New Results in Building Companys Sustain

International scientific conference
BUSINESS – SCIENCE – GOVERNMENT

PARTNERSHIP: FOSTERING COUNTRY
COMPETITIVENESS
21-23 September, 2011
International Business School at Vilnius University

Vilnius, Lithuania
Business-Science-Government Partnership: Fostering Country competitiveness
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BUSINESS – SCIENCE – GOVERNMENT PARTNERSHIP:

FOSTERING COUNTRY COMPETITIVENESS
Conference proceedings
21-23 September, 2011
Copyrite ©
The materials published in Conference proceedings may be only reproduced for
instructional and non-commercial use. Any use for commercial purpose must get
the written approval from the International Business School at Vilnius University
(VU IBS).
All full papers and abstracts, submitted to conference “Business-Science-
Government Partnership: Fostering Country competitiveness” were subject to a
peer review process by specific objective specialists.
ISSN: 2029-7971 Published by: VU IBS
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FOREWORD
The International School at Vilnius University would like to welcome
all the authors that with their submitted publications will significantly contribute
to promoting partnership between science, business, government and non-
governmental institutions. Stronger partnership and cooperation is in line with
main trends of sustainable development and is, in parallel, a long-term driver for
competitiveness of a country.
Within these conference proceedings we would like to show the
international business community that the academic community is well prepared
to create a valuable vision that products can be successfully marketed by
businesses as well as governments.
It is a great pleasure to introduce the reader original papers that were
submitted by academicians, researchers, students and practitioners from all over
the world for publication.
All papers and abstracts were double blind reviewed.
ACKNOWLEDMENT
Many organizations and people contributed to the organization of the
conference “Business-Science-Government Partnership: Fostering Country
competitiveness”.
The main organizer of the conference and the hosting institution was
International Business School at Vilnius University.
The conference was co-organized with the EuroMed Research Business
Institute (EMRBI), the Lithuanian Business Confederation: ICC Lithuania,
Northtown Technology Park, Sunrise Valley Science and Technology Park and
Work and the Labor Research Institute.
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Scientific Committee of the Conference
 Dr. Akbar Yusaf H. (Central European University, Hungary)

 Acad. Buračas Antanas (International Business School at Vilnius University,
Lithuania)
 Habil.dr. Beresnevičienė Danguolė (International Business School at Vilnius
University, Lithuania)
 Dr. Chmieliauskas Alfredas (ISM University of Management and Economics,
Lithuania)
 Dr. Graage Frank (Steinbeis – Transfer Institute, Germany)
 Dr. Yiannaki Simona Mihai (European University Cyprus, Cyprus)
 Dr. Kaufman Ruediger (Nicosia University, Cyprus)
 Dr. Kiškienė Austė (Sunrise Valley, Lithuania)
 Dr. Kyriakidou Niki (Leeds Metropolitan University, UK)
 Dr. Kriaučiūnas Aldas Pranas (Purdue University, Krannert School of
Management, USA)
 Dr. Mockaitis Audra Irene (Monash University, Australia)
 Dr. Mongrut Samuel (Toulouse Business School, Spain)
 Dr. Nazelskis Eugenijus (International Business School at Vilnius University,
Lithuania)
 Dr. Paškevičius Arvydas (International Business School at Vilnius University,
Lithuania)
 Dr. Pocius Arūnas (Work and Labor Research Institute, Lithuania)
 Prof.dr. Ruževičius Juozas (International Business School at Vilnius
University, Lithuania)
 Dr. Tsoukatos Evangelos (Technological Educational Institute of Crete, Greece)
 Dr. Vaiginienė Erika (International Business School at Vilnius University,
Lithuania)
 Dr. Viliūnas Vaidotas (Marijampole College, Lithuania)
 Prof. Dr.Gunnar Prause (Wismar Business School Tallinn University of
Technology, Estonia)
 Dr. Matteo Rossi (University of Sannio, Italy)
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Contents
KNOWLEDGE AND TECHNOLOGY TRANSFER

Competitive Knowledge-and Technology Transfer - The Steinbeis Approach
Uwe Haug, Dipl.-Ing. (FH) ......................................................................................................................... 11
In the service of the society: The Finnish UAS system
Tauno Kekäle, Hanna Yli-Yrjänäinen ......................................................................................................... 18
Implementing an academic innovation and entrepreneurship program – the University of Gothenburg model
Dr. Thomas Hedner, Dr. Boo Edgar, Dr. Ivor Cowlrick ............................................................................. 23
Development of Science-Industry partnership in Slovenia- A Case study approach
Maja Bučar, Matija RojeМ............................................................................................................................ 28
National Innovation System: Commercialization of knowledge in the Russian and Lithuanian Universities
Tatiana Khvatova, Femi Odebiyi................................................................................................................. 36
ORGANIZATIONS DEVELOPMENT MODELS
What do SMEs expect from E – government services?
Gunnar Prause, Merli Reidolf...................................................................................................................... 45
New results in building company's sustainable competitive advantage
Vladimir Kuryakov ...................................................................................................................................... 62
Technological innovation framework for development of sustainable competitiveness in bioethanol industry
Darius Sargautis, Tatajana Volkova ............................................................................................................ 70
Applying business models for project, program and portfolio management in public sector
Alfredas Chmieliauskas, Austėja Pilkaite, Erika VaiРinienė, VaiНotas Vili nas ........................................ 83
MANAGEMENT SOLUTIONS
Factors impacting knowledge sharing of sustainable organization: case of Lithuanian companies
Rasa Smaliukienė, Renata Korsakienė ........................................................................................................ 94
Standardization-adaptation paradox in international advertising: the case of cultural and regulatory
peculiarities in Lithuania
R ta Ruţeviči tė , Juoгas Ruţevičius ....................................................................................................... 102
Title: Strategic CSR: a solution to the economic crisis
Skouloudis Antonis, Chymis Athanasios, Evangelinos Konstantinos....................................................... 111
DEVELOPMENT TRENDS AND COMPETITIVENESS OF COUNTRY
Countrв‘s РrowtС moНel anН Мompetitiveness
M. Starkeviči tė ........................................................................................................................................ 119
Multi-variant estimations of relative sustainable development of the Baltic countries: emphasizing the
institutional dimension
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VirРinija Grвbaitė, Manuela Tvaronavičienė ............................................................................................ 126

The changes in the financial markets of the Baltic states in the period of economic downturn
Petras Dubinskas, Stanislava StunРurienė Laima Urbšienė ...................................................................... 136
Vocational training benefit and trends analysis in Lithuania
Laima Okuneviči tė Neverauskienė, Ar nas PoМius................................................................................. 143
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I. KNOWLEDGE AND TECHNOLOGY TRANSFER
Competitive Knowledge-and Technology Transfer - The Steinbeis Approach
Uwe Haug, Dipl.-Ing. (FH)

Managing Director R & D, Steinbeis-Foundation, Stuttgart, Germany
Email: haug@stw.de
―KnowleНРe anН teМСnoloРв transfer р la Steinbeis‖ Сas beМome a Сallmark of effiМient anН
effective transfer in every corner of the globe. If success was documented just in numbers, then for
Steinbeis they would be: some 1.7 billion euros of transfer recognized by our customers since 1983;
continual expansion of Steinbeis‘ potential to transfer knowleНРe anН solve problems, initiallв
supported by 16 Transfer Centers such that now the international network encompasses more than
810 centers, in the meantime operating as Steinbeis Enterprises (SE), involving more than 5.000
people.
WСat is meant bв tСe abstraМt term ―knowleНРe anН teМСnoloРв transfer‖? OriРinallв teМСnoloРв
transfer was used solely to describe the process of bringing together people from trade and industry
with counterparts from science and academia with the aim of putting a specific technology to use.
Today, the term is used more widely because the acquisition of knowledge, the half-life of
knowledge and the very nature of technology and applications have changed. Technology transfer
in the classic sense now also has to encompass related services. Given the need for lifelong
learning, the emphasis of knowledge transfer has changed. Steinbeis therefore has established the
state-recognized private Steinbeis-University-Berlin with a unique project-competence-study
model.
The Transfer Network: Structure and Organization

TСe transfer Мompanies lie at tСe Сeart of tСe―BaНen-Württemberg Technology Transfer MoНel‖
developed by Johann Löhn over 25 years ago. Even in those days, a cornerstone of his model was a
self-sustaining technology transfer, playing by the rules of free enterprise. Originally called
Transfer Centers (TCs), as the years passed they were named Steinbeis Transfer Centers (STC).
Today, the notion of technology transfer has expanded to knowledge and technology transfer,
implicating the establishment of consulting centers, research and development centers as well as
centers for training and employee development. STCs and other Centers now fall under the
umbrella term Steinbeis Enterprise, or SE for short.
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A key to success: transfer entrepreneurs and transfer companies

Prior to 1983, formal technology transfer coming out of business-minded universities of applied
sciences in Baden-Württemberg was handled by a total of 16 resident Technology Consulting
Service Centers (TCSCs). Playing to the specialist knowledge of the professors in charge, these
centers offer a wide range of services, flourishing, given the scope of their remit. In addition to
providing consulting services, the TCSCs begin to take on larger and larger projects for customers.
Although the centers are in a position to keep up with demand and offer extended services, the
moНel‘s unНerlвinР Мapabilities are pusСeН to tСe limit.
At this point, Lothar Späth feels the time is ripe for politiМal aМtion to Мope witС tСe state‘s МСanРinР
business landscape, much of it shaped by SMEs. Though it seems self-explanatory today, his
technological foresight met skepticism and criticism. Yet Späth was not deterred, commissioning
Johann Löhn – then-principal and head of the TCSC at the Furtwangen University of Applied
Sciences – to СeaНup a Мommittee on ―teМСnoloРв transfer‖. TСe Мommittee‘s finНinРs laв tСe
groundwork for establishing a new position: a Government Commissioner for Technology Transfer
(GCTT). Johann Löhn quickly starts pinpointing what the GCTT should accomplish. Thus the
foundation of the Steinbeis model was born. As before, the TCSCs were to form the backbone of
technology transfer, with just one change: they would be complemented by specialized Transfer
Centers, manaРeН bв a professor workinР in an entrepreneurial МapaМitв. LöСn‘s innovation, tСe
guiding principle of the Transfer Center, has endured and remains the crux of the Steinbeis system.
Today, decentralized Transfer Centers – which have also moved into consulting, R&D, and training
and development centers – owe their existence to one simple, underlying precept of what we call
transfer entrepreneurship, bringing transfer entrepreneurs and transfer organizations together. The
Steinbeis umbrella ―Мorporation‖ is aМtuallв wСat unНerpins Steinbeis Enterprises (known toНaв as
SEs, formerly Transfer Centers) and so-called transfer entrepreneurs. These enterprises and the
people who run them benefit from the setup in three ways: legal protection (built into the corporate
structure), synergies within the Transfer Network, and the value inherent in the umbrella Steinbeis
brand.
A key to success: Baden-Württemberg

Baden-Württemberg is central to the success of Steinbeis. The federal state in which Steinbeis was
―born‖, BaНen-Württemberg offers precisely what is needed for an idea to flourish. One: an
excellent basis of knowledge flourishing in a high-achieving, well-developed university network
featuring a broad spectrum of research and teaching activities. This is complemented perfectly by
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research institutes at the forefront of their fields, such as Fraunhofer Institutes, major research
establishments (now known as Helmholtz Centers), and Max Planck Institutes. Two: a rich and
diverse collection of companies, from sole-trader enterprises to traditional SMEs and corporations.
It‘s a fertile Мlimate for Steinbeis – one which has been supported from the beginning through state
politics. In fact, state politics consider Steinbeis as an important and reliable component of planning
Baden-WürttemberР‘s economic and technology policies. Today, Steinbeis still considers Baden-
Württemberg its principal federal state in every respect, both in terms of procuring demand and
generating sales. Nearly 60 percent of all Steinbeis Enterprises are based in Baden-Württemberg.
They generate a solid 60 percent of all of the revenue with the Transfer Network. And 50 per cent
of turnover is generated through companies located in Baden-Württemberg.
A key to success: marketability and constant renewal

Steinbeis Enterprises offer services which meet market demand – as long as those services offer
customers benefits and success over the long term. Central to Steinbeis Enterprises is the
understanding that they only stay open as long as their services prove to be economically viable. In
otСer worНs, tСeв are not put on ―life support‖. FurtСer, no one is obliРeН to run a Steinbeis
Enterprise longer than they feel comfortable. They are closed – simply, without red tape. As the
Steinbeis model of success is so stable, it can sustain constant renewal without jeopardizing the
overall system. So it should not come as any surprise that nearly 1,200 Steinbeis Enterprises have
been founded since 1983 and about 400 have been closed.
A key to success: decentralized activity within a common structure

Managerial and operational responsibility lies with the head of every Steinbeis Enterprise: the
transfer entrepreneur. AММorНinР to tСe Steinbeis moНel, ―transfer bв experts‖ – a notion established
by Ferdinand von Steinbeis himself – plays a pivotal role. Within each Steinbeis Enterprise,
managers take their own decisions in keeping with a central framework that applies to all
enterprises. Typically, Steinbeis Enterprises are units that, from a legal standpoint, belong to
Steinbeis but some enterprises are now independent even if they still aНСere to ―transfer Мenter‖
principles. Managers enjoy entrepreneurial latitude to draft quotes, handle expenses, recruit
personnel and keep the business running. Managers are also free to decide which quotes to prepare
for which clients and set fees and conditions. They are also responsible for marketing the
enterprise‘s serviМes, translatinР expertise into turnover, agreeing on fees and salaries, and writing
off financial investments. Ultimately, they put everything into place to safeguard the ongoing
existing of the enterprise. When working with clients, managers and their Steinbeis Enterprises
adopt the role of suppliers.
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The central departments – known in simple terms as the Steinbeis headquarters – shape and
safeguard the formal framework. In an official, external relationship, the foundation headquarters
with its unit Steinbeis Enterprise is responsible to the customer; just within the internal relationship,
the Steinbeis Enterprise manager is responsible to foundation headquarters.
Fig. 1 Internal and external relations in Steinbeis enterprises
The umbrella organization also provides various services to the enterprises, relieving them of
certain administrative tasks. Services include customary paperwork in finances, billing and HR – all
bookkeeping, for example, as well as monthly P&Ls and balance sheets every month plus payroll
and HR contracts. Services also extend to the type of support needed to set up the company –
consulting and back-up, based on the concept of transfer entrepreneurship – encompassing support
in the field of law (such as contracts), insurance, PR, but also made-to-measure management and an
open ear for the types of problems faced by Steinbeis enterprises. Arrangements with knowledge
bases are a key part of the central framework. Most of the Steinbeis Enterprise managers run their
units on top of their normal obligations. As a rule, managers work full-time as professors or
research associates at a knowledge base. To achieve its aims, Steinbeis should avail itself to the
infrastructure already in place. This requires basic framework agreements. In Baden-Württemberg,
for instance, StW headquarters signed a number of agreements for Steinbeis Enterprises at bases of
knowledge – universities, colleges of higher education and universities of cooperative education –
with the Ministry for Science, Research and Art. Framework agreements are necessary, but they
amount to nothing without a highly capable person who is ready and willing to take up the reins of
entrepreneurship. Another element pivotal to the central framework is the contract signed between
the umbrella organization and the manager of the enterprise. These contraМts НoМument eaМС partв‘s
rights and obligations. One section in particular stipulates that the Steinbeis Enterprise is directly
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entitled to any of its financial gains, indirectly the manager. Instead of taking a share of the
enterprise‘s profits, founНation headquarters levies a network fee of normally nine per cent on
turnover. Putting knowledge to work at a local level yet within a central framework:
quintessentially Steinbeis, this approach embodies the philosophy behind the Löhn Method (L°°).
Its maxim: decentral, individuals are their own managers; central the umbrella organization follows
tСe impulse ―values, tСen Рoals, tСen self-НisМipline, tСen suММess‖. RooteН in tСe most basiМ
principle of transfer entrepreneurship tСe loМal ―transfer unit‖ lies at the heart of the Steinbeis
model. The key players on this stage are the transfer entrepreneurs and their transfer organizations.
By managing transfer centers as companies that are part of the larger Steinbeis entity, transfer
entrepreneurs can take advantage of a framework designed to generate profit. Profit serves two
purposes. First, it Нemonstrates tСat tСe market Мan ―use‖ tСe applieН knowleНРe. SeМonН, profit is
an excellent indicator of how well the knowledge had been transferred. As part of a broader
network – the Steinbeis Transfer Network – transfer entrepreneurs can reap the benefits of the
Steinbeis brand. However, they must also be willing to help maintain the brand by paying a network
fee (servinР as founНation СeaНquarters‘ Мommission on turnover). Transfer entrepreneurs must also
be committed to shaping the overall brand image through peak performance. One of the umbrella
orРaniгation‘s prinМipal tasks in leaНinР tСe network anН its enterprises is to ensure tСat tСe
framework remains sturdy and continues to develop safely. Encouraging and finding people willing
and able to engage in transfer is the first step towards foundation headquarters working with these
entrepreneurs to found a local unit in the region – and help local transfer management blossom.
A key to success: flat hierarchies

Steinbeis Enterprise managers make their own transfer decisions at their local transfer
establisСments, tСe SE. TСe umbrella orРaniгation remains ―merelв‖ a serviМe proviНer, ready to
support the enterprise in its transfer processes – and step in as an exception. The next – and final –
tier above Steinbeis Enterprise managers is occupied solely by StW board of directors.
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Fig. 2 Internal relations in Steinbeis enterprise
A key to success: small-scale and major contracts

Thanks to its structure and system, Steinbeis is perfectly equipped to handle small-scale and major
contracts with equal dexterity. From one standpoint, 50 percent of customers (totaling 5,000 in
2008, for example) generate less than 2,000 euros in turnover per year. Another 24 percent of
customers achieve an annual turnover between 2,000 and 5,000 euros, 16 percent of customers
generate an annual turnover between 5,000 and 15,000 euros. From another standpoint, normally
ten percent of all customers (totaling nearly 850 in 2008, for instance) produce 80 percent of all
revenue for the entire year. Whereas lower amounts of income can be attributed to smaller contracts
such as individual consulting sessions, training programs and measurement and testing work, larger
revenues are associated with extensive R&D contracts, labor-intensive consulting work and skills
training programs for specific projects.
A key to success: the principles of the Baden-Württemberg Transfer Model

In toНaв‘s Мontext, tСe core principles can be summed up as follows:
1. Cover the entire spectrum of technology:
The extensive network of Steinbeis experts offers an incredibly diversified wealth of practical
expertise in every area, especially in fields catering to emerging technology and management as
well as products, processes and systems.
2. Offer end-to-end solutions:
Customers profit from this approach in a number of ways. A look at the bigger picture is the only
perspective that will guarantee that knowledge and technology will transfer successfully. All core
competences support finding solutions. Another benefit: Steinbeis leverages the synergies that
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emerge at the intersections of technology and management, creating opportunities and generating
results that only a network can foster.
3. Deliver value to the customer:
Our Мustomers‘ РrowtС anН tСeir abilitв to staв aСeaН of tСe Мompetition anН innovation are central
to what Steinbeis stands for. Here, the power lies in made-to-measure and visionary solutions
designed to last. Every project unfolds along open, constructive and fair lines of communication,
side by side with partners and customers – independent of industry or size.
4. Safeguard trust:
No matter what the undertaking is about, Steinbeis considers confidentiality a matter of utmost
importance. Projects are managed with complete discretion and privacy. Customers can rest assured
that the results of their projects go no further than Steinbeis. No information is published without
tСe Мustomer‘s approval.
Source:
1. Steinbeis 1983-2008, 1st edition 2011, ISBN 978-3-938062-76-0.
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In the service of the society: The Finnish UAS system
Tauno Kekäle, Hanna Yli-Yrjänäinen

Vaasa University of Applied Sciences, Vaasa, Finland
Email: tke@puv.fi
Background
In the last years, the academic societies of the western world have been transforming rapidly. The
universities feel pressure from knowledge production in more open innovation systems on the one
side, demands from the funding bodies from the other, and the increasing complexity of the
societies themselves from yet another side. It seems that the modern times, with belief in planning
(societies) and predictability (science) have taken a hit, even if the popularity of traditional
―eviНenМe-baseН‖ researМС still stubbornlв persists. Indeed, there are fields where the base of
relevant knowledge is not yet emptied, but the complexity means the evidence is old very quickly,
anН tСe МСanРinР premises mean tСere‘s little use of toНaв‘s trutСs in preНiМtinР tomorrow‘s trutСs.
Nowotny et al (2010) calls this societal phase the Mode-2 society, because they think that both
―knowleНРe soМietв‖ anН ―risk soМietв‖ lone are too simplistiМ; tСeв must be unНerstooН as two
simultaneous facets of the same issue. This is a bit like the fate of Titanic – they only had eyesight
control of icebergs, and when there was indeed an iceberg in clear sight in front of them, the big
ship did not turn quickly enough to avoid the disaster.
This is one possible answer to the problems pinpointed in European Innovation Scoreboards (see
e.g. EIS 2009). The best countries of Europe on this scoreboard have traditionally been ahead of the
U.S. of A. and Japan in innovation predictors (education and infrastructure development levels,
amount of patents per 1.00 persons etc) but still behind them in innovation performance metrics
(new high-tech products, high-tech jobs, money earned from new products; see Figure 1). One of
the explanations is certainly in the entrepreneurial culture, but one part also lies in the lack of
pragmatism and connection to companies of the European universities.
While this may or may not be true in all areas of the big picture of the global society, some
countries have decided to act in advance. Finland is one of these. The main finances of research and
higher education still go to the traditional universities, but for 16 years ago a chain of Universities
of Applied Science (originally, at the time of founding, called polytechnics) was founded to cover
the country. Currently these higher-education and applied research units count 20 in the country.
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Figure 1. European innovation performance lagging behind both USA and Japan. (Source: EIS
2009:25)
Finnish universities of applied sciences have close contacts with trade and industry through their
research and development collaboration. While universities focus on scientific basic research, R&D
at the universities of applied sciences is, in particular, aimed at promoting regional innovation
activity. The development of research activity emphasizes high-quality, internationally competitive,
ethically sustainable research.
Examples: The Vaasa University of Applied Science

While not one of the biggest towns in Finland, with its about 60.000 inhabitants the region of Vaasa
is one of the most industrial regions of Finland. While the average proportion of industrial jobs is
about 19 % of all the jobs in the country, in Vaasa region the industry caters for 24,5 %. Most of
these are within the energy cluster; around 100 companies making electricity-generating and –
saving machinery and appliances, the biggest such cluster in the Nordic countries. The biggest
companies include Wartsila Diesel, with about 3.000 people in Vaasa making medium-revolution
diesel engines for ship and stationary power generation use, and ABB Vaasa, with more than 2.000
persons making generators, special transformers, relays, switchgear etc. Vacon Plc., making
frequency converters for elevators, cranes, railway rolling stock and other uses, and The Switch,
making very big wind turbine motors, are among the future giants in their fields.
Being located in a region such as Vaasa makes for an interesting and demanding location for a
University. Vaasa has two: the University of Vaasa and Vaasa University of Applied Sciences. The
Universities of Applied Sciences in Finland must by law take part in the development of their
regions. For Vaasa University of Applied Sciences (VAMK) this has meant the building of a
technology laboratory that is suitable for both teaching purposes and actually high-tech testing and
development required by the companies in the region. The nature of the businesses of these
companies has led the building of the labs for both the teaching and the services to be concentrated
within the energy area; electrical engineering, mechanical engineering, and software engineering.
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Applied science at its most typical: Testing of prototypes

The industries in the Vaasa region are, as the main idea of Nowotny et al. (2010) suggests, based on
technologies where the main relevant ideas have been conceived a long time ago. The technology
base of electrical motors and transformers is basically from the 1800s, the diesel engine likewise,
solid-state electrical network shielding, software-based industrial automation and frequency
converters from 1950s. The competitiveness does not seem to be based on patenting and
groundbreaking science, but on industrial (production) engineering and fine-tuning the details and
usability of the products. Each minute detail can improve performance and/or profitability, but the
small benefits gained this way can also be quickly copied by others. This kind of industrial
environment demands lots of engineering work, but not much basic research. Thus, it is not
surprising to hear the statistics saying that up to 70 % of product and production innovation in
Finland is developed by bachelor-level engineers. This kind of industrial environment also demands
lots of testing of different ideas: do the new approaches really gain anything? Do they work?
Vaasa University of Applied Sciences works as testing laboratory for many of the areas of product
and production improvements for the industries in the region. The types of testing the VAMK
habitually conducts for its company partners include electromagnetic compatibility (checking of the
electromagnetic interference levels of the products, as well as their tolerance for external
interference) and accelerated life-cycle testing of these products (humidity, heat, vibration etc worth
years of normal use, exaggerated in a laboratory for days of weeks) as well as different calibration
and prototyping services. Examples for less-standardized tests could include pressure tests for liquid
cooling of the current generation of frequency converters when they were in prototype stage, and
testing of transformer isolation material for its isolation ability.
Company Clinic - Student projects for working life
For smaller needs of the surrounding society, a special innovation has been built at VAMK: the
Company Clinic. At the Company Clinic, the students of VAMK implement customised research,
development and innovation services for companies, private persons and other organisations.
During the years 2003 – 2006 Company Clinic has been a project in co-operation with Jyväskylä
University of Applied Sciences, called Mara Company Clinic (Mara comes from the Finnish words
for Tourism and restaurant services department). In the beginning the action has been developed in
that department. Nowadays Company Clinic is a part of every department in Vamk, University of
Applied Sciences.
The projects are implemented during the academic year in educational units and the projects are
supervised by teachers. The development needs are determined together with the client and the
project is fitted to the client's schedule during the academic year. The projects benefit both the
students and the client. The students get to apply the theory they have learnt in practice and the
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client receives the research or development results for use. The objective is that though projects the
students gain experience from various development projects and also receive useful contacts in
working life. Projects are included in the study units if the topic of the project is suitable for the
study unit.
The Company Clinic assignments can be implemented within study units, in courses, as project
studies or as free-choice studies. The assignments vary between fields of study and they can be very
different: from market development, planning of meals to surveys in welfare or design of a
prototype, depending on the degree programme. Each educational department complete projects in
their own way. Each educational field has also their product cards that help the Company Clinic
coordinator in sales and marketing. The product cards are service descriptions of possible
assignments that can be implemented as projects by the students. Each assigment is tailored to the
needs of the client.
The feedback from the students has been only positive and they are willing to have more teaching in
co-operation with working life. They feel that they can understand theory better when thinking
things in real situations. Students get connection to the working life, learn act in a group, learn keep
the deadlines, and understand the different kinds of people and their opinions. Many teachers of
Vamk are accustomed to teach students telling theory in front of the class, that´s why the new way
of teaching via projects is also a challenge for many teachers. Teachers have to have willingness
and motivation to learn something new and be as if the one of the students.
The scheduling is at times the challenge when doing co-operation between the working life and
school. In the school reaction speed is not that fast than in working life when learning is the main
point. Company Clinic has many regular customers which order every year some research and all
the time is coming more who are interested in co-operation with the future employees, the students.
Other projects
Simultaneously, a university with an impact also must bring research findings from the rest of the
world to local students and companies. EU-funded and other big network projects are one way to
tap into knowledge elsewhere. At VAMK we have also started an attempt to increase our
participation in international research projects. Altogether, to date the research project funding is
about one million euro of our total annual budget of 22 million; this sum is scheduled to double in
2011. The projects include all kinds of ideas; a recent one, Design Camp, hired 5 design students
and put them in the service of interested SME companies to improve the designs of their products
over the summer holiday. This service was nearly free of charge to the companies; instead the
students and their supervisors had a competition where the most interesting 5 products/companies
only were accepted among three times the number of interested companies. Other EU-funded
projects include improvement of the workplace/school relationships, practice periods for the
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teachers and students in companies, and even promoting technology laboratory building in Northern
Africa together with a local energy company.
Conclusion
As Nowotnв et al. (2010) МonМluНe, ―tСe line wСiМС formerlв НemarМateН soМietв from sМienМe is
regularly transgressed and the resulting closer integration of science and society signals the
emergence of a new kind of science: contextualized and context-sensitive sМienМe.‖ TСe FinnisС
system of Universities of Applied Science (the name itself a paradox) is an attempt to re-think the
higher education and research towards the needs of a quickly-transforming, global society. Time –
and metrics such as the EIS - will tell, eventually, how much the society really benefits. But the
politiМal powers of tСe Мountrв are quite МonfiНent tСat tСere‘s no turning back, despite the
economically bad times.
References
1. EIS (2009) European Innovation Scoreboard. ProInno Europe Paper No. 15. European
Commission, Enterprise and Industry. (available at: http:www.proinno-
europe.eu/sites/default/files/page/10/0371981-DG ENTR-Report EIS.pdf, quoted September
2011)
2. Nowotny, H., Scott, P. & Gibbons, M. (2010) Re-Thinking Science. Knowledge and the Public
in an Age of Uncertainty. Polity Press/Blackwells, Cambridge, UK.
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Implementing an academic innovation and entrepreneurship program – the

University of Gothenburg model
Dr. Thomas Hedner, Dr. Boo Edgar, Dr. Ivor Cowlrick

Centre of Innovation and Entrepreneurship, The Sahlgrenska Academy, University of Gothenburg,
Sweden
Email: thomas.hedner@gu.se
Introduction
Schumpeter (1) stated that the successful entrepreneur should be innovative, creative and risk prone.
In support of that, others (2-5) have argued that entrepreneurial traits include; risk adoption,
creativity, exploitation of market niches, growth orientation and a desire to maximize profits for
themselves and investors. Successful university entrepreneurship curricula often emphasize the tacit
and narrative pedagogical perspectives (3-7) rather than theoretical ones. Therefore, it is important
to point out the importance of tacit learning and real venture creation and to strategically integrate
these principles into the academic curriculum.
Formal theoretical or explicit knowledge is knowledge that can be easily codified, systematized,
formalized, and communicated to others by oral or written means. In contrast, informal or tacit
knowledge is personal, context specific knowledge that cannot readily be transferred to other
individuals by written or verbal means (6,7). Thus, the focus of education and pedagogy should be
concentrated on know-how (actions) and know-who (networking) rather than know-what (facts) and
know-why (science), i.e. more tacit and narrative knowledge and skills than theoretical knowledge.
Venture creation approach

At the University of Gothenburg in Sweden, we have adopted an organizational approach where
academics and entrepreneurs from the medical, engineering and business schools have worked
jointly together to develop master education and academic curricula in innovation and
entrepreneurship (7).
Our pedagogic approach throughout our innovation and entrepreneurship educational platforms
consists of three key phases:
1) an initial tСeoretiМal innovation anН entrepreneursСip teaМСinР, followeН bв…
2) an integrated tacit and narrative venture creation platform in order to create tools to be
utiliгeН in…
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3) real life business start-up in an on-campus innovation and entrepreneurship real-life venture
creation training.
This interdisciplinary educational setting is vital to implement a culture of innovation and

entrepreneurship within the university setting. Real venture development ecosystems need to be
anchored in tacit project development as well as in relevant innovation and entrepreneurship
teaching and research.
The coordinating team for developing cross-discipline university innovation and entrepreneurship
curricula embrace members from diverse academic settings and disciplines at the strategic and
operational levels, in order to succeed in overcoming many of the problems which are typical of
such kinds of multidisciplinary and cross-institutional projects. One major problem in many
universities is faculty rivalry which can make collaborative curricula almost impossible. By
focusing on tacit and narrative venture creation during education and training, it is our experience
that a novel and open environment reduces rivalry and dismantles obstacles. In the tacit and venture
creation part of the curriculum, the teachers essentially put the students in the driving seat. They
seek and request the knowledge and competence they need in order to develop their ventures
further. The teacher becomes a coach rather than a master. Another problem in many university
environments is a lack of faculty teachers with sufficient competence and practical experience in
innovation and entrepreneurship. In the Gothenburg business school master programs, a significant
ad hoc teaching staff has therefore been attracted from regional venture and business societies. (For
a summary of approach to creating an innovation and entrepreneurship learning program see Box
1.)
Returning value to internal and external stakeholders

