and to thereby increase the competitive ability of Tallinn as a city and as a region. The city's ability to compete as defined in the strategy is its ability to create the conditions for the consistent development of new jobs with extensive added value in such a way that growth in productivity is seen in many areas of the economy and that the real incomes and social inclusion of the city's residents increase.

The underlying principle of the strategy is the understanding that in spite of the rapid development of the last decade, Tallinn must make a concerted effort to boost its competitive ability.

The strategy unites activities from a range of fields in one common source document and establishes the preconditions for the long-term planning of policies and operations in different fields of civic life.

Innovation is defined in the strategy in evolutionary terms: innovation is the novel application of new or existing knowledge and/or skills in the economic process through new/improved products, services, organisational changes et al. The aim of innovation - as well as its result - is generally the competitive edge of one company over others. A competitive edge in today's economy is unique knowledge that few (or no) others possess and that leads to demand.

The basis of the Tallinn Innovation Strategy 2009-2013 is the ‘Knowledge-Based Estonia' research, development and innovation strategy, a national framework document. The strategy is also guided by the main strategic documents of Tallinn itself, such as the ‘Tallinn 2025' strategy and the ‘Tallinn Development Plan 2009-2027', which present the city as one of innovative and balanced development, fully integrated into the Scandinavian and European economic environment. Also taken into account in the strategy are the individual development plans of the city and its districts, the general planning of the city and the activities of Tallinn as the 2011 European Capital of Culture.

The measure of the strategy over time stems from the financial perspective of the European Union, which is valid until 2013 and on the basis of which the European Union's Structural Funds remain open to Estonia. These form a key source of financing from the point of view of the strategy.

The development of the strategy has been a lengthy process which began as part of the international ‘BaltMet Inno' project (supported by the Interreg IIIB programme) in 2006. Our main partners in its development have been Tallinn Technical University and the Estonian Institute for Futures Studies. The strategy is based on a large number of local and international studies, the work of various working groups and a range of discussions conducted in 2006 and 2007. The experiences of other large cities in the Baltic Sea region in supporting innovation are also taken into consideration in the strategy. It is a dynamic document, which is why the list of activities proposed for implementation is not an exhaustive one, but one which will continue to be amended and added to according to changes in the economic situation.

Basis of strategy

The strategy is based on the supposition that although a city as a densely populated area is of key importance in terms of the rise and spread of innovation, the options open to civic authorities in fostering innovation are frequently limited. Cities are often dependent on national policies and funding. In partnership with enterprise, civic authorities must be capable of establishing long-term activities based on the needs of companies within the framework of national policy and funding. Such is the situation with Tallinn.

The strategy is also based on the fact that the development of Tallinn over the last ten years has been discordant. It is already considered one of Europe's most innovative cities, and yet its development has by no means been balanced in social, spatial and other senses. In terms of economic growth and innovation, Tallinn mirrors Estonia's development. Rapid growth in domestic consumption and the country's debt burden have driven the economy, but the downside to this is low rates of productivity, concentration on operations which offer little added value, limited cooperation and networking between companies and relatively weak research and development. Such a contradictory position is not a sustainable one. Tallinn's economy, as per the Estonian economy as a whole, requires robust modernisation.

Above all else, the Tallinn Innovation Strategy seeks to create the right conditions for the diversification, rejuvenation and restructuring of the economic activities and enterprise in Tallinn and the surrounding areas. However, these processes take place through actual enterprise, which is largely integrated into international business clusters and manufacturing value chains. The innovation strategy therefore also represents a strategy for the internationalisation of Tallinn and its businesses. The city must determine its position in the context of the Baltic Sea region. This will require cooperation with our neighbours in the development of shared understandings and, in the longer term, common policies.

The strategy focuses on six key areas - areas whose contribution to the development of Tallinn is substantial; areas which have seen rapid growth in productivity and markets; and areas whose development has had a major influence on other economic activities. They are:

1) high quality of policy shaping and involvement;

2) concrete, clearly worded priorities in terms of policy and activities; and

3) a sector-based approach to economic activities and policy shaping, in areas where the conditions for unique competence already exist.

The key prerequisite for the implementation of the strategy is that the framework documents and activities of the different areas of the city become more fact and analysis-based. Active cooperation between the city, its universities and its businesses is of marked importance here. This, however, requires development in the networking and organisation of the private sector and in the analytical competence needed for it. First and foremost, the private sector must be capable of consistently analysing the hindrances to development within its own organisations and of thereby being a strong partner to the city in shaping and implementing policies. At present not all private sector organisations are capable of this. The city must also contribute steadily to the development of private sector organisations, as has been the case in support for professional associations. Only in this way will the city gain a valuable partner in shaping and implementing policies. The opportunity Tallinn has here is to initiate and, where possible, contribute financially to the rise of private sector organisations and to the creation of active ties with universities.

