Country Report Portugal 2009

INNO-Policy TrendChart
INNO-Policy TrendChart –
Innovation Policy Progress Report
Portugal
2009
European Commission
Enterprise Directorate-General
PREFACE
Innovation is a priority of all Member States and of the European Commission. Throughout Europe,
hundreds of policy measures and support schemes aimed at innovation have been implemented or
are under preparation. The diversity of these measures and schemes reflects the diversity of the
framework conditions, cultural preferences and political priorities in the Member States.
PRO INNO Europe® is an initiative of the Directorate-General for Enterprise and Industry (DG ENTR)
which aims to become the focal point for innovation policy analysis, learning and development in
Europe, with the view to learning from the best and contributing to the development of new and better
innovation policies in Europe. Run by the Innovation Policy Directorate of DG ENTR, it pursues the
collection, regular updating and analysis of information on innovation policies at national and
European level.
INNO-Policy TrendChart serves the 'open method of coordination' approach laid down by the Lisbon
Council in March 2000. It supports policymakers and innovation support measure managers in Europe
by providing summarised and concise information and statistics on innovation policies, performances
and trends. It is also a European forum for benchmarking and the exchange of good practices in the
area of innovation policy.
INNO-Policy TrendChart products
INNO-Policy TrendChart, previously the TrendChart on Innovation, has been running since January
2000. It currently tracks innovation policy developments in all 27 EU Member States, plus Brazil,
Canada, China, Croatia, Japan, Iceland, India, Israel, Norway, Switzerland, Turkey and the US. The
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INNO-Policy TrendChart website ( ) provides access to the following services and publications, as
they become available:
• a database of innovation policy measures in the 39 countries;
• a news service and related innovation policy information database;
• annual policy monitoring reports for all countries covered;
• the European Innovation Progress Report, an annual synthesis report bringing together
key points in the INNO-Policy TrendChart.
This document has been prepared within the framework of an initiative of the European Commission's
Enterprise and Industry Directorate-General, Innovation Policy Development Unit. Official responsible:
Cesar Santos (Cesar.SANTOS@ec.europa.eu).
The present report was prepared by Vitor Corado Simões, ISEG-Instituto Superior de Economia e
Gestão, Universidade Técnica de Lisboa (vcs@iseg.utl.pt). The contents and views expressed in this
report do not necessarily reflect the opinions or policies of the Member States or the European
Commission.
The report covers the period from July 2008 to June 2009.
Copyright of the document belongs to the European Commission. Neither the European Commission,
nor any person acting on its behalf, may be held responsible for the use to which information
contained in this document may be put, or for any errors which, despite careful preparation and
checking, may appear.
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See http://www.proinno-europe.eu/index.cfm?fuseaction=page.display&topicID=52&parentID=52 online.
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CONTENTS
EXECUTIVE SUMMARY: PUBLIC SUPPORT FOR INNOVATION – A SNAPSHOT .............................I
1. MAIN TRENDS AND CHALLENGES IN THE NATIONAL INNOVATION SYSTEM..................... 1

1.1 RECENT ECONOMIC TRENDS AND MARKET DEVELOPMENTS ..................................................................... 1
1.1.1 The credit crisis and its effect on innovation activity...................................................................... 2
1.2 RECENT TRENDS IN THE NATIONAL INNOVATION PERFORMANCE ............................................................. 6
1.3 IDENTIFIED CHALLENGES ...................................................................................................................... 10
2. PUBLIC SUPPORT TO INNOVATION .................................................................................................. 14
2.1 MAIN OBJECTIVES FOR INNOVATION POLICY .......................................................................................... 14
2.2 INNOVATION GOVERNANCE SYSTEM ...................................................................................................... 17
2.2.1 Governmental bodies..................................................................................................................... 17
2.2.2 Main bodies managing implementation of policies....................................................................... 18
2.3 PUBLIC FUNDING TO INNOVATION .......................................................................................................... 20
2.3.1 Review of the current range of support measures for innovation.................................................. 20
2.3.2 New or modified support measures ............................................................................................... 22
2.3.3 Strengths and weaknesses in the innovation policy support system .............................................. 24
3. INNOVATION POLICY AND COMPETITIVENESS: AN APPRAISAL........................................... 25
3.1 THE ABILITY OF POLICY TO ADDRESS CHALLENGES ............................................................................... 25
3.1.1 How well does policy respond to innovation challenges?............................................................. 25
3.2 EFFECTIVENESS OF POLICY DESIGN ........................................................................................................ 26
3.2.1 Process of delivery ........................................................................................................................ 28
3.3 IMPACT OF PUBLIC SUPPORT FOR INNOVATION ....................................................................................... 29
3.3.1 Conclusions: possible future actions and opportunities for innovation policy ............................. 32
ANNEXES ........................................................................................................................................................... 33
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Exhibits
Exhibit 1: Comparable indicators of economic performance................................................................... 2

Exhibit 2: European Innovation Scoreboard: Portugal ............................................................................ 7
Exhibit 3: Main innovation policy challenges ......................................................................................... 10
Exhibit 4: Main innovation policy documents......................................................................................... 14
Exhibit 5: Technological Plan quantified targets ................................................................................... 15
Exhibit 6: New Innovation Policy Support Measures............................................................................. 23
Exhibit 7: Potential Effects of Innovation Policy Support Measures on EIS.......................................... 30
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Abbreviations
AdI – Agência de Inovação (Innovation agency)

AICEP – Agência para o Investimento e Comércio Externo de Portugal (Agency for Investment and Foreign
Trade)
CCCT – Conselho Coordenador de Ciência e Tecnologia (Advisory Board on Science and Technology)
CFOP – Competitiveness Factors Operational Programme
CIS – Community Innovation Survey
CITEC – Programme supporting the creation of research and technology centres in companies
COTEC – Business association to promote technology and innovation
CSF – Community Support Framework
CTP – Competitiveness and Technology Poles
EIS – European Innovation Scoreboard
EPO – European Patent Office
EU – European Union
FACC – Fundo de Apoio à Comunidade Científica (Scientific Community Support Fund)
FCT – Fundação para a Ciência e Tecnologia (Science and Technology Foundation)
FDI – Foreign direct investment
FEDER – European Regional Development Fund
FINOVA – Innovation Financing Support Fund
FTE – Full time equivalent
GCNELPT – Gabinete do Coordenador Nacional da Estratégia de Lisboa e do Plano Tecnológico (Office of the
National Coordinator for the Lisbon Strategy and the Technological Plan)
GDCF – Gross Domestic Capital Formation
GDP – Gross Domestic Product
IAPMEI – Instituto de Apoioo às Pequenas e Médias Empresas e à Inovação (Institute for Support of Small- and
Medium-sized Enterprises and Innovation)
ICT – Information and Communication Technologies
IIS – Innovation Support System
IMF – International Monetary Fund
INL – Iberian International Nanotechnology Laboratory
INOFIN – Financial Innovation System
MCTES – Ministério da Ciência Tecnologia e Ensino Superior (Ministry for Science Technology and Higher
Education)
MEcI – Ministério de Economia e Inovação (Ministry for the Economy and Innovation)
MFAP – Ministério das Finanças e Administração Pública (Ministry for Finance and Public Administration)
NIS – National innovation System
NITEC – Programme supporting the creation of research and technology teams in companies
NRP – National Reform Programme
NSRF – National Strategic Reference Framework
OECD – Organisation for Economic Co-operation and Development
OP – Operational Programme
PNACE – Programa Nacional para o Crescimento e o Emprego (National Programme for Growth and
Employment)
PRACE – Programa de Reforma da Administração Central do Estado (Public Central Administration
Restructuring Programme)
PPS – Purchasing Power Standards
RTD – Research and Technological Development
RTDSS – Research and Technological Development Support System
R&D – Research and Development
SIESCTN – Sistema de Incentivos às Entidades do Sistema Científico e Tecnológico Nacional (Support System
for the Scientic and Technological System Bodies)
SIFIDE – Tax system to support research and development activities
SIQPME – Sistema de Incentivos à Qualificação das PME (SME Skills Support System)
SME – Small- and Medium-sized enterprises
SSH – Social Sciences and Humanities
S&E – Science and Engineering
S&T – Science and Technology
TBP – Technological Balance of Payments
UMIC – Agência para a Sociedade do Conhecimento (Knowledge Society Agency)
USA – United States of America
USPTO – United States Patent and Trademark Office
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Executive Summary: Public support for innovation – a snapshot
1. Main trends in the National Innovation System
The main characteristics of the National innovation System (NIS) in Portugal have remained largely
unchanged. It includes a wide spectrum of players, due to a process of development of scientific and
technological organisations, which has gained a stronger pace as a result of the successive
Community Support Frameworks. The range of science and technology (S&T) players is wide, ranging
from Universities and Public Laboratories, through Associated Laboratories and S&T Parks to
Technological Infrastructures and Technological Centres. The most recent addition to these players is
the Iberian International Nanotechnology Laboratory (INL), a joint endeavour of Portugal and Spain. In
the financing field there is also a large number of actors, although the development of seed and
venture capital remains weak. The key players in the NIS are, however, business firms. The
Portuguese economic fabric is characterised by a very high share of SMEs. While a crust of high
performing companies has developed, many SMEs still lack the in-house capabilities needed to
achieve international competitiveness and to successfully focus on 'high-end' markets.
There is wide consensus that the chief weakness of the NIS in Portugal is the low density and depth of
the linkages established among players in the system. For many years, since the Porter Report in the
early 1990s, the design of a cluster policy has been in the policy agenda as a key instrument to foster
cooperation and linkages among the actors in the NIS. For one reason or another, only in the National
Strategic Reference Framework 2007-13 (NSRF) has a cluster policy been established. The first
Competitiveness and Technology Poles (CTP) and Other Clusters selected were disclosed in July
2009. It is expected that proper implementation of the cluster policy might play a very important role in
responding to the above-mentioned weakness. This is an important opportunity, but entails
simultaneously a serious policy challenge.
The analysis carried out in this Report, taking namely into account the European Innovation
scoreboard (EIS) 2008 data, has shown that Portugal has improved its innovation performance, but
has also enabled the identification of a number of challenges. These include the following: (1)
strengthening human resources capabilities, particularly at undergraduate and graduate levels; (2)
fostering the emergence and establishment of new companies, both domestic and foreign-owned, to
promote employment, particularly in knowledge intensive activities; (3) strengthening of SMEs in-
house capabilities; (4) transforming the cluster policy initiative into an effective opportunity for change
and for increasing the systemic density of the NIS; and (5) improving policy coordination, delivery and
medium-term consistency.
As a result of the improvements achieved in some areas as well as of the revision of the battery of EIS
st th
indicators, Portugal experienced an upgrade in the EU-27 innovation ranking, from 21 to 16 place.
Simultaneously, Portugal joined the 'Moderate innovators' group, while in 2007 it was among the
'Catching-up countries'. Although competitiveness depends on a host of factors and not just on
innovation performance, and because there is a time lag between such performance and
competitiveness outcomes ( 2 ), it is likely that these achievements translate in increased economic
performance in the future. However, medium-term forecasts in this regard are not optimistic. In fact,
while the crisis has seriously undermined economic performance, the trend since 2000 has been
extremely modest and the prospects for future growth are far from bright.
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For a more in-depth look, see the Annexes of the report.
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2. Main developments in public support for innovation
The present innovation support policy headlines were laid down by the Technological Plan, launched
in 2005, and by the NSRF 2007-13. The Technological Plan has three main axes, which to a large
extent correspond to its main action lines: knowledge, technology and innovation. A further
examination of the set of measures included in the Plan led to the identification of seven fields of
action: (1) Networked society, (2) Upgrading of human resources, (3) Science & Technology
infrastructure, (4) Entrepreneurship, (5) Financing system, (6) Framework conditions for economic
activity, and (7) Company capabilities.
The NSRF includes, besides the regional operational programmes, three nationwide programmes, on
Human Potential, Territorial Enhancement, and Competitiveness Factors (CFOP Compete). This is the
key operational programme dealing with innovation policy at the national level. However, a new
feature of the NSRF is the increased relevance of Regional Operational Programmes in managing
innovation support schemes, namely those specifically addressed to small firms. The strengthening of
innovative capabilities and behaviour is among the main objectives of the NSRF 2007-13. The CFOP
Compete includes the following support systems relevant for innovation: (1) Innovation, (2) SME skills,
and (3) Research and technological development. It encompasses other relevant initiatives,
addressed namely to support S&T organisations, to promote innovation financing and risk-sharing, to
encourage collective actions, and to promote 'collective efficiency strategies'. These are focussed on
clustering policy.
Most of the measures under the CFOP Compete support systems were launched up to mid 2008. For
this reason, in the period under review there were no major developments in public support for
innovation. The main initiatives taken were the creation of the Innovation Financing Support Fund
(FINOVA, PT 98), a fund of funds aimed at strengthening the financing instruments for SMEs
particularly for more innovative projects, the revision of the Industrial Property Code, and the launch of
the SME Academy, which is still making its first steps. As a result of the crisis, several changes were
introduced on the national framework for company investment support systems. The intended
objective was to increase flexibility to use them 'as instruments to stimulate investment and job
creation, especially in the fields of innovation, internationalisation and R&D'. However, the main thrust
of the changes is to increase flexibility, enlarging the scope of what is considered to be 'productive
innovation'. This also now includes the setting up of business units or production lines with significant
impact on product, exports or employment as well as on technological improvements.
3. Appraisal of national innovation policy
Portugal now has a wide set of innovation policy measures, addressing different innovation fields.
Beyond new support measures, what is needed is to improve coordination, delivery and evaluation.
Coordination needs to be improved on policy design, inter-measure relationships, and national-