During the initiation of our program, we identified both negative and positive characteristics of the
internal and external stakeholders and considered their capacities to make significant impact on the
establishment of the novel innovation and entrepreneurship program and the actual curricula. Our
multi-disciplinary project group and detailed project plan guided us to set specific goals and
objectives which enabled us to identify and prioritize the activities needed to reach our ultimate
goal – implementation of a cross-border innovation and entrepreneurship program, according to our
vision.
This was a rewarding exercise to focus the project group, and it helped us to focus and refocus on
our most important objectives. There are a number of interest groups to relate to regardless of
whether one is part of a government-backed system, like many European universities, or if one
belongs to a private or any other type of academic system. For programs in innovation and
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entrepreneurship, one well recognized and robust measure is societal return of investment in terms
of the establishment of dynamic new company start-ups and SMEs. Employment opportunities for
young creative academics and direct societal return in terms of income tax from these entrepreneurs
and employees are other positive forms of returning value to stakeholders.
Venture competitions
Another important part of establishing a cross-border academic innovation and entrepreneurship
platform is the creation and establishment of a venture competition. In Gothenburg and the region
of western Sweden, Venture Cup has played an important role for establishing a strong
entrepreneurial spirit throughout universities and young academic business cluster communities.
Venture Cup (8) started in 1998 as a way to promote entrepreneurship within the academic and
university setting as well as the society as a whole. It is a business plan competition with an
academic course implemented throughout all academic faculties and disciplines. Venture Cup is
organized as a non-profit organization supported by universities, society and the business
community. Over the years, venture Cup has generated a large number of high-growth start-up
companies in Sweden, Finland, Norway and Denmark, and has grown to become the largest
business plan competition in the world.
The main idea of Venture Cup is to guide and support entrepreneurs with potential business ideas to
a start a company. During the academic course and competition, students start with formulating the
business idea and they attend a series of lectures and workshops where they determine a complete
business plan. After going through the formal steps in the competition, the initial business ideas
develop into potential investment-ready business plans. By the end of the course, the student teams
submit their ideas or projects for consideration by a professional jury. At each stage of the Venture
Cup competition, prizes are awarded. In the initial stages of the competition, prizes are awarded
locally. By the end of the course, there are national competitions with award sums in the order of
Euros100,000. These awards can be used as start-up capital for winning business plans. In total,
more than Euros 0.5 million are awarded across Scandinavia every year. At a Scandinavian level,
the Venture Cup competition has contributed significantly to promote entrepreneurship within
universities and society, and has contributed significantly to generate high-growth companies in the
region.
Value for the future

Over the past decade, Gothenburg University has developed an action-based approach to actively
support and stimulate students in creating real-life ventures. This is realized through an organized
innovation and entrepreneurship learning program across the academic disciplines. We have also
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implemented a quality assurance system and infrastructure to institutionalize this novel educational
approach. Importantly, a pedagogic approach has to be an approach characterized by pragmatism
and focus on real venture creation in the academic setting and related clusters. This approach has
resulted in the development of a range of high-tech and start-up service companies in the
Gothenburg University and other university clusters. Importantly; this results in a high return of
investment for society. Our calculations match those of Massachusetts Institute of Technology
(MIT) and others - for one Euro invested at least ten Euros are returned to society over a decade.
The societal benefits probably go far beyond this estimate since calculations from MIT indicate that
the indirect societal benefits are indeed much larger. To gain credibility and support for an
academic innovation and entrepreneurship activity, it is very important to consider all stakeholders
and demonstrate the impact on society. One must be able to convincingly show that an innovation
and entrepreneurship program creates major value for external stakeholders, and that it also
produces internal impact and value for the university.
Box 1
What can you do to develop and cross-fertilize an entrepreneurial
attitude throughout your university?
 Start to develop a clear strategy and distinct project plan how to
implement innovation and entrepreneurship all over the university
and assure that you will follow up on your project plan
 Engage young teachers/researchers with an entrepreneurial attitude
 Coach and support young entrepreneurial academic talents to acquire
academic research and teaching merits – integrate them in your staff
 Mix teachers actively between academic disciplines
 Focus on venture creation, i.e. the pragmatic and tacit dimensions of
your educational curriculum
 Engage teachers in innovation and entrepreneurship with double
degrees (competencies – biomedicine / business or technology /
business)
 Engage teachers from the local business society who can provide your
students with tacit and narrative experience
 Create a business creation venture competition all over the university
 Make a plan to communicate your results to all stake-holders
(university, students, business society, politicians) and follow it
through
References
1. Schumpeter JA. (1926). Theorie der wirtschaftlichen Entwicklung. Duncker and Humblot,
Leipzig
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2. Collin LA, Smith AJ, Hannon PD. (2006). Discovering entrepreneurship. An exploration of a
tripartite approach to developing entrepreneurial capacities. J European Industrial Training, 30,
no 2/3, 188-205
3. Henry C, Hill F, Leitch CM. (2005a). Entrepreneurship education and training: can
entrepreneurship be taught? Part I. Education + Training, 47, no 2, 98-111
4. Henry C, Hill F, Leitch CM. (2005b). Entrepreneurship education and training: can
entrepreneurship be taught? Part II. Education + Training, 47, no 3, 158-169
5. Platt L. (2004). Accepting risk – daring greatness. Vital Speeches of the Day, 70, 17, 541-543
6. Taatila V. (2010). Pragmatism as a philosophy of education for entrepreneurship. In ―Innovation
anН EntrepreneursСip in Universities‖, EН Marja-Liisa Neuvonen-Rauhala, Proceedings of the
3rd International FINPIN Conferences Joensuu, Finland. A publication Series of Lahti
University of Applied Sciences, Series C, Part 72; ISSN 1457-8328; ISBN 978-951-827-112-6
7. Hedner T, Edgar B, Maack K and Abouzeedan A. (2010). Innovation and Entrepreneurship
curricula at Swedish Universities – Theoretical, tacit and narrative learning aspects. In
―Innovation anН EntrepreneursСip in Universities‖, EН Marja-Liisa Neuvonen-Rauhala,
Proceedings of the 3rd International FINPIN Conferences Joensuu, Finland. A publication Series
of Lahti University of Applied Sciences, Series C, Part 72; ISSN 1457-8328; ISBN 978-951-
827-112-6
8. Venture Cup. http://www.venturecup.se/vast/hem accessed September 2011
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Development of Science-Industry partnership in Slovenia- A Case study

approach
Maja Bučar, Matija Rojec

Centre of International Relations, Faculty of Social Sciences, University of Ljubljana, Slovenia
Email: maja.bucar@fdv.uni-lj.si
Abstract
The paper analyses the science-industry partnership in Slovenia. A problem of insufficient
cooperation between public research sector and business sector in the area of R&D and innovation
has often been identified as a weakness of Slovenian national innovation system, contributing to
slow restructuring of Slovenian industry. Our assumption is that the lack of motivation and specifics
of each sector in terms of objectives of research can explain the difficulties the two sides experience
in entering the partnerships. The paper provides suggestions as to what should be done on firm and
government level to intensify the science-industry cooperation in Slovenia.
The empirical data is gathered through specially prepared eight case studies from food and chemical
industry, which are very different in terms of partnerships with public R&D. Both partners in
cooperation, science (public R&D institution or higher education research unit) and a corresponding
partner from tСe inНustrв Сave been intervieweН. TСis ―mirror‖ approaМС was СiРСlв insiРСtful,
since it provided us with the opportunity to observe how same cooperation is viewed differently
depending on the position of the interviewee.
As the case studies show, what needs to be taken into account is the importance of personal contact,
informal relationships, building alliances not through formal contracts, but by step-by-step
cooperation experiences. Support to various activities, where representatives of the two
communities, science and business can meet each other and openly discuss the issues related to their
potential partnership, can be a valuable, even if under-rated instrument.
Key words: science-industry partnership, NIS, Slovenia, food/ chemical industry.
1. Introduction
The relationship between industry and science has attracted significant attention in recent years both
in academic circles as among the policy makers. In particular, one can think of literature related to
‗Triple Helix MoНel‘ bв Etгkowitг anН LeвНesНorff, (1997) pointinР to new relationsСips between
business, university and government, or literature on national innovation system (Lundvall, 1992;
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Freeman, 2002; Dosi et al., 1988; etc.). Innovation capability as defined by Furman at al. (2002)
also stresses the importance of close linkages of business to the public research sphere. Many
governments across the OECD have launched major new initiatives to support increased interaction
between universities and industry (Cohen et al., 2002). These initiatives are often premised on the
expectation that university–industry interaction can increase the rate of innovation in the economy
(Spencer, 2001).
In transition countries such as Slovenia the lack of sufficient cooperation between public science
anН inНustrв is even more pronounМeН (see RaНošević, 2004). One of tСe positive МonsequenМes of
the Europeanization of science and technology (S&T) and innovation policies in the countries that
joined EU in 2004 (2007) is increased attention to the promotion of science- industry partnership to
improve competitiveness.
The objective of this paper is to analyse the science-industry partnership in Slovenia to see, what
the main characteristics of this cooperation are, as seen from the perspective of the actors. The
analysis is based on assessment of different policy papers and studies on innovation and R&D
policy in Slovenia, and primarily on specially prepared eight case studies from food and chemical
industry. In the case studies, both partners in cooperation, science (public R&D institution or higher
education research unit) and a corresponding partner from the industry have been interviewed.
2. Science-industry cooperation in Slovenia: some basic data

Lack of partnership between public R&D organisations (PRO) and business sector has been
identified as one of the deficiencies of Slovenian system of innovation (see for detail various EU
Innovation Trendchart Country Reports on Slovenia, Bučar anН Stare, 2006; Bučar anН RojeМ,
2009). Several policy documents1 addressed the issue and proposed shifting of the public resources
towards more applied research and thus stimulating partnerships. The implementation was less
successful, as evident partly also from the structure of R&D funding flows by funders and
performers of R&D. Majority of the funding for public R&D institutions comes from the
Рovernment, anН business invests mostlв in its own R&D МapaМities (Bučar et al, 2010). Some
improvements are however noticed in data compiled by the Community Innovation Surveys. From
2002-2004 to 2004-2006, the cooperation of innovation active enterprises is on the increase in all
categories. The most dynamic and closest is the cooperation with the suppliers on one hand and the
customers on the other2, yet an increase is recorded in cooperation of innovative enterprises with
HEI and public research institutes. This remains the least active area of cooperation.
1
National Research and Development Programme (2006-2010), Slovenian Development Strategy (2005-2013),
National Reform Programme for Achieving the Lisbon Strategy Goals (NRP) 2005-2010, National Strategic Reference
Framework (NSRF) (2007-2013), etМ. See Нetails in Bučar et al., 2010.
2
This was confirmed earlier in a НetaileН stuНв bв Jaklič, Damijan anН RojeМ, 2008.
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Govt/PRI
HEIs
Consultants/commercial
labs
Competitors
Clients/customers
Suppliers
Enterprise
0 10 20 30 40 50
2002-2004 2004-2006
Fig. 1 Share of innovative enterprises cooperating by innovation activity with other subject 2002-
2004 and 2004-2006
Source: SORS (2006, 2008).
The low relevance of public research units for innovation activities of enterprises is reflected in the
answers the enterprises quote as the source of relevant information for their innovation activity.
Less than 10% of all information for innovation, coming from public R&D is considered relevant
bв tСe business (Bučar et al, 2010).
3. Methodology
Eight cases have been selected for the analysis of science-industry cooperation in Slovenia, four in
the food industry and four in the chemical industry. Cases have been selected in a way that each
case in the science sector has a corresponding case in the industry sector. Each case addressed the
following issues:
- The main features of the partnership;
- The conditions for science industry partnership as seen from the actors involved;
- The guiding principles in science-industry partnership;
- The importance of knowledge creation and sharing;
- Measures to improve the innovation capacities in the sector.
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For each case study a set of interviews was conducted by the authors as well as documents provided
by the partners on their cooperation were studied. The findings are presented through the prism of
potential policy options for the government.
4. Main findings and messages

The analysed cases represent a relatively broad variety of types of science-industry partnerships.
However, far the most important type is an open-ended permanent cooperation, formalised in long-
term contracts within defined field, which is then specified in more detail in the annual plans or ad
hoc requests. Mutual interest of both sides is essential for long-term partnership; both industry and
science need to benefit from joint work. It is often claimed that there is a lack of interest for
cooperation with industry on the side of public research organisations. The cases show that the
institutional and policy setup do not provide incentives for the partnerships. The main motivation
for science to enter into cooperation with industry is additional finance and, as reported in some of
the cases, better opportunities to do research in a specific area, where extensive testing is required to
publish scientific articles.
The motivation for cooperation on the industry side has proved to be both sector specific as well as
size specific. In highly competitive and R&D intensive pharmaceutical sector the cooperation with
public R&D institutions is considered a natural way of doing business, while in food processing the
need for such cooperation is of a more secondary nature. Case studies also confirm that science-
industry cooperation is much more developed in the case of medium and large companies, while
small companies are hardly found as partners to public R&D institutions. An interesting
observation, coming from the case studies, is that the partnership was in several cases the result of
initiative coming from the public sector, either due to the requirements for the co-financing when
applying for project funding or through informal contacts with people from enterprises.3
Several different policy measures have been designed to promote science- business partnership and
more financial support has been made available in recent years (for details, see Bucar et al, 2010).
Due to their relative novelty, it is difficult to appraise these measures fairly. What surprised us is
low awareness of these measures among the business community. The respondents felt that the
overall R&D policy environment is not promoting partnerships, yet at the same time they had
highly limited knowledge of the government measures. This indicates a need for the government to
more actively promote the existing policy measures.
Those interviewees who are familiar with some of the support measures and who have applied for
various funds (R&D subsidies, Young Researchers programme, tax incentives, special grants, etc.)
3
Same was observed by Zajc (2011) in her extensive study of cooperation of small and micro enterprises with public
sector research organisations (PRO). One of the most often cited reason for cooperation was the proposal, coming from
PRO.
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have complained of the heavy bureaucracy accompanying these measures. With the co-financing
coming from the EU Structural Funds, the procedural details are even more demanding, but since
the financial level of support has increased, there is still a motive to apply. Simplification,
coordination and better visibility of the support measures is therefore required.
The interviews stressed that only a limited number of Slovenian firms have the adequate absorption
capacity to establish science-industry collaboration. They must be willing and able to cooperate:
they have to have sufficient human and financial resources for such partnerships. Small firms often
have significant problems in adequately formulating their needs, they lack human resources in R&D
area or in management and are too much involved in day-to-day business to consider R&D as
relevant for their operations. As the case studies all show, what needs to be taken into account is the
importance of personal contact, informal relationships, building alliances not through formal
contracts, but by step-by-step cooperation experiences. Flexible support to various activities, where
representatives of the two communities, science and business can meet each other and openly
discuss the issues related to their cooperation, can be a valuable instrument4.
The requests of public authorities for measurable impact of science-industry cooperation – in the
sense of how much have the sales income of the participating partners increased as a result of
partnership - is not really understood and appreciated by the cooperating partners. On the side of
public R&D units, the measurable impact might be the extra income, derived from the cooperation,
ability to purchase research equipment or afford more (young) employees in the laboratory/
department. Often even more important than financial are „soft‟ effects of such cooperation: the
research teams are exposed to real-life problems, have the possibility to test their theories in
practice, contribute to the solution of a specific problem and use the results of the empirical work
for their scientific publications.
The question of measuring the direct impact of cooperation on increased sales surprised even the
business sector. The results of science-industry collaboration are measured in terms of new
knowledge gained, the fulfilment of specified tasks (testing, measuring) or some other pre-set
objectives. The view of the interviewees from the business sector is that if the results are not
forthcoming or are unsatisfactory from the point of what was expected, the relationship is
terminated. A successful relationship involves a lot of joint work and selection of any single
indicator of success is hardly possible or practical. This message should be taken on board by the
policy makers who design complex schemes in evaluating the impact of each specific joint project
or cooperation case; the monitoring of the cooperation in an artificial and formal manner does not
serve any purpose and only de-stimulates partnership.
4
For example, the activities of technology platforms, which the government used to support, were mentioned as a good
practice.
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So far the policy measures in Slovenia have concentrated on promotion of cooperation for business
sector. What is missing is a proper support mechanism at public R&D institutions to stimulate
researchers for the work with industry. There is little system incentive through improved income to
individual researcher, participating in research with industry. Legally, researchers in public research
organisations are civil servants and their salaries are regulated centrally by the legal provisions of
Public Sector Wage System Act and a collective agreement for all public sector employees 5. Also,
industry cooperation is not recognised as a promotion criterion, in fact it may even diminish the
МСanМes for promotion, sinМe work witС inНustrв maв result in laМk of time for more ‗serious,
publication-orienteН‘ researМС. StrivinР towarНs internationallв reМoРniseН sМientifiМ exМellenМe
may lead to serious shortage of research capabilities in the areas useful for national economy,
leaving the business sector without modern knowledge. In the world where new knowledge is the
key competitiveness factor, this can only lead to lagging behind. Low competitiveness of business
sector sooner or later results in lower funds for scientific research as well. WE suggest that in a
small country and within a small science community one needs to be flexible as to the scientific
excellence criteria and respect both types of science: the more basic kind as well as the applications
СelpinР Мountrв‘s business Мommunitв.
The science-industry cooperation is affected also by the overall institutional framework for R&D
and innovation. Here one of the conclusions is that frequent changes in policies and in support
measures are not creating a positive environment for any cooperation. Stability in the policy, in the
science evaluation criteria as well as in the support measures is what makes the framework more
supportive to the risky undertakings like science-industry partnership.
References:
1. Bučar, M. anН Stare, M. (2006) From quantitв to qualitв: МritiМal assessment of Slovenia's
potential for knowledge-baseН РrowtС. V: PieМС, Krгвsгtof, RaНošević, Slavo (EНs.). The
knowledge-based economy in Central and Eastern Europe: countries and industries in a
process of change. Basingstoke; New York: Palgrave Macmillan, pp. 239-255.
2. Bučar M. anН RojeМ M. (2009): Cases of Science-Industry Cooperation in Slovenian Food and
Chemical Industries, CIR Analysis: http://www.mednarodni-
odnosi.si/cmo/CIR/CIR1BucarRojec.pdf
3. Bučar M., Jaklič A. anН UНovič B. (2010) National system of innovation in Slovenia, CIR
Analysis: http://www.mednarodni-
odnosi.si/cmo/CIR/CIR4National%20System%20of%20Innovation%20in%20Slovenia.pdf
5
See: http://www.mju.gov.si/en/legislation/legal_acts_in_force/
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4. Cohen, W.M., Nelson, R.R., Walsh, J., 2002. Links and impacts: the influenМe of publiМ
research on industrial R&D. Management Science 48, 1–23.
5. Dosi, G., Freeman C., Nelson R., Silverberg R. and Soete L. (1988) Technical Change and
Economic Theory. London/New York: Pinter Publishers.
6. Etzkowitz & Leydesdorff, (1997). Universities and the Global Knowledge Economy, London:
Pinter.
7. EU (2007 and consequent years) EU Innovation Trend Chart on Innovation: Country Report on
Slovenia 2006–2007, 2008, 2009, 2010. http://trendchart.cordis.lu/country_reports.cfm
8. Freeman, C. (2002) Continental, national and sub-national innovation systems-
complementarity and economic growth, Research Policy, no. 31, pp.191-211.
9. Furman, J. L., M. Porter and S. Stern (2002) The Determinants of National Innovative Capacity.
Research Policy 31: 899–933.
10. Government Office for Growth. 2006. Framework of Economic and Social Reforms for
Increasing the Welfare in Slovenia. Ljubljana: Government of the Republic of Slovenia.
11. IMAD (2005) Slovenian Development Strategy 2006-2013, Ljubljana. Institute for
Macroeconomic Analysis and Development; web: http://www.gov.si/umar/aprojekt/asrs/ssd.php
12. IMAD (2007) Implementation Report on Reform Programme for Achieving the Lisbon Strategy
Goals;
13. IMAD (2008) Development Report (Poročilo o raгvoju ). Ljubljana: UraН гa makroekonomske
analize in razvoj- Institute for Macroeconomic Analysis and Development.
14. Jaklič, A., Damijan J. and M. Rojec (2008) Innovation Cooperation and Innovation Activity of
Slovenian Enterprises; Discussion Paper 201/2008; LICOS Discussion Paper Series.
15. Lundvall, B.-Å. (ur.) (1992): National Systems of Innovation: Towards a Theory of Innovation
and Interactive Learning. Pinter Publishers, London.
16. Ministry of Science and Technology (1995). Nacionalni raziskovalni program (National
Research Programme). Ljubljana: MST.
17. Office for Growth of the Rep. of Slovenia, 2006, The Framework for social and economic
reforms for increasing the welfare in Slovenia,
18. web: http://www.svr.gov.si/fileadmin/srs.gov.si/pageuploads/Brosura_Okrvir_reform_ANG.pdf
19. RaНošević, Slavo, 2004, TСe Innovation CapaМities of tСe CEEC in tСe EnlarРeН EU, Journal of
Common Market Studies, vol. 42, no.3, pp. 641-666.
20. Republic of Slovenia (2005) National Reform Programme for Achieving the Lisbon Strategy
Goals, Oct. 2005.
21. Republic of Slovenia (2006) Report on the Implementation of the NRP for Achieving the
Lisbon Strategy Goals, Nov. 2006.
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22. SORS: Rapid Reports, Research and Development, Statistical Office of the Republic of
Slovenia, various issues in 2006, 2007 and 2008.
23. Spencer, J.W., 2001. How relevant is university-baseН sМientifiМ research to private high-
teМСnoloРв firms? a UniteН States–Japan comparison. Academy of Management Journal 44,
432–440.
24. Zajc, Mojca (2011) Opportunities and Barriers for Cooperation of SMEs and Public Research
Organisations in Creation and Transfer of Knowledge, Ph.D. thesis, University of Ljubljana;
Faculty of Social Sciences.
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National Innovation System: Commercialization of knowledge in the Russian

and Lithuanian Universities.
Tatiana Khvatova1, Femi Odebiyi2

1
International Management department of St.Petersburg State Polytechnic University, Russia.
2
Business Administration department of LCC International University, Lithuania.
Emails:Tatiana-Khvatova@mail.ru, fodebiyi@lcc.lt
Abstract
The success of policies geared toward increasing innovation is to a large extent dependent on the
implementation process. The achievement of policy goals and objectives are critical to all
stakeholders in the innovation system. One perspective is to examine the institutional process of
implementation; how these policies are translated from theory to practice. A second perspective is
to view the empirical results of the policy in context. Hence, this article details: 1) the institutional
mechanism for the commercialization of knowledge in universities in Lithuania- are the policy
implementation structures and systems effective enough for success?; 2) The results of a case study
on a government policy on innovation in Russian Universities to ascertain the level of effectiveness
of the policy in consideration.
The article shows the shortcomings arising from policies and structures put in place to stimulate
innovation and commercialization of knowledge.
Keywords: innovation; knowledge commercialization; higher education; national policy
Introduction
Economies of the developed countries are more and more relying on knowledge, innovations and
new technologies which are considered to be the key driving force for economic development. The
concept of knowledge economy and the idea that generation of knowledge and innovations
determine the growth of productivity and standards of living attract high attention and support form
academicians, businessmen, and government authorities.
Many countries use the National System of Innovation (NSI) approach to manage innovation
processes in their countries. The concept of NSI was developed in the 1990s by B.A.Lundval,
K.Freeman, R.Nelson and others. NSI is a system of interconnected organizations (structures)
involved in producing and commercialization of scientific knowledge, innovations and technologies
within the frontiers of the country. On the other hand, NSI is a system of institutions (legal,
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financial, social) providing the framework for innovative processes and having strong national
roots, traditions and cultural peculiarities.
In this article the writers would like to explore a key element of National System of Innovation
(NSI) – the system of higher education in Russia and Lithuania, and in particular the way
universities could commercialize their knowledge better, and what kind of institutional mechanisms
are provided by the state to make commercialization more efficient.
Methodology/approach
This article combines viewpoint and case study approaches. Using the viewpoints of experts in the
innovation field, mainly from the higher education sector, the effectiveness of a national innovation
policy for Russian universities was assessed. The case study approach was employed as an
exploratory tool for ascertaining the structure and mechanism used by Lithuania Innovation Center
for universities to commercialize their knowledge. Data from The Global Innovation Index 2011
was used as the tool for measuring the success of the Russian and Lithuanian innovation system,
and at the same time highlighting the similarities and differences in these two national innovation
systems.
Commercialization of Knowledge in Lithuanian and Russian Universities

Lithuania in its transition to a market economy realized the need to put more emphasis on research
-
and innovation. This need has led to restructuring and reorientation of the economy
metamorphosing into an economy of high-value added industries. In retrospect and in comparison
to other EU member states, the Lithuanian economy is relatively small in size. There is little room
for technological diversification, which means that specialization is vital for national productive
capacity (Mancusi, 2001). In a knowledge economy, partnerships and networks between these
institutions- industry, university and government- are crucial for building innovative capacity
fundamental to economic growth. Well-defined interactions between university, industry and
government foster the production of technological innovations (Almeida, 2008). The trend in the
Lithuanian Innovation System is not as promising as one would have expected. The 2009
Innovation PoliМв ProРress Report on LitСuania СiРСliРСteН ―tСe weak links between business anН
higher education and research and development (R&D) communities result not only in obsolete
qualifications of the highly educated labour force, but also in low value added innovations, inability
to develop new-to-market proНuМts anН internal teМСnoloРiМal proМesses‖.6 However, the Ministry
of Economy is coordinating the innovation delivery process through its innovation support
6
See http://www.proinno-europe.eu/trendchart/extranet/upload/countryreports/Country_Report_Lithuania_2009.pdf
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institutions, among who are the Lithuanian Innovation Centers, Business Incubators, and Science
and Technology Parks. This was with the aim of making the business sector more participative,
interactive, producer and consumer in the national innovation system. Innovation support
institutions should serve as a barrier-remover for tСe business seМtor in aММessinР universities‘
knowledge resources.
The public institution, Lithuanian Innovation Centre (LIC) is a non-profit organization, providing
innovation support services to enterprises, research institutions, industry associations and business
support organizations. Mission of Lithuanian Innovation Centre is provision of the innovation
support services by implementing Lithuanian innovation policy.
The main strategic goal of LIC is the increasing of Lithuanian international competitiveness by
stimulating innovations in business. This goal is divided into the following objectives:
 To foster capabilities of the companies to develop and implement innovations.
 To accelerate commercialization of achievements of advanced sciences.
 To decrease the risk of innovation implementation.7
To ascertain the service of the LIC in fostering innovation through collaboration with the higher
education institutions in Lithuania, a set of questions were posed to one of the representatives of the
center (see Appendix 1). Answers to these questions would have provided significant insights into
the challenges and successes of the LIC in bringing together the seemingly divergent operation of
the business sector and the higher education institutions. Unfortunately, as of the time of submitting
this article there was no response from the LIC contact, despite email and phone call follow-ups. In
Lithuania the innovation support delivery process can be classified as somewhat complicated due to
high level of bureaucracy and administration requirements (Inno-Policy TrendChart, 2009).
Simplification in procedures of interaction and cooperation between business sectors and higher
education institutions should be the hallmark of the functions of LIC. Transfer structures should
facilitate both easy access to knowledge reservoirs in higher education institutions, and developing
of a portal or platform for perceiving and understanding the needs of the business sector. This could
be in form of a knowledge node, where LIC, the intermediary organization, consults with
innovation stakeholders on their opinions regarding barriers to innovations and appropriate support
measures to address them. Inputs from stakeholders can prove crucial in the development of broad-
based approaches essential for increasing innovation capacities in the business sector and
commercialization of knowledge in the higher education institutions. Knowledge transfer is a key
component in the innovation system. It also induces the promulgation and adaptation of knowledge
7
See http:// http://www.lic.lt/index.php?1288504095
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and fosters interactions that promote economic development between business, government, and the
academic community (RCUK, 2006:35). The national government support measures targeting
higher education institutions (with a focus on education function) is about 15% as compared to the
total support measures given to all the target groups in the economy (see Appendix 2). Private
institutions for education / lifelong learning are accorded about 3% of the total innovation support
measures in Lithuania (Appendix 2). In Lithuania, 10 of the 23 colleges are private and 8 of the 23
universities are private (Ministry of Education and Science, 2010: 13). Increased support measures
for private higher education institutions are recommended. These could be in terms of policy
designs that take into consideration the peculiar nature of private higher education institutions.
Private institutions are less likely to be involved in science and technology fields of learning, but
more likely in management, tourism, communication, and business administration fields of
learning. Emphasis should be placed on support measures that harness the strengths of private
institutions. Some of these strengths would include: innovation management, providing information
and skills to access international markets, intellectual property management and skills, skills on
commercialization and new products market penetration, etc.
Considering the situation in Russia at the moment - state financing of university research is going
down: in 2004 universities received 6.1% of all state expenditures on R&D (civil research), in 2005
– 4.3%, in 2007 – only 3.7% (Indicators of Science, 2008). However, the Government is planning to
increase this portion up to 20% (Strategy-2020). Two-thirds of all university research is funded by
federal budget, while contracts with enterprises and foreign sources bring 13% and 9% of all
financing respectively.
There are 1108 universities in Russia, including 658 state-owned ones. Research is conducted in
406 universities (according to official statistics). However, according to the alternative survey made
by the Higher School of Economics, Moscow, only 50-70 universities conduct scientific research
(Savitskaya, 2009).
Looking at statistical data the writers conclude that a lot of effort has to be made to nurture
conditions for scientific research, attracting the young, updating equipment and more. Among the
pitfalls of university research system, the underdeveloped system of technology transfer from
science to business makes the results of university R&D unreachable for companies. Only 5% of all
inventions made in 1992-2000 were successfully commercialized (Gokhberg, 2003).
While doing the case-studies the writers discovered differences between official version and
experts‘ opinions wСв МommerМialiгation is so ineffiМient. TСe offiМial version usuallв empСasiгes
that university teachers and researchers do not know the market how their results could be applied
in practice, that managers of companies are generally not familiar with most important directions of
contemporary science and therefore they cannot evaluate technological efficiency of R&D results
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offered to them; the State, while making policies of technology transfer, does not have enough
knowledge about the real conditions of doing research (NSI and innovation policy of Russian
Federation, 2009).
AММorНinР to experts‘ opinions, tСe reasons for low efficiency of technology transfer in Russia can
be attributed to the following:
 There is practically not so much demand for innovation in the industrial sector: industry
(for example, radio-electronics) is in deep decline and unable to introduce any innovation
into their production processes. There are ideas, but they are sold abroad.
 Companies (mainly foreign) that want innovation, find it anyway; both scientists and
managers adjusted to the current situation and are even satisfied with it;
 Commercializing in Russia would mean making your invention public; but Russian laws
on intellectual property protection are imperfect, it is not difficult to overtake any patent.
In AuРust 2009 a Russian feНeral law № 217 ―On Small enterprises at universities‖ was
promulgated to enable the creation of small enterprises (SE). Creating this kind of SE should bring
up the following advantages: a) create the source of additional financing for the university; b)
encourage scientific projects development; c) give students an opportunity to apply their knowledge
in practice; d) increase efficiency of technology transfer.
Experts say that those who created this law drew a conclusion that universities have a lot of R&D
results with potential for commercialization, and there are a lot of interested investors. According to
the data provided by the Ministry of Education and Science, by the middle of 2010 only 325 SE
were created (Mitrofanov, 2010) anН aММorНinР to experts‘ opinions most of tСem were МreateН just
―to fill paperwork‖ – to reach a certain indicator for a university. The average value of R&D results
introНuМeН into tСe МСarter Мapital is €675, wСile tСe averaРe siгe of МСarter Мapital is €1625. It is
obvious that this amount of money is not enough to develop any substantial business.
SМientists anН experts revealeН weaknesses of tСe law №217, for example imperfeМt leРislative
basis: in Russian law tСe notion of ―innovative aМtivitв‖ is not defined as a term; this leads to
manipulations in evaluation criteria in statistical research. Further, there are pitfalls in the
mechanism of SE creation. For example, there is no re-evaluation mechanism of the license in
charter capital, which is necessary in case the value of this license grows as business develops.
Universitв assets Мannot be useН even in tСe beРinninР, at tСe staРe of ―seeН‖ – for this side
investors should be found. But side investors do not want to invest into enterprise which has no
taxation benefits or simplified taxation procedures. There are also a lot of pitfalls with the
distribution of intellectual property for the newly created product. The law requires a lot of
paperwork and gives no opportunity to search for foreign investors. As a result the writers suggest
that at the moment it is quite difficult to do innovation within the framework given by the law
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№217; in orНer to remove tСe pitfalls tСere sСoulН be amenНments maНe into BuНРet, Civil anН Tax
codes of Russian Federation.
Evaluating components of the Russian and Lithuanian National Innovation Systems