The strategy creates a framework for the development of the competitive ability of the companies in the region between 2009 and 2013, but the objectives that have been set will only be able to be achieved if supported by other national, regional and local development documents. The strategy also represents the basis for the development of new action plans or programmes. What Tallinn as a local government undertakes must correlate to (analogous) national policies. Innovation measures and associated activities must therefore also be developed so that they complement the measures implemented at the state level, but in such a way that they remain based on the interests and priorities of the city.

It is important to remember that the administration of the European Union's Structural Funds is conducted at the national level in Estonia. In order to achieve the objectives set out in the innovation strategy, the City of Tallinn, businesses and support structures must be capable of making appropriate and extensive use of these funds. At the time of developing the strategy the majority of the implementing documents for national support measures had yet to be approved.

Main obstacles to innovation and development

The strategy aims to overcome the following obstacles to innovation and development as encountered by Tallinn's companies.

1) Shortage of skilled workers. One of the primary characteristics of economic development in the period since Estonia regained its independence has been the reduction in the amount and diversity of skills and knowledge in Tallinn. This has led to a situation where there is a lack of skilled labour in virtually every field. The worsening in the demographic situation in the coming years will only make the situation more acute. Human resources are therefore a priority of the innovation strategy.

2) Limited interest in applied technical education. For more than ten years the education sector - and applied education in particular - has failed to meet current needs. Technical education subjects are generally unpopular among young people. Cooperation between educational institutions and companies is limited, with competition among them for teachers. Engineering subjects need to be heavily promoted and the leading specialists in the field need to be involved in the development of curricula.

3) Limited awareness of innovation. Innovation continues to be associated by most people with research and development and new technology. There is limited understanding of the nature of terms associated with innovations in quality management, organisational restructuring, design, sales methods and other fields, such as ‘marketing innovation' and ‘organisational' itself. In order to foster the rise of innovation and to mould the right understanding it is important to educate innovative people who are capable of developing further.

4) Limited cooperation between research and development institutions and companies. Research and development institutions and companies are not well-informed of each other's possibilities and needs. The innovations developed by researchers and scientists are not reaching entrepreneurs because there is no clearly delimited channel by which they can do so. Nevertheless, companies are prepared to carry out basic and applied research in association with academic partners. In order to boost cooperation through strategic partnerships, groups need to be identified who are capable of working together and effective leaders need to be found.

5) Limited development potential and market force of companies. Enterprise in Tallinn and its surrounding areas is characterised by contradictory tendencies: on the one hand there is the concentration of exports in a handful of large companies, while on the other is the large number of small companies whose levels of cooperation and ability to cooperate are weak. Small businesses often lack the ability and opportunity to increase their market force to any significant extent. This risk would be reduced by networking and partnerships between small companies, which would also help them compete on international markets.

6) Inability of companies to position themselves internationally. The indicators than characterise the development and innovation activities of Estonia's companies point to the fact that they are focusing on increasing production volume and improving quality rather than broadening their product range and seeking new markets. The inability of companies to make themselves visible on the international level is a significant hindrance to their growth and competitive ability.

7) Limited international recognition of universities. Insufficient international cooperation is not only a problem for Tallinn's companies, but also for several of its universities. Strong international partnerships would bring prominent teachers and trainers and promising students to Tallinn, but this is being hindered to some extent by a dearth of financial resources. Students favour universities and colleges with good reputations and equally reputable teaching staff (professors). Student exchanges would enable new knowledge to be brought into the region and existing knowledge to be developed with the support of international experience.

8. Shortage of areas for innovation to develop and shortage of supporting infrastructure. Urban planning is of great importance from the point of view of the rise and development of social capital. Greater involvement of social partners (business associations, support organisations and universities), residents and the various structural units of the city in the decision-making process plays a key role here. All planning and development ideas - and especially the scope of their influence on other areas - must be analysed at the outset.

Strategic objectives and the four pillars of the Tallinn Innovatio[/color]n Strategy

As a result of the hindrances to innovation and development described above, the directions and objectives of the Tallinn Innovation Strategy are as follows.

1) Human resources

Overall goal: that proportionally more people are involved in, working on or earning income from the development and implementation of new ideas and solutions.

