Innovation in Croatian Enterprises: Preliminary Findings from Community Innovation Survey

Innovation is considered one of the most important drivers of economic growth. Within transition countries, the significance of innovation is facilitated by several factors. These include exhaustion of growth and productivity improvements based on non-investment reallocations and the integration into the European Union, which states the development of a knowledge-based economy as a crucial policy goal. Furthermore, the capability to innovate successfully is the foundation of sustainable competitive advantage, especially given the turbulent business environments that characterize transition economies. This paper reports preliminary results of the first Community Innovation Survey conducted in Croatia. The survey collects internationally comparable enterprise-level data on inputs and outputs of innovation processes in Croatian companies, covering the period from 2001 to 2003. Key survey findings are summarized and compared to selected countries of Central and Eastern Europe. These include the data on product and process innovation, expenditure on innovation activities, intramural research, information sources for innovation and factors that constrain innovation. Moreover, the relationships between some firm characteristics (firm size and ownership) and innovation are examined. Although the data provide some encouragement in terms of innovation outputs, unfavorable structure of innovation expenditures (especially low levels of R&D expenditures), widespread occurrence of intra-organizational constraints to innovation and failures in commercialization of innovations and/or their integration into business strategies concerns corroborate the assumptions that the movements towards a knowledge-driven economy in Croatia are still quite weak – emphasizing the need for policy improvements. Main obstacles to innovation currently seem to be within companies, rather than in insufficiencies in state support or in the lack of funds for innovative activities, but that is likely to be related to the strong confinement of innovation to equipment purchases. The share of innovative firms increases with firm size. The share of new products in sales does not depend on firm size except for the products that are line extensions (not new for the firm but new for the market), where we detect a decreasing trend.