regional responsibilities. Regarding policy design, progress has been made but there is still a need for
improving inter-ministerial coordination. At the level of inter-measure relationships, the existence of a
flexible budgetary approach is positive, as it encourages an encompassing view of the measures.
Further integration should, however, be developed between support systems. In particular, the links
between Innovation and Research and Technological Development support systems needs to be
improved, since the separation between them to some extent replicates Ministerial domains. Taking
into account the perspective of the customers, namely the companies which are the target of incentive
systems, is essential. Conerning national-regional responsibilities, the NSRF 2007-13 went a step
further in assigning responsibilities to regional authorities. This is a very positive move. Being a novel
initiative, it requires adjustments and learning from both national and regional bodies. It would be
desirable for regional authorities to have further competencies to better carry out their tasks.
With regard to delivery, five main aspects are worth mentioning. The first is the capacity to meet
deadlines and to speed the incentives contracting process. For the first time, decision timetables were
defined when the calls were launched. This is a very positive feature, and may be interpreted as
indicating a new attitude from Public Administration. Together with the online management of
applications, it has significantly contributed to increased transparency. Unfortunately, not all deadlines
have been met, and companies have complained about the length of the process of contracting and
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transferring the funds to the promoters. The second is selectivity. This has been one of the key
orientations for the NSRF 2007-13. Fighting the crisis led to extend eligibility criteria; there is a risk
that this might entail a less strict stance on selectivity. This may be understood in the present times,
but higher selectivity needs to be reinstated once the crisis is over. Selectivity is essential for the
measures to have the expected effects on enhancing innovation and promoting change. Third, good
delivery requires information diffusion and even a 'missionary' approach. Fourth, there is a need to
improve inter-agency coordination. Fifth, good implementation means that the proxy cannot be taken
for reality. More relevant than short-term international comparisons is the capability to foster
sustainable change. The delivery challenges are especially critical in the case of 'Collective Efficiency
Strategies'. Finally, it is very important to ensure medium- to long-term consistency in policy design
and implementation, making this independent from electoral cycles.
Evaluation is essential to follow up on measures, identify areas for improvement and assess the
results achieved. The pressure of the European Commission to carry out ex ante and ex post
evaluations of the successive Community Support Frameworks (CSFs) has contributed to laying down
the roots of an evaluation culture. Much needs to be done, however, to develop it. A committed
approach to use evaluation as a relevant tool for improving the quality of policy design and
implementation is needed.
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1. Main trends and challenges in the National Innovation

System
1.1 Recent economic trends and market developments
The declining economic performance trend that has characterised the Portuguese economy since the
beginning of the present century has not been reversed in 2008, as shown on Exhibit 1. Although the
Gross Domestic Product (GDP) per capita in Purchasing Power Standards (PPS) improved with
regard to 2004, this is more the result of an exceptionally low figure for that indicator in 2004 than to a
sustained recovery in the last year. In fact, the indicator has further declined in 2008 against previous
years (76.2 for 2007). The figures for real GDP growth rate tell a similar story: GDP has stagnated in
2008, while the EU-27 average has shown a slight increase. After a GDP growth of 1.9 in the previous
year, 2008 has been characterised by a zero growth rate. This is to a large extent a consequence of
the effect of the financial and economic crises. The main pattern, however, is that, since 2002,
Portugal have consistently exhibited annual GDP growth rates below EU-27 average. Forecasts for
2009 indicate that Portugal is likely to record a negative real GDP evolution of 3.7, slightly below the
EU-27 decline of 4.0%. Such a negative record is due to the combined effect of the financial and
economic crises. However, recovery is not likely to happen before 2011, and long-term growth
prospects are extremely modest: potential GDP growth for 2011-17 is below 1%, according to data
recently released by OECD (OECD, 2009).
Three other aspects mentioned in Exhibit 1 deserve a reference. First, the slight growth in labour
productivity as against 2004: an increase of almost 4% points, between 67-70% of the EU-27 average.
However, 2008 has not exhibited an improvement by comparison to 2007. If productivity growth is a
key EU long-term competitiveness challenge (European Commission, 2009), such a challenge is even
more pressing for Portugal.
Second, the achievements with regard to keeping public deficit down: for 2008, public balance
remained stable at –2.6% of GDP. As pointed out in the 2008 Report, this corresponds to the lowest
level of public deficit for three decades (Simões, 2008). The effort undertaken to curb the public deficit,
which for 2004 and 2005 reached 3.4 and 6.1% of GDP respectively, has been remarkable and has
paid off. Again, however, the crises are casting clouds over the sustainability of the deficit. The
budgetary stimulation measures taken to foster the re-launch of the economy together with the
increases in public investment and in public administration wages will lead to an increase in public
expenditures so that the deficit for 2009 will exceed the 3% of GDP benchmark; in May 2009 the
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Government forecast was 5.9% ( ), but this is likely to be exceeded. The Governor of the Banco de
Portugal (Bank of Portugal) has warned that the expansionist budgetary policy, though required to
fight the crises, should be associated to a credible strategy that might ensure the return to a budget
consolidation approach (Banco de Portugal, 2009a).
The third aspect is the fact that business investment, though stable with regard to the previous years
and below the historic heights in earlier decades, is still above the EU-27 average. Again, some
remarks should be made to put the figures in context. As the last report by the Bank of Portugal
indicates, Gross Domestic Capital Formation (GDCF) has been losing speed throughout 2008 and
early 2009, leading the Bank of Portugal to forecast a 14% decline in GDCF for 2009 (Banco de
Portugal, 2009b). Such decline is a consequence of weak demand, both at home and abroad. In fact,
exports have shrunk, to a large extent due to the strong decline in exports to Spain. Trade deficit has
nd
increased between 2007 and 2008, from 7.5% to 9.6% of GDP (Contas Nacionais Trimestrais, 2
quarter 2009). Meanwhile, according to the International Monetary Fund (IMF), Portugal's exports of
goods have lost world market share, although this has been partially compensated by an increase in
services market share.
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Jornal de Notícias, 15 May, 2009, http://jn.sapo.pt/PaginaInicial/Interior.aspx?content_id=1233641 online.
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Exhibit 1: Comparable indicators of economic performance