The data8 below outlines, with side-by-side comparison, indices of input and output components of
the two innovation systems. Higher score in the indices translates to better performance.
Indicators Russia……… Lithuania.…….
Score 0-100 Score 0-100

Rank Rank
1. Global Innovation Index 35.9 56 38.5 40
2. Innovation Efficiency Ratio 0.8 59 0.6 91
3. Institutions (Political, Regulatory & 51.8 97 78.0 33
Business environments)
4. Human capital & research (Education expenditure, Tertiary enrolment & 45.1 38 47.0 34
R&D)
5. Infrastructure (ICT, Energy & General infrastructure) 25.8 73 35.0 35
6. Market sophistication (Credit, Investment & Trade & competition) 36.4 76 43.9 48
7. Business sophistication (Knowledge workers, Innovation linkages & 44.9 37 33.3 74
Knowledge absorption)
8. Scientific outputs (Knowledge creation, Knowledge impact & 32.9 34 21.8 78
Knowledge diffusion)
9. Creative Outputs (Creative intangibles, & Creative goods & services) 28.9 75 37.2 49
LitСuania is aСeaН of Russia in tСe Рlobal rankinР of TСe WorlН‘s Top Innovators. Innovation
efficiency, the ratio of innovation output over innovation input, plays a critical role in the
innovation system; as the scores show in the table above, Lithuania is behind Russia in innovation
efficiency. Consequently, policy instruments and structures in Lithuania should be readdressed in
order to translate input performances into tangible results. Improvements in the Lithuanian
innovation system would have to begin with efforts to increase innovation efficiency.
University/industry collaboration, one of the crucial links in the innovation system and a sub-pillar
of innovation linkage, is more advanced in Lithuania (score of 54.1 and rank 33)3 as compared to
Russia (score 44.5 and rank 55)3. Appropriate measures need to be taken to improve relevance of
academic research in Russian universities; such measures would include provision of incentives for
8
Data taken from The Global Innovation Index 2011; http://www.globalinnovationindex.org/gii/GII%20COMPLETE_PRINTWEB.pdf
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Russian industry to invest more in joint university/industry R&D initiatives. Applying to both
Russian and Lithuanian contexts, one key factor is the reengineering of inter-organizational
structures to facilitate smooth cooperation between universities and industries. Departing from loose
partnership structures, formalization is recommended for the university/industry collaborations.
Formalization of inter-organizational relationships, according to Vlaar et al. (2006: 1619) is the
organizing process of codification and enforcing of inputs, outputs and behavior, and the outcomes
of this process using contracts, rules and procedures.
Conclusions
The non response from the LIC was one of the limitations of this article. The writers propose a
detailed longitudinal project on innovation and commercialization of knowledge in Russian and
Lithuanian universities in order to generate empirical evidence that identifies best practices and
detects shortcomings in policy designs and implementation structures.
As reМommenНations to improve tСe appliМabilitв of tСe law № 217 tСe writers МonsiНer tСe
following: а) introducing amendments into the law (developing the mechanism of intellectual
property transfer into the charter capital, etc); b) creating a mechanism of giving facilities (land,
office) to SE under beneficial conditions; c) making other resources (library, equipment,
infrastructure) available for SE; d) bringing amendments into educational standards (teach how to
manage intellectual property); e) offerinР taxation benefits (for example, ―tax vaМations‖ for 3-5
years).
Above all, universities sСoulН be reallв interesteН in МommerМialiгinР researМС results, not onlв ―on
paper‖, but in praМtiМe. Onlв sвstemiМ МСanРes in tСe eМonomies of LitСuania anН Russia as a whole,
i.e. improving investment climate, modernization of the industries, increasing transparency and
openness of tСe Мountrв‘s eМonomв, reНuМinР bureauМraМв, etМ, МoulН revive innovative aМtivities in
the country. Without these changes local initiatives to increase innovative activities in a single
branch (universities in our case) would not bring any sufficient results.
References
1. AlmeiНa, M. (2008), ‗Innovation anН entrepreneursСip in Braгilian universities‘, International
Journal of Technology Management and Sustainable Development 7: 1, pp. 39-58, doi:
10.1386/ijtm.7.1.39/1
2. Gokhberg, L.(2003), ― ая а ая а я а
‖, Voprosi EМonomiki, № 3. InНiМators of SМienМe (2008) MosМow, p.199.
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3. INNO-Policy TrendChart (2009), Innovation Policy Progress Report Lithuania, URL

(consulted May 2011): http://www.proinno- europe.eu/trendchart/extranet/
upload/countryreports/Country_Report_Lithuania_2009.pdf
4. Manusi, M.I. (2001), ‗TeМСnoloРiМal speМialiгation in industrial countries: patterns and
DвnamiМs‘, Review of World Economics, Vol. 137, pp. 593-621.
5. Ministry of Education and Science of the Republic of Lithuania (2010), Education In Lithuania,
URL (consulted May 2011): http://www.smm.lt/en/docs/Educatiom_2010_taisytas.pdf
6. Mitrofanov, A. (2010), ― а а я я а – а
я а а а №217-ФЗ‖, Proceedings of scientific ConferenМe ‗Interaction
of authorities, science and business in developing the strategy of innovative development in the
North-West region of Russia‟, 17-18 Dec, 2010, St.Petersburg, p. 274.
7. Research Councils UK (RCUK) (2006) Independent External Challenge Report to Research
Councils UK “Knowledge Transfer in the Eight Research Councils” April 2006. London:
Research Councils UK, URL (consulted May 2011):
http://www.rcuk.ac.uk/documents/documents/exchallenge.pdf
8. Russia‘s Ministrв of EНuМation anН SМienМe (2009), NSI and innovation policy of Russian
Federation URL (consulted May 2011):
http://window.edu.ru/window_catalog/files/r64728/book449.pdf .
9. Savitskaya, N. (2009), ― а а а ‖, URL (consulted May 2011):
http://www.ucheba.ru/vuz-article/10933.html.
10. StrateРв of Russia‘s innovative Нevelopment until 2020, projeМt, URL (Мonsulted May 2011):
http://www.economy.gov.ru/minec/activity/sections/innovations/doc20101231_016.
11. Vlaar, P W L, F A van den Bosch and H W Volberda 2006. Coping with Problems of
Understanding in Interorganizational Relationships: Using Formalization as a Means to make
Sense, Organization Studies, 27: 1617-1638.
Appendices
Appendix 1. Part of the questions sent to Lithuania Innovation Center (LIC) and innovation policy
experts in Russia:
 What are the mechanisms put in place for the transfer of knowledge from universities to the
business sector?
 What are the challenges in the process of these knowledge transfers?
 How proactive are universities in their pursuit of commercialization of knowledge and
discoveries?
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 How do universities or their staff respond to initiatives directed toward the

commercialization of their knowledge and discoveries?
 Are the national innovation policies favorable to all the parties involved- Universities, and
Industry? Are universities seen as economic development agents, and therefore motivated to
collaborate with industry?
Appendix 2. Target groups of support measures (INNO-Policy TrendChart – Innovation Policy

Progress Report Lithuania 2009)
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II. ORGANIZATIONS DEVELOPMENT MODELS
What do SMEs expect from E – government services?
Gunnar Prause, Merli Reidolf

Wismar University, Tallinn University of Technology
Emails: gunnar.prause@hs-wismar.de, merli.reidolf@ttu.ee
Abstract
E-government is a popular topic in the political agenda and many countries have developed or plan
to develop e-serviМes, but often tСe Мustomers‘ neeНs are not in tСe foМus. Our artiМle will take a
closer look at the needs of the small and medium-sized enterprises sector to reduce their
administrative burdens with the help of the e-government. The qualitative research was conducted
in the six countries. Entrepreneurs and key informants from the government level and other experts
were interviewed. The article brings out what the entrepreneurs value about e-services and which
are the disadvantages for them and add the piece to the discussion how to overwhelm the areas of
neglection. The opinions depended on the level of e-governance in the state as well on the previous
experiences and trust.
Keywords: G2B, business oriented e-services, SMEs
Acknowledgements
The authors wish to thank European Union and Baltic Sea Region Programme INTERREG IVB for
funding the research and partners of the project EGOPRISE, which was approved in September
2009, for the assistance in data collection. The aim of the project is to turn public administration to
more business oriented service suppliers, relieve SMEs from administrative burdens, improve their
access to information and use e-government to do that. The project partners are from the Baltic Sea
Region (BSR) - Belarus, Denmark, Estonia, Finland, Germany, Latvia, Lithuania and Sweden.
1. Introduction
E-government and the economic growth are popular topics in the political agenda all around the
Baltic Sea Region. (see, e.g.EU 2010a, EU 2010b ). Better government which would reduce the
administrative burden on the SMEs (small and medium-sized enterprises) shoulders could help to
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achieve entrepreneurial targets and innovation. However, studies on evaluation and measuring of e-
government are showing that often the user satisfaction is not in line with the offered services
(Capgemini 2007) that the goals for thematic developments in e-government are missing which
would take into account the special needs of users (Lille and Prause 2009, Prause and Reidolf
2011), e-services are more technology driven (OECD 2006, Schuppan 2010, Lenk 2007) and even
the authorities have to admit that often they do not have the proved information about customers
expectations but they have to assume (Prause et al 2011). Successful implementation of the e-
government will be more often in the agenda to reduce the cost of the local and national
governments (Warkentin et al 2002) whereas the needs of the business sector are not the most
important targets. Therefore it is important to understand the needs of the entrepreneurs as an
important group of potential e-government users and also help to reduce the administrative burdens
of the enterprises. Our study helps to reduce this gap in order to improve e-governmental services
for SME sector.
The existing surveys are investigating evaluation and measurements of e-government including the
business sector but they are neglecting the needs and expectations of entrepreneurs and SME sector
towards e-government (Heeks 2006). Hence the purpose of the current article is to understand what
tСe entrepreneur‘s value in e-government, and what are the disadvantages. Our goal is also to make
proposals to create more business oriented e-services. As an example we turned special attention to
the internalisation of SMEs.
In the EGOPRISE partnership we are trying to develop new interoperable e-governmental solutions
by keeping in mind the needs of entrepreneurs and SME leaders. To fulfil the purpose, all the
project partners conducted semi-structured interviews and made country-based summaries. In the
article we will use the results of the interviews and conduct a comparative analysis of six countries.
The article is divided into five parts. The 2nd section introduces the theoretical framework of
business oriented e-governance. In the section 3, the research method will be described. In the
section 4, the main findings are presented and discussed; the article ends with the summary and
recommendations.
2. Theoretical Framework
The definitions of the E-Government can broadly be divided into two groups: as just the online
service delivery or the possibility to change the governance through the use of the Internet (Torres
et al. 2005). OECD (2003, p1) define the e-Рovernment as ―tСe use of information anН
communication technology (ICT) and particularly the Internet, as a tool to achieve better
Рovernment‖. TСe otСers are talkinР more about tСe teМСnoloРв anН stress tСe ICT (TСompson et al
2005).
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The Commission of the European Communities (2003, p7) sees the E-Government as ―tСe use of
information and communication technologies in public administrations combined with
organisational change and new skills in order to improve public services and democratic processes
anН strenРtСen support to publiМ poliМies‖. So tСe Commission of tСe European Communities
emphasises more the need to change working processes and organisational structures in order to
improve the public service delivery.
In our study we are trying to combine the views of OECD and EC, i.e. we see ICT as a tool to
achieve better government as there is the possibility to get a better service or reduce administrative
burdens and sustain economic growth. In parallel we use the e-services as the implementation of
electronic delivery for government information, programs, strategies and services. We will analyse
the government to business (G2B) interaction between local and central government and
commercial business sector. (EgoPrise 2010).
In general, the previous studies focused on the number of offered online services and the depth or
stage (Torres et al. 2005). The European countries have been benchmarked according to the
availability and sophistication of the level of the basic e-government services (European
Commission 2009). Analyses made by the European Commission (2009) show that usually more
decentralized service delivery structures have less sophisticated services. Torres et al (2005) noticed
that although big cities are not always more innovative, their delivery of services is more complex
because they have more staff and other management resources.
But the availability of technology is not enough; digital technologies must be used, and used
effectively (Economist Intelligence unit 2009). Equally important is the awareness about the
services, the affordability of access, ease of use and willingness to use the services (Commission of
tСe European Communities 2003). VerНeРem anН Verleвe (2009, 490) stuНies sСow tСat ―tСe
supply of e-government services is a precondition for people to develop the intention to use these
serviМes‖. van Dijk et al (2008) study in Netherlands indicates to the big error in governments
aРents‘ loРiМ wСen tСeв tСink tСat eleМtroniМ serviМes will be automatiМallв useН as soon as tСey are
available. But the users will keep on using the traditional non-electronic services because they are
used to and feel convenient unless they learn a better alternative.
The main challenge is to identify the needs of the customers and design the services according to
their needs (Torres et al. 2005). We must know the expectations of the entrepreneurs from the point
of view of interaction with government to understand how to relieve the businesses from the
administrative burden and offer them better governance. The e-government services may help to
make businesses more profitable through revenue expansion by helping to collect and disseminate
МritiМal information anН tСerefore enСanМe tСe firms‘ intelliРenМe Рeneration anН Мost reНuМtion
(Thompson, Rust, and Rhoda 2005). More productive and higher quality e-services will reduce the
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cost of the public service and administrative errors as well as transaction costs at business side (time
effort) (Commission of the European Communities 2003). The customer-oriented approach is
important because the producer and customer are on the different sides of the web interface and this
moves them farther apart although the idea was to bring them closer than before (Mohammed
2008). This should be kept in mind when the system analytics are going to develop e-government
services.
To look on E-Government services from the customers perspective among others also means to
concentrate on how the customers can access services, how they can get information concerning
e.g. applications or permissions and how transparent are administrative processes. Beside these
more organisational aspects technological points have to be considered by designing and developing
E-Government services (Prause et al. 2011).
The other question is how to encourage entrepreneurs to use e-government. The survey showed that
the conditional factors of service supply, knowledge of services, and digital media use are the most
primary and basic factors for explaining government Internet services usage; the
social/demographic factors are not so important and the question of digital divide cannot be
unНerestimateН (van Dijk et al 2008). MaСaНeo (2009, p 398) results sСoweН tСat tСe users‘ attituНe
or perception of the usefulness and ease of use of the system is the most powerful predictor of
users‘ intentions, tСis is followeН bв tСe soМial influenМe (inНiviНual belief tСat otСers tСouРСt tСeв
should use e-services). The success stories; improved social characteristics and knowledge of the
end users help to widen the number of users (Warkentin et al 2002).
According to the Commission of the European Communities (2003), the issues that affect the use of
e-services are:
 inclusive access (including digital literacy to take the full advantage of offered services,
choice of devices, availability of the Internet, fast and always-on communication);
 trust and confidence (protection of personal data, authentication, identity management, this
also means that only data which is neccessery for the fulfilment of the respective service
may be collected);
 better use of public sector information (e.g. re-using the content such as geographical,
tourist, meteorological information and statistics could led to the economic growth and job-
creation but also choice and quality of services for citizens)
 interoperability (e.g. service is provided without any breaks regardless of the number of
different administrative bodies; open standards are used at the technical level)
 organisational change (e.g. customer orientation, a one-stop approach, a life or a business
event orientation).
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As the previous studies demonstrate, it has usually not been widely analysed what the customers, in
our case SMEs expect from e-governance, and how this could help to achieve their entrepreneurial
targets. Therefore our target is to add a comparative view of expectations of entrepreneurs in the
BSR and bring out the differences between the countries and check whether they are in accordance
with the previous studies,
3. Method
This paper will present the results of a qualitative survey, which was carried out in five Baltic Sea
countries. The focus of the current study is to highlight the gaps between SME needs/expectations
towards e-government services compared to the existing situation and find new ideas about the
improvement of interactions between public sector and businesses. We will also compare the views
of entrepreneurs of different BSR countries.
The qualitative approach was used to find out new ideas and structures. Two interview guides for
semi-structured interviews were developed, one for entrepreneurs and the other one for E-
Government experts (e.g. people from the government agencies or municipalities who were
responsible for improving the e-governmental system or separate service, other researchers who
have studied this theme etc). was developed to understand the requirements of entrepreneurs to E-
Government services and the G2B interactions throughout the BSR concerning regional needs and
future visions in the area of E-Government. The guides were in English and the responsible project
partners in Denmark, Estonia, Finland, Germany, Lithuania and Sweden translated it and conducted
interviews in the mother tongue of the interviewee.
Between May and September 2010 interviews in six Baltic Sea Region countries (Estonia, Finland,
Germany, Latvia, Lithuania and Sweden) were conducted.In the each country the partners
conducted 8-19 interviews. All interviews were recorded and transcribed in the language of the
interviewee and the country-based summaries were compiled. The method of data analysis of
country-based summaries was thematic content analysis (Anderson 2007) of the interview data
based on categories derived from the interviews. The categories derived from the interviews. When
there is in the following text a reference to the opinions of the entrepreneurs from specific country
of the country based summary, only the abbreviation of the country is used.
The current article is mostly based on the country-based summaries of interviews with
entrepreneurs, but some comments are added also from the interviews with experts. When in the
following text a reference to the country-based summary is made, only the abbreviation of the
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country is used9. . The main purpose of the paper is to analyse the expectations of enterprises
towards the e-government services and what they value about these services.
4. Results and discussion

4.1 e-Government backgrounds of the studied countries
In the Table 1 there are some e-government and information society indicators of countries, which
were included into our study and also the EU average. Almost all of enterprises in the project
partner countries have Internet access and the availability is better than the EU27 average. But not
all the enterprises, which have access to the Internet, use it for G2B interactions.
Most of the enterprises (71%) in the whole EU use the Internet for interaction with public
authorities. Danish, Swedish, Finnish and Estonian enterprises have better availability of on-line
services than EU27 average and they also use the Internet more for interaction with public
authorities than the EU27 average. It is worth mentioning that although e-government on-line
availability index in Germany is equal to EU27 average, the German enterprises use the e-
government services less than EU27 average. And in Lithuania where the e-government availability
is lower, more than 90% of all the enterprises use e-government services. As written before
availability is not the only thing that influences the usage of e-services.
Table 1. Information society indicators in the project partner countries, 2009

Indicators, % EU27 DK SE DE FI EE LT LV
E-government
.. usage by enterprises1 71 90 86 65 96 79 91 64
2
.. on-line availability 74 84 95 74 89 90 60 65
3
Enterprises
.. with Internet access 94 98 95 98 100 95 95 88
4
.. with a broadband connection 83 82 89 89 94 86 58 62
.. using the Internet for interaction with public authorities 71 90 86 65 96 79 91 64
.. using the Internet for returning filled in forms to public
55 66 61 52 83 64 85 51
authorities
.. using the Internet for submitting a proposal in a public
11 11 15 12 0 14 23 10
electronic tender system to public authorities
Note:
1 Percentage of enterprises using the internet to interact with public authorities (i.e. having used the Internet for one or more of the
following activities: obtaining information, downloading forms, filling-in web-forms, full electronic case handling)
2 The indicator shows the percentage of the 20 basic services which are fully available online i.e. for which it is possible to carry out
full electronic case handling. For example if in a country 13 of the 20 services were measured as being 100% available on-line and
one service was not relevant (e.g. does not exist), the indicator is 13/19 which is 68.4%. Measurement is based on a sample of URLs
of public web sites agreed with Member States as relevant for each service.
DK – Denmark, SE – Sweden, DE – Germany, FI – Finland, EE – Estonia, LT – Lithuania, LV - Latvia

9
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3 Percentage of enterprises with at least 10 persons employed in the given NACE sectors. Within the last calendar year before the
survey.
4 The availability of broadband is measured by the percentage of enterprises that are connectable to an exchange that has been
converted to support xDSL-technology, to a cable network upgraded for Internet traffic, or to other broadband technologies.
Source: Eurostat
Table 2 shows how the use of the Internet for interaction with public authorities by enterprises has
changed in 2005 and 2009. The number of e-government users has risen in all countries. The
enterprises in Nordic countries have always been among the top users and therefore the growth has
not been remarkable. More than 2/3 of Estonian and Lithuanian enterprises (70%) used in 2005 the
e-government, which was relatively more than German, Latvian and EU27 average. Although the
percentage of e-government users in Germany and Latvia is still lower than EU27 average, the
growth has been bigger than in the EU27 on average. By 2009, the percentage of e-government
users in Lithuania has grown up to 91%, whereas the number of users in Estonia has not been
growing as much as in Lithuania. One possible explanation may be that Estonia had already in 2004
quite a good infrastructure and availability, and during 2005-2009 publicity to increase the number
of users has not been too widespread.
Table 2. Enterprises10 using the Internet for interaction with public authorities (2005 and 2009)
EU27 DK SE DE FI EE LT LV
2005 57 87 80 44 91 70 72 35
2009 72 90 86 65 96 79 91 64
Source: Eurostat
The higher transaction level of e-government can be measured by the usage of Internet for returning
filled-in forms to public authority (Table 1). As expected from the literature review the number of
enterprises who use transaction services is lower, but still most of the enterprises from the countries
in the EGOPRISE project use it more than EU27 average. Only just half of the Latvian and German
enterprises use the transaction services.
4.2. Reasons for using e-government

During the interviews we asked why the enterprises use e-government services. The mentioned
benefits can be broadly divided into three groups: saving resources, and increasing convenience and
transparency. Sometimes the entrepreneurs do not think about benefits and use it because e-service
is compulsory (DK, DE, EE, LT).
10
Percentage of enterprises with at least 10 persons employed in the given NACE sectors. Within the last calendar year before the survey.
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The most important factors, which the entrepreneurs said, that they value are saving time and
money. The entrepreneurs believe that they save time when looking for information whenever
necessary, save travelling time if they do not have to move from the office. The SMEs all over the
BSR region mentioned that using e-government is efficient, saves time and expenses (incl. reduced
paperwork, optimising the internal workflows, server recourses (because the (central) government is
responsible for maintaining and making back-ups of all documents).
The interviewed entrepreneurs also value convenience; they can use the services whenever they
need. E-government information services are 24/7 available (should be) and are always accessible
and this makes it possible to check information from other sources and compare the information or
possibilities by yourself (EE), no necessity to visit an authority‟s office (FI, DE), easier than calling
and waiting for forms to be sent (SE), possibility to install system-to-system reporting (DK). It was
also mentioned, that thanks to the electronic services one does not need to do the same things
repeatedly (FI) and the known services are easy to use (DE).
The increased transparency in the administration process was mentioned in Danish, German and
Estonian interviews. The entrepreneurs think that if there are less bureaucratic procedures then
quality and speed of administration will increase transparency. Thanks to the integrated systems one
does not need to do the same things repeatedly (FI) and can avoid mistakes, which may happen
when submitting data/applications/etc via traditional methods, as the system controls the submitted
data (EE). One of the advantages is that there is always a copy of sent things, and often also a
receipt for the sender (FI) and the back-up of all documents should be done by the government
(EE). If there is more than one source available, this will increase availability, trust in information
obtained and its comparability as well as different points of view (EE).
Concerning the information protection, there are different opinions. Some said that using e-
government will help to protect information (EE, FI). For example it is possible to find out who
looked at the data. On the other hand some of the interviewees where afraid that the information
might leak (EE, DE). Also in Lithuania the SMEs referred to the low confidence for the safety and
reliability of processes (LT). There is a threat that authorities will control too much, as they are
tempted to ask for too much information (DK).
4.3 Disadvantages of the e-government

In the interviews we also asked why the entrepreneurs do not use the e-services or what the
disadvantages are. Some interviewed entrepreneurs from countries like Denmark, Sweden, Estonia
and Finland cannot see reasons not to use e-services. All the interviewed companies take it for
granted that the services of the authorities as well as business services are offered on the internet.
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Using the electronic services is the first preference of the companies (FI). E-services are offered
and preferred (SE).
The other entrepreneurs mentioned a list of disadvantages which are closely connected to the
benefits the entrepreneurs wish to experience. The negative factors can be divided into four groups:
 Lack of knowledge, information and communication;
 Inconvenience;
 Inconsistence;
 Technical problems;
 Data security issues.
Some entrepreneurs brought out that they do not know about services and therefore did not use
them. This was one of the important factors mentioned also in other studies. They do not know
where to find what kind of information or whether services exist (EE, DE) or they are not familiar
with the possible advantages of using them (LT). The information is available in different web-
pages with different structures (LV, EE) and presented information is too general (EE, SE) or in
official language (FI), there are difficulties in interpreting. There is no one to ask for help (FI); in
most cases it is only information but not 2-way communication (EE). All this makes it difficult to
find the necessary services and they lose the most important advantage – saving resources, incl.
time.
As could be seen in the Table 1, in Estonia the availability of e-governance is one of the highest and
confirmed by an expert. There are quite a lot of e-services, including interactive services where the
whole process could be finished without leaving PC (EE). The interviewed persons from the
Estonian authorities are quite optimistic that entrepreneurs know how to use the Internet and
therefore the e-services are also well-known to them and there will not be problems with the e-
services. And they do not talk too much about raising the level of knowledge of entrepreneurs.
NevertСeless, tСe numbers anН tСe entrepreneurs‘ opinions show that the usage is not as high as it
could be.
The German experts complain about missing marketing of existing and new e-services, poor
technical conditions and proposed the provision of training possibilities for entrepreneurs in order to
increase the acceptance of e-services. The use of offered e-government services varies to a large
extent and depends on the size of the enterprises, the age and the education level of the business
owner. The enterprises use mostly information and interaction services (mostly download of
electronic forms), less frequently transaction services. But many enterprises still do not know how to
use e-government services (DE).
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There was also mentioned the risk that information might leak (DE, EE) anН tСat‘s wСв
entrepreneurs avoid e-services. Often (in German summary) or sometimes (in Estonian summary)
direct personal contact to the public administration is preferred; this might be again the question of
beliefs. The information leak was not a problem for Estonian experts. On the other hand the German
experts talk more about data protection and legal obstacles.
If the service is not used often or needs to be done once, then the learning process takes too much
time and makes it inconvenient (EE). Also the logic of different systems or even plain downloadable
forms is sometimes different. It was also mentioned, that if things in a digital transaction start to go
wrong – then it can become really complicated and the personal communication is needed. You
cannot see how far you got in the process – and how many of your registrations have been accepted
– and then it is very difficult to get in touch with live people, who can find it out for you and solve
your problem (DK). Then the process becomes very time consuming and instead of winning time
the entrepreneur may have to use extra resources to finish the process. Sometimes it is also not
possible to save the application between the processes (FI) as the entrepreneurs might not have time
or knowledge to finish the process at once.
It was also mentioned that the entrepreneur has a problem or group of obligations what s/he must
do. If the entire chain of needed actions is not offered through the Internet, there are media brakes
then it does not help if just some of the services are interactively used via the Internet. If you have to
meet an official for additional reason (for example giving a physical signature or training) then it
does not matter whether there is an e-service or not (EE). Usage of e-services is time consuming
and ineffective, since the process is complicated and there are poor links between state institutions
(LT). If there are media breaks in the service chain, the links between different institutions are poor
and the process becomes inconsistent and therefore uncomfortable and time consuming. Also many
experts admitted that the cooperation between different authorities could be better (EE, FI) and
there is room for increasing efficiency.
Mostly the entrepreneurs from countries, which have relatively higher e-governance level, had
experienced different technical problems, which reduced the advantages or needed some extra
resources. Sometimes the e-service or server is too slow or offline, there are problems if it is not
used by Windows and/or Microsoft Office software, but by smaller hard-ware like mobile phones
(EE). Registering as a user is in many places an additional burden (FI). When there are system-to-
system interactions, then whenever the authorities change the system (which they do regularly), the
enterprises have to change their systems too (DK).
Regarding the German situation, all public authorities offer at least information on their websites,
but in general the experts admitted that the e-governmental situation can be characterised by
missing customer orientation of public administration, media discontinuity and unclear added value
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for tСe entrepreneurs. In Estonia onlв few experts rose a question tСat toНaв‘s e-services are
composed based on the needs of the authorities and follow mostly the institutional structures and
noboНв reallв knows tСe entrepreneurs‘ expeМtations, everвboНв is just РuessinР.
4.4 How the e-government could help in the internationalisation of SMEs