Doing this will require:

- the amount and diversity of the skills and knowledge possessed by companies to be increased by developing human competence;

- assistance to be given in adapting the curricula of educational institutions (including international curricula) and in making relevant proposals based on the needs of enterprise (the city as leader and go-between); and

- the promotion of foreign competence being brought to Tallinn (teaching staff, students and professionals).

2) Cooperation

Overall goal: that new skills and knowledge generated through partnerships and improved capabilities (both literally and in the material sense) are contributing to growth in the competitive ability, market force, export base and internationalisation of companies.

Doing this will require:

- the establishment of a group of existing networks and networks of partner organisations (business associations, universities, business support organisations et al);

- the continuation of activities in key areas and in economic spheres which exhibit greater potential for development;

- cooperation and specific joint projects to be launched between entrepreneurs, scientists and researchers and the public sector; and

- the sustainability of existing associations and partnership centres to be ensured.

3) Internationalisation

Overall goal: that companies and educational institutions are capable of positioning themselves internationally, of obtaining information from a broader base and of being competitive.

Doing this will require:

- international business information on different markets to be made more available to areas with greater potential for development;

- the market horizons of companies to be expanded and creation of contacts with international competitors and clients promoted;

- the promotion of cooperation and sharing of experience with close neighbours (Helsinki, St. Petersburg and other Baltic Sea cities); and

- the launch of joint activities as part of international networks to develop the innovation and competitive ability of the region and to make the region more attractive.

4) Physical and intellectual city space

Overall goal: that an inspirational city space which fosters innovation and breaks down barriers is contributing to the development and implementation of new knowledge.

Doing this will require:

- the involvement in key planning and development processes of representatives of the private sector, universities, communities and business support structures, whose role would be to assess the scope of influence of the city's most important development documents; and

- the promotion of the development and establishment of the meeting places required for the birth of new ideas and knowledge.

In order for these objectives to be achieved and for the conditions for Tallinn's long-term development to be created, the strategy prescribes activities and support measures which are based on the following four pillars.

I City of talent

II City of partnerships

III City of international capabilities

IV City of planning

City of talent
People want to live and work in a city that is good to live and work in. Companies want to come to a city where they will find the people and the infrastructure they need. Tallinn must become a city that talented and ambitious people who think bold thoughts want to live, work and study in - both those from Estonia and those from abroad. A marked improvement in the quality and quantity of human capital is the primary objective of the Tallinn Innovation Strategy and the one that runs through all of its activities.

As a result of the demographic situation in Estonia, labour needs in the country are likely to become an ever more acute problem. In order to adopt new technology you have to have people working for you who know how to handle such complex equipment and machinery, and there are not enough such people on the labour market at present. Although existing human resources also need to be developed from the point of view of increasing innovative capability and productivity, more thought needs to be given, as an alternative, to increasing labour resources in sectors which provide greater added value. This is primarily the case where skilled foreign specialists are concerned, who could contribute to the development of new products, services, technology and processes in companies or to significantly upgrading existing products, services, technology and processes.

New knowledge and competence must be generated and developed. Playing an important role here are educational institutions (colleges, universities and institutions of vocational education) which are able to offer high-quality education meeting all modern conditions to talented young people and which are flexible and willing to cooperate on the basis of the needs of companies and the directions in which the economic environment is developing.

City of partnerships
The key words of partnership are cooperation and networking, both of which require the public and private sectors (the city and businesses, businesses and universities and universities and the city) to work together in an active and trustworthy manner. The partnerships between the city, its businesses and its universities must be based more on formal agreements or forms of cooperation. Previous work with professional associations and representative organisations must be continued as part of both sector-centric activities and development programmes. A key objective is that the new skills and knowledge generated through the partnerships contribute to growth in the competitive ability, market force, export base and internationalisation of companies. This will require the registration of partner organisations - business associations, universities, business support organisations and enterprise development and competence centres - and, from the point of view of the city, further development of those economic areas which show greater potential to develop.

On the basis of the strategy Tallinn will draw up a separate programme document for the 2009-2013 period: the Tallinn Cluster Development Programme. This programme will focus on at least six broader clusters, incorporating companies, sub- and umbrella organisations, educational and research institutions and other organisations that form part of the field (such as research and development centres). From the perspective of Tallinn's development, the clusters will be created in the following key areas:

1) information technology as a horizontal assembly of technology and skills and as a field with great potential for close ties between sectors (‘integration clusters');

2) mechatronics (comprising mechanics, electronics and information technology) as a field with great potential for the development of high technology;

3) medicine and technology (comprising fields from biotechnology to medical equipment and potentially even medical tourism);

4) creative economy (potentially comprising the development of education, technology, culture and existing enterprise);

5) maritime operations and logistics (comprising transport and logistics); and

6) financial services (comprising financial services for export and a planned financial services centre).