Indicator National performance EU-27 average
2004 2008 2004 2008
GDP per capita in PPS (EU-27=100) 74.6 75.3 100* 100*
Real GDP growth rate (% change previous year) 1.5 -0.0 2.5 0.9
Labour productivity per person employed 67.0 70.6 100* 100*
(EU-27=100)
Total employment growth -0.1 0.4 (e) 0.7 0.9
Inflation rate (average annual) 2.5 2.7 2.0 3.7
Unit labour costs (growth rate) -1.4 1.7 (f) -1.4 0.5
Public balance (net borrowing/lending) as a % of GDP -3.4 -2.6 -2.9 -2.3
General government debt as a % of GDP 58.3 66.4 61.5 62.2
Unemployment rate (as % of active population) 6.7 7.7 9.0 7.0
Business investment as a percentage of GDP 19.5 19.6 17.2 18.5
Source: Eurostat - Structural Indicators and Long-term Indicators http://epp.eurostat.ec.europa.eu online.
Key: (*) EU25 average, (^) or latest available year (for example: 2005), (:) not available
The analysis of Exhibit 1 suggests the existence of a further problem in Portugal's economic
performance: unemployment growth. In 2008, for the first time in the present century, Portugal's
unemployment rate is above the EU-27 average. Forecasts for 2010 converge in indicating a further
increase in unemployment rate, estimated between 9.8% and 11%, according to the European
Commission and the IMF, respectively. This is in part a result of the economic crisis, with the
corresponding decline in demand. But it also reflects Portugal's structural-competitiveness
weaknesses and the country's insufficient capability to attract and retain international direct
investments. Of course, the increase in unit labour costs, above the increase in productivity, has not
contributed to enhance competitiveness, although there is clearly a need to focus more closely on the
activity structure if sound, and policy supporting, conclusions are to be taken.
The last Bank of Portugal report provides a grim perspective of Portugal's capabilities to enhance
competitiveness. It argues that 'the persistence of a set of structural weaknesses, particularly on what
regards human capital, the working of labour and product markets and the effectiveness of the system
of justice may undermine the Portuguese economy's adjustment and her capability to ensure a re-
launching of the convergence, in real terms, with EU average' (Banco de Portugal, 2009b:39). This is
certainly a biased perspective, leaving the key role of innovation in competitiveness policy aside. It
shows nevertheless that there are weak links, which curtail the possibilities to translate innovation
efforts into improved competitiveness. The focus on the digital sphere, knowledge and innovation,
which has been behind the policy followed by the XVII Constitutional Government as well as the
Technological Plan, is worth pursuing. Relevant improvements were achieved, as the European
Innovation Scoreboard (EIS) 2008 indicates (PRO INNO, 2009a). But their translation into improved
competitiveness will not materialise if a simultaneous effort to address and overcome key bottlenecks,
some of them of structural nature, is not carried out. If a forward-looking and committed effort is
pursued, Portugal may be better positioned to explore the world business opportunities, which will
emerge when the recovery takes full speed. In any case, the way ahead requires commitment,
consistency and a long-term approach.
1.1.1 The credit crisis and its effect on innovation activity
The present crisis is much wider and deeper than just a credit crisis. Of course, it still emerged as a
financial crisis due to the excessively high leveraging of a number of economic activities. As the
consequence of a domino effect, the financial crisis led to a credit crisis, then to a demand crisis, and
finally to a fully-blown economic crisis. Therefore, what is being faced is not just another crisis but a
more complex one with financial and economic dimensions. This crisis also has in the background a
change in the World economy with the strengthening of emerging – namely Asian – players.
Therefore, a different World is likely to take shape in the wake of the crisis.
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If the European Union as a whole has been seriously hit by the developments mentioned above, it is
not surprising to find that the strongest problems have been faced by those smaller countries more
exposed to the very business logic that gave rise to the crises (such as Ireland and more dramatically
Iceland) or by those more vulnerable to external shocks (such as some new Member Countries like
Hungary, Latvia or Romania). In this context, it comes as no surprise that the crises have seriously
been a blow to the Portuguese economy, a small and very internationally integrated economy, whose
international competitiveness had already shown signs of deterioration. While domestic demand has
dropped, the main challenges have come from a heavy decline in international demand. Particularly
striking has been the case of the shrinking of the Spanish market, which has had a heavy negative
impact, since Spain is Portugal's main trade partner. Additionally, the credit crunch has hit the
automotive industry, which is now one of the key specialisation fields of the Portuguese economy. In
spite of launching a support programme specifically addressed to the automotive sector, the effects
have been significant, with lay-offs and even the closure of some car-components companies.
Portuguese authorities have announced in December 2008 an anti-crisis programme labelled Iniciativa
para o Crescimento e o Emprego (Growth and Employment Initiative) which, according to the Finance
Minister involves an overall amount of EUR 2 040 Million, or around 1.2% of GDP. The legal basis for
this programme is the Law 10/2009, of March 10, which introduced significant changes to the 2009
Budget. The 'Initiative' is related to the European Economic Recovery Plan, and is partly financed with
EU support. The Finance Minister has stressed this fact at his Parliamentary speech: 'an option
coordinated with European partners, based on the awareness that a common action will be able to
deliver much better results than an isolated initiative'.
Before this 'Initiative', the Government had already taken several measures to fight the crisis: (1)
providing guarantees to the banks to borrow funds in international markets; (2) launching measures to
support SMEs namely a reduction in income tax and the setting up of the PME Investe credit facility
(which is in its fourth round), aimed at improving SME access to credit for developing their current
activities and making healthier tangible and intangible investments; (3) supporting ailing companies;
4
and (4) developing a programme to support the automotive industry ( ). In spite of these measures,
the analysis of the original 2009 Budget suggests that, at first, the Government did not fully anticipate
the magnitude of the crisis impact.
The 'Initiative' has, according to the Law No 10/2009, the following objectives: to promote economic
growth and employment, by strengthening the country's modernisation, competitiveness, skills of
Portuguese citizens, energy autonomy and efficiency, environmental sustainability and social
cohesion. The programme includes five measures:
1. modernisation of schools, by accelerating the refurbishing and modernisation of public

schools, in connection with the Technological Plan for Education (expected investment: EUR
500 million),
2. promotion of renewable energy sources, of energy efficiency and energy transport networks,
also aimed at encouraging the development of 'a cluster of photovoltaic panels industry'
(MFAP, 2009: 12) as well as an increased use of mini wind turbines (estimated investment:
EUR 250 million),
3. support to new generation broadband networks, the bulk of the corresponding investment,
expected to amount to EUR 1,000 million being undertaken by telecom operators (estimated
public investment: EUR 50 million),
4. specific programme of support to economic activity namely to SMEs and promotion of exports,
whose main measures are presented below (estimated public investment: EUR 800 million),
5. strengthening support to maintenance and creation of employment, with a budget of EUR 580
million by reducing employers' contributions to social security, creating a skills-employment
5
programme, financing additional training of workers as an alternative to lay-offs ( ), promoting
youth employment (youth recruitment and a programme of 12 000 professional internships for
youth), encouraging return to employment, supporting small firm creation and a programme of
skills-employment internships for the unemployed, integrating 30 000 unemployed in not-for-
profit organisations, and improving social security.
4
Another support programme, addressed to fashion industries (PADIM) was announced in March 2009.
5
This type of measures had already been included in the programme of support to the automotive industry).
3
The measure addressed to support economic activity, exports and SMEs includes a wide array of sub-
measures, several of them already used in 2008 to respond the crisis. There are four main focus
areas:
1. responding to the credit crunch by extending the previous PME Investe credit guarantee
scheme,
2. encouraging company restructuring through a mechanism of co-financing mergers and
acquisitions,
3. promoting exports by supporting credit insurance instruments as well as promoting entry into
foreign markets,
4. reducing the tax burden for companies, namely through a mechanism of automatic tax credit
for investment. In this context, a reference is due to the increase of support provided under
SIFIDE, the regime of tax incentives for company investments in R&D. The deduction rate has
been increased to 32.5% of the R&D investments incurred, while the maximum amount for the
incremental rate has been increased from EUR 750 000 to EUR 1.5 million.
The last three measures are also instruments to enhance the country's attractiveness for foreign
investors. Broadband technology investments have strengthened the 'capacity to attract foreign
investment and to earn profit from the national R&D potential generated inter alia by the Technological
Plan (MFAP, 2009:13). There are, however, no additional measures specifically addressed to attract
inward investment. Interestingly, a large part of the companies which have benefited from the
programme of support to the automotive industry are foreign-owned. An important objective of the
programme was to provide mechanisms that might play a temporary countervailing effect against the
vicissitudes of the international-demand slump for cars.
The National Coordinator of the Technological Plan argued that anti-crisis measures were also
oriented to preparing Portugal to further its innovative capabilities to better respond to post-crises
opportunities. In his Parliamentary speech on the presentation of the above-mentioned 'Initiative', the
Ministry for Finance and Public Administration stressed that a key tenet of the 2009 Budget was the
strengthening of the country's 'bet on Science, Technology and Innovation'. The analysis of the anti-
crisis measures shows, however, that innovation has not been a major concern in the design of the
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anti-crisis programme ( ). But innovation concerns are even more absent in the opposition's speech.
The so-called Plan to address the country's competitiveness problem, proposed by the Social
Democratic Party (the main opposition party) has no reference whatsoever to innovation-orientated
measures ( 7 ). It may be enough to focus on tax measures and to 'remove obstacles and bottlenecks'
to free SMEs' creativity.
In spite of the overall comment made above about the anti-crisis 'Initiative', it is important to
acknowledge that several measures may have a positive effect on the creation of innovation
capabilities as well as on innovation performance. The following aspects deserve a mention: First is
the effort on the development of technological infrastructures, namely investments in new generation
ICT broadband. This will contribute to preparing the country for the future and improving its
attractiveness. However, taking into account that most investments will be carried out by telecom
operators, it is important to ensure that such investments would not be used as an excuse to keep
Internet access prices among the highest in the EU. These investments will certainly open new
opportunities for innovation in connection with the upgrading undertaken; however, the participation by
Portuguese players in the development of the new infrastructure is relatively limited, hindering the
comparison with the effort launched in the USA under President Obama's recovery plan.
The second positive aspect of the 'Initiative' is intended to support and enhance existing capabilities
and skills. The training support vs. lay-off approach is particularly relevant in the automotive industry. It
is an instrument to sustain existing innovative capabilities and inter-company linkages while investing
in human skills upgrading. This is especially relevant to keep in Portugal existing 'anchors' in the
8
automotive industry, namely Volkswagen, as well as to support Portuguese component suppliers ( ).
6
See, however, the revision of company investment incentive systems (Decree No 65/2009), presented below.
7
See http://www.politicadeverdade.com online.
8
An important casualty, especially from the high-tech exports and high-skilled employment perspectives was the
closure of the Portuguese subsidiary of the German group Quimonda, due to the bankruptcy of the mother
4
Also with respect to the automotive industry, a reference is due to the programme of Electric Mobility,
involving a host of Portuguese and foreign companies, aimed at creating conditions for the distribution
of electrically-powered vehicles.
The commitment to low carbon emissions, renewable sources of energy and energy efficiency has
also positive implications for innovation. The effort undertaken is in line with the overall EU strategy to
further energy sustainability and to get a lead in this field. In the case of Portugal, some comments
have been made about a price distortion due to the subsidisation of renewable energy investments
and output. However, this is inevitable if public policy is envisaged as an instrument to promote
innovation and sustainability. The inclusion of energy investments in the anti-crisis package is clearly
positive from the perspective of encouraging innovation and sustainability, and to further consolidate
the achievements in the energy field.
Responding to the crisis by encouraging company restructuring, namely mergers and acquisitions, is
also positive from the innovation standpoint. Provided that anti-competitive effects are appropriately
dealt with, such moves are likely to enhance innovation. This is mainly due to two factors: First, the
achievement of economies of scale, which are likely to enable improvements in international
competitiveness as well as to promote the launch of innovative projects. Second, the leadership of the
processes leading to mergers and acquisitions is often taken by the company which is better managed
and more efficient: the operation may be envisaged as a way to improve efficiency and to create
value, inter alia by a stronger commitment to innovation. The strengthening of the benefits granted
under the tax system to support research and development activities (SIFIDE) is also likely to promote
innovation, due to increased commitment to R&D. Although many companies may not have profits in
the current year, the losses may nonetheless enable the system to encourage the commitment to R&D
and innovation. This fact may be especially relevant in the present context, since it is in downturn
periods that companies are forced to reassess their product and service offers, and therefore to
innovative further. This fact has been empirically confirmed in the Portuguese case during the early
1990s crisis (Simões, 1997). A similar reasoning is behind the argument put forward in the article 'Why
9
an Economic Crisis Could Be the Right Time for Companies to Engage in Disruptive Innovation' ( ), as
well as in the special issue of the INNO-Grips newsletter on innovation and the crisis (INNO-Grips,
2009).
There are, however, some issues that were not considered in the 'Initiative', and that might have been
used as an innovation lever. First, the measures to support entrepreneurship by unemployed workers
do not discriminate according to the knowledge intensity level of the firm created. In fact, the measure
in this regard seems to be mainly concerned with low-skill intensive workers who may have found it
difficult to reintegrate into the labour market. But, as the Quimonda case shows, the economic crisis
has also affected more skilled workers; though this raises economic problems, it may also promote
skilled entrepreneurship, since those workers might consider the launching of their own businesses on
the basis of a professional experience gained in a multinational context. These cases should have
been taken into account by the schemes supporting entrepreneurship. Second, the government's
intention to launch an ambitious programme of transport infrastructures (namely the high speed train
connections with Spain and the new Lisbon airport) generated hot political debate, and the
government has temporarily suspended the launch of such investments, leaving the decision to the
new government. Unfortunately, such a discussion has been based much more on public finance and
employment arguments than on the likely contribution of the projects for innovation, change and
competitiveness. From the innovation standpoint, the programme of public investments might have
been an important opportunity to boost innovation. Finally, the Skills-Employment approaches should
have been extended to the managerial ranks. In fact, the crisis might have been used as an
opportunity to launch a committed programme of training for managers, thereby fighting against an
important barrier to change and promote innovation in Portuguese firms.
The crisis has also led to a revision of the company investment incentive systems under CFOP
Compete. The Decree-Law No 65/2009 introduced several changes in the conditions and regulations
of the access to those systems, aiming to increase flexibility. The intended objective was to adjust
company. Efforts have been undertaken to attract a new investor to keep at least part of the company alive, but
they have been unsuccessful so far.
9
See http://knowledge.wharton.upenn.edu/article.cfm?articleid=2086 online.
5
access conditions to the restrictions raised by the crisis and to widen the concept of 'productive
innovation'. This was extended to include projects aimed at creating new units or production lines with
a significant impact on the product, exports or employment as well as technology upgrading projects.
Particular focus was put on the creation of conditions to attract 'strategic interest projects',
irrespectively of whether they are being undertaken by national or international investors.
1.2 Recent trends in the national innovation performance