One of the examples of service chains in our study was the internationalisation of SMEs. The small
and medium-sized enterprises need to use the foreign markets if they are interested in growing and
developing. The question is how much the government and in our context especially e-government
services could help and what kind of help is needed. We asked if they had got some e-governmental
help and what kind of e-governmental services could help them.
The entrepreneurs as well as interviewed experts do not see the e-government as the biggest
obstacle of the cross-border activities. The major obstacles in the internalisation are according to
the entrepreneurs connected to the legislation, cultural differences, language barriers (LV). This is
in line with the results of empiric studies related to international operations of SMEs in the BSR
(Beifert and Prause 2006; Beifert 2007). Both studies revealed that administrative and legal topics
are of high relevance for entrepreneurs in business internationalisation, where these topics were
ranked higher among the Baltic States, Poland and Russia, than in the old EU countries like
Denmark, Germany and Sweden.
In Estonia the entrepreneurs pointed out that they are used to use e-government but the
governmental e-service usage in cross-border activities is very minimal. The digital signatures are
not so common in other countries. The technical standards are not the same. And the question about
accepting other countries digital signatures is still open.
The other entrepreneurs added that there could be the same e-services in other countries; this could
help in the cross-border cooperation. A challenge is the integration of e-services offered for SMEs in
Estonia into at least neighbouring countries as more and more businesses expand, thus avoiding
dabbling of similar procedures or reporting in the main offices and its affiliates abroad (EE). The
Estonian government could spread the knowledge and help so in the internalisation. As a conclusion
it can be assumed that more and new transnational e-services will facilitate the internationalisation
process of SMEs in BSR.
5. How to raise the usage of e-government and make the services more SME friendly
The intention should not be to do everything via e-government. Personal contact by phone cannot
be replaced completely by e-service (SE). The question is how the e-government could help the
businesses more, what could be done to relieve the businesses from the administrative burdens.
During the interviews the entrepreneurs made some country-specific proposals for improvements,
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but there were also several general proposals that could be useful in the BSR region and also in
other countries.
If people are not aware of the e-services and therefore do not use them, they are also not familiar
with the added value that e-services could offer (Verdegem and Verleye 2009). Trust is an
important factor when talking about successful implementation of e-government (Warkentin et al
2002). According to the studies mentioned before, to raise the number of users of the e-government,
the agencies should let people know what kind of e-services exist. It is recommended that the non-
users should hear the positive success-stories, which emphasize that e-services are not only for
technology fans but for everybody. This could help to raise the knowledge and trust. The customers
should find the e-services as easily as possible and their trust should not be abused.
The interviewees wished to find the entire information from the one place and get all the necessary
information to finish the process at home. It is not possible to fill independently most of the
downloadable forms, because it is sometimes required that they are filled in the presence of an
official or the instructions are so confusing (LV) or written in official language (DE). Also the
same fields in the different forms or applications should be defined in the same way across the
different services (EE). The analyses also showed that a lot more effort should be put to design the
process and to the use of technological solutions that make e-services easily accessible via different
operation systems and hard-ware. For example the downloadable forms should be standardized,
usable also in Mac and Linux computers. Sometimes it is not possible to fill-in the forms with the
computer (EE) or save the unfinished or finished document (FI). Regular meetings or monitoring
with the end users are needed, to find out how the solutions really work.
Besides the already mentioned training and marketing measures, the experts stress the involvement of
intermediaries for e-service like tax and business advisors in order to increase acceptance and convenience of
e-governmental offers by using single service points (DE).
Another result of the study was that highly developed e-government countries are offering larger
numbers of sophisticated e-services, but the services are still distributed among different web-sites
and they are often not offered and constructed according to the needs of the entrepreneurs. This is
part of the public organisational background of the administrative system, which is divided into
ministries and other national or local public institutions that are responsible for parts of the offered
e-services, but are not able to offer integrated services for entrepreneurs. As an example the highly
developed company registration service in Estonia can be mentioned, which is lacking a direct
interface with taxation so that the creation of a company can be realised fully online using one step-
by-step procedure, but the registration for VAT is still a separate operation not connected to the
registration portal (EE).
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5. Conclusions and recommendations

Although the e-government and economic growth both are popular topics in the political agenda,
there are not too many attempts to make the public service more customer friendly by using e-
government and helping thus SMEs to achieve better economical results. As stated before the
picture of users oppinions is so far neglected (Heeks 2006). Our surrent article opportunity to
analyse the views of entrepreneurs of e-government of six different countries and therefore it is
possible to compare weather the usage is in accordance with the number of services and their
sophistication. The entrepreneurs around Baltic Sea see possibilities how the e-services could help
them. In the interviews a set of disadvantages were mentioned where many of these disadvantages
are in close connection to the advantages. As the entrepreneurs value the time and convenience and
transparent governance, they are not satisfied when these requirements are not fulfilled, e.g.
information is not available, it is fragmented or difficult to interpret and there is no one to ask for
help, the service is not available if they want to use it or there are technical problems that take time
to overcome. If we look opinions of the representatives of government institutions, the actions to
solve mentioned problems which are not inside the one authority are not so actively used.
It is not an issue anymore whether the government is online, but the question is in what form and
with what consequences. Torres et al (2005) study and our interviews showed that there is a lot of
information and forms available, but it is always not a two-way communication and there is a lack
of possibilities to finish the whole procedure at once via the Internet. The transition to e-government
is not happening with the same speed in different countries and within the cities of each country
(Torres et al. 2005, pp 235).
The intention should not be to offer all public services as online services. The design of access
channels and the harmonisation of access channels are of vital importance for the acceptance and
the added value of E-Government services. Large enterprises can and have to communicate with
public administration in another way than a craftsman with a micro-sized enterprise – for him a
small online portal witС all relevant information, tСe personal МontaМt witС ―Сis‖ emploвees at tСe
public administration or intermediaries are more relevant than complete E-Government solutions
that transfer data from back-end to back-end systems. So in Hungary and France were implemented
special non-emergency numbers for enterprises/employers. There the caller can get information
concerning for instance the employment of workers (France) or the can register temporary workers
(Hungarв). TСe extension of serviМes offereН via tСe ―traНitional‖ aММess МСannel telepСone was
identified as necessary by the responsible authorities in these countries (Prause et al. 2011).
If people are not aware of offered E-Government services and do not use them therefore, they are
also not familiar with the added value these services could offer (Verdegem and Verleye 2009).
Trust is an important factor when talking about successful implementation of E-Government
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(Warkentin et al 2002). According to the studies mentioned before, to raise the number of users of
E-Government services, the agencies should let people to know what kind of online services do
exist. It is recommended that the non-users should hear and experience the positive success-stories
which emphasize that E-Services are not only for technology fans but for everybody. This could
help to raise the knowledge and trust. The customers should find the E-Services as easily as
possible and their trust should not be abused.
―EНuМation anН traininР are essential to ensure that citizens have the neccessery digital literacy to be
able to take full aНvantaРe of tСe offereН serviМes‖ (Commission of tСe European Communities
2003). But the empirical study in the EGOPRISE project revealed more. So it can be stated that
there is a huge difference among the countries investigated concerning the governmental online-
ability. The study showed that in Demark, Estonia, Finland and Sweden there are more e-services
available, but the usage of e-government among enterprises is not equally high. This may be
because the dissemination and training activities of the e-government sector towards entrepreneurs
are not appropriate. Especially the age of entrepreneurs has a direct influence on the level of usage.
The group of older entrepreneurs (over 50 years) is using the internet and the related e-services less
intensively than the younger persons (Eurostat 2009). Special training programs can help to increase
the penetration of usage of the e-government services in the future.
Another result of the study was that even highly developed E-Government countries are offering
larger numbers of sophisticated E-Services but the services are distributed among different web-
sites and they are often not offered and constructed according to the needs of the entrepreneurs.
This is part of the public organisational background of the administrative system which is divided
into ministries and other national or local public institutions which are responsible for parts of the
offered E-Services but which are not able to offer integrated services for entrepreneurs. As an
example the highly developed company registration service in Estonia can be mentioned which is
lacking a direct interface with taxation so that the creation of a company can be realised fully online
using one step-by-step procedure but the registration for VAT is still a separate operation not
connected to the registration portal (Prause et al. 2011).
The last important point that should be mentioned here is the fact that transnational e-services are
still a topic of the future. With the upcoming implementation of the service directive at EU level a
secure authentication of entrepreneurs from all EU member states will be possible, but the currently
offered e-services are dominated by national considerations, which is not a big surprise, because the
whole e-government sector is heavily dependent on national legislation. Even developed e-
government countries like the Nordic States are offering their online-services mainly for national
clients. Here the huge potential of transnational e-services in the field of internationalisation of
enterprises is still to be realized.
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Our study showed that although there is a lot of discussion going on about e-government the
understanding of the values and needs of entrepreneurs and SME sector are not so obvious. The
well known surveys and the theoretical constructs about E-government are aiming rather at the
needs of larger companies neglecting the special situation of SME sector. Our article reveals that
from the perspective of entrepreneurs and SMEs governmental e-services are not really known and
in order to reduce bureaucratic burdens they have to be better integrated and structured according to
the SME specific business processes.
Consequently the next step in the Egoprise project will be the analysis and modelling of
administrative process chains between public administration and enterprises in order to find
potential opportunities for improvement and optimization of these processes and the offered
services. Of special relevance for the Egoprise project is the implementation of improved process
oriented organizational structures and the standardisation of processes between the public
administrations within a country and between BSR countries in order to facilitate and support the
ongoing economical integration of the BSR since internationally operating SMEs have to tackle
beside lingual and cultural barriers also multiple mandatory administrative procedures. The
standardisation of these processes of the different BSR countries would decrease significantly the
administrative burdens in transnational entrepreneurship.
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EntrepreneursСip Forum ConferenМe ―EntrepreneursСip anН SoМietв: CreatinР Social, Economic,

Cultural anН Personal Value‖, Centre for EntrepreneursСip ResearМС, Essex Business SМСool,
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Hatzelhoffer, M. Lobeck, W. Müller, C.-C. Wiegandt (Eds) E-Government und Stadtentwicklung,
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_10149893&ppg=68 [Accessed 19 October 2010].
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New results in building company's sustainable competitive advantage
Vladimir Kuryakov
Management Systems Consulting Corporation, Riga, Latvia
Email: vlkuryakov@mail.ru
Abstract
There is a lot of well-developed and valued literature on competitive advantage and related
strateРies. Competitive aНvantaРe moНel of Porter (1985) is at tСe Сeart of a firm‘s performanМe in
competitive markets and defining competitive strategy as offensive or defensive action to create a
defendable position in an industry or market, in order to cope successfully in this position with
competitive forces and generate a superior return on investment by creating and delivering superior
value to target customers.
Two dimensions were mentioned for corporate value creation: first - by performance relatively to
competitors (Value Chain framework and Porter's Competitive Advantage model); second – by
gaining Industry/Market Attractiveness (Competetive Force model). Some scholars are defining
competitive advantage as superior differentiation and/or lower costs by comparison with the
marginal (breakeven) competitor in the product market (Peteraf and Barney, 2003). But
differentiation does not enough to imply a competitive advantage: it is only a necessary but not
sufficient condition for competitive advantage, because superior value should be delivered to target
customers.
The current paper deals with general review of approaches for sustainable competitive advantage
and demonstrates application for new resource-based approach, developed by Prof. Eric Flamholtz,
that deals with how a firm can create and sustain competitive advantage from the strategies it
employs to build the business itself, and, in particular its infrastructure. Accordingly, it represents
resource-based approach, but different from traditionally used in strategy. This approach is based on
30 вears researМС on orРaniгational beСavior anН Мan be termeН a ‗miМro‘ perspeМtive on strateРв
and competitive advantage
Introduction
Porter famously described the 3 factors that can provide Competitive Advantage: Cost Leadership,
Differentiation, anН FoМus. Well known Porter‘s analвsis МonМentrates on tСe firms‘ Мompetitive
interactions on the demand or industry/market side. And it is a positional approach based on
industry/market analyses and dealing witС proНuМt‘s Мosts/Нifferentiations anН market penetration,
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(positional aНvantaРes faМtors). AnН even in now Нaвs manaРerial‗s attention Сas often foМuseН onlв
on Мompetition in proНuМt markets. TСis approaМС Мan be termeН a ‗maМro‘ perspeМtive on strateРy
and competitive advantage.
Initiated in the mid-1980s by Wernerfelt (1984), Rumelt (1984) and Barney (1986), the resource-
based approach has a central premise that firms compete on the basis of their resources and
capabilities (Peteraf and Bergen, 2003). In this paper we will deal with the resource-based
approach.
Literature review
Most resource-baseН view researМСers МСoose to ―look witСin tСe enterprise anН Нown to tСe faМtor
market conditions that the enterprise must contend with, to search for some possible causes of
sustainable Мompetitive aНvantaРes‖ СolНinР Мonstant all external environmental faМtors (Peteraf
and Barney, 2003, p. 312). Definition of firm resources (Makadok, 2001) includes all stocks of
available factors that are owned or controlled by the organization, and capabilities are an
orРaniгation‘s МapaМitв to Нeploв available resourМes to МonМeive of anН implement strateРies tСat
improve its efficiency and effectiveness and apply market potential.
By sustained competitive advantage we will understand a competitive advantage that persists over a
long period of time. This approach proposed by Porter (1985) has been adopted. Some scholars
Нefine МonМept of sustaineН Мompetitive aНvantaРe relateН to Мonsumers‘ preferenМes: wСen an
attractive number of Мustomers prefers firm‘s proНuМts or serviМes over tСe offerinР of Мompetitors
and when the basis for this preference is durable (Thompson, Stricland, Gamble, 2008), but do not
describe the process to gain this position. There are different views on sustain competitive
advantage. Transformation of short-run competitive advantage into a sustained competitive
advantage requires that these resources should be superior to their competitors, heterogeneous in
nature and not perfectly mobile (Barney, 1991; Peteraf, 1993). When the imitative actions have
Мome to an enН witСout НisruptinР tСe firm‘s Мompetitive aНvantaРe, tСe firm‘s strateРв Мan be
called sustainable. This is in contrast to views of others (e.g., Porter, 1985) that a competitive
advantage is sustained when it provides above-average returns in the long run.
Resources and capabilities together form (Prahalad and Hamel, 1990) distinctive competences that
are required to develop and deliver superior value to customers. According Prahalad and Hamel
(1990), firms may succeed in establishing a Sustainable Competitive Advantage by combining
skills and resources in unique and enduring ways.
The current paper deals with general review of approaches for sustainable competitive advantage
and demonstrates application for new resource-based approach, developed by Prof. Eric Flamholtz,
that deals with how a firm can create and sustain competitive advantage from the strategies it
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employs to build the business itself, and, in particular its infrastructure. Accordingly, it represents
resource-based approach, but different from traditionally used in strategy. This approach is based on
30 вears researМС on orРaniгational beСavior anН Мan be termeН a ‗miМro‘ perspeМtive on strateРв
and competitive advantage
Keywords: Organizational development, Sustainable Competitive advantage, Pyramid of
Organizational development, Organizational infrastructure, Strategic building blocks, Financial
success
Methodology
Flamholtz (1995) proposed a six factor framework to understand and plan the successful growth of
firms at different stages of growth as well as to explain organizational success and failure.
The initial hypothesis underlying this framework is that organizations must perform certain tasks to
be successful at each stage of their growth.
The six key tasks that have all been supported by previous research are:
1. Identification and definition of a viable market niche (Aldrich, 1979; Brittain and
Freeman, 1980; Freeman and Hannan, 1983),
2. Development of products or services for the chosen market niche (Burns and Stalker,
1961; Midgley, 1981),
3. Acquisition and development of resources required to operate the firm (Pfeffer and
Salancik, 1978; Brittain and Freeman, 1980; Caroll and Yangchung, 1986),
4. Development of day-to-day operational systems (Starbuck, 1965),
5. Development of the management systems necessary for the long-term functioning of the
organization (Child & Keiser, 1981; Tushman et al., 1985)
6. Development of the organizational culture that management feels necessary to guide the
firm
The last four of the key tasks (resources, operational systems, management systems, and culture)
Мomprise a firm‘s ―infrastruМture‖.‘In tСis Мontext, infrastruМture is НefineН as tСe resourМes anН
capabilities (both tangible and intangible) required to support the long-run growth and development
of a firm as well as its day-to-day operations. And organization must perform this all 6 tasks but
attention and efforts that should be allocated to each task differs depending on the size of the firm
(Flamholtz, 1995). The parallel relationship between size and organizational structure leads to an
organizational life cycle model that complements the Pyramid of Organizational Development
(Flamholtz, 1995).
A second hypothesis is that there is a relationship between successful performance of the six key
tasks and the financial results of firms (Figure 1) and that each of these tasks must be performed in
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a stepwise fashion in order to build a successful organization. This has been tested and proved
(FlamСoltг, 2003). Stepwise fasСion tasks‘ performanМe leaНs to СierarМСiМal PвramiН moНel of
Organizational Development, as shown in Figure 2. Similar hierarchical views are present in the
previous literature. For example, Woodward (1985) discussed a similar relation between market
niМСe anН proНuМt, anН struМture anН Мulture. In aННition, CСanНler‘s (1962) book, StrateРв anН
StruМture, suРРests tСat a firm‘s struМture follows from its lonР-term strategy.
Fig. 1. Six key tasks organization should perform to be successful in the long-run
Figure 2. Pyramid of Organizational Development
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A third hypothesis is that these six key tasks are areas for competition among enterprises. This, in
turn, suggests that each of these key are potential sources of competitive advantage. Relationship
has been found between successful performance of the six key tasks of strategic organizational
development and the competitive success of firms. Also it opens that the key sources of competitive
advantage are a firm‘s infrastruМture, ratСer tСan its МСoiМe of markets anН its Мompetitive aНvantaРe
products, and each of these tasks must be performed in a stepwise fashion in order to build a
successful organization. This has been tested and proved (Flamholtz, 2003).
Revealed findings validate the Flamholtz Pyramid model for organizational development. This is a
development of resource based approach, where market and product – are common levels, resources
includes all stocks of available factors and competences covering operational systems, management
systems and corporate culture.
Findings
The first two levels of the pyramid define markets and products. Although the prevailing paradigm
of strategy tends to view these two areas as the principal key strategy. But in the longer term they
are unlikely to be so. So, new market will attract competitors. Similarly, even though marketing
strateРв is built arounН tСe МlassiМ ‗4P‘s‘ (proНuМt, priМe, promotion, anН plaМe) or new МonМepts 5P,
6 , 7 , ... 12 & 4 , SIVA, Мompetition will typically neutralize product/service advantages in a
relatively short time, because this advantage is mobile and transferable as a matter of fact.
But the true sources of sustainable competitive advantage can be found in areas with less potential
for imitation. FlamСoltг (1995) Сas sСown tСat four levels of tСe pвramiН, nameН as ―infrastruМture‖
of the firm, are less susceptible to imitation, and, accordingly, provide the basis for long-term
sustainable competitive advantage. The contemporary findings (Flamholtz, 2003) showing that
although competition between firms takes place at all levels of the Pyramid, but the long-term
sustainable advantage is primarily found at the top four levels.
Our research (Flamholtz, 1995, 200, 2005) indicates a strong statistically significant relationship
between the variables included in the Pyramid and financial performance:
 Gross Margin: 70% of Gross Margin explained by successful management of the Pyramid.
 EBIT: Successful management of the Pyramid accounts for as much as 55% of EBIT.
 ROI: 22% of ROI is linked to effective design and management of the Pyramid.
Research limitations
Ultimately, we expect to elaborate our estimations on further cases and will be able to explain as
much as 70 to 90% of financial performance by our model application.
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Conclusion
A differential competitive advantage of Wal-Mart versus K-Mart has been estimated (Flamholtz,
2003) and shown in Figure 3 below. Perhaps it is the clearest example; there is no physical product
that Wal-Mart can offer that cannot be offered by K-Mart. Accordingly, the difference in
sustainable competitive advantages over the long run and, in turn, differences in financial
performance between Wal-Mart and K-Mart are ultimately derived from differences at the top of
the Pyramid model. This is counter to the conventional view that companies typically compete in
product and markets, and it provides empirical evidence that management actually matters.
Competitive advantage in infrastructure creates obvious advantages in products and markets (brand
equity, market position, etc.). The bottom line is that infrastructure is a true source of potential
sustainable competitive advantage.
Figure 3. Differential Competitive Advantage: Wal-Mart vs. K-Mart
Management Systems Consulting Corporation developed methodology and unique products to build
long-run sustainable competitive advantage for commercial enterprises and not-for profit
organizations. This has been proved in 30+ years of consulting practice on USA, Europe and BRIC
markets and ready for further implementations.
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Technological innovation framework for development of sustainable

competitiveness in bioethanol industry
Darius Sargautis, Tatajana Volkova

BA School of Business and Finance, Latvia
Email: darius.sargautis@gmail.com
Abstract
Purpose – the aim of this work is to develop a technological innovation framework to increase the
competitiveness of bioethanol producers.
Design/methodology/approach – TСe stuНв is baseН on literature review anН Мompanies‘
management systems analysis.
Findings – Technological innovation framework and the drives which are identified in the
framework.
Research limitations/implications – The conceptual framework is still in its nascent stage and
requires further empirical work. The study is limited partially by closed data thus limiting
Мompanies‘ aМtivitв analвsis.
Practical Implications – This research is useful for executives, who apply innovation management
as an essential part of company strategy and for public institutions, as a way for an advanced
economy development.
Originality/Value – This paper is the first attempt to create an innovation framework in bioethanol
industry by applying which companies can ensure sustainable competiveness in the industry.
Key words: innovation, bioethanol, competitiveness.
Introduction
Growing population, countries economic development, CO2 quotas, technology –are all key factors,
affecting the growing demand of energy in the world outlook (IEA, 2010). In addition to that,
emissions into the environment, rapidly dwindling energy resources, and dependence on imported
energy, have given a powerful impetus to the development of energy from renewable sources.
Bioethanol11 is one of the expeditiously and rapidly growing alternative biofuels. Reports show that
only in the last three decades manufacturing of bioethanol has skyrocketed over 130 times
11
Bioethanol is ethanol (C2H5OH) produced by the biological fermentation of carbohydrates derived from
plant material. In terms of fuel use, ethanol is mainly of interest as a petrol additive or substitute. Both
synthetic ethanol and bioethanol are suitable for fuel use, but synthetic ethanol is classed as a fossil fuel.
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(F.O.Light, 2009). A growing number of governments are now expanding or introducing programs
for energy-seМuritв, eМonomiМ anН environmental reasons. For example Braгil‘s national etСanol
program ProAlcool was launched in response to the oil crises in the 1970s, and in 2010 the
mandatory blend of ethanol in ethanol/gasoline blends exceeds 25%. The Energy Independence and
Security Act of 2007, the Renewable Fuel Standard (RFS) in the United States, requires that 34
milliard liters of renewable fuels are to be consumed annually by 2008, rising progressively to 136
milliard liters by 2022. Agreed in January 2009, the Renewable Energy Directive (2009/28/EC),
introduced a mandatory use of renewable energy in the EU transport sector. The first-generation
bioethanol produced today, will be gradually replaced by the second-generation bioethanol
(Eisentraut, 2010), produced mainly from non-food raw materials containing cellulose and
hemicelluloses (wood, sawdust, straw, etc.). Enormous investments in the research and construction
of experimental plants, government support and promotion shows that already within 5-10 years the
second-generation bioethanol can be economically beneficial.
To this date, plants producing ethanol are designed and constructed so that they are able to produce
a single main product - bioethanol. According to that, the producers of ethanol, considering its
strategy for enterprise development in the long run, are mainly following the cost leadership
strategy.
A firm has a cost advantage if its cumulative costs of performing all value activities are lower than
competitors' costs in the given industry. The strategic value of cost advantage hinges on its
sustainability (Porter, 1998). Sustainability will be achieved if the sources of a firm's cost advantage
are difficult for competitors to replicate or imitate. Cost advantage is sustainable if there are entry or
mobility barriers that prevent competitors from imitating its sources. Sustainability varies for
different cost drivers and from one industry to another.
Economies or diseconomies of scale, learning, capacity utilization, linkages, interrelationships and
policy choices to create proprietary product or process technology, are the main drivers, imitation of
which is the most complex processes. A deeper study of bio-ethanol industry has shown that
innovations are almost tСe onlв faМtor least prone to imitation. JoСannessen‘s (2009) study beside
imitation, shows а larРe numbers of international Мase stuНies Сave pointeН out tСe МonneМtion
between innovation and the competitive ability on the part of companies (Freeman, 1982; Dosi,
1984; OECD, 1984). We will not argue in favor of these connections in this paper, but regarding the
statement, that economic growth and competitive ability presuppose continuous and radical
innovations as a postulate (Scott, 1989; Verspagen, 1992).
Looking at today's ethanol producers through the lens of innovation, we can separate them into 2
groups - companies involved in the creation of innovative products and processes and those
companies, for whom innovation source comes from equipment suppliers.
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The second group includes most of the manufacturers for which innovations available to them
mainly through offers of equipment suppliers. But over the time it becomes publicly available
sources and as soon as the same manufacturing processes and products are introduced to different
companies, they cease to be innovative.
This article is an attempt to summarize the main drivers influencing the innovative systems of
company required for maintaining the sustainable competitiveness of producers of ethanol.
Today, the scientific literature on innovation is so large and diverse that even keeping up-to-date
with one specific field of research is very challenging (Fagerberg, 2005). Although Fagerberg
indicates that a detailed concept of the whole innovation system today is almost impossible,
systematic knowledge, basic principles and laws in the field of innovation should be known to the
entrepreneurs and heads of departments. Innovation generating companies must take into account
many factors affecting the creating innovations in general.
Besides that, here is a lack of systematic research studies on the main successful innovation
drivers/factors of technological innovation (as well as organizational) within organization as a
source of sustainable competitive advantage.
Research methodology
The study is focused on the scientific literature review, analyzing the most important innovation
drivers. The drivers which can improve the competitiveness of the company through technological
innovation were taken into account. The analysis included well-known sources of information in the
form of scientific articles and books. The review also took place among the available scientific
articles published in electronic databases such as EBSCO and EMERALD.
Literature review
Four approaches, which have received attention in the last decade, were indicated in terms of
innovation and external sources. These are customer-supplier relations (von Hippel, 1988), network
studies (Hakanson, 1989; Midley et al., 1992; Johannessen 2009); market conditions (Ames, 1988;
Ancona, 1992) and national and regional innovation systems (Lundvall, 1992; Nelson, 1993).
Several studies have pointed out certain internal factors as critical for the innovation potential of
companies. The most critical innovation factors appears to be: cultural factors (Hage and Dewar,
1973); structural links, i.e. information, communication and learning processes (Teece, 1986, 1988;
Tusman and Nadler, 1986); internal competence (Drucker, 1985; Quinn, 1992); the role of
management (Howells, 1996); and the importance of ICT (Freeman, 1991; Antonelli, 1993).
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McAdams et al. (2008) attempt to incorporate both - technological and non technological
innovations into SMEs12 companies innovation portfolio. This research shows the influence of such
factors as the role of leadership, people and culture, product and processes, knowledge and
information management systems, TQM and business management, innovation in relation to
customers and market as most important factors for innovation system.
Ibrahims et al. (2008) overview of the process of technological innovation research shows that this
subject is multi-disciplinary involving several disciplines, starting from economics, sociology,
political science, design, manufacturing, industrial marketing, macro-organization behavior and the
management of technology (Becker & Stafford 2001; Hislop, 2003; Nejad, 1997).
From economic perspective, technological innovation is seen as the first commercial transaction
involving the invention (Sorge, 1991; Hislop, 2003; Martin & Terblanche, 2003).
Ibrahims et al. (2008) reviewed the literature, searching for potential determinants or firm
МompetenМies (inНepenНent variables) assoМiateН witС teМСnoloРiМal innovation. TСe firm‘s
competencies were classified into sixteen variables and covered the following: intensity of R&D,
technical competencies, intensity of marketing.
We see that in essence, there are very different research studies in the domain of the modules or the
critical factors influencing technological innovation.
In-depth analysis of literature related to technological innovation, makes it possible for the authors
of this paper to propose a classification of processes, associated with technological innovations
based on 3 modules. Firstly, for the emergence of technological innovations special conditions are
necessary (here we mean the planned innovation. Innovation emerged as an accident, are not scope
of this article). Secondly we study the process of innovations and the existing types of them. The
latest model combines an accomplished management of innovation. The main drivers of each of
these modules and the technological innovation framework as a whole are shown below in the
Figure Nr. 1.
Innovation Innovation process Innovation control
 
environment

  
NIS Form of innovation Restructuring
 
Regional innovation Innovation models Diffusion

systems Types and extent of Innovation
Knowledge innovation measurement

management
Technological

innovation capabilities
Organizational

innovation

sources of innovation
Human capital
Fig. 1. 3 base modules for technological innovation framework.

