Economic growth and the knowledge triangle

The exit from the crisis could, under certain conditions, mark the starting point for sustainable economic growth. Important opportunities are opening up, both for economic recovery and reinforcement of research and innovation in Greece.

Research and development in Greece exhibits strong characteristics: high-quality human resources and examples of excellence in performance in both public and private institutions. Weaknesses can be identified in the following areas: production of high-technology goods (in 2015, only 22.7 percent of total exports were medium- and high-tech goods), business enterprise expenditure on R&D (in 2014, about 30 percent of total R&D expenditure was funded by the business enterprise sector, compared with an average of 55.3 percent in the 28 member-states of the European Union) and patenting (only 39 patents were granted in 2016, according to the European Patent Office).

Thus, Greece remains a “moderate innovator” (ranking 22nd in the EU-28 in 2016) and continues to lag behind other countries in its transformation to a knowledge-based economy.

This is largely attributable to the low effectiveness of the innovation system, which means that Greece’s substantial research output, as measured by internationally accepted indicators, does not translate into growth output. The public research system remains largely isolated from production. Moreover, business enterprises, education and innovation are often treated as different policy areas, leading to silo thinking. An integrated approach to the knowledge triangle would tackle this deficit.

The knowledge triangle, as incorporated into the Lisbon strategy in 2000, links together education, research and technology, and innovation, replacing the traditional one-way flow of information with a two-way circular motion between the three corners of the triangle (universities – research centers – business sector). Each participant in the triangle helps to strengthen R&D, increase the stock of knowledge and productive capital by attracting investment, develop export-oriented industries, and have a positive impact on the economy and the knowledge society in general.

Higher education institutions (HEIs) play a key role in the knowledge triangle. Greek HEIs must therefore face the challenges by developing synergies with the labor market, as well as with research centers and businesses, domestic or foreign. Meanwhile, one of the main objectives of higher education is to develop skills that meet labor market needs.

The labor market is changing rapidly. Technological progress is eliminating jobs that require routine manual and cognitive skills and is creating jobs that require digital skills.

Furthermore, it is clear that foundational skills such as literacy, numeracy and problem-solving are no longer enough. They need to be coupled with soft skills, attitudes and values such as openness to new experiences, adaptability, communication and teamwork.

According to survey data from the European Center for the Development of Vocational Training (Cedefop), Greece has one of the highest rates of overqualification (26 percent). Despite this, only 55 percent of employees have the skills required by the labor market. This mismatch highlights the need for investment in continuing vocational education and training (CVET). Emphasis must thus be placed on the involvement of employers and other social partners in developing flexible education systems, capable of responding to economic changes, and on labor market policies that facilitate mobility.

At the same time, academic culture needs to expand beyond the traditional functions of research and teaching. Sweden, with its amendment to the Higher Education Act in 1997, formally engaged the universities in a third mission: fostering entrepreneurship. However, university entrepreneurship is dependent upon various factors: institutional autonomy, management of funding, governance mechanisms and the overall business environment.

Autonomy is crucial if HEIs are to play their part in the knowledge triangle, for two reasons. First, enhanced autonomy entails greater freedom in the management of funds. Second, it provides more incentives for increasing productivity through innovative activities and the commercialization of research results.

The planned actions must focus on the systematic tackling of structural weaknesses by all parties involved in the knowledge triangle. In order to foster innovation and to strengthen the competitiveness of the Greek economy, a favorable regulatory environment must be created.

Encouraging good practices, lifting obstacles to researchers’ mobility and promoting research networks will have multiple benefits for the Greek innovation ecosystem. Greece’s research resources, despite ranking high at the EU and the international level, have yet to be tapped toward boosting economic growth and reversing Greece’s brain drain.

* Yannis Stournaras is governor of the Bank of Greece.