The European Innovation Scoreboard (EIS) 2008 underwent significant changes in both its
composition and structure with regard to previous issues. The new EIS corresponds to a significant
improvement with regard to the earlier version for three main reasons:
1. It has a more consistent structure. A systems approach was followed, clearly distinguishing
between Enablers (Human resources, Finance and support), Firm Activities (Firm
investments, Linkages & entrepreneurship, Throughputs) and Outputs (Innovators, Economic
effects).
2. It provides more room to take into account non-technological innovation and innovation
dissemination, thereby translating better the patterns of innovation activities in non-leader
countries, such as Portugal.
3. It assigns much less importance to the Summary Innovation Index (SII), which had been
subject to strong criticism (Simões, 2008b; Schibany & Streicher, 2008; Tarantola, 2008a and
2008b).
The new EIS is, of course, still not at the optimum level concerning the translation of cooperative
activities, the full understanding of technological balance of payments, and the capture of company
innovation activities (10). But it is a much better instrument to express the various facets of innovation
performance than its predecessor.
Portugal's ranking in EIS 2008 has significantly improved with regard to EIS 2007. In fact, Portugal is
now included in the 'Moderate Innovators' group, while in 2007 it was considered as a 'Catching-up
country'. In terms of overall ranking, Portugal jumped from the 21st to the 16th rank. This is a result of
the combination of two key factors: (1) the country's performance improvement with regard to many
EIS indicators, a topic which will be further examined below, and (2) the methodological changes
introduced, leading the EIS 2008 to better translate the specific innovation patterns of non-leader
countries, as mentioned above.
A summary of the relative position and evolution of Portugal with regard to the EU for each dimension
as well as for each of the 31 indicators included in the EIS 2008 is provided in Exhibit 2.
The dimension in which Portugal fares better is 'Innovators', where the country ranks 24th among EU
countries with an index around 0.65, much above the 0.45 recorded by EU. Additionally, one finds that
Portugal is above the EU average for all the indicators included in this dimension: product/process
innovations, marketing/organisational innovations, and resource efficiency innovators. This result is a
bit puzzling, since Portugal is outperformed by three countries only, one being Germany, and the
others Cyprus and Greece. A closer and retrospective analysis indicates that Portugal had already
shown above-average performance in similar indicators used in earlier versions of the EIS. The
comment raised in the Country Report Portugal 2008 remains appropriate: 'even though one may
argue that the Portuguese National System of Innovation [NSI] is more orientated towards the DUI-
mode than the STI-mode [Lorenz, 2005], the high levels of in-house innovation remain difficult to
explain' (Simões, 2008a:3). The only sound explanation seems to be the one presented in the Country
Report Portugal 2006: 'as the CIS [Community Innovation Survey] [...] is based on self-assessment,
one should not exclude the possibility of an over-assessment of performance' (Simões, 2006).
Therefore, there is evidence that innovation performance of Portuguese firms (11) is over-evaluated.
There is clearly a need to improve statistical data collection in this regard. Otherwise, it risks seriously
undermining the reliability and consistency of the EIS as a whole. This is undesirable, especially now
10
The last problem is to a large extent due to the weaknesses inherent to the Community Innovation Survey.
11
As those of Cyprus and Greece.
6
when the EIS has been substantially improved. The solution may be a thorough revision of the CIS
methodology to enable the collection of sound data without self-evaluation biases.
Portugal exhibited a relatively good performance in Finance and support: it scores around 0.45, not
very far away from EU average. A look at the indicators in this dimension shows that Portugal fared
better than EU-27 average on Private credit relative to GDP (1.69, above the EU average of 1.31), a
result that is to a large extent a consequence of the credit-based nature of the Portuguese financial
system. Another item where Portugal showed a positive performance was Broadband access by firms:
76.0, only one percentage point below EU-27 average. This performance is clearly a result of the
policy towards the development of information and communication technologies (ICT), electronic
networking and promotion of Internet access followed by the Government in the context of the
Technological Plan. The annual growth rate in this regard is noteworthy: slightly above 25%, which
corresponds to almost the double of the performance recorded by EU average. In this field, Portugal
has been able to significantly bridge the gap vis-à-vis EU average. The weakest 'link' in this group is
Venture capital. This result is not at all surprising, since it is the consequence of two main factors: the
credit-based nature of the Portuguese financial market; and the 'shallowness' of the domestic market,
raising barriers to the development of a sound venture capital industry, in spite of the measures taken
by the successive governments to encourage the development of venture capital activities. Still in this
dimension, a reference is due to Public R&D expenditures, which corresponded to 0.46% of GDP,
confirming the medium-term trend to approach EU average. The annual growth rate of 3.6, while
insufficient to achieve the target defined by the Technological Plan for 2010, reflects the investments
undertaken by the present Government to promote scientific research.
The main weaknesses concern the dimensions Economic effects and Human resources, where
Portugal is at the bottom (i.e. ranks below the 20th) of the EU-27 league. Human resources has
traditionally been one of the country's key weaknesses. It is important to remark, however, that an
effort has been undertaken to improve the capabilities in that regard. In fact, Portugal leads the growth
performance ranking for that dimension, ahead of Latvia and Italy. A look at the five indicators in this
dimension shows that Portugal is even above the EU average on what concerns S&E and SSH
doctorate graduates, exhibiting a score of 2.75 per thousand population in the 25-34 years cohort,
which is over two-fold the corresponding score for the EU. This is a clear result of the investments in
doctoral education. However, the other indicators are behind EU average, the wider gap being in
Tertiary education and Life-long learning. This case is particularly striking since though exhibiting a
score, which is below one half of the EU, the statistics do not show a clear growth trend in
performance. This is a bit surprising keeping in mind the policy followed by the Government since
2005 to strengthen human resources capabilities, epitomised in the Novas Oportunidades (New
Opportunities) initiative.
Exhibit 2: European Innovation Scoreboard: Portugal
7
It seems that the EIS indicator on Life-long learning does not capture the results of the investment
under New Opportunities. An overall analysis of the indicators under this dimension suggests that it
might be time to redefine the priorities in the education field, putting now more emphasis on youth
education attainment, tertiary education and further growth in S&E graduates than on support to
doctoral education. In this field, the time has come to consolidate the achievements so far, as well as
to enhance the employability of PhDs by the economic fabric.
Economic effects are the other lagging dimension: Portugal's performance is around two thirds of the
EU average. The six indicators included in this dimension reveal that Portugal is systematically below
EU average, although significant performance differences become evident. There are two variables for
which Portugal is very close to EU: New-to-market sales and New-to-firm sales. Both correspond to
information from the CIS, i.e. based on self-assessment.
8
In contrast, Portugal exhibits scores slightly above one half of the EU average for Employment in
medium-high and high-tech manufacturing (3.45% against 6.69% of the workforce) and for
Knowledge-intensive services exports. These are clearly weaknesses of Portugal's NIS. On a more
positive note both record growth rates are well above EU average. However, the closure of the
Quimonda semi-conductors plant will entail a decline in Portugal's performance on high-tech and
medium-high tech employment and exports. This is an area where a committed effort has to be
launched, namely by improving the capability to attract high-tech foreign investment. However, the
declining capability of the EU as a whole to foster employment in high-tech and medium-high tech
sectors further compounds the problems faced by Portugal. The situation is different regarding
Knowledge-intensive services exports. The remarkable growth achieved in the last years (around
5.4% per annum) is likely to be sustainable. In fact, a new cohort of newly created firms aimed at
12
addressing the global market has been developing ( ).
The three dimensions on Firm Activities (Firm investments, Linkages & entrepreneurship, Throughput)
record scores below EU average, while exhibiting growth rates well above the EU. Somewhat
surprisingly, Linkages & entrepreneurship is the dimension with the lowest gap. Having in mind the
wide agreement on the weak cooperative drive of Portuguese companies and on the risk aversion of
the Portuguese population, one would expect a much lower score, and a wider gap to the EU average,
on this dimension. There are two explanations for the relatively positive behaviour recorded: (1) again,
the fact that two out of the four indicators considered are drawn from the CIS, thereby based on self-
assessment (which also explains why Portuguese firms declare higher levels of in-house innovation
than EU average), and (2) the weaknesses of the entrepreneurship indicator used in the EIS, which is
more an expression of firms demography or 'renewal' than a translation the strength in knowledge-
based entrepreneurship. The indicator with the lowest performance (Public-private co-publications) is
simultaneously the one with the highest growth, which may suggest that a change is taking place in
the relationships between universities and public research organisations on one hand, and companies
on the other.
With regard to Firm investments, two main features emerge. The first is the level of Non-R&D
innovation expenditures relatively close though below EU average. The second, and most important,
is the significant increase in Business R&D expenditures, which amounted to 0.61% of GDP for 2007,
exceeding, for the first time ever public R&D expenditures. The growth of these expenditures is
remarkable, outperforming progress in all other EU Member States. Such growth has been the result
of various factors, namely the following: (1) an increase in survey coverage, partly due to the entry of
newcomers, both new firms and new R&D performers (measures such as the NITEC – the programme
for supporting the creation of research and technology teams in companies – likely played a role in
this regard), (2) increased awareness of large firms about the advantages of improving their
accounting systems to collect and declare R&D expenditures, and (3) the effect of the SIFIDE as a
vehicle for using R&D expenditures as a tool to escape the income tax.
The behaviour in the Throughputs dimension is variable, with a maximum for Community trademarks
and a minimum for EPO patents. This appears to reflect the traits of the Portuguese economic fabric
regarding the relevance of brand protection for many firms exporting to European markets, particularly
in consumer products, and the weaknesses of the technological system, together with the absence of
a crust of large high-tech firms with significant investments in patent protection. Note that Portugal
exhibits growth rates in the use of intellectual property rights above the EU average. However,
especially in the case of patents, growth rates are still too small to ensure a fast approach to average
EU levels. A recent positive development concerns the Technological Balance of Payments (TBP).
According to statistical data provided by the Bank of Portugal, the country has recorded a positive
balance in TBP for 2007 and 2008. This was not captured by the EIS, considering the most recent
data relate to 2006, and since the indicator, as mentioned above, does not provide a balance in
intangible technology trade but rather a sum of the flows as a percentage of GDP.
12
Most of these firms are included in COTEC’s Innovating SMEs Network.
9
1.3 Identified Challenges
Based on the analysis undertaken in the above sections as well as an appraisal of the strengths and
weaknesses of the NIS in Portugal and its main developments in a context of crisis and on the verge
of elections, it was possible to identify four main innovation policy challenges for Portugal. Since the
challenges identified stem to a large extent from the country's structural weaknesses, it comes as no
surprise that they are not very much different from those pointed out in earlier reports (Simões, 2007
and 2008a). A brief description of the challenges identified is provided on Exhibit 3 below. A reference
to the relevant indicators and trend is also made. Then, some comments on the rationale for the
selection of each challenge and on its policy implications will follow.
Exhibit 3: Main innovation policy challenges