12
Bioethanol producers can be viewed as SME as the multinational companies, as well.
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Module I. Innovation environment

As one of the most important faМtors influenМinР Мompanв‘s innovations Мan be iНentifieН National
innovation systems (NIS), аs tСe network of institutions in publiМ anН private seМtors, wСose
activities and interactions initiate, import, modify and diffuse new technologies (Freeman C. ,
1987). Very broadly, it can refer to the distinct characteristics of the process of R&D, production,
and diffusion of economic goods (including but not restricted to technology) as it operates within a
nation state (Marcela & Vivien, 2006). The central premise of the NIS approach is that major
economic upturns are based on the take – off of a new techno-economic paradigm (Green, Richards,
& Walsh, 1998) – that is, a constellation of related product or process innovations together with
changes in institutional paradigms.
In addition to NIS the environmental influence on the creation of innovative products on more
shallow levels is considered regional. The research of regional innovation systems (Asheim &
Isaksen, 1997) (Cooke, 1992), (Cooke, 1998), (Cooke, 2001) appeareН after tСe Freeman‘s (1987).
research on NIS. The axis, around which whirls the regional innovation system, is the tacit
knowledge. Published data indicates a strong dependence of the implicit knowledge of the regional
learning (Lundvall & Johnson, 1994), (Florida, 1995), (Morgan, 1997), (Cooke & Morgan, 1998),
(Lundvall & Maskell, 2000). After all, aММorНinР to tСe stuНies, it‘s МonfirmeН tСat taМit knowleНРe
is difficult to convey. Here, the best way to transfer knowledge is by face-to-face communication
between partners.
Knowledge management is not solely focused on innovation, but it creates an environment
conducive for innovation to take place. According to the literature, there are three main drivers of
the application of knowledge management in innovation: a) to create, build and maintain
competitive advantage through utilization of knowledge and through collaboration practices. b) as a
resource used to reduce complexity in the innovation process, and managing knowledge as resource
will consequently be of significant importance. c) the integration of knowledge both internal and
external to the organization, thus making it more available and accessible. Matheus (2009) research
shows there are a number of studies that focused on internal design, process and manufacturing
knowledge (Adler et al., 2003; Clark and Wheelwright, 1993; Garvin, 1993) as well as on design,
process and manufacturing knowledge of suppliers (Hahn et al., 1990; Hartley, 1997; Ragatz et al.,
1997) separately. Studies have emphasized knowledge at the technological level (e.g. Gholz, 2005;
Prencipe, 2005; Sapolsky, 2005) as well.
Technological innovation capabilities. Siгe Мan affeМt a firm‘s innovation anН performanМe
(Rothwell, 1983; Pavitt et al., 1987). Large companies tend to have more resources with which to
enhance their innovation capability and performance (Yam, Lo, Tang, & Lau, 2011). They are
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usually more powerful than small companies and have some advantages in gaining the support of
headquarters for their business operations and innovation activities (Tsai, 2001).
As one of the technological innovation driver organizational innovation can be pointed out. The
ability of an organization to innovate is a precondition for the successful utilization of inventive
resources and new technologies (Lam, 2005). The term organizational innovation refers to the
creation or adoption of an idea or behavior new to the organization.. Lam (2005) pointed, the
organizational and technological innovations are intertwined. The existing literature on
organizational innovation is indeed very diverse and not well integrated into a coherent theoretical
framework .
Entrepreneurs need to search purposefully for sources of innovation, the change in their symptoms
that indicate opportunities for successful innovation. There are many factors that influence the
functional source of innovation. Hipples‘ (1988) studies shows that the sources of innovation vary
greatly. In some fields, innovation users develop most innovations. In others, suppliers of
innovation-related components and materials are the typical sources of innovation. In other fields,
conventional wisdom holds and product manufacturers are indeed the typical innovators.
The research by Pavitt et al. (1984) on more than 2000 significant innovations in the UK identified
five major technological sources in different industrial sectors: a) supplier-dominated, b) scale-
intensive, c) science-based, d) information-intensive, e) specialized suppliers.
Human capital was identified as the source of innovation as well (OECD, 2010). Human capital is a
measure of the quality of labor, it refleМts people‘s skills anН МompetenМes. It Сas been НefineН as
―tСe knowleНРe, skills, МompetenМies anН attributes, emboНieН in inНiviНuals tСat faМilitate tСe
Мreation of personal, soМial anН eМonomiМ wellbeinР‖ (OECD, 2001). Innovation relies on a skilled
labor force, not only for high-technology and research sectors but throughout the economy and
society. Countries have long made human capital a priority because of its significance for economic
and social development. The type of skills required for innovation vary widely across industries,
firm size and ownership structure (Toner, 2009).
Module II. Innovation process

Managers of technological innovation have to know about the broad and aggregate features of
technological innovation itself, as well as the context in which technological innovation occurs.
Sundbo & Gallouj (1998) conclude that there are basically four forms of innovation:
(1) product; (2) production process; (3) organization; and (4) market.
Innovation models. Technological change has been described by push of technology (Schumpeter,
1939) and pull of demand (Schmookler, 1962) or their interaction (Freeman C. , 1982) as triggers
of innovation. More recently (1990s), the theoretical analysis has moved towards the theory of
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technologiМal МСanРe as an interaМtion witСin a network of Мompanies iНentifieН in tСe sвstems

integration and networking (SIN) model (Rothwell R. , 1992 (I)). Rothwell proposed five
generations of innovation models to explain the historic pattern of innovation. The importance of
networkinР is refleМteН in tСe fiftС Рeneration of Сis innovation – SIN model.
Following the collaborative approach of Rothwell (1992 (II)), Hamel and Prahalad (1994) propose a
managing migration paths model. Given the competitive environment of the innovation/diffusion
process in the industry, Utterback and Abernathy (1975) developed a model of the dynamics of
innovation – the innovation life cycle model. The model describes the process of innovation and the
degree of technical change (incremental/ radical change).
The type and extent of technological innovation varies, with consequences for its management.
Researchers also have analyzed extent and type of innovation according to whether it is: a) Radical
or incremental (Freeman C. , 1974), b) Continuous or discontinuous—that is, whether it affects
existing ways of doing things (Tushman & Anderson, 1986), or whether it is sustaining or
disruptive (Christensen, 1997), c) Change over life cycles (Abernathy & Uterback, 1978), d)
Modular, e) Results in the emergence of a dominant design (Abernathy & Uterback, 1978).
Module III. Innovation Control

The ultimate aim of technological innovation is to improve the competitiveness of firms by adding
higher value to what they do. Above, we focused on how firms configure and organize internal
resources and collaborate with external actors to develop innovations. Commercializing technology
is a fundamental element in building value and sustaining competitive advantage. Dogson et. al.
(2008) focused on the paths to market for innovations, appropriability regimes, formal and informal
methods of protection, marketing of new products and services, and the process of technology
transfer.
Restructuring might be necessary to consolidate and strengthen the core competencies developed
due to technology innovation, and therefore, exploit them in their further products and services
(Mishra & Srinivasan, 2004). It has been argued that radical innovations, which tend to generate
very high returns, are more predominant in SMEs compared to large firms (Kanter, 1985; Simon et
al., 2002).
Diffusion is one of the three pillars on which the successful introduction of new products, processes,
and practices into society rests, along with invention and innovation (Bronwyn, 2005)
Innovation measurement. An important development has been the emergence of new indicators of
innovation inputs and outputs, including economy-wide measures that have some degree of
international comparability (Smith, 2005). There are three broad areas of indicator use in STI
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analysis: first, R&D data; second, data on patent applications, grants and citations; and third,
bibliometric data.
Discussion and conclusions

The close cooperation between companies and government agencies is necessary to provide an
innovative environment that is bound to increase the competitiveness of the companies operating in
bio-ethanol industry. This study examined only the main drivers affecting the company innovation
policy. It is needed to deepen reserach in this field to identify additional drivers.
All of the major drivers are part of a complex innovation process, development of which requires
the creation of R&D, that would be able to use an identified model.
Next step is to interview the people responsible for innovation in the companies operating in bio-
ethanol industry, to determine the power of each of the identified drivers.
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Applying business models for project, program and portfolio management in

public sector*
Alfredas Chmieliauskas1, Austėja Pilkaite1, Erika Vaiginienė2, Vaidotas Viliūnas3
1
ISM University of Management and Economics, 2International Business School at Vilnius
University, 3Marijampole College
* The paper reflects a part of the results of the research sponsored by Reserch Council of
Lithuania, project No. MIP-10559
Email: erika.vaiginiene@tvm.vu.lt
Introduction: program management elements in public sector

Governmental programs, their effectiveness, efficiency, sustainability and impact may be analyzed
in many ways: politically, economically, socially and so on. This paper focuses on managerial side
of programs, in order to analyze and propose the most appropriate methods and models for the
Lithuanian public sector. In public policy cycle, the benefits are achieved through the consistent
implementation chain, ensuring that programs are properly planned and launched, public and
business needs regarded, implementation is based on appropriate public sector capacity to manage
risks and changes, transparency and accountability promoted.
Public sector efficiency becomes more relevant in the current situation after crisis when there is a
high requirement for savings in public sector, increasing public demand for public goods and
quality, in general, and the creation of higher value for taxpayers' money. In the current economic
environment strategic thinking, decisions, control and accountability are more important than ever.
New Public Management concept and its application, which emerged in seventies, fosters the idea
of introducing a public sector modernization with managerial elements. "The application of private
sector management methods is an optimal management of resources, implementation of total
quality management principles, promotion of competition, the treatment of citizens as customers
allowing them to choose, the strategic management development, employee accountability and
responsibility for the performance focus, staff autonomy, professionalism, mobility and increased
innovation" (Sakalas, VienaţinНienė, 2008). One of these management techniques in recent years
has drawn probably the most attention is programming. The apparent growth in popularity of this
method shows high level of governmental conferences for programming implementation in the
public sector (Cox, 2009).
Lithuanian public management terminology has recently settled a practice to formulate public
policy in the form of programs. Declaring the state's long term development strategy, it is argued
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that the program must ensure its implementation, "(...) each program will be linked to one or more
strategic objectives, concepts and programs are set to ensure that all strategic objectives are
implementeН‖ (Ţin., 2002 b). Orientation towarНs proРramminР Мan be seen in tСe SinРle
Programming Document of the European Union Structural Funds where the "programming"
terminoloРв is useН (Ţin., 2009). Often publiМ poliМв is assoМiateН witС tСe proРram, for example
National Energy Efficiency Program, National Equal Opportunities Program, Employment Program
(Ţin., 2009). TСe programs may be national, international or financed by budget or other funding.
They can be implemented by each institution, as part of its strategic operations, or inter-state level
of the program, implemented by several public sector organizations. For example, there are 123
inter-institutional programs funded in Lithuania (Izokaitis, Balsys, 2008). Accordingly
programming is often linked to budgeting which is still largely focused on functional, "routine"
practice instead of implementation of the strategy. As indicated in (Kassel, 2010), the specifics of
public sector project management is that we should answer the additional question "why", as project
must meet the public interest. Frequently this question becomes a challenge. Especially, that the
public good is not always clear, tangible, measurable in financial benefits and is difficult to
calculate. State agencies are implementing programs in their own activities in accordance with the
objectives set forward, which is not quantitatively expressed, i.e. investments are not directly linked
to planned outcomes. Such evaluation does not include long-term effectiveness and impact criteria
that are essential for public purpose - to provide public goods. Thus, public policy implementation
is based on programs, but it is clear that the public sector do not cover all elements of program
management. In this respect, a useful insight into the private sector approach towards management
experience is necessary, based on project management methodology.
Hierarchical model of project, program and portfolio management

Modern project management distinguishes three key elements that are hierarchically
interdependent: projects, programs and portfolios (Turner, 2008). Explaining the principles of
program management, in particular, it is worth paying attention to the hierarchical structure of the
organizational strategy.
As shown in Figure 1, each program with an organizational strategy (a specific strategic priority)
bonds bigger associated object: the strategic priority corresponds to the portfolio of initiatives; the
program consists of smaller objects - projects (along with other, mostly functional, "routine"
activities). For example, the Ministry of Economy is responsible for portfolio consisting of six
proРrams (―Improve МonНitions for business‖, ―Develop an innovation-frienНlв environment‖,
―AttraМt foreiРn НireМt investment‖, ―Promote exports‖, ―StrenРtСen small businesses‖, ―Promote
tourism‖), anН eaМС one is broken Нown furtСer into projeМts.
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Figure 1. Programs within organizational strategy
Reaching the goals of projects, programs and portfolios is based on the inter-compatibility of
processes therefore the organization needs to ensure a uniform interpretation of these concepts.
A project is a specific goal-oriented activity with defined scope, time, cost and quality constraints.
AММorНinР to tСe Нefinition of ProjeМt ManaРement Institute, ―a projeМt is a temporarв enНeavour
unНertaken to Мreate a unique serviМe, proНuМt or result‖ (PMI, 2008 a). An example of a project
could be installation of an electronic customer service system in outpatient clinic.
Project management as a whole consists of initiating, planning, executing, monitoring, controlling
and closing processes (PMI, 2008 a).
Initiating includes formulation of project objectives and forecasting of necessary resources.
Planning is associated with a preparation of a detailed plan, which reflects project scope, quality
requirements, implementation schedule, budget, allocation of resources, perceived risks, methods of
communication, procurement and subcontracting. During implementation the plan is monitored and
controlled and adjusted or changed in a way that the expected results would be achieved in line with
the requirements. Closing of the project includes evaluation of the project results, their suitability
for use, analysis of the project experience and its impact on other projects. The structure of project
management processes is shown in Figure 2.
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Figure 2. Structure of project management processes
ProРram is ―a Рroup of projeМts manaРeН in a МoorНinateН waв in orНer to reaМС tСe Мommon Рoal‖
(PMI, 2008 c). The programs may include not only projects, but also other (e.g., routine) activities.
For example, tСe proРram ―E-СealtС serviМes‖ Мonsists of a series of projects with unique objectives,
suМС as ―E-reРistration‖ (online aММess to МliniМs), ―E-СealtС insuranМe‖ (online purМСase of СealtС
insuranМe), etМ. All of tСese projeМts leaН to an overall proРram objeМtive: ―implement a sinРle
national electronic health record and health care system that enables the use of effective health care
information about patients' treatment proРress anН timelв exМСanРe of Нata on patients‖ (ESP,
2009).
Program management process consists of the following elements (PMI, 2008 a):
 Program development (including management and technical infrastructure);
 Program implementation;
 Integration of results (of components, i.e., projects);
 Program closing.
During the program development the necessary information is systematised to define a long-term,
sustainable impact of the program. The components of the program (projects and other activities)
necessary to achieve its objectives are also defined as well as their inter-relationships and
dependencies. This also includes definition of the management structure, control methods and
procedures, technical and other infrastructural resources. Program implementation produces the
results of its components which should be integrated into one coherent whole. Closing of a program
is associated witС НisbanНinР its manaРement anН teМСniМal infrastruМture, utiliгinР tСe ―lessons
learneН‖ anН monitorinР of tСe МreateН value. ProРram manaРement proМesses anН tСeir
relationships with management of projects are shown in Figure 3.
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Figure 3. Structure of program management processes
Portfolio management is a term used to describe methods for analyzing and collectively managing a
group of projects, programs and other activities based on numerous key characteristics to achieve
strategic objectives of the organization (PMI, 2008 b). TСe proРram ―E-СealtС serviМes‖ is a part of
the healthcare portfolio, along with components from other sectors (pharmaceuticals, personal
health, public health, health sciences, health insurance etc.). Frequently portfolio is perceived as an
ongoing strategic process of an organization covering all projects and activities aimed at strategic
targets (Gorog, 2011). Portfolio management processes include (PMI, 2008 b):
 Identification and categorization (of components);
 Evaluation, selection and prioritization (of components);
 Portfolio balancing;
 Authorization of components.
During the identification and categorization of portfolio components new ideas and initiatives are
analyzed against the organizational strategy plans and expected benefits, and later defined in the
form of the projects, programs or other activities. Evaluation, selection and prioritization of the
components is based on a set of the selection criteria and results in prioritized list of components.
Balancing of portfolio is an analysis of new components in the context of all other organizations'
activities, ensuring continuous update of portfolio composition. The list of components is approved
(authorized) by senior management for implementation. This list is publicly available to interested
groups informed about the expected results and the allocation of resources (both human and
financial). Implementation of approved programs and other components of the portfolio is
constantly analyzed, their results are reported, reviewed, updated and, where necessary, changes are
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made. Portfolio management process and its relationships with program and project management
are shown in Figure 4.
Figure 4. Structure of portfolio management processes
Importance of organizational project, program and portfolio management competences

It is clear that a number of factors (experience, strategic goals, needs, resource constraints, etc.)
influence organizational capabilities to use the projects, programs and portfolios for achieving its
strategic objectives. Over the past decade, widespread formalized analytical models, allowing to
measure anН assess orРaniгation‘s projeМts, proРrams anН portfolio manaРement praМtiМes,
generally are expressed by certain project management maturity level.
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The ability of organizations to manage different kinds of projects, programmes and portfolios is
considered to be organizational project management maturity. Several project management maturity
concepts and models have been developed over the last decades (Gareis, 2007, Gareis & Gruber,
2005, Thomas & Mullaly, 2008). Cooke-Davies (2003) refers to the tendencies of different levels of
project management maturity depending on the dynamism of the business processes in different UK
industries and overall economic conditions. Gareis (2007) is arguing about cultural and historical
influences in different nations. Certain differences of organizational project management maturity
in different industries in Lithuania have been identified (Chmieliauskas et al., 2007).
Therefore the organizational capacity to achieve strategic goals is coherent and dependent on
orРaniгation‘s projeМt manaРement maturitв.
Thomas and Mullaly (2008) are discussing the perceptions and influences of organizational
maturity in their comprehensive research on the value of project management. Research argues that
the maturity level results from the implementation.
Without defined project management process system or singular project management methodology
within the company (Thomas & Mullaly, 2008) it is difficult to expect that organization is capable
to initiate, plan and successfully perform the projects on regular bases, to track formally the
progress and use knowledge management to keep and improve organization experience.
The progression of increasing maturity designed into Organizational Project Management Maturity
Model (OPM3) (PMI, 2003) consists of several dimensions, or different ways of looking at an
orРaniгation‘s maturitв. One Нimension involves viewinР Best PraМtiМes in terms of their
association with the progressive stages of process improvement — from standardization to
measurement control and, ultimately, to continuous improvement. Another dimension involves the
progression of best practices associated with each of the domains, first addressing project
management, then programme management, and finally, portfolio management. Each of these
progressions is a continuum along which most organizations aspire to advance. Therefore,
necessary organizational project management (OPM) maturitв sСoulН aННress orРaniгations‘
capability.
Table 1 provides the comparative content analysis of the three OPM maturity models (Pellegrinelli,
1997, Kerzner, 2005, OGC, 2006).
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Table 1. Comparison of project management maturity models

OPM PROJECT MANAGEMENT MATURITY MODELS
MATURITY
PM Solutions H.Kerzner OGC P3M3
LEVELS
INITIAL PROCESS COMMON LANGUAGE INITIAL PROCESS
Recognition of PM processes. Lip service to PM. Virtually Organisations recognize
No established practices or no executive-level support. projects (programmes) and
standards. Documentation is Small ―poМkets‖ of interest. run them differently from its
Level 1 loosed and ad hoc. Metrics are No attempt to recognize the ongoing business (projects).
informally collected on an ad benefits of PM. Self-interest Projects (programmes) may be
hoc basis. Мomes before Мompanв‘s best run informally with no
interest. No investment in PM standard process or tracking
training and education. system.
STRUCTURED PROCESS COMMON PROCESSES REPEATABLE PROCESS
AND STANDARDS Recognition of benefits of PM. Organizations ensure that each
Many PM processes exist but Organizational support at all project is run with its own
they are not considered an levels. Recognition of need for processes and procedures to a
Level 2 organizational standard. processes/ methodologies. minimum specified standard.
Documentation exists on these Recognition of the need for Limited consistency or co-
basic processes. Functional cost control. Development of a ordination between projects.
management is involved in the PM training curriculum.
PM of larger projects.
ORGANIZATIONAL SINGULAR DEFINED PROCESS
STANDARDS AND METHODOLOGY Organizations have its own
INSTITUTIONALIZED Integrated processes. Cultural centrally controlled project
PROCESS support. Management support processes, and can individual
All PM processes are in place at all levels. Informal PM. project flex within these
Level 3
and established as ROI for PM training dollars. processes to suit the particular
organizational standards. PM Behavioural excellence. project.
processes and standards
institutionalized with formal
documentation.
MANAGED PROCESS BENCHMARKING MANAGED PROCESS
Projects are managed with Establishment of a Project Organizations obtain and
consideration as to how the Office or a Centre of retain specific measurements
project performed in the past Excellence. Dedication to on its project/programme
Level 4 and what is expected for the benchmarking. Looking at management performance and
future. Efficiency and both similar and non-similar run a quality management
effectiveness metrics are used industries. Quantitative organization to better predict
to make decisions regarding benchmarking (processes and future performance
the project. methodologies). Qualitative
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benchmarking (cultures).
OPTIMIZING PROCESS CONTINUOUS OPTIMISED PROCESS
Processes are in place and IMPROVEMENT Organizations run continuous
actively used to improve PM Lessons learned files. process improvement for
Level 5 activities. Lessons learned are Knowledge transfer. COE/PO projects/programmes in order
regularly examined and used mentorship programme. to improve its ability to depict
to improve PM processes, Strategic planning for PM. performance over time and
standards, and documentation. optimise processes.
It is widely accepted, that full-fledge implementation of portfolio management processes requires

maturity level 4 (Turner, 2008). This means that organizations willing to constantly achieve their
strategic objectives through portfolios of projects and programs must set their goal towards this
level of maturity.
ResearМС into projeМt manaРement maturitв in LitСuania‘s business seМtor (CСmieliauskas et al.,
2007) demonstrated that, on the average, project-oriented companies are between level 2 and level
3. Based on initial results of the authors (research is still in progress), public sector in Lithuania
features even lower maturity. Therefore, it is critically important to understand the challenges of
―МlimbinР up tСe maturitв laННer‖.
Organizations which satisfy the characteristics of the second OPM maturity level should ensure that
each project/programme is run with its own process and procedures to a minimum specified
standard, or should recognize that common processes need to be defined and developed in such a
way that successes of one project can be repeated in other projects too (Kerzner, 2005). There are
basic, documented processes for developing project plans and integrating, analyzing, and
developing the reports on work results (Crawford, 2006), although the processes are not considered
to be an organizational standard. It means that such organizations still lack unified system,
procedure or standard for project and/or program management.
The third level of OPM maturity declares that this kind of organizations have their own centrally
controlled project and/or programme processes, and individual projects flex within these processes
can suit a particular project or programme (OGC, 2006). Kerzner (2005) maintains that the third
level of OPM maturitв (МalleН „SinРular MetСoНoloРв―) means tСat tСese orРaniгations reМoРniгe
the synergistic effect of combining all corporate methodologies into a singular methodology, the
centre of which is project management. According to PM Solutions‘ OPM maturitв level 3,
orРaniгation‘s projeМt manaРement proМesses are МonsiНereН to be a stanНarН praМtiМe for projeМts.
Management monitors status, performance, and changes and responds with corrective actions
(Crawford, 2002). Systems are becoming more integrated; in most cases Project Management
Office (PMO) is established.
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Conclusions
After carrying out the analysis of literature and several maturity analyses in private and public
sectors, the authors argue that the use of project and programme management methods and tools
accounts for a major part of organizational strategy implementation. This raises additional
organizational requirements for project management maturity.
Current status of project, program and portfolio management practices in Lithuania shows that
organizations in public sector should first of all to focus on development and implementation of the
formal project and programme management procedures or standards as well as other attributes of
organizational project management maturity level 3.
BaseН on LitСuanian Рovernment‘s approveН strateРiМ planninР metСoНoloРв, it МoulН be arРueН
that state policy implementing agencies (in particular – the Ministries) must reach a maturity level
not lower than the third, ensuring compliance with the methodology and processes and ensuring a
defined program evaluation. In turn, the consistent assessment of the portfolio would allow
developing processes that are congruent with the evaluation results.
Literature
1. Chmieliauskas, A., et.al. Maturity of Project Oriented Organizations: Lithuanian Case.
Management Horizons. Visions and Challenges: 9th International Scientific Conference. –
Kaunas: Vytautas Magnus University, 2007. 51-69.
2. Cooke-Davies T.J. (2003). The maturity of project management in different industries: An
investigation into variations between project management models. International Journal of
Project Management 2003, 21: 471-478.
3. Cox, S. (2009). The importance of good project and programme management in the civil
service. In: Conf. ProМ. „ProjeМt anН ProРramme ManaРement 2009: DeliverinР Best PraМtiМe―,
London. (www.publicserviceevents.co.uk).
4. Crawford, J.K. (2006). The Project Management Maturity Model. Information System
Information Systems Management On Line Journal. www.ism-journal.com, Fall 2006.
5. ESP (2009). Elektroninės sveikatos paslauРos. (http://esp.sam.lt/Informacija).
6. Gareis, R., Gruber, C. (2005). Report: The Maturity of Austria as a Project-Oriented Nation.
Vienna, July 2005.
7. Gareis, R. (2007). Maturity Models for the project-oriented Company. The Gower Handbook of
Project Management, Turner J.R. (ed), Gower, Aldershot.
8. Gorog, M. (2011). Translating Single Project Management Knowledge into Project Programs.
Project Management Journal, Vol. 42, No.2.
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9. Izokaitis, J., Balsys, A. ir kt. (2008). Valstybinio audito ataskaita Nr. VA-P5-50-1-12.
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kontrolė.
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Era of Downsized Governement. Taylor & Francis.
11. Kerzner, H. (2005). Using the project management maturity model (2nd ed.). John Wiley &
Sons.
12. McAvoy, J. (2006). Evaluating the Evaluations: Preconceptions of Project Post-Mortems. The
Electronic Journal Information Systems Evaluation. Vol. 9, Issue 2.
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Consultation Draft v2.0. The Office of Government Commerce, London.
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Management 1997: 15 (3):141-149.
15. PMI (2003). Organizational Project Management Maturity Model (OPM3): Knowledge
Foundation. Project Management Institute.
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Management Institute.
17. PMI (2008 b). The Standard for Portfolio Management (2nd ed.). Project Management Institute.
18. PMI (2008 c). The Standard for Program Management (2nd ed.). Project Management Institute.
19. Sakalas, A., VienaţinНienė, M. (2008). Naujoji viešoji vaНвba ir ţmoРiškųjų išteklių vaНвbos
kaitos tenНenМijos. Kaunas, AkaНemija: LŢ U leiНвbos Мentras.
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Institute, Inc. Pennsylvania, USA. 2008. 458 p.
21. Turner, R. (2008). Gower Handbook of Project Management (4th edition). Ashgate: Gower.
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III. MANAGEMENT SOLUTIONS
Factors impacting knowledge sharing of sustainable organization: case of

Lithuanian companies
Rasa Smaliukienė, Renata Korsakienė

The General Jonas Zemaintis Military Academy of Lithuanian
Emails: rasa.smaliukiene@mil.lt; renatakorsa@takas.lt
Abstract
Presented paper aims to compare national and international companies of Lithuania by exploring
the main factors impacting knowledge sharing. The authors strive to reveal the role of environment,
leadership and motivation at an institutional level. The research of factors is based on the previous
larger studies performed by authors. In order to compare international and national companies of
Lithuania quantitative research has been performed. The survey allows concluding that majority of
companies do not have formal knowledge sharing procedures. On the other hand, international
companies are more oriented toward knowledge sharing than local companies. The authors
conclude that situation in the market and actions of competitors are the major forces impacting
organizational knowledge sharing. The respondents have indicated the importance of non-financial
rewards impacting motivation to share knowledge. However, dissatisfaction of employees with their
reward is seen as the urgent issue in national companies. Authors of the research have elaborated
proposals, which are useful for further development of knowledge sharing of Lithuanian national
and international companies. The limitations of the presented study were connected with the fact
that companies included in the sample represent different business sectors and majority of
respondents represent small and medium-sized enterprises.
Keywords: knowledge sharing, external factors, motivation, leadership, Lithuanian companies
Introduction
Recently both executives and academics have identified institutional knowledge sharing as one of
the key factors impacting sustainable development of organization. Notably, the academic literature
on knowledge sharing is expending and the topic is seen as a source of long-lasting organizational
efficiency (Collins and Smith 2006; Goll et al. 2007; Thornhill, 2006; Kong, 2010). Even the
classical knowledge- based view of the organization demonstrates that the key role of the
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organization is to create anН applв knowleНРe ratСer tСan onlв reНuМe operations‘ Мost (Dвer anН
Nobeoka, 2000).
The extensive research in the field allows us to identify preconditions of effective knowledge
sharing. One group of research is focused on the companies as the units of analysis in knowledge
sharing. For example, Fey and Furu (2008) had examined interdependence between top
management compensation and knowledge sharing in multinational corporations and found that
compensation (i.e. external stimuli) makes an impact toward manager's behavior in knowledge
sharing. Moreover, managers motivate their subordinators to share knowledge too. Another group
of studies focuses on inНiviНual‘s factors in knowledge sharing. As can be seen by, Yu et al. (2010)
have analyzed factors of knowledge sharing via weblogs that becomes popular not only between
online charters, but also between employees. According to their findings, knowledge sharing culture
is considered as a linear combination, which means that enjoying helping and usefulness thereafter
promotes knowledge sharing behavior.
The importance of knowledge sharing has influenced the concept of knowledge management. For
instance, Nakamori (2010) points out that in the context of growing globalization new and more
complex challenges, related to knowledge creation and sharing, have been arising. On the other
hand, knowledge management and organizational change management are seen as interrelated
processes. According to opinion, expressed by Moran and Brightman (2001), change management
is ―tСe proМess of Мontinuallв renewinР an orРaniгation‘s НireМtion, struМture anН Мapabilities‖.
Additionally, change management is perceived as reactive, discontinuous and often triggered by
organisational crisis (Nelson, 2003). Hence, the success of change management is directly linked to
knowledge sharing capabilities, which allow ensuring sustainable development of organization.
A variety scientific literature is devoted to factors, impacting a failure of fluent knowledge sharing
at the institutional level. McDermott R. and O‘Dell (2001) have identified cultural barriers; Matzler
et al (2011) has mentioned personally traits, while Willem and Buerlens (2007) have identified
organization-specific coordination mechanisms as limits for knowledge sharing. On the other hand,
internal and external factors, impacting organisational long term efficiency and sustainability, are
distinguished.
Hence, considering important aspects of knowledge sharing, the focus of this paper is to compare
national and international companies of Lithuania by exploring the role of environment, leadership
and motivation at the institutional level.
Environmental forces impacting knowledge sharing for sustainable development

It has to be noted that vital forces make an impact on organisations in their business environment.
The impact of external environment is seen as an unchangeable in the short run and these forces
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include intense competition and technological obsolescence. Many scholars assert the turbulence of
external environment For instance, Boyne (2009) identified that turbulence has a negative effect on
performance of organization. Other scholars stress that it is time for a new paradigm to understand
the organization-environment relationship. They suggest, that tendencies of the environment such as
growing competition, changing expectations of shareholders, technological development requires
organisations radically rethink how best they can ―fit‖ most effectively with the environment. Huber
and Glick point out that the environment is getting more complex and turbulent, and the quantum of
knowledge is increasing (Huber and Glick, 1993). According to scholars, knowledge and
knowledge sharing has the biggest impact on the design of organisations.
The conclusion we can draw is, that scholars focusing on different aspects of environment generally
agree about volatile and dynamic nature of environment and point out that organisations are
influenced by many different changes in an external environment. Notably, fast changes in the
environment constrain management decisions and impact short-termism and unsustainability of
organization. Hence, taking into account these tendencies, the systems of knowledge sharing are
seen as the most important for organizational development.
The debate now continues addressing the question of what type of knowledge is critical to share for
sustainable development. The question leads to an estimation of internal forces within an
organisation. The organisations have more possibilities to control these forces and can be proactive
handling them. Proactive actions include learning, development, recruiting, investments and
modernisation of information flow systems in the organization. Hence, considering implications of
internal forces and their management requires to constantly developing new organizational forms
adapted to a new environment.
Individuals, as important stakeholders, are seeking that organisations fulfil their needs of personal
development and time. Hence, some scholars identify individual fears and internal competition in
the organization as distortions of knowledge –flow. Not going deep into an elaborate discussion, we
want to outline the major impact of leadership and motivation as factors impacting knowledge
sharing.
The role of leadership and motivation in the institutional knowledge sharing

Notably, the role of leaders in the knowledge management process is seen as essential and
significant (Huang et al. 2008). According to research carried out by scholars, leadership, corporate
values and communication predetermine the successful knowledge management (Gill, 2001). The
perceptions of the managers influence their approach towards the problem solving (Finkelstein and
Hambrick, 1996). The notion prevails that leadership is related with the indication of organisational
way, i.e. using personal power in order to induce employees to work together towards a common
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goal (Gill, 2003). However, the leaders have to tackle with the most difficult challenges, i.e. how to
assure the exchange of knowledge among employees in the organisation and foresee where the
organisation should be in the future (Rosen et al. 2007).
According to Nixon, global business leaders are concerned with such big issues as the creation of
successful and sustainable workplaces, the need to be good corporate citizens, the gap between
strategy makers and those not involved; products that damage the quality of life and, etc. (Nixon,
2002). Therefore, the effective motivation for communication can tackle with the aforementioned
issues (King and Marks, 2008).
Effective leaders motivate their employees to reach common organisational goals through sharing
ideas, information and knowledge. Motivation arises from alignment of organisational goals with
inНiviНuals‘ neeНs, values anН interests anН from the use of positive language. On the other hand,
short-term wins also motivate employees because their recognition and reward are growing.
Notably, at the individual level, the appropriate communication can be identified as an important
factor which helps employees to understand the needs of knowledge management and their personal
effects of the change. Therefore, communication has become an important prerequisite for
achieving knowledge management objectives at the personal level (Armenakis and Harris, 2002).
On the other had, communication can be used in order to reduce resistance, minimise uncertainty
and assure the involvement of employees, which may change morale and retention rates (Klein,
1996). At the organisational level, communication plays an important role in enabling managers to
challenge embedded culture. Nevertheless, inefficient internal communication is one of the
important factors impacting the failure of knowledge sharing. The assumption we can draw is, that
the appropriate method for communication, and decision what the content of that communication
should be, are at the same time both extremely important and highly complex issues for managers to
address.
Lithuanian organisations attitude towards institutional knowledge sharing