The following criteria were taken into account in the choice of clusters: 1) that the fields in question are ones whose contributions to Tallinn's development today are significant; 2) that the development in these fields and growth in productivity and markets is rapid, creating the right conditions for further long-term growth and specialisation; and 3) that the influence of the development in these fields on other economic activities is significant. The clusters were designated in a relatively broad and interdisciplinary manner, taking account of local potential and competitive positions, and display rapid growth potential over the next 5 to 10 years. The city's role here is primarily one of catalyst and coordinator; all five key areas should earn the support of the national cluster and/or technology programme. The actual activities of the partnership programmes must be aimed at the coordination and analysis of different fields, organisations and operations.

City of international capabilities
There can be no doubt that international cooperation, including in the fields of education and research, supports innovation. Better use of the potential of the Baltic Sea region in particular (incorporating St. Petersburg) is one of Tallinn's strategic objectives. The city must become a magnet for talent in key fields within the Baltic Sea region. It is of vital importance to be internationally visible.

In the longer term it will only be the sale of innovative new products and services on foreign markets that enables welfare to be increased. The fact that the Estonian market is so small means that exporting takes on great importance to companies from the point of view of them expanding quite early on in their life cycle. This requires the availability of market information to be ensured and export opportunities to be explored. The availability of international business information is viewed here primarily from the point of view of the development of the sector as a whole, not of individual companies. If a company's market horizons are expanded and they are brought into contact with international competitors and clients, the options available to them and motivation to update and develop their products and services increase.

Cluster programmes must be international and must involve companies from cities in the Baltic Sea region which are important to Tallinn. To achieve this, business relations between larger foreign-owned companies and Estonian suppliers must be fostered and partnership projects launched wherever possible. Several activities here overlap the ideas in the second pillar (‘City of partnerships').

In order to develop international capability, recognition and cooperation it is important to be part of large international networks which help boost the competitive ability of the region on the global scale. Cooperation must be continued in the Baltic Sea region (the BaltMet network), the city must launch new joint projects in fields which support the development of innovation (clusters, innovation through urban planning, creative economy et al), exchanges of experts should be carried out between partners (cities, companies and universities) and the region should be marketed as an innovative and creative environment.

Cooperation must also continue with our close neighbours, especially through promotion of Tallinn and Helsinki in the twin cities of research project (making use of and developing the complementary resources of the two regions). The objective of Helsinki-Tallinn Euregio, a non-profit organisation, is to involve universities, other institutions of higher education, research institutes and the business sector in the development activities of cities and the regions surrounding them. This is a good starting position to promote the internationalisation of Tallinn's institutions of higher education.

City of planning
Talented, ambitious and dynamic people want to live in a city where an inspiring environment presents them with a wide range of possibilities for activity and development. Innovative projects are born in an environment where the conditions are right for the generation and development of ideas. The city space of Tallinn must assume a greater density than it currently does, and must do so quickly. City planning must take place on a new basis. In response to the Old Town of Tallinn, which is oriented primarily towards tourists, and the suburban sprawl of the outskirts of the capital, a city for the ‘creative class' should emerge with its heart in Northern Tallinn. This means the vigorous and distinct development of a youthful, evolving and compact cultural space. Tallinn's seaside areas must be opened up to the city's residents and the sea must become a living part of its city space. However, such development can only take place if the planning process is rooted in partnership.

In fostering innovation the role of urban planning is to enable and simplify the establishment of areas in which innovation can develop. This requires an understanding of the potential of the city at the macro level; the existence of functioning associations between key organisations such as universities, research institutes and companies; good infrastructure (roads); the availability of space and rental premises for enterprise (‘guiding the free market economy'); the possibility to adapt former industrial areas; and the creation of living environments which attract talented and innovative people.

From the point of view of innovation, urban planning also enables a number of special functions to be fulfilled:

1) innovation as an objective (e.g. research and technology parks);

2) innovation as a new source of knowledge (e.g. creative business parks); and

3) innovation as a by-product (e.g. individual research projects).

The list of resources for financing the activities indicated under the following courses of action is not final. The sums included herein have been planned for the financing of the operations of the City Enterprise Department. Activities connected to the development of infrastructure are mostly funded from the budgetary resources of other departments (the Municipal Engineering Department, the Transport Department and the City Planning Department).

More information:

Jaanus Vahesalu
Manager of International Projects
Jaanus.Vahesalu@tallinnlv.ee
+372 6404 425

www.tallinn.ee