Description of challenge Relevant indicators and trends
1. Strengthening human resources capabilities, Portugal has been able to catch up with regard to the EU.
particularly at undergraduate and graduate Such performance was particularly noteworthy for doctorate
levels graduates. EIS figures on tertiary education, on youth
education and on lifelong learning suggest the need to
strengthen efforts in these fields. Improving the education
system is essential for achieving structural change in the
economic fabric.
2. Fostering the emergence and establishment Employment in medium-high and high-tech manufacturing is
of new companies, both domestic and foreign- around one half of the EU average. Medium-high and high-
owned, to promote employment, particularly in tech manufacturing exports have been languishing, and even
knowledge intensive activities declining. There is a need to transform the efforts in
promoting entrepreneurship in a higher record of new
company creation. The attraction of knowledge-intensive
foreign investments, with high levels of employment and
exports, is a policy must.
3. Strengthening of SMEs in-house capabilities Although EIS indicators on SMEs innovating in-house,
Product/process innovators, Marketing/organisational
innovators and Resource efficiency innovators show good
performance, there are no doubts that Portuguese SMEs
suffer from weak in-house capabilities, namely in terms of
skilled human resources, including management, and
strategic competences.
4. Transforming the cluster policy initiative into The percentage of SMEs collaborating with others is limited,
an effective opportunity for change and for while public private co-publications are less than one seventh
increasing the systemic density of the NIS of EU average. These are indicators of the lack of systemic
density in the NIS in Portugal. For the investment and the
achievements in scientific research to materialise into
improved company knowledge intensity and international
competitiveness, appropriate linkages have to be established.
The Competitiveness and Technology Poles (CTP) and other
clusters measures may play a key role in promoting an
increased density of linkages. But the way how these will be
selected, implemented and managed is essential for the
promises to translate into reality.
5. Improving policy coordination, delivery and This does not refer to any specific EIS indicator. However, it
medium-term consistency has implications for the long-term evolution of most of them.
Portugal now has a wide set of innovation policy instruments.
The issue now is to appropriately put them into practice.
Delivery is essential. Another important issue is to help
players, namely companies, to better make use of the
instruments available. These need to be seen from the
demand standpoint. Finally, policies should be time-
consistent, and largely independent from electoral cycles.
10
1. Strengthening human resources capabilities, particularly at undergraduate and graduate

levels. EIS data indicates that very good performance has been achieved on what regards
doctoral education: Portugal is already above EU average. This has an important implication:
how can a similar result at all education levels be achieved?
Human resources skills are a very important structural weakness that needs to be responded
to, if the country is to improve its competitiveness. Of course, this demands a medium- to
long-term approach. The NRP 2008-10 defined the objective to 'Invest in education and
training and to improve Portuguese population's skills' ( 13 ). In spite of good intentions, the
education policy followed by the Government was very far from achieving the intended results.
The envisaged change and the increase in the level of education were not brought about.
Higher Education policy has been able to induce change, but the budgetary restrictions
undermined University responses to the challenges. On the other hand, the New
Opportunities initiative has been a very positive step in fighting the low education levels of
adult population. Another positive move was the promotion of digital literacy among primary
education students, in the context of e-escola. But much more needs to be done. Improving
education levels and skills of the overall population, by focusing on secondary and tertiary
education as well as on lifelong learning (extending the 'New Opportunities', for instance) is
needed. There is also a need to make the education system more flexible and decentralised.
2. Fostering the emergence and establishment of new companies, both domestic and foreign-
owned. The economic crisis has made unemployment an increasing concern for Portugal's
economic policy. Some forecasts suggest, as pointed out in 1.1.1 above, that Portugal's
unemployment rate may exceed the 10% mark. This raises a double problem for economic
policy: there is a need to promote investment that might generate new employment
opportunities, but there is simultaneously a need to promote investments which may
contribute to modernising the industrial fabric and increasing knowledge intensity, if a
structural change is to be brought about. Therefore, the economic crisis created the need to
attract investment and promote entrepreneurship even more strongly, but reduced the room
for policy action. There is a need to promote establishment of new companies, not just
knowledge intensive ones, but also those with an important employment effect.
In spite of a wide array of initiatives to promote entrepreneurship, the results so far have been
limited. It seems that after initiatives already taken in this regard and mentioned in the
previous report (Simões, 2008), the moment has come to be stricter in the selection of
initiatives to support. There is also a need to improve the dissemination of information to make
potential entrepreneurs more aware of the support mechanisms available, namely in the field
of financing. Information problems were identified even for entrepreneurial initiatives
generated in some of the Universities apparently more successful in stimulating the
emergence of high-tech firms (Matias, 2009). The focus should be on ensuring consistency in
action as well as on coordinating and increasing the scale of initiatives.
The track record in attracting foreign direct investment (FDI) is limited. The economic crisis
has made the attraction of new investments more difficult, and turned the need to support
existing investments more pressing. The programme of support to the automotive sector has
been important for domestic suppliers, but mainly to contribute to business livelihood and
avoid lay-offs of foreign investors already established in the country. Foreign investment has
played a key role in promoting structural change in Portugal. Foreign investment policy is
therefore one of the main levers of innovation policy. Except for an intended programme to
increase the linkages between foreign-owned companies and domestic firms, the NRP 2008-
10 makes no reference to FDI. Nevertheless, FDI is a central target of the programme of
support to projects with national potential importance (PIN). Recently some FDI projects have
been announced in the fields of electrical cars, namely an investment by Renault/Nissan, and
of the aeronautics industry by the Brazilian Embraer group. The employment effects of these
projects, at least in the short-term, are not very significant.
13
Office of the National Coordinator for the Lisbon Strategy and the Technological Plan (GCNELPT) 2008:93.
11
3. Strengthening of SMEs in-house capabilities. The EIS provides a rosy picture of Portuguese
SMEs innovating capabilities: all indicators in the Innovators group (Product/process
innovators, Marketing/organisational innovators, and resource efficiency innovators) are
above EU average. Nevertheless, Portuguese SMEs suffer from a shortage of skills and
strategic capability. The educational level of employees is significantly below EU average,
which has negative consequences for productivity and international competitiveness.
The response to these weaknesses is a medium- to long-term one, since it is very dependent
on the improvement of the overall education system. Some efforts have been made to
strengthen SMEs' innovation capabilities, from the creation of NITEC (PT 36 and PT 75) and
CITEC (PT 96) to the launch of RTD and Innovation Vouchers (PT 94 and PT 80) and the
design of the Innovation Scoring (PT 84). The establishment of the SME Academy is also
intended to improve SME capabilities and strategic thinking.
A field that has been almost systematically omitted in SME and innovation policies is the
training of SMEs' managers. As a rule, the new generation of SME managers has higher
education levels, very often with university degrees. Nevertheless, the average management
level in SMEs needs to be improved if they are to face the twin challenges of innovation and
global competition. An interesting initiative in this regard, although limited to a crust of larger
and/or more innovative firms, was launched by COTEC in connection with the process of
disseminating the standards for managing innovation projects. However, similar moves
addressed to 'ordinary' SMES are lacking. The NRP 2008-10 indicates two measures that
may contribute to progress in the right way: the programme of development of company skills
for entering foreign markets, and the creation by the Institute for SMEs and Innovation
(IAPMEI) of the 'SME Academy', aiming to help the SMEs' top managers focus 'on innovative
and international growth' (GCNELPT, 2008: 51). It is important to design appropriate
programmes, to join forces and to mobilise the target market for a sustained change to
happen in this regard.
4. Transforming the cluster policy initiative into an effective opportunity for change and for
increasing the systemic density of the NIS. The long-awaited decision on collective efficiency
strategies (CTPs and other clusters) was finally made public. There were 18 projects that
have been approved, including 11 CTPs. Investments are expected to approach EUR 17
million. A key instrument of the clustering policy announced by the government has finally
been put into operation. Cluster policies figured high in the Technological Plan, in the National
Strategic Reference Framework (NSRF) and in the Lisbon Strategy. They were correctly
envisaged as key instruments to strengthen the NIS as well to forge links and cooperation
among the various players.
The issue now is to ensure that the CTPs and the clusters selected are implemented in a way
to induce change. The leitmotiv behind the session of signing the contracts was 'to sum (in
order) to multiply'. In fact, such cooperative endeavours cannot just correspond to a sum of
players and initiatives; they should instead be mechanisms to create synergies and to forge
mutually beneficial linkages among the actors. The fact that a legally autonomous
organisation, whose equity is shared among the partners has to be created to manage the
CTP or cluster, provides a better basis to promote cooperative approaches. The acid test,
however, will be the implementation of the cooperative projects themselves. Current activities
will require the partners to make commitments and investments; this will lead to learning
processes that may, or may not, confirm the expected advantages of working together. To
some extent, the decision to assign the CTP or cluster 'label' to the projects is the beginning of
an experience of working together. It does not mean that the promises of the cluster policy will
occur. Fit and trust among the partners have to be continuously nurtured and developed. New
challenges for public policy will emerge. The capacity to appropriately support the synergetic
development of the initiatives will be essential to contribute so the clusters become an
effective opportunity for change. The big challenges for cluster policy lie ahead.
12
5. Improving policy coordination, delivery and medium-term consistency. In previous reports it