The above discussion leads to the research question which is related to the factors impacting
knowledge sharing of national and international companies of Lithuania.
In order to develop a questionnaire, the structured interviews were conducted by interviewing
representatives of national and international companies located in Lithuania. The result of
interviews allowed developing the questionnaire, and the pilot testing was conducted in 2010 by
mailing to 20 national and international companies. In 2011, the updated questionnaire was mailed
to the population of firms located in Lithuania. The questionnaire was sent to 200 firms. Completed
questionnaires numbered 170, which is a response rate of 85%. The organisations represent
different business sectors in Lithuania: banking, IT sector, wholesale and retailing,
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telecommunication sector, tourism, insurance, construction, pharmacy, and real estate,

biotechnology and publishing sector. In the investigation participated in 51,2% national and 48,8%
international organisations. The biggest percentage of respondents was from firms, which have no
more than 49 employees (respectively 86%). High-level managers (6,5% of all participants),
middle-level managers (50,6% of all participants) and employees who do not have managing
position (49,4% of all participants) filled questionnaires.
Respondents assessed the approach towards knowledge sharing. It occurred that 60,6% of
respondents disagreed and strongly disagreed that their organizations have formal procedures for
knowledge sharing. 40 % (χ2=32,085; p<0,001) of respondents agreed and strongly agreed that
knowledge sharing is active in their organizations.
The comparison of national and international organisations allows concluding that international
organisations implement new initiatives in knowledge sharing more rapidly than national
organisations. 80,7% of respondents, who represented international organisations, and only 50,6%
respondents, who represented national organisations, agreed and strongly agreed with such a
statement. The conclusion we can draw is, that international organisations are more oriented
towards knowledge sharing than national organisations. On the other hand, both, national and
international organisations demonstrate a positive approach towards change and knowledge sharing.
92,7% (χ2=25,656; p<0,05) of respondents, who represented international organisations, and 88,5%
(χ2=31,6; p<0,05) of respondents, who represented national organisations, agreed and strongly
agreed that their organisations have possibilities to change due to internal knowledge sharing.
Questions about external environment let us to reveal, that situation in the market and actions of
competitors are the major forces impacting organizational knowledge sharing. The comparison of
national and international organisations allows concluding that international organisations
distinguish a situation in the market (90,4%), new technologies and products (84,4%) as the major
forces impacting organisations internal knowledge sharing. Notably, national organisations
distinguish the situation in the market (82,8%), new technologies and products (72,4%) and policy
of government (50,6%).
The need to raise productivity, improve a quality of products and services are seen as the major
internal forces impacting knowledge sharing in organizations. Notably, the initiative of employees
was perceived as rather insignificant. The comparison of national and international organisations
allows concluding that international organisations distinguish such internal factors as the need to
raise productivity (95,2%) and the need to raise flexibility of organisation (88%). The respondents
from national organisations emphasise the need to raise a quality of products and services (88,5%)
and the need to raise productivity (85,1%).
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The analysis of leadership let us to reveal, that employees of international organisations can expect
the assistance of their managers in knowledge sharing (79,5%) (χ2=32,085; p<0,001), the managers
formulate clear tasks (72,3%) (χ2=15,704; p<0,01) and involve employees in the problem-solving
process (59%) (χ2=9,287; p<0,05). According to responses of respondents from national
organizations we can conclude, that the employees can expect the assistance of their managers in
knowledge sharing (64,4%).
Notably, non-financial motivators are seen as the main factors impacting knowledge sharing in
organizations. The respondents from international organizations (86,4%) and national organization
(92%) agree and strongly agree with such statement. However, taking into account financial
motivators, the respondents indicated that the employees are not rewarded properly. The
respondents from international organisations disagree and strongly disagree that financial
motivators help to share knowledge (54%, χ2=25,656; p<0,05). The respondents from national
organisations disagreed and strongly disagreed that financial motivators help to share knowledge
(77,1%, χ2=46,26; p<0,001). Hence, the conclusion we can draw is that international organisations
pay more attention to motivate the employees to share knowledge. However, the low rate, which
indicates dissatisfaction of employees related with their reward, is seen as the urgent issue in
national organisations.
Conclusions
The analysis of the literature allows concluding that knowledge sharing is seen as an important
aspect of organisational sustainability. It is agreed that changes of business environment are
impacting knowledge sharing of sustainable decision-making in organizations. In the context of
globalization arise from new, even more complex challenges related to knowledge creation and
sharing. It has to be noted that organisations often do not perceive the need to develop formal
structures for knowledge sharing.
On the other hand, the internal environment of organisations makes an impact on knowledge
sharing process. Scholars provide different issues, impacting failure of fluent knowledge sharing at
the institutional level. Notably, cultural barriers, personally traits or organization-specific
coordination mechanisms are seen as most important issues. Hence, the leadership and motivation
take an important place in the knowledge sharing in the organisations.
The survey of Lithuanian organisations allows us to conclude, that majority of respondents do not
have formal knowledge sharing procedures in organizations. However, the knowledge sharing is
seen as the precondition for organizational change. Notably, international organisations are more
prepared for knowledge sharing processes than national organisations. Analysis of external and
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internal environment forces allow us to distinguish such factors as a situation in the market, new
products and technologies, need to raise productivity and efficiency impacting knowledge sharing.
The success of knowledge sharing depends on such factors as leadership and motivation, which are
related with each other. Hence, these factors can create prerequisites to diminish resistance of
employees, minimise uncertainty and assure the involvement of employees in the knowledge
sharing process. Management and inter-personal skills are seen as the most important in knowledge
sharing of organizations and influence the success of such a process. Finally, the competences of
managers should be developed through training, continuing learning, creating and maintaining
knowledge sharing in organizations.
The limitations of the presented study were connected with the fact that companies included in the
sample represent different business sectors and majority of respondents represent small and
medium-sized enterprises.
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Glick, W. (Eds), Organisational Change and Redesign, Oxford Press, New York, N.Y., pp.3-15.
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Standardization-adaptation paradox in international advertising:

the case of cultural and regulatory peculiarities in Lithuania
Rūta Ruževičiūtė1 , Juozas Ruževičius2

1
Queen Mary University of London, e-mail: r.ruzeviciute@hss10.qmul.ac.uk
2
International Business School at Vilnius University, e-mai: juozas.ruzevicius@ef.vu.lt
Abstract
The purpose of this study is to review the main approaches and positions met in international
advertising standardization debates as well as discuss individual cultural and regulatory peculiarities
of Lithuania that could have a fundamental influence in tailoring international advertising. The
comparative literature and legal acts analysis was undertaken in this study.
Methodology - the comparative literature and legal acts analysis and case study were undertaken in
this article.
Findings: absolute adaptation of international advertising might lead to the dramatic cost increase as
well as loss of global brand identity. That is why the most optimal solution here would be to find
the most efficient degree of standardization with the regard to individual national peculiarities. The
case study of cultural and regulatory issues in Lithuania shows that despite of globalization and
emergence of such regional institutions as European Union, diversity among cultural values as well
as laws still exist across different countries and regions.
Keywords: international advertising, standardization, adaptation, culture, governmental and legal

regulations, Lithuania.
Introduction
Globalization, developing technologies, increasing economical integration stimulates both the
growth in supply and competition (Ruţeviči tė & Ruţevičius, 2010). Companies tСat are willinР to
survive in this global competitive struggle must look for unique means that could help to distinguish
tСeir proНuМts from rivals‘ МommoНities. In tСis Мase, effeМtivelв manaРeН aНvertisinР Мan become
the major weapon contributing to the development of positive and unique brand image that leads to
the perception of unique surplus value (Aaker & Biel, 1993). However, the question of international
advertising management is still strongly escalated in both practice and theory (Agrawal, 1995).
Exponents of standardization ( Elinder, 1965; Fatt, 1967) and adaptation (De Mooij, 2003) give
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their own reasoning for application of certain positions, while in this paper it is argued that
compromise between both approaches should be met.
The aim of this study is to review the main approaches and positions met in international
advertising standardization debates as well as discuss individual cultural and regulatory peculiarities
of Lithuania that could have a fundamental influence in tailoring international advertising. It is
important to highlight that the authors of the paper are not aware of any academic study that analyse
cultural and regulatory adverting issues in the context of Lithuania. Thus, the current study fills the
latter lacuna. Desk research on the comparative literature and legal acts as well as country case
study analyses were undertaken in this paper.
This paper consists of two main parts. The first section covers critical review of articles that analyze
standardization and adaptation issues of international advertising in a period of five-decades (De
Mooij, 2003; Elinder, 1965; Fatt, 1967; Harris, 1994; Harvey, 1993; Kanso, 1992; Koslow &
Costley, 2010; Papavassilou & Statahakopoulos, 1997). The articles were selected with a regard to
Academic Journal Quality Guide, developed by The Association of Business Schools in the United
Kingdom (The Association of Business Schools, 2010). The chosen papers were published in
marketing field journals ranked with indexes 2, 3 or 4 that indicate the leading trend in a field. The
second section includes case analysis of Lithuanian advertising while focusing on two major issues
cultural context and government and legal regulations. The later case practically proves that
advertising can not be universal.
Global advertising debates

The standardization and adaptation issues of international advertising are strongly escalated in
scientific literature for more than 6 decades (Agrawal, 1995). The articles that are reviewed in this
part of the paper demonstrate a great diversification of opinions as well. 3 major trends can be
indicated: absolute standardization (Elinder, 1965; Fatt, 1967), adaptation (De Mooij, 2003; Koslow
& Costley, 2010) and combination or compromisation (Harris, 1994; Harvey, 1993; Kanso, 1992;
Papavassilou & Statahakopoulos, 1997). More over it can be noticed, that certain trends of these
debates is met in regard to particular periods. In this case, the 1960s represents the era of
Мonsumers‘ uniformity approach; the 1990s indicates the epoch of prevalent tendency in business
optimization with a regard to consumer diversity, while period from 2000 shows an increasing
Мustomiгation trenН. AРrawal (1995) in Сis artiМle ‗Review of a 40-year debate in international
aНvertisinР‘ also notiМe Мertain Нominant stanНarНiгation anН aНaptation approaМС pСenomena
typical just to certain periods.
The international advertising scholarly pioneers Elinder (1965) and Fatt (1967), as mentioned
above, put a strong focus on international advertising standardization. They pointed out number of
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reasons why advertising should be uniformed among different countries. Both of the authors
assumed that one of the most important reasons here is related with social aspects as increasing
homogeneity in standards of living or consumption habits. Although Elinder (1965) and Fatt (1967)
in tСeir papers aНmitteН tСe МonНitional Нiversitв amonР Мonsumer, tСeв believeН tСat ‗Нifferent
people are basiМallв tСe same‘ (Fatt, 1967, p. 61). More over, they forecasted that this trend will
become more and more prevalent in the future. The clarification for these statements were related
with growing level of mobility (Elinder, 1965), developing international communication means and
practices (Elinder, 1965; Fatt, 1967) and increasing level of international corporations producing
products with global brands (Fatt, 1967).
De Mooij (2003), representing the other extreme in international advertising debates in her paper
‗ConverРenМe anН НiverРenМe in Мonsumer beСaviour: impliМations for Рlobal aНvertisinР‘ Рives tСe
reasonable explanations why international advertising should be adapted in different countries. De
Mooij (2003) and Koslow and Costley (2010) findings confirm the high importance of cultural
sensitivitв in marketinР aМtivities. TСese eviНenМes sМientifiМallв Нisapprove Fatt‘s (1967) anН
ElinНer‘s (1965) statements about tСe МonverРenМe of botС Мonsumption as well as neeНs anН leaНs
further in questioning the efficiency of international advertising absolute standardization.
However, absolute adaptation might have its own weaknesses as well. The major bottle neck here is
the high costs related with customization. Moreover, considerable variety of different promotion
forms and tools can lead to the loss of global brand identity (Aaker & Biel, 1993). However,
literature (Harvey, 1993; Pitofsky, 1977; Usunier and Lee, 2005) as well as practical examples such
as Parker Pen in Mexico or Pepsi in Taiwan (Haig, 2005) suggest that the main focus falls here on
cultural and national sensitivity issues as cultural differences, legal or governmental restrictions,
infrastructural conditions and competitive situation.
Cultural differences, that were broader described above, make a great impact on just on prevailing
national needs, wants and perception but on communication style as well (De Mooij, 2003; De
Mooij & Hofstede, 2010). That is why advertising content, style and form, usually to a certain level
should be shaped according to the national and cultural peculiarities. For example, Hofstede (2001)
and De Mooij (2010) suggest tailoring advertising appeals, execution and style according to cultural
dimensions as individualism/collectivism, masculinity / femininity, power distance, uncertainty
avoidance and long / short-term orientation.
The high prevalence of compromised strategies employed in practice can be proved by several
researches carried out by Kanso (1992) and Harris (1994). Both researches indicate that majority of
companies highly compromise between advertising standardization and adaptation. Although, these
papers do not directly investigate utility of the latter approach, it could be concluded that companies
treat it as the most optimal and effective solution in international advertising. It is worth to highlight
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that the actual results of the studies slightly differs. Kanso (1992) discovered that 77% of
Мompanies‘ Мompromise between stanНarНiгation anН aНaptation approaМСes wСile estimations in
Harris (1994) study reached 69%. This trend can be influenced by several factors. First of all, there
could be noticed a diversity in samples. Kanso (1992) have analysed just manufacturers producing
durable goods, based in The United States, whereas Harris (1994) sampled European companies
having different profiles. Secondly, the absence of clear prevalent perception of standardization,
adaptation ant the relation level with compromisation could lead respondents to different
interpretation of these concepts. For instance, Kanso (1992) study revealed that 75% of companies
employ adaptation strategy, although 77% of the same sample also confirmed that they to some
extent use standardized messages in the marketing communication campaigns.
In summary of international advertising standardization and adaptation debates it could be said that
compromise here should be made. Although, complete adaptation strategy supplies with obvious
advantages related with the regard to crucial cultural and national differences (De Mooij, 2003;
Koslow & Costley, 2010), the certain degree of standardization in these highly competitive times
becomes essential as well. The major reason for that is cost economy. The purely localised
advertisements are not just more expensive to release, due to increasing globalization trend it
becomes more costly to control overall advertising process and to maintain constant image of a
brand as well (De Mooij & Hofstede, 2010; Harvey, 1993; Harris, 1994; Papavassilou &
Statahakopoulos, 1997).
Advertising in Lithuania: culture and regulations

Culture. Lithuania is a small country situated in North-Eastern Europe (Encyclopaedia Britannica,
2011). Although, the population here reaches just more than 3 millions, Lithuanians have developed
their own culture through rich, though severe history (Youngblood-Coleman, 2010). However, it
could be noticed that in the literature there is a lack of cultural researches that cover not just
Lithuania, but Baltic countries in general (Huettinger, 2008; Siraliova & Angelis, 2006). This
tendency can be explained by the former Soviet block; even now the countries which at that time
belonged to Soviet Union are frequently related to Russia and even targeted as a sub-segment of it
(Čiburienė & Guščinskienė, 2007; ManninР & Poljeva, 1999; HuettinРer, 2006). However, several
centuries lasting Soviet oppression have formed an aversion towards the system of communism that
has resulted in rejection of Russian cultural values and attitudes (Manning & Poljeva, 1999; Smith,
1990). For instance, inhabitants of Baltic States are more self-determined, more open minded and
much harder working people, than their eastern neighbours (Smith, 1990). More over, the education
level is considerably higher in Baltic region as well (United Nations, 2010). Differently from other
Baltic countries, Lithuania due to closely related past also has cultural commonalities with Poland
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that is known as highly religious country and Germany famous for its orderliness (Huettinger,
2008). This fact suggests an assumption that Lithuanians are mores disciplined and devoted than
their neighbours.
More comprehensive researches on Lithuanian national character were carried out by Mockaitis
(2001) anН HuettinРer (2008). BotС sМСolars baseН tСeir researМСes on HofsteНe‘s Мultural
dimensions theory that seeks to evaluate cultural differences in 5 core dimensions as masculinity,
uncertainty avoidance, individualism, power distance and long term orientation, while rating the
countries in 120 points scale (Hofstede, 2001). Mockaitis (2001) and Huettinger (2008) were the
only scholars who showed some attempts to investigate Lithuanian cultural dimensions according to
the latter methodology. It is important to note that these studies do not include the estimation of
long term orientation. Nevertheless, the researches revealed significant results, contradicting the
prevailing point of view. Eastern European countries were usually characterized by low uncertainty
avoidance, high masculinity, intense collectivism and power distance levels (Huettinger, 2008).
Both studies indicated almost similar results on all dimensions, except masculinity. The researches
revealed that Lithuanians are moderately-СiРС in unМertaintв avoiНanМe (e.Р. MoМkaitis‘s, 2001,
estimation – 67 points, HuettinРer‘s, 2008, estimation – 65 points), low-to moderate in power
НistanМe (e.Р. MoМkaitis‘s, 2001, estimation – 45 points, HuettinРer‘s, 2008, estimation – 42 points),
moderately-stronР in inНiviНualism (e.Р. MoМkaitis‘s, 2001, estimation – 55 points, HuettinРer‘s,
2008, estimation – 60 points). However, Mockaitis (2001) found Lithuania as masculine society
sМorinР 65 points, wСile HuettinРer‘s (2008) estimation НefineН it as stronРlв feminine one witС just
9 points on masculinity scale. This discrepancy can be explained by the increasing trend of
feminism in LitСuania, notiМeН in tСe past НeМaНes (Vosвli tė, 2001). TСis faМt suРРests an
assumption tСat HuettinРer‘s (2008) estimations relateН witС low masМulinitв inНex МoulН refleМt
reality better.
In a comparison with neighbouring countries Lithuania scores similar with Scandinavian region in
masculinity, individuality and power distance. The uncertainty avoidance level is higher in
Lithuania. However, even small cultural differences should be considered when it comes to
international advertising or consumer behaviour (Siraliova & Angelis, 2006). According to De
Mooij (2010) and De Mooij and Hofstede (2010), in order to ensure efficiency all cultural
dimensions should be taken into consideration while planning advertisement style. Lithuanians are
willing to expose more to the advertisements appeals that are directed towards individualism such
as success, independence, task orientation, pleasure (De Mooij, 2010). However, these motives
should be considered cautiously, since Lithuanian, according to Huettinger (2008) is also feminine
country. Contrarily, countries that score low on masculinity focus on relations and quality of life,
rather than personal achievements (De Mooij & Hofstede, 2010). However, this discrepancy could
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be effectively employed in order to achieve value paradox that according to De Mooij (2010) could
reflect inner personal, not cultural, value.
Governmental and legal regulations. The main law that regulates advertising in Lithuania is
Lithuanian Law on Advertising (2000). The other laws that regulate advertising issues include
Lithuanian Law on Alcohol Control (1995), Lithuanian Law on Tobacco Control (1995), Lithuanian
Law on Pharmaceutical practice (1991), Lithuanian Law on Public Information (2006) and Civil
Code of Lithuania (2000).
According to Harvey (1993) there are several areas that should be carefully considered before
advertising enters foreign market: vulnerable groups, requirements for comparative, deceptive and
corrective advertising, restricted categories, government intervention before launching advertising
and government position towards local or foreign content in advertisements. However Lithuanian
Law on Advertising (2000) does not include all of these aspects. The main fields that are regulated
here are vulnerable groups, requirements for comparative and deceptive advertising, restricted
categories and prohibited content.
TСere are 3 main unНerlвinР prinМiples for all sorts of aНvertisinР in LitСuania: ‗НeМenМв, justiМe
anН reМoРnisabilitв‘ (LitСuanian Law on AНvertisinР, 2000, clause 3). Advertising here is
prohibited if certain basic trends, like racism, humiliation, danger stimulation in content are
identified. More over advertisements that employ tools that affect subliminal mind or trespass on
reliance or even superstitions are banned here as well (Lithuanian Law on Advertising, 2000).
Absolute prohibition in advertising is applied for 2 categories: pornography and psychotropic/
narcotic substances (Lithuanian Law on Public Information, 2006). Tobacco advertisements in
Lithuania are forbidden as well (Lithuanian Law on Advertising, 2000). However there are certain
exceptions when certain ways of advertising of this category are accepted. Examples of these cases
include special tobacco retail shops or journals orientated to tobacco market. More over, tobacco
companies have chance to advertise their products in supermarkets as well, just in this case
advertisement should be applied on tobacco stands (Lithuanian Law on Tobacco Control, 1995).
Other categories as alcohol, pharmaceutical, medical services and guns can be advertised under the
strict regulations (Lithuanian Law on Advertising, 2000). For instance, prescribed pharmaceutical
and guns can be promoted just in special journals (Lithuanian Law on Advertising, 2000;
Lithuanian Law on Pharmaceutical practice, 1991). The advertising of alcohol falls under less
restrained regulations. The promotion of alcohol in general terms is allowed, although exception (do
not include beer and cider categories) here falls on outdoor advertisements. However, alcohol
advertisements should not promote positive attributes, be directed to children and adolescences
under 18 years old or related to celebrity endorsement (Lithuanian Law on Alcohol Control, 1995).
Lithuanian Law on Alcohol Control (1995) also defines prohibition norms related with the
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advertising distribution channels. For example, it is forbidden to advertise alcohol in the front pages
of newspapers, journals and books, in public transport, in petrol stations, in education institutions or
on national television channels between 6 AM and 11 PM. It could be noticed that the latter
regulation is strongly related with juvenile protection against negative information. Lithuanian Law
on Advertising (2000) also defines other norms that should be followed in order to protect this
vulnerable group. These examples include prohibition to make psychological pressure that would
affect children reliance on parents or stimulate their superiority against peers. More over it is
forbidden to encourage infants to make the direct influence on parents in order to posses the
promoted products (Lithuanian Law on Advertising, 2000).
In summary it should be concluded, that different regions and countries have its own peculiarities
that regulate content, form, execution, appeals and distribution channels of advertising. The case
study of laws in the small country, Lithuania, that is counting just 3rd decade of its independence,
have practically proved that. Even though the increasing authority of such structures as European
Union can be noticed, the homogeneity across the law systems in different countries can not be
ensured (Petty, 1997).
Conclusions
The increasing trend of assimilation in international economies, is also leading to the resemblance
in other areas as information technology, communication means and business activities. However,
the convergence tendency is not universal. Literature shows, that cultural values are strongly rooted
in modern societies and are resistant to changes (Clark, 1990; De Mooij, 2003). More over, the
national differences lie and on the governing systems that are not affected by the occurrence of
central regional structures (Petty, 1997). These facts suggest that national and cultural individuality
goes beyond the globalisation trend.
The importance of cultural and national sensitivity should be particularly considered by
international business practitioners. Although standardization strategy of marketing across different
markets might look appealing due to the cost economy, the ignorance of national and cultural
differences might lead to both revenue and market share loss. The examples of eBay in China or
Wall Mart in Germany practically prove that.
Still an all, it is important to stress that special attention here should be paid for marketing
communications since nowadays it have become harder to sell rather than produce (Aaker & Biel,
1993). That is why it could be said that advertising have become one of the most powerful means in
competition. The fact of perceptual and attitudinal diversity that impacts needs and consumption
motives across the countries makes us to recoil on adaptation approach (De Mooij,
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2010; De Mooij & Hofstede, 2010).For instance, contrarily to the prevailing opinion, Lithuania,
despite of geographic proximity and close historical relations, has really little in common with its
eastern neighbour Russia that is why the same communication techniques would work in both
countries different (Huettinger, 2008; Siraliova & Angelis, 2006). More over, the above mentioned
fact on differences lying on governmental, regulatory structures or economical development makes
the need of international advertising adaptation even stronger. In this case the example of
comparative advertising that would work much better in Lithuania rather than in Italy, due to the
high restriction, could be given (Petty, 1997). However, absolute adaptation can lead to dramatic
increase in costs, loss of brand image and burden in control and coordination. Thus, in order to
maintain business efficiency, in these highly competitive times, compromise between both poles
should be met.
Reference
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(2), 7-11.
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12. Harris, G. (1994). International advertising standardization: What do the multinationals actually
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Lithuania. Baltic Journal of Management, 3(3), 359-376.
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17. Koslow, S., & Costley, C. (2010). How consumer heterogeneity muddles the international
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18. Manning, P., & Poljeva, T. (1999). The challenge of management development in the Baltic
states in the twenty-first century. Journal of Management Development, 18 (1), 32-45.
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Title: Strategic CSR: a solution to the economic crisis
Skouloudis Antonis1, Chymis Athanasios2, Evangelinos Konstantinos3
1
Department of Environmental Studies, University of the Aegean
2
Centre for Planning and Economic Research (KEPE). Corresponding author
3
Department of Environmental Studies, University of the Aegean
Email: athxymes@yahoo.com
Purpose: Investigation of the role strategic Corporate Social Responsibility (CSR) can play during
a period of crisis.
Design/methodology/approach: It is a conceptual paper. Using the well developed literature on
CSR as well as the recently developing literature on the interaction between crisis and CSR this
paper contributes conceptually to CSR theory and literature.
Findings: We find that CSR has two major parts, superficial and strategic. Strategic CSR can
positively affect firms exit the crisis through legal and ethical compliance, social innovation, and
social entrepreneurship.
Practical implications: There are interesting practical implications for managers as well as policy
makers in order to better help firms and the economy in general to align economic and social
interests.
Social implications: The article calls for special attention from all stakeholders to strategic CSR in
times of crisis. It aims to increase public awareness to CSR.
Originality/value: There is a synthesis of Carroll‘s anН Visser‘s МonМept of Нifferent tвpes of CSR
and a development of specific actions through which strategic CSR can offer a solution to economic
downturns as well to shield firms from future crisis. Consequently it has value to both academicians
and practitioners.
Introduction
During the difficult times of the recent credit-fiscal crisis which evolved in many countries
into a deep economic – debt crisis, it is interesting to study the role of Corporate Social
Responsibility (CSR). The research question posed in this paper is two-fold: first, how the crisis
affects CSR activities and, second, how CSR can affect firms in periods of crisis. In order to answer
to these questions we rely on two major blocks of literature: on one hand the broad literature on
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corporate social performance-financial performance link and on the other hand the literature on the
relation between CSR and different aspects of competitiveness such as legal and ethical compliance,
entrepreneursСip anН innovation. CombininР Carroll‘s НesМription anН Visser‘s Мontinuum of CSR
we distinguish 2 major faces of CSR, namely, superficial and strategic. We suggest that in a first
stage, both types of CSR will be negatively affected from the crisis due to the decrease of resources
available to invest in CSR actions. However, strategic CSR gets less affected. Moreover, at a
second stage, strategic CSR can help firms exit the crisis faster and with fewer losses.
The Social Performance (SP) – Financial Performance (FP) relation

CSR is not a new concept. Plato refers to the need for environmental conservation
particularly with regards to business such as mining and lumbering; later, St. Thomas Aquinas
arРueН tСat businesses МoulН be leРitimateН as lonР as tСeв work towarНs a ―Нefinite purpose,
namelв, tСe РooН estate of tСe СouseСolН [Мommunitв]‖ (EberstaНt, 1973: p.78). CSR Мontains 4-
levels: economic, legal, ethical, and discretionary (Carroll, 1999) and refers to all stakeholders
groups such as customers, suppliers, employees, stockholders, investors, managers, the local
community, government agencies, environmental organizations and other non-governmental
orРaniгations (NGO‘s) (Freeman, 1984).
Although a definitive answer is not yet available (due to methodological and definitional
problems), by far the majority of research has established a positive relationship, between FP and
SP (Margolis et al., 2007; Wood, 2010). It is well established by now that a firm can do well by
doing good (Wood, 2010). Empirical and theoretical research shows that investors, consumers,
employees and other stakeholder groups prefer socially responsible firms (Graves and Waddock,
1994; Harrison, 2003; Turban and Greening, 1997). The great majority of empirical evidence shows
a positive relation between SP and FP (see Wood, 2010 and Margolis et al., 2007 for a complete
review). An important issue in the literature is the causality between SP and FP. Many authors have
theoretically argued and empirically supported that the causality run both ways, either from FP to
SP or, from SP to FP (MarРolis anН WalsС, 2001; Hillman anН Keim, 2001; Preston anН O‘Bannon,
1997; Waddock and Graves, 1997).
As Carroll (1979) stated, firms can respond in different ways: reactive, defensive,
accommodating or proactive. Here lies the key of their success. If they respond in a reactive or
Нefensive waв followinР stakeСolНers‘ Мomplains tСeв Нo not Мreate СiРСer levels of trust. On tСe
contrary, if tСeв responН in a proaМtive waв tСeв are aСeaН stakeСolНers‘ anН soМietв‘s expeМtations,
thus creating trust and gaining competitive edge and long-term higher performance (Wood, 1991,
2010).
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Figure 1: A continuum of stages on the CSR embeddedness in business conduct

Systemic CSR: Identifying and tackling the root
Defensive CSR: Corporate Promotional CSR: Corporate causes of global issues of unsustainability and
responsibility practices are responsibility is materialized as irresponsibility through the adoption of innovative
limited and only undertaken a public relations instrument to business models, revolutionizing organizational
if shareholder value will be enhance the corporate image, operations, products and services as well as lobbying
protected as a result. brand and/or reputation. for a progressive national and international policy
agenda
Charitable CSR: Companies support Strategic CSR: CSR activities are tied to the
social and environmental causes o pa y’s ore usi ess operatio s pri arily
through donations and sponsorships through adherence to sets of codes and
through Fou datio s or Chair a ’s implementation of social and environmental
Fund and aimed at empowering systems, a process that involves subsequent cycles
community groups and/or civil society of CSR policy development, target setting,
organizations. programmes implementation, auditing and
reporting.
Source: Adapted from Visser (2011)
Visser‘s Мontinuum of CSR (fiРure 1) matМСes Carroll‘s НesМription of Нifferent CSR
aspects and we use these two approaches to distinguish between superficial and strategic CSR.
Superficial CSR includes reactive, defensive and accommodating CSR while strategic CSR includes
proaМtive CSR. We also inМluНe Visser‘s sвstemiМ CSR as an evolveН form of strateРiМ CSR.
Crisis and CSR

Empirical literature on the relationship between the current crisis (financial and economic)
and CSR is scant, mostly due to lack of data since the crisis is still a very recent event. Some
empiriМal researМС suРРests a neРative relation (KaraibraСimoğlu, 2010; Arevalo anН AravinН,
2010; Zaharia and Grundey, 2011). At the same time they find that firms highly engaged in CSR do
muМС better НurinР a Мrisis tСan firms witС lower НeРrees of CSR (KaraibraСimoğlu, 2010) anН, tСat
proactive CSR initiatives are less affected by the crisis relatively to other CSR initiatives (Arevalo
and Aravind, 2010). On the other hand there is evidence of increased corporate social performance
before and during the crisis (Giannarakis & Theotokas, 2011) and that CSR does not increase
during the financial crisis but neither decreases (Selvi et al., 2010). It seems that causality as well as
tвpe of CSR plaвs a МruМial role. CSR Мan affeМt tСe extent of tСe Мrisis‘ results to tСe firm (anН tСe
whole economy in general) and can shield a firm from a future crisis impacts (Argandoña, 2009).
Based on the results above and on the literature on the relation between SP and FP we can
describe the mechanism of the interaction between crisis and CSR. The literature alludes that the
relation between the crisis and CSR follows the pattern of the relationship between SP and FP.
SpeМifiМallв, in tСe first staРe as tСe Мrisis Сits, firm‘s profits anН resourМes to Нevote in CSR are
decreasing causing a decrease in CSR projects. However, the strategic and proactive part of CSR
which is embedded in the core business of the firm gets affected much less than the superficial part
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(reaМtive, Нefensive, aММommoНative). In tСe seМonН staРe, strateРiМ CSR boosts firm‘s
competitiveness (Porter and Kramer, 2006) and shields the firm from the negative effects of the
crisis (Argandoña, 2009, Arevalo and Aravind, 2010). Thus, firms that have a strategic view of CSR
incorporated into their core business will exit the crisis faster and relatively unharmed.
Strategic CSR as a remedy for the economic downturn

