Report on the S4 achievements and S5 implementation: smart specialisation creates opportunities for economic breakthrough

The Government of the Republic of Slovenia took note of the Report on the achievements of Slovenian Smart Specialisation Strategy (S4) on 31 January 2024.

Amid lack of collaboration between the industry and the institutions in the field of research, development and innovation (RDI) and lack of investments in joint projects, the European Commission introduced the concept of smart specialisation strategy (also known as S3) already in the 2014-2020 programming period in order to help stimulate and concentrate the investments of members states and regions in research and innovation. Slovenian Smart Specialisation Strategy, also known as S4, was developed in 2015.

S4 was an operational plan underlying the transition of Slovenia to a highly productive economy based on the innovation capacity of enterprises, promotion of economic transformation and product diversification, and the search for new, propulsive market niches. This ambitious plan also envisioned a change to the development model and S4 governance model through the formation of new strategic development and innovation partnerships (SRIPs). The latter remain the central mechanism of S5, dictating the focus on breakthrough, competitive economic areas in Slovenia and, as such, the driving force behind the ongoing entrepreneurial discovery process (EDP) also in the 2021-2027 programming period. 

Key takeaways from the Report

The Report on the S4 achievements and S5 implementation (the Report) investigates the success of S4 implementation against a set of agreed performance indicators, including labour productivity, which is one of the key elements used to evaluate performance, by looking into economic indicators and the data collected from SRIPs.

The findings show that values of certain performance indicators were surpassed, whereas others experienced the pace of growth equal to the EU average; coupled with high labour productivity, this points that S4 objectives were partially achieved. Fast-growing businesses are the most dynamic part of the economy; in terms of development, they are extremely important for the growth and competitiveness of the economy, and they foster innovation and internationalisation.  

The Report summarises the relevant S4 priority areas and the corresponding SRIPs, outlining for each of them the set targets, the main achievements, their performance, collaboration initiatives, and integration in international value chains. For each SRIP, the Report provides an overall numerical assessment of performance based on five agreed criteria.  

Additionally, market potential estimation is given for each SRIP for a 5-year horizon on the basis of historical economic performance data. The analysis shows that, in general, by 2027, a higher market potential is observed for sales in international markets. Accordingly, operating cash flows and profit will increase. Investments in R&D will see a steady growth. The main challenge is expected in human resources area, where the pace of recruitment progresses only marginally, therefore the labour productivity indicator will also increase (probably more in synthetic than in real terms).

The Report also delves into globally integrated approaches and international cooperation of Slovenia and finds that international cooperation has significantly strengthened at all levels – strategic, programme and project – with the aim of strengthening the integration of Slovenian innovation stakeholders in regional and global value chains (outward internationalisation), strengthening the competences of R&D departments and staff in businesses and knowledge institutions, and attracting foreign top experts and high-tech companies to Slovenia (inward internationalisation).  

In terms of international collaboration, the Report suggests that relational capital, intangible structural intellectual capital, acquired through the systematic integration of Slovenia in European cross-regional value chains (S3 platforms, Vanguard initiative, EIT/KIC, I3, etc.) will be of key importance for the future competitiveness of Slovenia’s economy.

The Report provides an overview of the policy mix which consists of financial measures and the non-financial part, i.e., measures fostering development. Three years into the implementation of S4 measures, it became clear that the share of the relevant available funding under the Operational Programme for the Implementation of the European Cohesion Policy 2014-2020 was (too) low in relation to the development opportunities, competences and needs of the relevant stakeholders. Lack of funding is most evident in the area of investments in RDI, in particular for the co-financing of joint development ventures in TRL 3-6 where the impacts are also the highest in the long run.

The way forward – S5 and the 2021-2027 period

The upgraded Smart Specialisation Strategy for the 2021-2027 programming period puts the twin transition that builds on using deep tech (application of advanced technologies and new business models) at the heart of its agenda. Twin transition is understood as an innovation-driven, low-carbon, digital and knowledge-based transformation of the economy and society. The orientation towards sustainability is reflected in the name given to the strategy (Slovenian Sustainable Smart Specialisation Strategy) which forms the basis for the allocation of part of the support from the ERDF under Policy Objective 1 ‘A smarter Europe’. 

The Report concludes that, in future, niche orientation, diversification and cross-regional innovations through deep tech will usher in whole new dimensions of focus of RDI institutions and businesses as well as S5. Amid the urgency of the green and digital transition and the roll-out of deep tech, the S3 concept, and with it S5, has evolved into the key EU tool for accelerating the transformation of potentially competitive economic activities and associated value chains that build on cross-regional collaboration.

The Report (in Slovene) is available here.

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