has been mentioned that there was a need to bridge the gap between science and enterprise
policies. The launch of the Technological Plan, creation of the National Coordinator of the
Lisbon Strategy and the Technological Plan office, as well as the design of the NSRF 2007-13
and NSRF 2007-13 governance system have contributed to bridging such a gap (Simões,
2008). There have been, in fact, improvements in innovation-policy design and coordination.
However, a cursory analysis of the NRP 2008-10 shows that, in spite of the progress made,
there are still different perspectives, and that a consistent, full-blown innovation policy is yet to
materialise. To achieve a coordinated, systemic innovation policy is still a challenge for the
years to come.
Delivery is another key challenge for exploiting the opportunities stemming from the
implementation of the NSRF 2007-13. The set of innovation policy related measures is, with
14
the exception of support services to SMEs ( ), appropriate, addressing a whole range of
issues. However, having nice instruments on paper, does not mean that they will be
successful in practice. It is important to look at the policy instruments from the target company
standpoint, to link the various measures, and to stimulate companies to take them up. The
success of policy measures depends not just on correct design, but also on the capacity to
implement them, assess them, and make the appropriate adjustments. The implementation
challenge is relevant for all types of measures, as the relatively low take-up of the RTD and
innovation Vouchers indicates, but especially for more complex and demanding initiatives as
the CTPs and clusters.
No less important is the challenge of the medium-term consistency of innovation policy. To be

effective, policies need to be sustained for some time. Companies are more comfortable with
a relatively stable policy set. Having said this, it should be recognised that policy learning and
adjustments are essential. But these should be done on the basis of sound evidence. Portugal
still lacks an independent evaluation culture that might provide the basis for policy change.
The NSRF 2007-13 provides a sound policy basis, and a wide range set of measures. Efforts
should be more directed to increase the consistency and the effectiveness of such policy
framework than to design brand new policies following the electoral cycle. Ensuring medium-
term policy consistency and improving evidence-based policy design are important challenges
to make innovation policy an effective instrument to enhance competitiveness.
14
It is important to note that even in this field, there was interesting progress, namely with the launch of the RTD
and Innovation Vouchers and the creation of the SME Academy, although it is too soon to assess its practical
relevance.
13
2. Public Support to Innovation
2.1 Main objectives for innovation policy

A brief summary of the main innovation policy documents disclosed by the XVII Constitutional
Government ( 15 ) is presented in Exhibit 4, which takes into account how the programmes are
responding to the financial and economic crises.
An overview of the innovation policy documents suggests a consistent policy approach, whose basic
headlines were drawn in the Technological Plan. This Plan has three main axes, which to a large
extent correspond to the main action lines: knowledge, technology and innovation. A further
examination of the full set of measures included in the technological Plan has led to the identification
of seven fields of action: (1) Networked society, (2) Upgrading of human resources, (3) Science &
Technology infrastructure, (4) Entrepreneurship, (5) Financing system, (6) Framework conditions for
economic activity, and (7) Company capabilities (Caraça & Simões, 2008).
Exhibit 4: Main innovation policy documents

2009: Lei nº 10/2009, Diário da República, 1ª Série, nº 48, 10 March (Revision of the Budget for 2009)
2009: Ministério das Finanças e da Administração Pública, Relatório Iniciativa para o Investimento e o
Emprego/Regime Fiscal de Apoio ao Investimento 2009/Alteração à Lei nº 64-A/2008, de 31 de
Dezembro, MFAP, January (Report on the Investment and Employment Initiative and on the Budget
changes stemming from the anti-crisis plan).
2008: Lei nº 64-A/2008, Diário da República, 1ª Série, 31 December (Budget for 2009).
2008: Estratégia de Lisboa- Plano Nacional de Reformas Portugal. Novo Ciclo 2008-2010 Consolidar
as Reformas (Lisbon Strategy- National Reform Plan, Portugal, New Cycle 2008-2010 Consolidating
Reforms), National Coordinator of the Lisbon Strategy and the Technological Plan Office.
2007: National Strategic Reference Framework 2007-2013
2006: PRACE – Public Central Administration Restructuring Programme
2006: Compromisso com a Ciência (Commitment to Science: policy document with the headlines of
science policy for the legislature)
2005: PNACE – Programa Nacional para o Crescimento e o Emprego 2005/2008 – Estratégia de

Lisboa Portugal de Novo (National Programme for Growth and Employment 2005/2008 – Lisbon
Strategy Portugal Anew)
2005: Plano Tecnológico (Technological Plan)
The Technological Plan established a set of quantified targets to be achieved by 2010. These are
indicated in Exhibit 5. Most of these targets have also been mentioned in the Commitment to Science
document and in the NRP 2005-2008 (National Programme for Growth and Employment 2005/2008).
15
It was considered that a four-year perspective was appropriate to provide a view of the main policy documents
and innovation policy objectives. By the same token, the analysis is concentrated on the documents delivered by
the XVII Constitutional Government. Policy documents issued by earlier governments, even in 2005, were not
included in Exhibit 4. The reader interested in a longer-term perspective may see the Country Report 2007
(Simões, 2007), where a table with the main policy documents for 2000-07 is presented.
14
Exhibit 5: Technological Plan quantified targets
Objective Target Ref. Year