Now let us turn to the examination of the concept strategic CSR and how this type of
CSR helps firms exit the crisis. We propose that strategic CSR acts in three different but closely
related ways: a) operating within the rules of the game, b) innovation and c) entrepreneurship.
These three ways of strategic CSR help firms develop competitive advantage.
Operating „within the rules of the game‟

The rules of the game do not only include legal compliance but acting according to the
ethical norms of the society (Williamson, 2000). UnНer tСe ‗lens‘ of strateРiМ CSR, tСe Мorporations
are concerned about the actual impacts of their operation, rather than the legal foundations for these
impacts and for whether the organization may be held legally responsible, something that indicates
that in effective CSR there is not a strict distinction between law and fact (Buhmann, 2006). This
denotes the voluntary nature of effective corporate responsibility that urges companies to act
beyond what the law dictates and engage in a self-regulating process (Carroll, 1991; Buhmann,
2006). Fulfilling the expectations of governmental stakeholders (who are actually the agents of the
publiМ in promulРatinР stanНarНs of firms‘ beСavior in tСe various business realms) makes it less
imperative for the law to do more to contain the externalities of firms. It reduces the possibility of a
more robust legislative intervention in the future and, therefore, provides better adaptation to
conditions of uncertainty on future legislation and those requiring relevant compromises on behalf
of tСe orРaniгation. FosterinР suМС an orРaniгational Мulture will unНerpin tСat tСeв operate ‗witСin
tСe rules of tСe Рame‘ (FrieНman, 1969: p. 133).
Innovation and CSR
As long as the strategic CSR concept reflects the transformational change of existing
business practices and conduct, it is rational to connect it with the business processes of
organizational change and innovation. Innovation, in all its forms; from incremental (remodelling
functionalities) to disruptive (breakthrough ideas), is a key factor for a company to survival and
long-term growth (Tushman and Anderson, 1986; Tidd et al, 2005). Husted (2005) identifies CSR
as a veСiМle for innovation wСile, aММorНinР to MaxfielН (2008), innovation is ‗inМreasinРlв seen as
a МuttinР eНРe waв to frame tСe business Мase for CSR‘ (p.373). RotСwell (1994) asserts tСat tСe
current innovation model is an increasingly complex, multi-actor task that requires significant levels
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of integration-engagement at both intra-and inter-firm level. Furthermore, Kanter (1999) sets forth
tСe term ‗Мorporate soМial innovation‘ to НesМribe tСe turn firms sСoulН Нo towarНs soМial issues anН
utilize them as a learning laboratory for the identification of unmet needs and the development of
solutions that create new markets.
In other words, the ways in which organizations engage with the various social constituents
is central to achieving two beneficial objectives: achieving competitive advantage through
innovation and at the same time implementing a more sophisticated and deeply embedded form of
orРaniгational responsibilitв (Bartlett, 2009). StrateРiМ CSR Мan brinР НireМt benefits on emploвees‘
morale and lead to advantageous productivity which can translate to innovative and potentially new
business opportunities.
Entrepreneurship and CSR

The concept of Corporate Social Entrepreneurship (CSE), although new, originates from
SМСumpeter‘s ―simultaneous creation of economic and social value‖ (Austin and Reficco, 2009).
The alignment of self-interest – profit maximization principle with social responsibility is the best
waв to a Мompanв‘s sustainable suММess (Austin anН RefiММo, 2009). TСe soМiallв responsible
company aims to transform ideas into action. Companies which succeed in this are values-based
companies and enjoy trustworthiness. They can generate trust, engage in ethical behavior and
provide innovative solutions to social problems. Social ends and profit maximization are not to be
regarded as contradicting each other (Cornelius et al. 2008). Innovative thinking and entrepreneurial
spirit can easily recognize the complementarities between economic and social goals, and the
opportunity to constitute a double bottom line (Cornelius et al. 2008).
It is known from CSR literature the triple bottom line principle (i.e. people, planet, profits or
tСe 3 P‘s) wСiМС inМluНes soМial, environmental anН eМonomiМ responsibilitв. AМtuallв, tСe term
CSE merges all three concepts of entrepreneurship, namely, corporate entrepreneurship, social
entrepreneurship and environmental entrepreneurship (Austin & Reficco 2009). This term describes
what, is also known as, sustainable entrepreneurship a necessary condition for sustainable
Нevelopment. TСe verв Нefinition of CSR bв tСe European Commission is ―Business Contribution
to Sustainable Development.‖
Social entrepreneurs are defined as change makers. They innovate in areas such as services,
quality of services, methods of production, production factors, forms of organizations and markets
(Defourny and Nyssens, 2010). Social entrepreneurs are considerably more effective at job creation
and have a higher turnover per employee than mainstream businesses (Harding, 2004). Successful
entrepreneursСip requires qualities suМС as ―imaРination, Мreativitв, novelty, and sensibilitв‖ (Harris
et al. (2009). These qualities are sine qua non for ethical decision-making, in other words, ethics
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and entrepreneurship are closely aligned. Entrepreneurial success calls not only for an effective
handling of the strategic dimensions of starting a new venture, but also for moral imagination
(Harris et al., 2009). Socially responsible firms have the ability to invent ways of doing things in a
socially and environmentally friendly way. These firms increase competitiveness through strategic
implementation of CSR (Porter and Kramer, 2006), that is, CSR embedded in their business
planning (Waddock and Graves, 1997).
Concluding remarks
Scholars argue that a cause of the recent financial crisis that started in the US in 2007 was
the incidences of unethical behaviour of financial decision makers such as regulators, supervisors,
managers or employees. Strategic CSR could probably not have averted the crisis but it could
definitely have made its effects less dramatic to firms, stakeholders and society in general
(Fernández and Souto, 2009; Argandoña, 2009; Selvi et al., 2010). We distinguished 2 different
types of CSR, superficial (reactive, defensive and accommodating) and strategic. We saw that in a
first stage, both types are negatively affected by the crisis but the latter much less than the former.
However in a second stage strategic CSR through its relations to legal and ethical compliance,
entrepreneurship and innovation can offer an opportunity to firms to exit faster from crises
relatively unharmed and protect themselves, stakeholders and ultimately the whole economy from
future crises.
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IV. DEVELOPMENT TRENDS AND COMPETITIVENESS OF COUNTRY
Country’s growth model and competitiveness
M. Starkevičiūtė
Vilnius University, International Business School, Lithuania
Email: Margarita.Starkeviciute@tvm.vu.lt
Introduction
The purpose of the paper is to define a framework for an economic growth model that can give a
country a competitive advantage on global markets. It is organized as follows: firstly, a growth
model of a transition period from centralized to market economy is discussed and presented. A
conceptual definition of the growth model modification after EU accession is given. Secondly,
some guidelines how a comparative advantage can be achieved using the chosen growth model are
offered and further model development opportunities are suggested. The purpose of the paper is to
consider the experience of economic reforms during transition from centralized to market economy
and EU membership. This consideration allows defining the main determinants of economic growth
as well as unveiling the factors behind the economic weakness. The carried out analysis creates
conditions to setting up an economic policy, which has a positive impact on these determinants and
compositeness accelerating the growth of economy. Meanwhile, the identification of problems is a
precondition for an economic strategy allowing addressing imbalances in economy.
1. Transition Decade Lessons (1990-2000)

Experts point out that the challenges faced by the EU countries demand a new economic policy
approach. They also suggest using the experience gained during the Asian crisis in 1997. The
lessons of the economic transformation of 1990‘s in tСe BaltiМ anН Central European Мountries
should not be overlooked as well.
The reform process was started from a total scratch without its own financial system and with 97 %
of exports going to the former Soviet Union market. After the period of the initial contraction the
growth of economy resumed and by 1996 reached 5.2 % led by strong expansion of export with
around half of export reorientated towards EU markets - a sign of growing competitiveness.
An institutional framework and infrastructure for functioning market economy were set up, whose
strength and resilience of economy was tested by the Asian crisis and subsequently the Russian
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financial crisis in 1997-1999 unveiling an ability to manage external shocks and readiness of
Lithuania to start accession to the EU process. Sound fundamentals, despite set backs due to the
Asian and Russian crisis, allowed to generate the average GDP growth rate (1995 – 2002), roughly
twice the EU average. The negotiations on accession were launched on February 2000 and on May
2004 Lithuania became a member of the EU.
The pillars of economic reforms in Lithuania, as elsewhere, have become micro liberalization
(price, goods and capital movement liberalization), macro stabilization (exchange rate, inflation and
budget deficit stabilization), the structural changes (privatisation, finding new trading partners and
financial sector development) and establishing a legal and institutional system (economic rights).
The modernization of economy was driven by structural changes and a shift of resource from
agriculture and manufacturing economy to a higher productivity services economy. Leading forces
for modernizing economy were newly established and privately - owned small and medium
enterprises, especially in services sector, for which reforms created an opportunity to expand in
underdeveloped sectors.
Learning by doing process facilitated an increase in productivity and competitiveness. Knowledge
input is difficult to evaluate, usually it is covered by total factor productivity. Total factor
productivity, in a broad sense, includes all factors that reduce the real cost of generating value-
added, including the acquisition of new knowledge, the introduction of new technology, an entry
into new markets, and better enterprise management and its growth could give a country a
comparative competitive advantage.
The growth equations that were estimated from the official national accounts data showed that
capital accounted for only a small share of economic growth, more than 90 % of the growth was
explained by increase in total factor productivity.
TСe analвsis of РrowtС equitation also МonfirmeН finНinРs tСat ―overall TFP improvement sСoulН
comfortably accept the overwhelming evidence of the "mushrooms" rather than "yeast" nature of
tСe proМess‖ (HarberРer, 1998), e.Р. tСat tСe РrowtС in proНuМtivitв is not even aМross tСe eМonomв,
but concentrated in a few economic activities and within activities in a few enterprises - nearly two-
thirds of the cost-reduction in the economy came from the construction and trade sectors.
Economic reforms could not be implemented successfully without a wider-range popular support.
Therefore, at the beginning of reforms social agreement between citizens and government on the
necessity and scope of reforms has to be reached.
At final stages of structural reforms an appropriate public policy is needed to smooth this transition
process by providing a shelter for the most vulnerable part of population hit by structural
unemployment, low average wages and pensions, as well as increasing regional and social
inequality. Time is required for the positive effects of an economic reform to manifest them;
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therefore different social groups do not immediately feel benefits. Government can clearly play a
positive role by expanding the supply and improving the quality of those public goods and services
that, over time, can help to augment total factor productivity growth and bring differential
competitive advantage.
Having summarized the macroeconomic results of transition, it is possible to say that that regulated
markets set better conditions for growth of economy other than self-regulated markets, while the
most important problem of economic growth strategy creation is to evaluate the degree of impact of
each determinant on growth and to set a mixture ensuring long term growth of economy.
Key policy recommendations were as follows: sound institutions and prudent macroeconomic
management, less investment and more total factor productivity promoting policies, promotion of
domestic savings instead of using foreign-savings, efficient investment in TFP-augmenting public
goods and services, support to small and medium enterprises (SME) by removing obstacles to their
operations.
2. EU Membership Experience (2004 – 2010)

In the beginning of the EU membership period, it was expected that convergence with the stable
and prosperous EU internal market would facilitate macroeconomic stability, help to modernize
economy and boost competitiveness and as an outcome ensure rapidly growing standards of life.
During the first five years income convergence process was going on and brought positive results as
data shows - all newcomers by 2010 compared to 2004 recorded GDP per capita at PPP growth,
though some divergence was observed.
Empirical analysis of the results of transition period in post – communist countries unveiled that
“despite the process of national catch-up growth, regional evolutions are on the whole divergent,
with a pattern of convergence at the middle- and lower-ends of the distribution and a slower
tendency for club formation at the higher end, and thus overall an increasing trend of
polarization.” (Monastiriotis, 2011).
What are the factors behind the divergence and polarization? The important feature of EU
membership period was that a relative shortage of investments during transition decade was
replaced by flood of money into economy. If investments are used efficiently they allow cutting
costs and increasing total factor productivity (technological change) as well as a rate of return on
investment wСiМС attraМts new investments. Countrв‘s Мompetitiveness is РrowinР. AnН on tСe
contrary when investment are used inefficient manner costs are not going down which leads to
diminishing return on investment and competitiveness as well as crowds out investment from the
country to other countries offering a higher rate of return (Harberger, 1998).
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The easy availability of credit due to low interest rate, perception of macroeconomic environment
as stable and the EU budget appropriations were building internal imbalances and economic policy
was not adjusted to manage liquidity and promote efficiency. A painful internal devaluation process
helped to restore competitiveness, but social costs are very high.
In 2004 policy makers had a chance to re-think economic strategy and to find out what could be the
determinants of growth at new stage of development given the changing global economic
environment and integration.
EU membership could have been considered as continuation of structural economic reforms with a
new round of institutional building triggered by EU institutional development as well as an upgrade
of technology and knowledge facilitated by integration. Therefore, the same growth model that had
proven during transition period could serve as a basis for economic policy and after accession to the
EU. Nevertheless, the growth model had to be adjusted to new economic settings.
Convergence of unit labour costs was sped up after accession to the EU in all new Member States.
The big European companies and banks were shifting their attention and financial resources
towards global markets, mainly in Asia as new EU Member States were loosing comparative
advantage against emerging economies due to the size of their economies and costs convergence
process.
That global settings matter had been understood during transition period, but at present in growth
literature weight attributed to impact of globalization is higher - the modern economic growth
model is defined as a joint outcome of the economic growth and external vulnerability.
There were two instruments available to trimmer rising costs – exchange rate depreciation and wage
poliМв. However, LitСuania‘s МurrenМв was peРРeН to euro at fixeН exМСanРe rate, so monetarв
policy was restricted, meanwhile, a substantial gap in wage level between new MS and old one and
free movement of labour spurred immigration process out of the country thus limiting an option to
use policy of wage moderation.
Diminishing comparative advantage due to labour costs convergence was a signal for policy makers
to paв more attention to Нifferential aНvantaРe, i.e. wСen a Мountrв‘s proНuМts or serviМes Нiffer
from its competitors by quality and specific features. In other words, it was necessary to focus on
setting up a framework conducive to creativity and innovation and green field investments.
The nature of economy was changing, the number of people doing creative work had grown and
they were generating most of the growth in value-added, while, competitiveness in productive
sector was increasingly dependent on creativity in employing available technologies. Lithuania was
lagging behind EU Nordic countries in developing its economic activities, which created a breeding
ground for new ideas to emerge, so these economic activities have not yet exhausted potential for
economic growth. In 2006 the share of innovative enterprises as percentage of all enterprise
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accounted in Lithuania 22 %, meanwhile in Sweden – 45% and in Finland – 51%, in Estonia this
indicator was also higher and made 48%, while Latvia stood at lower end with 16% of enterprises
attributed to innovative group.
Key policy recommendations were as follows: review of tax policy and state expenditure priorities
and quality of financial markets supervision to manage growing internal imbalances, incentives for
resource productivity growth, introduction of framework conducive to creativity and innovation,
focus on private – public partnership to attract green field investments, social sector modernization
program to increase human capital.
Conclusions
In the beginning of transition period economists thought that economic growth and prosperity are
automatic outcomes of shift from centralized to market based economy. However, the reality was
different. Success of economic transformation depended on ability through structural reforms to
gain competitive advantage by augmenting total factor productivity and setting appropriate
macroeconomic, institutional and legal framework conducive to growth of economy.
Transformation process was a challenging one as in short period of time the structure of GDP had to
change from low – productivity to higher productivity services, the structure of knowledge needed
to be updated, the market - responsive institutions and the rule of law had to be build-up, internal
trust and external openness should be promoted to accumulate human capital.
A sustainable rate of growth can be maintained if total factor productivity (TFP) continues to
improve. This requires a wide range of learning, technology adoption, market development and
managerial improvement, as a pre-requisite to efficient private investment and appropriate
enterprise restructuring.
In the beginning of the EU membership period, it was expected that convergence with the stable
and prosperous EU internal market would facilitate macroeconomic stability, help modernize
economy and boost competitiveness and as an outcome ensure rapidly growing standards of life.
However, as it seen now reality is slightly different.
The growth model had to be adjusted to new economic settings and global structural changes, first
of all to an increase in the extent of the market and in human capital per worker, as well as a long - run
stability of relative wages (new Kaldor factors). Meanwhile, social and political stability needed for
successful implementation of reforms could not come without rapid growth of living standards.
Volatile financial markets, mounting sovereign debt, capital and labour mobility require innovative
economic policy and reliable transition period policy recommendations adjusted to the new
economic setting and based on accumulated integration experience could well serve as a benchmark
for Нevelopment a sustainable anН Мompetitive Мountrв‘s lonР – term growth model.
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Literature
1. Atoyan R., (2010). BeвonН tСe Crisis: RevisitinР EmerРinР Europe‘s GrowtС MoНel. IMF
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Community and Everyday Life – NY, Basic Books.
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88, No. 1, p. 1-33.
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Human Capital - Cambridge, MA, Working Paper No 15094, National Bureau of Economic
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financial integration: currency risk, legal harmonization, or trade? - Cambridge, MA NBER
Working Paper No 15034.
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33, p. 31-39.
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Economics / European Institute.
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Yale, Yale University.
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American Political Science Review Vol. 87, No. 3, p. 567-576.
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Development – New York, Harward press.
15. Purfield C., Rosenberg C. B., (2010). Adjustment under a Currency Peg: Estonia, Latvia and
Lithuania during the Global Financial Crisis 2008-09. IMF Working paper.
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16. Romer P. M. (2007). Economic Growth – Stanford University, Concise Encyclopedia of

Economics, Liberty Fund, p.6.
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International МonferenМe ―LitСuania: From Transition To ConverРenМe―, Vilnius: EuРrimas,
p.153-161.
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Multi-variant estimations of relative sustainable development of the Baltic

countries: emphasizing the institutional dimension
Virginija Grybaitė, Manuela Tvaronavičienė

Vilnius Gediminas Technical University, Lithuania
Email:virginija.grybaite@vgtu.lt
Purpose – The aim of this paper is twofold: to estimate and to compare sustainable development
processes in Lithuania, Latvia and Estonia, focusing on institutional dimension of sustainable
development and to explore if the different methods authors employ, impaМt on Мountrв‘s rankinР
results.
Design/methodology/approach – Authors employ two of the most popular methods: the AHP
(Analytic Hierarchy Process) and the multi-criteria complex proportional method (MCP). Data
embracing 2004-2010 year period is being analyzed. Authors take into account that different
approaМСes to Мountries‘ Нevelopment assessment miРСt affeМt tСeir Мomparison results. In orНer to
obtain a multi-faceted view, several variants of sustainable development estimations of Lithuania,
Latvia and Estonia are being performed.
Findings - Despite applied different multi-criteria methods, those differences in presented case had
no impact on countries ranking.
Keywords Sustainable development, AHP (Analytic Hierarchy Process), Multi-criteria complex

proportional method (MCP), institutions
1. Introduction
In recent years more and more attention are being paid to the institutions and theirs impact to
economic growth and development. The importance of institutional aspect is being emphasized
(Aoki, 2001; North, 1991, 1994; Nelson and Sampat, 2001; DasРupta, 2007, Grвbaitė anН
Tvaronavičienė, 2008, TСe WorlН Bank Group, 2007, Glaeser et al. 2004, Rodrik, 2000). Properly
functioning institutions are essential for sustainable development in the realization of the social,
economic, and environmental aims set by the society (Helm, 1998). Implementation of any policy
depends on the institutions and the competence of these institutions. Despite the assertion of prime
importance of institutions in the process of development there are some disagreements on the
definition of institution (whether political and economic institutions should be distinguished;
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whether institutions and organizations are synonymous, origin of institution, i.e. endogenous versus
exogenous one). Acemoglu and Robinson (2008) distinguish two types of institutions: economic
and political. Political institutions condition efficiency of economic ones. Economic institutions, in
their turn, are main players consequently determining level of sustainable development. Economic
institutions are seen as ―МolleМtive МСoiМes tСat are tСe outМome of a politiМal proМess―, i.e. ―НepenН
on tСe nature of politiМal institutions anН tСe Нistribution of politiМal power in soМietв―. NortС
(1991) admits that institutions provide the incentive structure of an economy and that, as the
structure evolves; it shapes the direction of economic movement towards growth, stagnation or
decline. Nevertheless, institutions, according to scientists, could obtain different meaning. North
(1994) perceives institutions as humanly devised formal and informal constraints, respectively,
rules, laws, constitutions, and norms of behaviour, conventions, self-imposed codes of conduct.
Those formal and informal constrains, respectively, define the incentive structure of societies and,
specifically, economies. North (1991) distinguishes institutions and organizations by indicating, that
it is the interaction between institutions and organizations that shapes the institutional evolution of
an economy. If institutions are the rules of the game, organizations and their entrepreneurs are the
players. Institutions are the humanly devised constraints that structure human interaction.
Organizations are made up of groups of individuals bound together by some common purpose to
achieve certain objectives. HoНРson (2006) Мlaims, tСat ―orРaniгations are speМial institutions tСat
involve (a) criteria to establish their boundaries and to distinguish their members from non-
members, (b) principles of sovereignty concerning who is in charge, and (c) chains of command
НelineatinР responsibilities witСin tСe orРaniгation―. Tvaronavičienė et. al. 2009 suРРests
institutions could be considered in broad and narrow sense. In broad sense notion of institution
embraМe orРaniгations, wСile in narrow sense NortС‘s approaМС Мan be aНopteН. Tvaronavičienė et
al. 2009 suppose that to consider institutional impact on sustainable development processes both
exogenous (outer) and indigenous (inner) stimuli to expand on various possible modes would have
been taken into account. Authors of this paper for estimation purposes consider the role of
institutions as environment conditioning tools. The better institutional performance at separately
taken country, the better performance of organizations-market players, and the faster sustainable
development processes.
2. Selection of indicators
Indicators, which will be used for comparisons of development level achieved in Baltic countries,
are being selected according following criteria: indicators have not contradict each other; could be
put into hierarchal range according significance; should be intrinsic to all considered countries;
numeric values of chosen indicators have to be available. (Bruntland, 1987). Choosing
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compounding indicators for the set, reflecting institutional development facet, appears to be a much
more complicated task. Tackling institutional development impact on sustainable development it is
reasonable to distinguish two general groups of indicators: socio-economic indicators, and
institutional indicators. It is obvious, that those groups in some respects overlap and any attribution
to one or anotСer Рroup is ratСer МonНitional (Grвbaitė anН Tvaronavičienė, 2008; Tvaronavičienė et
al. 2008). Authors select socio-economic indicators would embrace major macroeconomic and
some social facets: Real GDP per capita (euro per inhabitant)); Total R&D expenditure, % of GDP;
Annual average inflation rate; Business investment, % of GDP; Level of Internet access-
households; Labour productivity per person employed; General government debt; FDI intensity;
Inequality of income distribution; Unemployment rate, annual average. The following indicators,
as reflecting institutional impact on sustainable development processes are being selected: Rule of
law (measuring perceptions of the extent to which agents have confidence in and abide by the rules
of society, and, in particular the quality of contract enforcement, property rights, the police, and the
courts, as well as the likelihood of crime and violence), Government effectiveness index (measuring
perceptions of the quality of public services, the quality of the civil service and the degree of its
independence from political pressures, the quality of policy formulation and implementation, and
tСe МreНibilitв of tСe Рovernment‘s Мommitment to suМС poliМies), VoiМe anН aММountabilitв,
Regulatory Quality (Kaufmann et al. (2005)), Index of Economic Freedom (Gwartney and Lawson,
(2003)), Corruption perception index (Transparency international, 2011), Level of Мitiгen‘s
confidence in EU institutions, E-government on-line availability, in per cent, Voter turnout in
national elections, in per cent (EUROSTAT, 2011). Listed indicators will comprise institutional
indicator group, while estimating relative sustainable development level of Lithuania, Latvia and
Estonia.
3. Quantitative evaluation of relative sustainable development in Lithuania, Latvia and

Estonia: institutional dimension emphasized
Multi-criteria methods allow to aggregate values of included indicators into system, and receive the
value of one integral indicator. That integral indicator would represent measure of considered
Мountries‘ Нevelopment at partiМular moment. ComputinР of suМС inНiМators for a Мertain perioН (in
our case years 2004-2010) allow deriving tendency of development of a concrete country. Integral
indicators computed for Baltic countries would allow comparing countries and getting insights of
their development specifics. Technique of integral indicator computing may differ depending on
multi-criteria method applied. We will use two, the most popular methods: AHP (Analytic
Hierarchy Process) and multi-criteria complex proportional method (MCP). MCP method is used to
normalize (convert indicators being maximized and minimized into one direction changing ones)
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values of inМluНeН into sвstem inНiМators (Ginevičius 2006; Ginevičius, PoНveгko 2008a,b;
Zavadskas et al. 2006). Multi-criteria methods are devised to connect the product of two values. The
first value is significance or weight of a particular indicator included into system; the second value
is the value of the indicator, for which significance has been determined. Usually significances are
set as decimals, sum of which is equal to one. The mostly spread approach to deciding, what
significance to attribute to a particular indicator, is to employ experts. Considering such a
МompliМateН question as estimation of Мountries‘ Нevelopment we alloweН tСat opinions of experts,
which due to a variety of beliefs, can be diametrically different. Even more, there is a principal
question if opinions of randomly chosen experts in our case can be employed. Different sets of
experts most likely would give different weights. For those reasons we adopted an idea to model
mathematically three plausibly different approaches to development; one would emphasize
institutional aspects of development, the second one would emphasize social-economic aspects, and
in the third case all indicators included into system would be considered as equally significant.
Comparisons of resultinР aРРreРateН inНiМators‘ values woulН reveal Сow muМС aНopteН approaМС
reflected by attributed significances affects the final result. To get answers to the raised scientific
question three different situations are being mathematically modelled. In the first situation
institutional aspect of development are considered as the most important and, appropriately,
institutional indicators receive the highest significances. In the second situation higher significances
are attributed to economic indicators. In the third situation economic and institutional aspects are
considered equally important; hence all indicators receive equal significances.
4. Results of development estimation

In the first modeled situation we assume that institutional aspects of development are being
emphasized. Application of AHP and MCP methods provides us with similar results: in the
averaged period of 2004-2010 Estonia is the country, which among the Baltic countries achieved
the highest level of development (after EU-15). Lithuania and Latvia according to calculations
appear, respectively, in the second and the third places (Fig.1a, b). If European context is taken into
consideration, EU-15 countries get into the first place, Estonia in second, EU-27 get into the third,
the fourth and the fifth by Lithuania and Latvia respectively. Observation of development dynamics
of all considered countries (Fig. 2a, b) provides us with similar ranking of countries according to
estimated sustainable development level.
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Fig. 1 a. Aggregated assessment of Baltic Fig. 1 b. Aggregated assessment of Baltic

countries in the EU context during the countries in the EU context during the
averaged period of 2004-2010 (the first averaged period of 2004-2010 (the first
situation; AHP method). situation; MCP method).
Data source: Eurostat, Transparency international, The Heritage Foundation, computed by authors
Fig. 2 a. Dynamics of aggregated assessment Fig. 2 b. Dynamics of aggregated assessment

of Baltic countries in the EU context during of Baltic countries in the EU context during
the period of 2004-2010 (the first situation; the period of 2004-2010 (the first situation;
AHP method). MCP method).
In the second mathematically modeled situation the highest significances are attributed to
indicators included into group of socio-economic ones. Data employed in calculations represent
mathematical averages of selected indicators, computed for years 2004-2010. As we know,
macroeconomic conditions during the last years have been changing drastically in the majority of
countries. Notion of sustainable development embrace a vast array of dimension of development,
СenМe, to avoiН Нistortions we НeМiНeН to base our Мountries‘ Мomparisons on perioН averaРes, as
providing more objective insights into processes of sustainable development. Aggregated indexes
computed according ACP and MCP methods gives different view compare with the first situation.
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Application method MCP shows that EU-15 countries remain in the first place, but when applying
AHP method, we see different situation, Estonia and EU-15 change their position, and we see
Estonia in the first place, EU-15 in the second, EU-27 in the third. Latvia and Lithuania also change
their position and Lithuania remains in the fifth place (Fig.3a, b). It should be noted that the values
of aggregated indexes computed for Lithuania and Latvia vary very little and this change is mostly
due to an inflation rate. In 2010 Latvia had the lowest inflation rate not only among Baltic
countries, but respectively among EU-15 and EU-27. For the comparison reason, let us glance at
dynamics of aggregated indexes of Baltic countries during the time period of 2004-2010 (Fig. 4a,
b). We can observe that Latvia and Lithuania regroup their positions in the year 2009-2010 (AHP
method). MCP method provides us with rather different information, and we observe that Latvia
and Lithuania does not regroup in the year 2010.

averaged period of 2004-2010 (the second averaged period of 2004-2010 (the second
Fig. 4 a. Dynamics of aggregated assessment the period of 2004-2010 (the second situation;
of Baltic countries in the EU context during AHP method).
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Fig. 4 b. Dynamics of aggregated assessment the period of 2004-2010 (the second situation;
of Baltic countries in the EU context during MCP method).
In the third modeled situation equal significances are attributed to all indicators included into
sustainable development system. Application of multi-criteria methods provides us with rather
similar results as in the modeled first situation, where greater significances are attributed to
institutional indicators. In the averaged period of 2004-2010 Estonia is the country, which among
the Baltic countries achieved the highest level of development (after EU-15) (Fig.5a, b). If
European context is taken into consideration, EU-15 countries get into the first place; EU-27 get
into the third, the second place is occupied by Estonia, the fourth and the fifth by Lithuania and
Latvia respectively. Observation of development dynamics during the period 2004-2010 of all
considered countries (Fig. 6 a, b) provides additional information: We observe that as in the second
situation (fig. 4 a, b) Latvia and Lithuania change their position in the year 2009-2010 (AHP
method), but applying MCP method provides us with completely different view: Latvia and
Lithuania does not change their position (Fig. 6a, b). Thus, we can draw that it depends on the
method used.

averaged period of 2004-2010 (the third averaged period of 2004-2010 (the third
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Fig. 6 a. Dynamics of aggregated assessment Fig. 6 b. Dynamics of aggregated assessment

of Baltic countries in the EU context during of Baltic countries in the EU context during
the period of 2004–2010 (the third situation; the period of 2004–2010 (the third situation;
AHP method). MCP method).
Table 1. Ranking of countries according generalized situational results

Method AHP MPC
Situation 1 2 3 1 2 3
Estonia Estonia Estonia Estonia Estonia Estonia
Place Lithuania Latvia Lithuania Lithuania Latvia Lithuania
Latvia Lithuania Latvia Latvia Lithuania Latvia
Conclusions
Despite the some disagreements between scientists concerning the definition, origin of institutions
and etc., scientists assert the prime importance of institutions in the process of development.
Properly functioning institutions are essential for sustainable development in the realization of the
social, economic, and environmental aims set by the society.
Authors performed research let to rank Baltic countries according level of development. Ranking
differs when emphasis is put on institutional and socio-economic aspects of development Type of
multi-Мriteria metСoН, applieН on Рiven statistiМal Нata, НiН not affeМt Мountries‘ ratinР (Table 1).
To summarize the specific of application of multi-criteria method, we need to emphasize that
despite the fact that methods are quite different, a selection particular methods for research, have
less impact on calculation results, than the attributed significance to one or other group of
indicators. Significances, attributed to one or other group of indicators are crucial because, finally,
affect ranging of countries.
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The changes in the financial markets of the Baltic states in the period of
economic downturn
Petras Dubinskas1, Stanislava Stungurienė2 Laima Urbšienė3