1. Population with tertiary education degree (as a % of the 25-64 age 15% 2010
groups)
2. Population having completed secondary education (as a % of the 20-24 65% 2010
age group)
3. Population with a degree in S&T fields per thousand inhabitants (in the 12 2010
20-29 age group)
4. Researchers as a share of employed population (per thousand) 5.3 2010
5. Percentage of families with broadband Internet connection 50% 2010
6. Lifelong training 12.5% 2010
7. New S&T PhDs per thousand population (in the 25-34 age cohort) 0.45 2010
8. Scientific output per million population 609 2010
9. Full time equivalent people engaged in R&D activities (per thousand 7.5 2010
active population)
10. Full time equivalent researchers (per thousand active population) 6.0 2010
11. Public R&D expenditures as a % of GDP 1.0% 2010
12. Business enterprise R&D expenditures as a % of GDP 0.8% 2010
13. Employment in medium hi-tech manufacturing (as a % of total 4.7% 2010
employment)
14. Employment in hi-tech services (as a % of total employment) 1.8% 2010
15. Medium-high and High-tech manufacturing value added 6.2% 2010
16. High-tech services value added 6% 2010
17. High-tech product exports (as a % of total exports) 11.4% 2010
18. Firms created in medium-high and high-tech industries (as a % of total 12.5% 2010
number of firms created in the year)
19. EPO patents per million population 12 2010
20. Community trademarks per million population 50 2010
21. Venture capital investment as a % of GDP 0.15% 2010
Source: Technological Plan
The NRP 2008-10 introduced slight changes in the formulation of the quantitative goals, but they are
basically consistent with those defined in the Technological Plan for the 2010 horizon. The goals are:
(1) achieving 5.5 researchers (FTE) per thousand of the active population by 2010 ( 16 ) (the figure
stood at 3.8 in 2005 in Portugal and 5.5 in EU 25); (2) doubling the amount of public R&D
expenditures recorded in 2003 ( 17 ); and (3) tripling private investment in R&D with regard to 2003.
Other targets mentioned concern the increase in the number of new PhDs granted per year, from
1500 in 2007 to 1800 in 2010. The targets set up for the growth of internationally referenced scientific
production and the international registration of patents in the European Patent Office (EPO) and the
United States Patent and Trademark Office (USPTO) are those already indicated in the Technological
Plan and in the Commitment to Science document.
The Technological Plan, notwithstanding the changes introduced, namely the addition of further
measures and the launching of the Technological Plans for Education, Health and Justice, continues
to be the basic policy document on innovation policy. A brief reference must be also made to the other
documents included in Exhibit 4. The PNACE corresponds to the NRP 2005-08. Among the
challenges identified, there are references to the need to promote university-industry cooperation, to
increase R&D expenditures and to develop partnerships for innovation and employment. In the
microeconomic field there is a domain specifically addressed to Research, Development and
Innovation. Most of the measures included there pertain to science policy, and not so much to
enterprise policy. However, in the Competitiveness and Entrepreneurship domain there is also a set of
measures with a bearing on innovation, namely on promoting company investments, improving
16
The figure mentioned in the Technological Plan was slightly lower (5.3).
17
In the NRP 2005-2008, there was also the target of achieving a R&D/GDP ratio of 1% by 2010.
15
conditions for entrepreneurship and SME competitiveness, establishing partnerships, activating
clusters and enhancing competitiveness. The Compromisso com a Ciência presented the headlines of
science policy: It defined five key orientations in this regard: (1) knowledge and S&T capacity, (2)
human resources and S&T culture, (3)public and private R&D organisations, (4) internationalisation
and quality evaluation, and (5) economic valorisation of research.
The PRACE and the NSRF 2007-13 have a different focus. They are not policy documents as such,
providing frameworks for action instead. The PRACE established a reorganisation of Public
Administration, redefining the responsibilities of the various Ministries, and reallocating public
agencies. In the innovation field, the main change introduced by PRACE was assigning the National
Institute for Industrial Property under the Ministry for Justice instead of the Ministry for Industry and
Innovation. Related to PRACE is SIMPLEX, a very important initiative of administrative and legislative
simplification to improve the efficiency of public services and facilitate relationships of citizens and
companies with the public administration. The NSRF 2007-13 is a key document for innovation policy.
It includes three Operational Programmes, the Competitiveness Factors Operational Programme
(CFOP – Compete) being the most relevant for innovation policy. The main Innovation policy
measures under the CFOP may be classified in two main groups: company incentives and 'Collective
Efficiency Strategies'. The first set of measures is already under way. There are three company
incentive systems: research and technological development, upgrading of SMEs capabilities, and
innovation. The Innovation Incentive System (IIS) is aimed at promoting innovation in companies
through both the adoption and development of new goods, services and processes as well as through
the stimulus to skill-intensive entrepreneurship and to new, innovative investment projects. There are
also important innovation measures which fall under the other two systems, such as the creation of
R&D teams in companies, R&D consortia or support to industrial property. The Collective Efficiency
Strategies are mainly addressed to promote clustering. The key instruments in this regard are the CTP
and other clusters.
While the NRP 2005-2008 identified as many as 15 challenges faced by Portugal (including one on
strengthening cooperation between companies and universities and increasing R&D expenditures),
the NRP 2008-10 takes on the challenges identified by the European Commission in assessing
Portugal's implementation of the previous NRP 2005-08. The purpose is to show how Portugal has
already responded to those challenges and the results achieved so far. Seven challenges are
mentioned, relating to different issues from the sustainability of public accounts and ensuring effective
competition to fighting against factors that threaten social cohesion. The NRP 2008-10 includes six
policy areas, one of them specifically addressed to ensure 'more R&D and a better innovation system'
(policy area No 3). Unfortunately, there is no clear definition of objectives for the policy area as a
whole. Some policy headlines are, however, identified:
• strengthening the S&T system,