International Business School at Vilnius University, Lithuania
Email: 1petrasd@tiscali.it 2ststunguriene@centras.lt 3laima.urbsiene@gmail.com
Abstract
This article looks at recent patterns of global financial crisis and analyses the results of causality in
equity markets of the three Baltic States: Lithuania, Latvia, and Estonia starting with 2008.
The authors employed empirical models developed on the basis of Granger causality tests, and co-
integration tests in order to confirm the hypothesis on the similarities of the general trends during
the two major international financial crises.
The research of causality has confirmed the hypothesis that the econometric methods applied to the
analysis of the 1987 crisis may be employed in the analysis of the 2008-2009 financial crisis as
well.
In the light of the recent empirical literature, pointing to strong financial markets interdependence,
both domestically and internationally, there are few assessments of turmoil and downturns in the
financial markets that are implemented by employing empirical tests developed on the basis of
econometric models.
Foreword
Most authors designate financial turmoil as the main reason moving financial markets worldwide.
The reasons for the appearance of such turmoil are most often divided into two categories,
macroeconomic and microeconomic. The reasons of macroeconomic character are ordinarily related
to the changes in the State budget, interest, and inflation rates (Wang et al., 2007). Insurance of
investment portfolios, speculative operations on derivative markets, risky acquisitions and
―bubbles‖ МauseН bв lonР-lasting speculations are attributed to microeconomic reasons (Malliaris
and Urrutia, 1992, Chuang et al., 2009). And nevertheless, this point of view has received some
criticism referring to the impossibility to verify the reliability of the conclusions (Roll, 1988). Since
the reasons for the financial turmoil have not yet been ultimately clarified, it has become a really
challenging task to identify the impact of such shocks in the financial markets upon the efficiency
of capital markets which is often perceived as the response of financial instrument prices to publicly
accessible information (Friedman, 1990).
136
The authors of the present article have advanced a hypothesis that the trends of an abrupt plunge
and subsequent stabilisation of equity prices that were clearly discernable during the 1987 crisis are
also striking feature of the current financial crisis. The survey underlying the present paper was
conducted on the basis of the following assumptions: 1) both crises affected financial markets of
several states; 2) characteristic feature for the inception of the crises is an abrupt fall in equity
prices; 3) indications of stabilisation in financial markets become observable before financial
experts conclude the end of the financial crisis.
Research Methodology
To confirm the hypothesis on the similarities of the general trends during the two major
international financial crises, the authors employed empiric tests developed on the basis of: 1)
Granger causality tests, and 2) co integration tests. Granger causality tests are the principal tests
used in forecasting methods by applying time series. Based on econometric calculation
methodology American researchers have been examining potential dependencies between different
international equity markets under financial crisis conditions (Malliaris and Urrutia, 1992; Aktan et
al., 2009; Blume et al., 1989; Horobet and Lupu, 2009; De Gooijer and Sivarajasingham, 2008;
Ruxanda and Stoenescu, 2009).
Co integration tests are used to identify the relation between changes of securities prices in
individual markets. For instance, Engle and Granger (1987) have proved that in case two non
stationary variables are co integrated, the auto regression vector in the first differences is not fixed.
The simplest co integration test is the Durbin-Watson regression co integration. CRDW is suitable
for the first line systems. But the critical values of the test are extremely sensitive to parameters the
values whereof are below zero. In practice, CRDW is not a recommended method for the
examination of economic data; however, the test is still applied in certain cases. (Malliaris and
Urrutia, 1992).
Dickey-Fuller co integration test that was applied for examination of the price changes in the
markets during the 1987 financial crisis is based on the regression co integration idea: initially
performed calculations according to the formula (1) were followed by an examination of the
residual errors of the Dickey-Fuller regression (2).
LnP1t  c0  c1LnP2t   t (1),
 t   t 1  b1 t 1  1 (2).
This method is based on the hypothesis that b1  0 , and LnP1t and LnP2t are not co integrated. This
method is recommended for the investigation of price developments in the pre-crisis period, since
137
the examination of financial markets during the crisis or in the post-crisis period requires the
identification of models specifically tailored for the situation, or requires creation of new models
(Christopoulus and Leon-Ledesma, 2008; Rublikova, 2003; Dufour and Jouini, 2006; De Gooijer
and Sivarajasingham, 2008). Many other researchers for the purpose of examining the phenomena
of the same crisis used regressive analysis methods (Roll, 1988; Arbel et al. 1988). For instance, R.
Roll established that the major plunge down of the Asian markets (except Japanese) started on 19
October 1987. The latter fall was caused primarily by minor slumps in the markets of some
European states, later on in the Northern America and finally, in Japan (Roll, 1988).
Research of the Developments in the Baltic Financial Markets

In relation to any survey of the developments in financial markets and specifically under
extraordinary conditions it is of vital importance to provide a description of the initial data collected
and the appropriate interpretation of them. For example, Malliaris and Urrutia (1992) presented the
data about six equity markets (New York S&P 500, Tokyo Nikkei, London FT-30, Hon Kong Hang
Seng, Singapore Straits Times and Australia All Ordinaries), with specific focus on the
developments in the period from 1 May 1987 to 31 March 1988. All data was divided into three
periods: a) prior to the crisis; b) during the crisis; c) after the crisis. Having established the co
integration degree, and considering the results obtained, the
authors selected an appropriate causality test. Similar surveys were performed by other authors as
well (Beine et al., 2008).
Lithuania, Latvia and Estonia entered a deep recession in 2008 after several years of record growth.
The banks, who have driven the loan-based growth deepened the crisis by almost completely
stopping lending. The recession has hit Latvia the hardest. The construction industry has almost
collapsed and retail sails felt. All countries had large balance of payments deficits. Due to these
reasons, financial markets decreased too.
The beginning of the financial downturn in the Baltic States (Lithuania, Latvia, and Estonia)
should be marked as the end of Q3, 2008 that was characterised by most prominent negative
changes in the capital market; while the beginning of Q3, 2009 should be considered the start of the
way to recovery. The data used for the survey of the situation in financial markets are divided into
three periods: 1) the pre-crisis period (01-02-2008 – 31-08-2008), 2) the crisis period (01-09-2008 –
30-05-2009); 3) and the post-crisis period (01-06-2009 – 31-12-2009).
Based on the precedent survey of the financial crisis of 1987 (Malliaris et al., 1992), the authors of
the present article chose to use the Granger causality testing methodology. To be able to apply the
Granger causality test first it was necessary to verify the degree of co integration of the indices of
the main equity markets in each of the country (OMX Vilnius, OMX Riga, OMX Tallinn). For that
138
purpose the authors used the Dickey-Fuller and Johansen testing methodology. Both methodologies
demonstrated a strong co integration between the changes in the indices of all equity markets
irrespective of the period analysed (i.e., pre-crisis, during the crisis, post-crisis). In all cases the T-
statistics exceeded the critical value. The strongest co integration was observable in the crisis
period, and the weakest – after the crisis (the specific data of the co integration survey are presented
in Annex 1).
The results of the survey demonstrated that in the period preceding the financial downturn, the
OMX Vilnius index was specifically affected, and in particular by OMX Riga (see Annex 2). No
causality was established between the Latvian and Estonian markets. The assessment of all three
Baltic markets has led to a conclusion that the Lithuanian equity market was the most passive, while
Latvian market was most active. This might justify a conclusion that the financial downturn of the
Baltic States that started in September 2008 was primarily initiated by the Latvian financial market.
In view of financial crisis cases of existence of causality between markets become more frequent. In
this respect, specifically noticeable is the Latvian market – the most active in the period preceding
the market and the most passive of the three during the crisis, though the Estonian market lost some
of its activity as well. Furthermore, in view of a financial crisis most investors relate their interests
and expectations with larger markets that under crisis conditions are considered more reliable and
tend to recover quicker. This is clearly evidenced by the case of the Lithuanian financial market that
was the most passive in the period preceding the downturn, became the most active in the mid of
the crisis, and survived the equity plunge period comparatively painlessly. Taken all these factors
and considerations into account it is highly probable that the end of the financial downturn started in
Lithuania initiating the recovery trends in the smaller Baltic States (Latvia and Estonia).
The end of the financial downturn has restored the initial situation. The Latvian market is gaining
its activity (even exceeding that of Estonia), and the Lithuanian market is less active than in the
crisis period, however, more active than at the time preceding the crisis.
Conclusions
The survey concluded that in all cases the developments in the period prior to the financial
downturn affected the OMX Vilnius index that was mostly influenced by OMX Riga index (see
Annex 2). No causality was established between the Latvian and Estonian capital markets. In the
opinion of the authors, the financial downturn trends of the Baltic markets that started in September
2008 originated in the Latvian financial markets.
In the mid of the financial crisis the Latvian market in pre-crises period turned from most active to
most passive. Estonian market had lost some of its activity as well. Thus, the financial downturn to
the largest extent affected the Latvian and Estonian markets. This is clearly evidenced by the case
139
of the Lithuanian market that became the most active in the mid of the crisis and survived the equity
plunge period comparatively painlessly, thus confirming that in view of a financial crisis the
interests and expectations of most investors are related to larger markets that are normally
considered more reliable and resilient.
The end of the financial downturn has restored the initial situation: the Latvian market is gaining its
activity (in some respects even exceeding the Estonian), and the Lithuanian market is less active
than in the crisis period, however, more active than at the time preceding the crisis.
The results of the causality of three financial markets confirmed the hypothesis that the analysis of
the 2008-2009 financial crisis may employ the econometric methods applied for the analysis of the
1987 crisis by identifying the change in the trends of the pre-crisis, crisis and post-crisis causality.
Annex 1
Determination of co integration according to the Dickey-Fuller method. The significance level is 5
%, while critical values – in the pre-crisis period ( – 2.882); during the crisis (- 2.877); in the post-
crisis period (- 2.869).
PerioН before tСe Мrisis (01/02/208 – 31/08/2008)
Dependant variable Independent variable T-statistics Results
OMX Vilnius OMX Riga -10.837 cointegrate
OMX Vilnius OMX Tallinn -11.261 cointegrate
OMX Riga OMX Vilnius -16.127 cointegrate
OMX Tallinn OMX Vilnius -9.703 cointegrate
OMX Riga OMX Tallinn -16.161 cointegrate
OMX Tallinn OMX Riga -9.324 cointegrate
DurinР tСe Мrisis (01-09-2008 – 30-05-2009)
Dependant variable Independent variable T-statistics Results
OMX Vilnius OMX Riga -1.292 cointegrate
OMX Vilnius OMX Tallinn -13.015 cointegrate
OMX Riga OMX Vilnius -14.929 cointegrate
OMX Tallinn OMX Vilnius -12.998 cointegrate
OMX Riga OMX Tallinn -14.317 cointegrate
OMX Tallinn OMX Riga -1.238 cointegrate
The period after the crisis (01-06-2009  31-12-2010)

Dependent variable Independent variable T-statistics Result
OMX Vilnius OMX Riga -17,365 cointegrate
OMX Vilnius OMX Tallinn -19,936 cointegrate
OMX Riga OMX Vilnius -21,517 cointegrate
OMX Tallinn OMX Vilnius -20,911 cointegrate
OMX Riga OMX Tallinn -21,567 cointegrate
OMX Tallinn OMX Riga -18,266 cointegrate
Determination of co integration according to Johansen method
140
PerioН before tСe Мrisis (01-02-2008 – 31-08-2008)

Number of
cointegration Trace statistics Critical value Result
equations
0 116.11 47.85 cointegrate
DurinР tСe Мrisis (01-09-2008 – 30-05-2009)
Number of
equations
TСe perioН after tСe Мrisis (01-06-2009 – 31-12-2010)
Number of
equations
0 328,83 47,85 cointegrate cointegrate
Annex 2
Assessment of the causality of the Lithuanian, Latvian and Estonian financial markets
Period before The period after
During the crisis
the crisis the crisis (01-06-
(01-09-2008 –
Causality direction (01-02-2008 – 2009 – 31-12-
30-05-2009)
31-08-2008) 2010)
χ2 statistics (critical value is 5.99)
Latvia → Lithuania 13,92 0,15 6,59
Estonia → Lithuania 6,54 4,75 2,04
Lithuania → Latvia 5,04 8,62 9,21
Estonia → Latvia 5,98 13,96 14,01
Lithuania → Estonia 5,47 16,37 3,2
Latvia → Estonia 3,19 1,03 22,17
References
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Markets in the Global Financial Meltdown: Evidence from bric-a. African Journal of Business
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2. Arbel A., Carvell S. and Postnieks E. (1988). The Smart Crash of October 19th. Harvard
Business Review, May-June, 124-136
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between Stock Markets. European Journal of Finance, 14 (8), 663-686
141
4. Blume M. E.; A. C. MacKinlay; and B. Terker (1989). Order Imbalances and Stock Price
Movements on October 19 and 20, 1987. Journal of finance, 44, 827-848
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Time-varying Coefficient VAR Model. Journal of Forecasting, 27 (4), 293-303
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Return-volume Relations. Journal of Banking & Finance, 33 (7), 1351-1360
7. De Gooijer JG, and Sivarajasingham S. (2008). Parametric and Nonparamertic Granger
Causality Testing: Linkages between International Stock Markets. Physica A-statistical
Mechanics and its Applications, 387 (11), 2547-2560
8. Dufour JM., and Jouini T. (2006). Finite Sample simulation-based Inference in VAR Models
with Application to Granger Causality Testing. Journal of Econometrics, 135 (1-2), 229-254
9. Engle R., and C. W. Granger (1987). Co-integration and Error Correction: Representation,
Estimation, Testing. Econometrica, 55, 251-276
10. Horobet A., and Lupu R. (2009). Are Capital Markets Integrated? A Test of Information
Transmission within the European Union. Romanian Journal of Economics Forecasting, 10 (2),
64-80
11. Malliaris A. G. and Jorge L. Urrutia (1992). The International Crash of October 1987:
Causality tests. Journal of financial and Quantitative analysis, vol. 27, no. 3, 353-364
12. Roll R. (1988). The International Crash of October 1987. The Financial Analysts Journal, vol.
44, Issue 9, 19-35.
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14. Ruxanda G., and Stoenescu S. (2009). Bivariate and Multivariate Co integration and their
Application in Stock Markets. Economic Computation and Economic Cybernetics Studies and
Research, vol. 43 Issue 4, 17-31
15. Wang ZJ. ; Yang J., and Li Q. (2007). Interest Rate Linkages in the Eurocurency market:
Contemporaneous and Out-of-samle Granger Causality Tests. Journal of International Money
and Finance, 26, 86-103
142
Vocational training benefit and trends analysis in Lithuania
Laima Okunevičiūtė Neverauskienė1, Arūnas Pocius2
1
Vilnius Gediminas Technical University, Faculty of Business and Managament, 2The Lithuanian
Social Research Centre,
Emails: laima.okuneviciute@dsti.lt, arunas.pocius@dsti.lt
Abstract
The purpose of article – to reveal vocational training benefit and assess the trends of number of
persons studying in the vocational schools.
Methodology. In pursuance to estimate the vocational training benefit in the authors conducted
studies have been widely used the methods of sociological research and comparative analysis. In
particular, this article focuses on review of conducted studies and literature on this topic.
Findings. Result of this publication – the assessment of vocational training benefit and
disadvantages.
Keywords: vocational training, social economic benefit, labour market.
1. Introduction
As shown by Lithuanian research on the effectiveness of vocational training, labour market
vocational training plays a very important function of increasing motivation for social integration
and economic activity. However, the authors believe that social effectiveness is underrated in
LitСuania, anН tСis isn‘t right. All social effects of labour market vocational training directly serve
for the promotion of employment motivation in unemployed people and thus might attain even
bigger benefits in a post-modern society than a mere direct impact on employment, because high
employment motivation will enable more flexible adaptation to labour market needs in future and
proper implementation of economic activity in different economic and work conditions.
One more criterion for assessing the benefits of vocational training is the assessment of economic
effectiveness. In view to the objectives of the research, the effectiveness analysis was carried out by
comparing the benefits (income) received as a result of training with the costs of vocational training
implementation (organised at expense of the State and Employment Fund). The research revealed
an extremely high labour market effect of involvement of youth without professional qualifications
into vocational training. This group of trainees was apt to information, highly rated theoretical and
practical training and soon (usually within a month after the training courses) got employed. This
143
group of learners was the most motivated to excel professionally and joined the labour market more
quickly.
2. Literature and research review

In order to reveal the benefits of vocational training, the report presents a review of research works
conducted during years 2004–2009 on the benefits of vocational training: Research of the social and
economic effectiveness of labour market vocational training.(2004); The research on vocational
training benefit, evaluating results of placement in 90 days after training (2005); Research of the
benefits of vocational training for the unemployed, including assessment of the effectiveness of
vocational training programmes implementation and the quality of practical training (2006);
Development of vocational training of the unemployed and people warned about pending
redundancy. Assessment of the effectiveness of training services (2006–2007); Assessment of
active labour market policy measures for the disabled and making proposals to improve
effectiveness of the measures implemented (2008); Assessment of practical training of the
unemployed (2008); Effectiveness of continuing vocational training development and its impact on
socioeconomic development in European countries (2008).
2008 Institute of Labour and Social Research conducted the evaluation on vocational training and
non-formal eНuМation effeМtiveness (Okuneviči tė Neverauskienė et al. 2008). TСis researМС Сas
enableН a Мloser look at tСe voМational traininР impaМt on personal anН professional opportunities‘
assessment and relationships with others. 50 and more percent of respondents said that training
encouraged the plan after the learning courses to find a suitable job, in the future to improve their
professional qualifications by the gained occupation, to show further interest to the gained
profession. In addition, these were the positive aspects of training: psychological stress is gone,
after the learning course the persons has worked under fixed-term work contract, planning to start
their own business / work individually, the opportunity to realize own artistic skills, persons have a
realistic assessment of their job opportunities, employers' attitudes have changed (preferably the
employee), changes in approach to work / increased motivation, increased self-esteem / self-
confidence, increased self-independence / persons may plan their activities, improvement in mood.
The research revealed that investments into labour market vocational training constituted one of the
most cost-effective fields of investment. In 2005, economic effectiveness of such investments was
45% per вear (AnНriušaitienė et al., 2005) anН in 2006 – 49% (BaРНţi nienė et al., 2006). In otСer
words, investment of 1 Litas into labour market vocational training should bring 0.45–0.49 Litas
revenue each next year to the budgets of the State and Social Insurance Fund, even if a placed
unemployed individual is paid minimum wage only. It means that labour market vocational training
144
does not cause any loss to the budgets of the State and Social Insurance Fund but, on the contrary,
bring additional revenue in the long run.
According to employers, graduates of vocational training, as employed in their companies,
particularly lacked technical knowledge and skills to maintain required work pace (BaРНţi nienė et
al., 2006).. In the authors note that practical training lacks effectiveness despite overall positive
assessment. Professional qualifications of graduate trainees not always meet the needs of employers
and some practical skills are insufficient for successful anchoring in the labour market. On the other
hand, the employers themselves do not actively participate in the process of improving labour
market vocational training programmes and lack initiatives as to the more efficient organisation of
practical training in undertakings. Only 14% of the respondent employers, usually executives of
larger industrial enterprises, had detail knowledge of vocational training programmes, and only one
third of the respondents said they would like to take part in the development of practical skills
training programmes (Assessment of practical training of the unemployed, 2008).
In view of assessing the quality of practical training in vocational training programmes, the
researchers highlight the following key advantages (Assessment of practical training of the
unemployed, 2008):
 VoМational traininР proРrammes are reРularlв upНateН takinР into aММount emploвers‘
requirements and changes in the labour market;
 Duration of theoretical and practical training is quite well balanced in the majority of
training programmes;
 Practical training is implemented in stages: in training establishments and real work
environment (companies); duration of practical training in majority of the most demanded
vocational training programmes is extenНeН takinР in aММount emploвers‘ requirements anН
accounts for more than 70% of the total duration of training; more time is allowed for
practical training in companies compared to the training establishment;
 Representatives of employers are among members of examination board evaluating final
qualification exams.
3. The dynamic trends of basic vocational schools graduates

Labour market voМational traininР is one of tСe most important forms of persons‘ lifelonР learninР
concept. Another form of vocational training – vocational training for young people completed in
the primary or secondary school. This is the primary vocational training after leaving school, which
is designed to gain a first qualification.
The negative trends were showed in general НвnamiМ of voМational sМСools‘ РraНuates number anН
by examining changes in separate training areas, although there was a strong lack of working class
145
employees in the country. General number of vocational schools graduates decreased by 2.5
thousand in 2000–2009 (from 14.9 to 12.3 thousand) (Table 1). The main concern is decreased
number of vocational schools graduates in production and processing, and engineering sciences (by
2.2 and 1.6 thousand). While these professions determines prosperous industrial development and
new technologies deployment into production.
The majority of young adults who are seeking speciality have formed a negative provision to
underestimate the vocational training. Working-class profession has lost its prestige, and pursuit of
higher education have often been based on the principle – a diploma paper is more important than
the quality of specialty knowledge. Contributed to the current situation higher schools rapidly
increased the number of students, but this at the same time affected both the quality of trainee
specialists, and employers and public interests to prepare more working-class employees.
Professional school graduates in 2009 accounted for only 28 percent. all higher education
institutions graduates (the number of universities and colleges graduates). In fact, one young person
who has completed a vocational school had an average of about 3.5 higher education graduates (in
2000 only 1.1).
Table 1. Number of vocational schools graduates by field of education

(According to Statistics Lithuania)
Chang
2000 2005 2006 2007 2008 2009 e
Computing .. 28 46 45 46 2911 2911
Architecture and
construction 1364 1472 1364 1676 2206 2380 1016
Security services .. 154 304 184 43 225 225
Social services .. 181 210 160 138 73 73
Health care 45 20 60 70 120 93 48
Art 330 421 384 344 320 347 17
Transport services 300 228 268 285 258 288 -12
Agriculture,
forestry and
fisheries 488 230 163 231 289 243 -245
Service for persons 3162 1931 2074 1939 2099 1936 -1226
Business and
administration 1619 3422 3186 3131 3017 73 -1546
146
Engineering 4111 3101 3015 2835 2844 2535 -1576

It Production and
processing 3456 1792 1583 1665 1315 1223 -2233
1256 1269 1232
Total 14875 12980 12657 5 5 7 -2548
sСoulН be noteН tСat workinР population‘s existing professional development aspirations are low to
meet the actual needs of the economy where it is needed the most working-class professions. For
example, the Lithuanian Adult Education and Information Centre in 2008 conducted a study that
found that willingness to gain a specific demand profession have expressed only 14 percent of
survey respondents. Absolute majority of the remaining respondents are not interested in working-
class professions.
4. Conclusions
1. The research findings suggest that VET benefits are very high in Lithuania. Of course, this
requires additional financial resources in a short term, but the research obviously demonstrate that
funding of VET is not loss-bearing in the long run. According to the estimates, VET notably
contributes to employment of individuals. In its turn, employed people are supposed to constantly
multiply a certain return of VET costs (through taxes and domestic consumption).
2. Besides economic and employment effect (benefit), the research identified a very high social
effect of VET in Lithuania, i.e., improved self-confidence, increased employment or learning
motivation, etc. In Lithuania, social effects of vocational training are hardly taken into account on
the policy-formation level. Therefore, we can say that the research uncovered a new dimension for
the assessment of VET benefits.
3. On the other hand, the conducted research identified a number of bottlenecks:
 Insufficient VET accessibility by different groups of people (disabled, rural individuals);
 Insufficient balance between theoretical and practical training;
 Insufficient quality of practical training (and often duration, too), imperfection of practical
training resource base;
 Insufficient variety of training programmes;
 Insufficient opportunities for the actualisation of training programmes (no
control/monitoring mechanisms);
 Underused distance learning opportunities;
 Insufficient differentiation of VET organisation by the needs and possibilities of individuals
(adults in particular) able and willing to learn;
147
 Insufficient cooperation of social partners on the level of VET policy building and
implementation.
4. TСe neРative trenНs were sСoweН in Рeneral НвnamiМ of voМational sМСools‘ РraНuates number
and by examining changes in separate training areas, although there was a strong lack of working
class employees in the country. Professional school graduates in 2009 accounted for only 28
percent. all higher education institutions graduates (the number of universities and colleges
graduates). In fact, one young person who has completed a vocational school had an average of
about 3.5 higher education graduates.
5. Basing on the research findings, the authors come up with recommendations that can help
improve the benefits of vocational training for the unemployed, increase the effectiveness of
vocational training programmes and the quality of practical training. The recommendations suggest
that training programmes should pay greater attention to specific practical skills and capabilities
characteristic to each individual group of professions, because employers first of all anticipate
particular practical skills and capability to do the job from future employees.
6 With the view to improving practical skills of trainees, the researchers believe more attention
should be paid to the development of new training programmes meeting labour market needs,
modernisation of training methods and practical training base according to the labour market needs,
adjustment of training programme contents, organisation of on-site practical training and
emploвers‘ involvement into tСe orРanisation of praМtiМal traininР.
Literature
1. AnНriušaitienė, D; Gruţevskis, B; Jonušauskas, S; Junevičius, R; Kabaila, A; PoМius, A;
Sakalauskas, R; Šileika, A; Zabarauskaitė, R; Zabulвtė, L 2004. ResearМС of tСe soМial anН
economic effectiveness of labour market vocational training. Vilnius: Institute of Labour and Social
Research.
2. Okuneviči tė Neverauskienė, L; Gruţevskis, B.; PoМius, A; Šileika, A; Junevičius, R. 2005. TСe
research on vocational training benefit, evaluating results of placement in 90 days after training.
Vilnius: Institute of Labour and Social Research.
3. BaРНţi nienė, D; Gruţevskis, B; Kabaila, A; Okuneviči tė Neverauskienė, L; SventiМkaitė, K
(2006): Research of the benefits of vocational training for the unemployed, including assessment of
the effectiveness of vocational training programmes implementation and the quality of practical
training. Vilnius: Institute of Labour and Social Research.
4. Okuneviči tė Neverauskienė, L; Gruţevskis, B; PoМius, A; Šileika, A; Šlekienė, K. 2006–2007.
Development of vocational training of the unemployed and people warned about pending
148
redundancy. Assessment of the effectiveness of training services. Vilnius: Institute of Labour and
Social Research.
5. Okuneviči tė Neverauskienė, L; Gruţveskis, B.; Moskvina, J.; PoМius, A 2008. Assessment of
active labour market policy measures for the disabled and making proposals to improve
effectiveness of the measures implemented. Vilnius: Institute of Labour and Social Research.
6. Okuneviči tė Neverauskienė L., Moskvina J. SoМial benefits of labour market vocational training
// Vocational Education: Research and Reality, T. 19. Kaunas: Vytautas Mgnus University, Centre
for Vocational Education and Research, 2010. ISNN 1392-6241. P. 158-167.
7. Okuneviči tė Neverauskienė L., Gruţevskis B. TСe neeН and the possibilities of human capital
development: assessment of employers and graduates of higher education institutions // Economica,
Volume 87. Vilnius: Vilnius University, 2009. ISSN 1392-1258. P. 90–106
Statistical Yearbook. 2011. Vilnius: Statistics Lithuania.
8. Assessment of practical training of the unemployed. 2008. Vilnius: Social Policy Group.
Effectiveness of continuing vocational training development and its impact on socioeconomic
development in European countries. (Leonardo da Vinci project ―CVTS-2 RevisiteН―. 3S ResearМС
laboratory (Austria), BETA Cereq Alsace Strasbourg University (France), BIBB (Germany),
CESPIM (Italy), NUOV (Czech Republic), Vytautas Magnus University, Centre for Vocational
Training Studies (Lithuania). http://www.trainingineurope.com.
9. Teresevičienė, M; Rutkauskienė, D; VolunРevičienė, A; Zuгeviči tė, A; Rutkienė, A;
TarРamaНгė, A. 2008. Opportunities of applвinР НistanМe traininР/learninР to promote voМational
training development. Kaunas: Vytautas Magnus University.
149

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International scientific conference

BUSINESS – SCIENCE – GOVERNMENT

21-23 September, 2011

International Business School at Vilnius University

BUSINESS – SCIENCE – GOVERNMENT PARTNERSHIP:

21-23 September, 2011

ISSN: 2029-7971 Published by: VU IBS

Scientific Committee of the Conference

 Dr. Akbar Yusaf H. (Central European University, Hungary)

KNOWLEDGE AND TECHNOLOGY TRANSFER

VirРinija Grвbaitė, Manuela Tvaronavičienė ............................................................................................ 126

I. KNOWLEDGE AND TECHNOLOGY TRANSFER

Competitive Knowledge-and Technology Transfer - The Steinbeis Approach

Uwe Haug, Dipl.-Ing. (FH)

The Transfer Network: Structure and Organization

A key to success: transfer entrepreneurs and transfer companies

A key to success: Baden-Württemberg

A key to success: marketability and constant renewal

A key to success: decentralized activity within a common structure

Fig. 1 Internal and external relations in Steinbeis enterprises

A key to success: flat hierarchies

Fig. 2 Internal relations in Steinbeis enterprise

A key to success: small-scale and major contracts

A key to success: the principles of the Baden-Württemberg Transfer Model

In the service of the society: The Finnish UAS system

Tauno Kekäle, Hanna Yli-Yrjänäinen

Examples: The Vaasa University of Applied Science

Applied science at its most typical: Testing of prototypes

Implementing an academic innovation and entrepreneurship program – the

Dr. Thomas Hedner, Dr. Boo Edgar, Dr. Ivor Cowlrick

Venture creation approach

This interdisciplinary educational setting is vital to implement a culture of innovation and

Returning value to internal and external stakeholders

Value for the future

Development of Science-Industry partnership in Slovenia- A Case study

Maja Bučar, Matija Rojec

Key words: science-industry partnership, NIS, Slovenia, food/ chemical industry.

2. Science-industry cooperation in Slovenia: some basic data

4. Main findings and messages

National Innovation System: Commercialization of knowledge in the Russian

Tatiana Khvatova1, Femi Odebiyi2

Keywords: innovation; knowledge commercialization; higher education; national policy

Commercialization of Knowledge in Lithuanian and Russian Universities

Evaluating components of the Russian and Lithuanian National Innovation Systems

Indicators Russia……… Lithuania.…….

Score 0-100 Score 0-100

3. INNO-Policy TrendChart (2009), Innovation Policy Progress Report Lithuania, URL

 How do universities or their staff respond to initiatives directed toward the

Appendix 2. Target groups of support measures (INNO-Policy TrendChart – Innovation Policy

II. ORGANIZATIONS DEVELOPMENT MODELS

What do SMEs expect from E – government services?

Gunnar Prause, Merli Reidolf

Keywords: G2B, business oriented e-services, SMEs

4. Results and discussion

Table 1. Information society indicators in the project partner countries, 2009

DK – Denmark, SE – Sweden, DE – Germany, FI – Finland, EE – Estonia, LT – Lithuania, LV - Latvia

4.2. Reasons for using e-government

4.3 Disadvantages of the e-government