• developing the information society,
• supporting collective efficiency approaches – CTPs (PT 82) and other clusters (PT 83),
• promoting the use of the Innovation Voucher (PT 80) and RTD Voucher (PT 94),
• recognising the relationships between cultural industries, creativity and innovation.
Furthermore, policy area No 2 'A favourable environment for business, especially for SMEs' also
provides measures aimed at fostering innovation, namely promoting investments with a significant
impact upon the Portuguese economy, encouraging internationalisation of Portuguese companies,
improving access to finance, promoting entrepreneurship, and disseminating good practices amongst
SMEs. The distinction between these two areas is not conducive to an encompassing, systemic
approach to innovation policy.
The last three documents in Exhibit 4 regard the response to the financial and economic crises. The
Investment and Employment Initiative is especially important, since it provides the basic frame for
policy action. Since a review of this issue has been carried out under 1.1.1. above, there is no need to
come back to it again.
16
2.2 Innovation governance system
The NIS in Portugal includes a wide variety of actors. The density and depth of the linkages among
the main players is relatively low, and the capabilities of many of these players are still limited. There
is increasing awareness about the importance of innovation to enhance competitiveness in a
globalised World, although its role may not be fully understood. The challenges faced by the
Portuguese economy require a committed policy aimed at bringing about a structural change in the
activities performed, as well as in firms' capabilities, strategies and business models. Proper
governance of the innovation system is essential to ensure consistent policy design and
implementation aimed at fostering a sustained change in the right direction.
Although innovation policy has inherently a horizontal nature, in Portugal it has traditionally concerned
two main Ministries: the Ministry for Economy and Innovation (MEcI), and the Ministry for Science,
Technology and Higher Education (MCTES). The first deals mainly with enterprise policy, while the
second is mostly concerned with research and higher education policies. The 'divide' between the two
Ministries, mentioned in several analyses of science and innovation policies in Portugal (Godinho &
Simões, 2006), though far from being overcome, has been 'bridged' to a significant extent in recent
years. Below is a brief characterisation of the main players in the Portuguese innovation governance
system.
2.2.1 Governmental bodies
As pointed out above, the key Ministries dealing with innovation policy are the MEcI and the MCTES.
Other Ministries with responsibilities for policy domains with a bearing on innovation policy include the
Ministry for Labour and Social Solidarity ( 18 ) (concerning mainly vocational training), the Ministry for
Agriculture, Rural Development and Fisheries, the Ministry for Public Works, Transportation and
Communications (responsible for the National Laboratory for Civil Engineering and has a key role in
public procurement), the Ministry for Education, the Ministry for Health, and the Ministry for Justice
(responsible for intellectual property affairs). Also relevant, though not enjoying the ministerial status is
the National Coordinator of the Lisbon Strategy and the Technological Plan Office: the Coordinator
has the rank of Secretary of State and reports directly to the Prime Minister.
In the period under review there were no major changes in the scope and responsibilities of the main
Ministries dealing with innovation policy ( 19 ). Therefore, a broad perspective of the responsibilities of
MEcI and MCTES on innovation policy will be provided, as well as information on governance
mechanisms and the role played by the Coordinator of the Technological Plan ( 20 ).
The MCTES is responsible for defining research orientation, assigning funds for research, promoting
the internationalisation of research activities, and evaluating research organisations' performance. It
coordinated, for instance, the process of reorganising Public Laboratories, and is managing the
international cooperation agreements established with American Universities (MIT, Harvard, Stanford,
Texas, and Carnegie-Mellon) and with the Fraunhofer Gesellschaft. It is also responsible for Higher
Education, as well as for the promotion of highly skilled employment. The main agency under MCTES
is the Science and Technology Foundation (FCT), which basically plays the role of a research council.
A consultative body is envisaged in the organisational structure of MCTES: the Coordinating Council
for Science and Technology (CCCT), but this has not materialised so far.
The MEcI is in charge of the various dimensions of enterprise policy. It is particularly focused on
encouraging company innovation, company modernisation, internationalisation, and the attraction of
FDI. Another task assigned to MEcI is the development of financial innovation and financial
instruments for supporting company innovation, including venture capital. The Ministry for Economy
and Innovation is responsible for the Competitiveness Factors Operational Programme (CFOP
18
Not surprisingly, this Ministry has played a pivotal role, together with the Minister for Finance and Public
Administration, in designing and managing the Investment and Employment Initiative.
19
Due to the resignation of the former Minister for the Economy and innovation, the Minister for Finance and
Public Administration now handles both Ministries. These remain, however, independent.
20
Since there are no major changes, the text is not much different from the last Country Report (Simões, 2008a).
17
Compete), the main programme for supporting innovation under the NSRF 2007-13. Two important
agencies are under the purview of MEcI: the Institute for Support to Small and Medium-Sized Firms
and Investment (IAMPEI) and the Agency for Investment and Foreign Trade (AICEP).
Traditionally, innovation policy in Portugal was characterised by a 'divide' between the science
approach, on the one hand, and the enterprise perspective, on the other. The existence of a joint-
venture among the two Ministries (the Innovation Agency and AdI), since the late 1980s, has not been
enough to overcome the 'divide'. The successive Community Support Framework (CSFs) have
contributed to reinforcing it, as they provided for distinct operational programmes (OPs) for science
and for enterprise/industry policy. More recently, however, a clear trend emerged to narrow the 'divide'
and to enable a more coordinated and systemic approach to innovation policy. The launch of the
Technological Plan in 2005 defined a broader framework for an integrated policy, encompassing both
science and enterprise polices. No less important has been the reduction of the number of OPs under
the NSRF 2007-13, and the concentration of the key measures concerning innovation policy in a
single OP – the CFOP Compete.
The design of the NSRF 2007-13 has introduced significant changes in the coordination of innovation
policy in Portugal. A coordinating structure has been created to ensure more consistency and
cooperation among the various OPs, and to improve policy delivery. The Council of Ministers
Resolution 25/2006 provided the first guidelines for the NSRF coordination system. A dual
coordination structure was implemented, with a political orientation body and a technical body
responsible for current coordination and strategic monitoring.
The National Coordinator of the Technological Plan and the Lisbon Strategy Office (GCNELPT) also
plays a coordination role, since both the Technological Plan and the Lisbon Strategy have a cross-
cutting nature. The implementation of several measures under the Technological Plan has required
some degree of policy coordination, a task the GCNELPT has endeavoured to undertake. For
instance, a network of governmental departments and agencies has been established to implement
the measures of the Plan. The design of the Lisbon Strategy is another instance where the GCNELPT
has coordination responsibilities. One should however acknowledge that the GCNELPT has only 'soft'
power, which limits its capacity to ensure proper coordination. An advisory body to the Technological
Plan (Conselho Consultivo do Plano Tecnológico), including more than 40 people from businessmen
and representatives of the main employers' associations to academics, was created in 2005. As a rule
its meetings take place every six months.
2.2.2 Main bodies managing implementation of policies
There are a number of bodies in charge of innovation policy implementation. The set of bodies has
remained stable during the period under analysis. Below is a brief description of the main
responsibilities and focus of the various bodies is provided. To help the reader, the presentation will
start with the bodies specific to each main Ministry to conclude with information on the management of
the NSRF 2007-13.
As mentioned above, two important agencies are under the purview of MecI: IAPMEI and AICEP. The
latter is responsible for investments by large firms, promotion of company internationalisation, and
attracting international investment. IAPMEI, on the other hand, mainly aims to support the
enhancement of SME capabilities, promote investments by SMEs and coordinate financial instruments
(venture capital, credit enhancement). It is the key organisation for promoting innovation in Portuguese
companies, since it also plays a role as funding agency, managing the support systems addressed to
companies under the NSRF 2007-13, namely the IIS, the SME Skills Support System (SIQPME), and
most of the measures under the Research and Technological Development Support System (RTDSS).
In this regard, IAPMEI gained, under the NSRF 2007-13, new responsibilities, being in charge of all
the measures specifically geared to promote in-house skills and innovation by SMEs. Previously,
some of these, such as the R&D nuclei in the company sector and the Programme supporting the
creation of research and technology teams in companies (NITEC, PT 36, now PT 75), were assigned
to AdI.
18
IAPMEI has shown in the period under review increased focus on the development of financial
instruments, namely FINICIA, as well as on the development of mechanisms to promote SMEs' sound
financial management. The development of instruments to provide support to SME management has
however lagged behind. Nonetheless, there are signs, including the measures in the NRP 2008-10,
that IAPMEI will grant further attention to this field.
The main focus of AICEP is internationalisation. This includes two main strands. The first is the
development of international businesses by Portuguese firms, following different market entry modes,
from exports to direct investments abroad. This may have some influence on innovation performance
for two reasons: (1) being more exposed to international competition will require further investment in
the development of distinctive competitive assets, and (2) the possibility to use internationalisation
from a competence-creating logic, developing home-base augmenting R&D activities (Kuemmerle,
1999) and learning from abroad. AICEP and public policy in general have not been much concerned
with this matter. The second is the attraction of FDI. This is a central concern for AICEP, which earns
profit from a network of offices abroad (as well as from Portuguese embassies), to approach potential
investors in the country. AICEP is responsible for the management of special investment projects,
involving a minimum investment of EUR 15 million, under the RTDSS.
FCT is the main agency under the MCTES. It plays a pivotal role as research council, assigning funds
to support post-graduate education and scientific research, and evaluating its performance. It is the
body responsible for policy coordination and funding of scientific and technological research, which do
not involve companies, in the context of the Support System for Science and Technology
Organisations (SIESCTN). Among the various activities carried out by FCT, the following deserve a
mention: management of the programme to contract doctors for research organisations; assignment of
doctoral and post-doctoral grants; financing and evaluating R&D organisations and projects;
management of the programme for scientific re-equipment; management of FACC, the scientific
community support fund; involvement in international research programmes including those with US
universities; and provision of information on EU science programmes, namely the Seventh Framework
Programme (FP 7).
Another agency in the context of MCTES is UMIC, the Knowledge Society Agency. This organisation
was created in 2002 to coordinate science, technology and innovation relationships with the EU as
well as to promote the development of the Information Society. The last issue soon gained strength,
and now UMIC is fully committed to it. UMIC has 'the mission of coordinating the policies for the
21
information society, and mobilising it through dissemination, qualification and research activities' ( ).
The Innovation Agency (AdI) is a joint venture between MecI and MCTES to promote innovation. Now,
its role is mainly focused on the bridging universities and industry. It is responsible for programmes to
promote university/industry research consortia as well as for seed capital programmes to support the
launch of new technology-based companies, namely under the NEOTEC initiative (PT 51). As
mentioned above, AdI has lost responsibilities to IAPMEI. It is now mainly focused on measures
involving S&T organisations (including the promotion of university-industry research consortia) or the
employment of post-graduates in companies and S&T organisations. AdI is responsible inter alia for
the measures on individual and co-promotion R&D projects (PT 89 and PT 95).
A final reference is due regarding the Managing Offices of the various OPs under the NSRF 2007-13.
The Regional Programmes Managing Offices have gained much more room for manoeuvre in the
NSRF, and have important responsibilities, for instance in support of scientific and technological
infrastructures (S&T parks and incubators), for the promotion of technology-based entrepreneurship.
From an innovation policy perspective, the most relevant Managing Office is the one responsible for
CFOP-Compete, which designs, launches and oversees the key incentive systems dealing with
innovation: SII, SIQPME, SIIDT, SIESCTN, Collective Actions Support System (SIAC) and Collective
Efficiency Strategies (including the support to CTPs and other clusters).
21
See http://www.infosociety.gov.pt/ online.
19
2.3 Public funding to innovation
2.3.1 Review of the current range of support measures for innovation
This section of the report is mainly based on an Innovation Policy Support Factsheet, which has been
produced by the Technopolis Group (2009), drawing on the TrendChart-ERAWATCH database of
support measures. The factsheet is exclusively based on the information included in the support-
measure database for each country. The charts of the factsheet are presented in Annex 1. The
analysis and interpretation of the information provided in the factsheet should be done with caution,
since the reliability of data is affected by a number of factors. These mainly concern the set of policy
measures and the budgetary estimate.
With regard to the policy measures set, a major issue concerns the fact that in Portugal, as in other
countries, a large share of innovation policy measures comes in the context of the Operational
Programmes included in the Community Support Frameworks or national strategic reference
framework co-financed by the EU. This process follows a septennial programming cycle, where every
seventh-year a thorough revision of the innovation policy support measures takes place: the measures
of the 'old' programme are discontinued, while the new ones are being launched. In the transition
phase there is an odd situation where old and new measures coexist: the 'old' are arriving to an end,
in the process of last payments and closing accounts, while the 'new' are being launched. The first
have more references, but are about to complete their lifecycle, while the latter will shape the future,
but are taking their first steps, still lacking sound information on implementation and funding. Due to
this problem, out of the 45 measures included in the factsheet for Portugal, 20 correspond to
measures included in the old programming cycle, therefore being destined to 'death'. While they still
have an influence on company behaviour and performance, their inclusion in the analysis may be
misleading since they may not reflect Government policies any longer. For this reason, while taking
the factsheet into account, closer focus will be put on support measures which correspond to the
present pattern of innovation policy in Portugal.
The cautionary aspect concerns also the budget estimate. In the case of Portugal such an estimate
suffers from several problems: (1) budgetary figures for the measures included in the NSRF 2007-13
are multi-annual, being defined for the septennium, and thereby limiting annual analyses; (2) for
budgetary flexibility reasons, budgets are disclose for 'Axis' only, with each 'Axis' including often more
than one support system, and each support system encompassing several measures; (3) this
restriction is compounded by the fact that the first calls have been launched less than two years ago,
making it impossible to rely on historical data to base estimates for assigning budgets to single
measures; and (4) some measures do not have a financial nature, but are essential to enable
business players to gain improved access to financial support. Therefore, it is very difficult to arrive to
sound budgetary estimates. The comments on budget aspects will be to a large extent based on
information regarding seven-year budgets together with the amounts of incentives granted so far
under different measures.
Information on the policy priorities provided in Annex 1 suggests that a significant share of support
measures in Portugal are addressed to policy priority No 4 (Enterprises), particularly to 4.2.2
(organisational innovation, including e-business, new forms of work, etc.) and 4.3.1 (support to
innovative start-ups). Although this is in part due to the combination of 'new' and 'old' measures, the
analysis of the new measures confirms the relevance of priority area No 4. A slight shift in favour of
4.2.1 (support to innovation management) may be discerned. In contrast, the relative weight of priority
areas No 1 (Governance and horizontal research and innovation policies), especially 1.1.3 (policy
advisory services), and No 5 (markets and innovation culture), especially 5.2.2 (Green public
procurement), is significantly below EU average. This gap may be explained for two main reasons.
First, policy intelligence activities (objective 1.1) have little tradition and therefore are relatively limited
in Portugal. Second, policy areas No 1 and No 5 are not usually a main concern in the design of policy
measures under the Community Support Frameworks (with the exception of S&T culture and
22
intellectual property) ( ). A further explanation might be the under-reporting of 'softer' measures, not
22
In general, however, these fields are addressed by one measure only.
20
directly associated to the NSRF and/or not giving rise to a legal support document. It is important to
note a recent move in policy priorities in Portugal, with a focus on cluster framework policies (objective
1.3.1). In fact, for the first time, a cluster policy approach has been designed and launched in Portugal.
This corresponds to a very significant change in the innovation support policy pattern.
The overall weight of measures in priorities No 2 and No 3 in Portugal is similar to EU average.

However, closer analysis shows different objective structures within the priority area. In priority area
No 2, about one half of the measures for Portugal concern R&D cooperation (objective 2.2.3),
exhibiting a share much above the EU average. In contrast, the weight of public research
organisations (objective 2.1.2) is much lower in Portugal. With regard to priority area No 3, Portugal
shows above average frequency for objective 3.1.1 (awareness creation and science education), and
below average for 3.3.1 (researchers' lifelong learning). This may be due to different maturity levels of
the national S&T systems. More relevant than these comparisons, which may be very influenced by
different country structures and policy reporting perspectives as well by the problems inherent to the
production of the Factsheet, is to analyse the objectives of the new breed of policy measures under
the NSRF 2007-13. While the new NSRF 2007-13 has not entailed significant changes with regard to
23
'Human Resources' (priority area No 3) ( ), increased focus is given to priority area No 2 (Research
and technologies), particularly on what concerns Science-industry links (objective 2.29 and Direct
State aid measures in support of (business) research (objective 2.3). The range of support measures
in these areas is now much larger, with the launch of Research and Technological Development
Support System (RTDSS). This provides incentives for individual company R&D projects (PT 89), co-
promotion R&D projects (PT 92) and collective R&D projects (PT 93), as well as for the creation and
strengthening of R&D teams (PT 75, previously PT 36) and centres (PT 96) and the provision of R&D
support services to companies through the RTD Voucher (PT 94).
As mentioned above, the majority of the innovation policy budget came, throughout the last three
decades, in the context of the successive Community Support Frameworks, labelled NSRF in the
present 2007-13 programming round. For the whole septennium, the budget assigned to the CFOP
Compete is EUR 5511 million, 56.3% of which come from the European Regional Development Fund
(FEDER). The CFOP Compete Axes more relevant for innovation policy are the following ( 24 ):
1. Axis 1: Knowledge and Technological Development with a FEDER budget of EUR 500 million.
Two main incentive systems are included in this Axis − the Research and Technological
Development Support System (RTDSS), and the support system for the bodies of the
scientific and technological system (SAESCTN). Although budget breakdown has not been
disclosed, the funds assigned to the first are higher. Budget-wise, on the basis of the funds
committed to the first calls, the main measures under RTDSS are company individual projects
(PT 89) and co-promotion projects (PT 95).
2. Axis 2: Innovation and Renewal of Business Models and Specialisation Pattern with a FEDER
budget of EUR 1 220 million. This Axis includes, besides a still important amount of projects
'transferred' from the Third Community Support Framework, two relevant incentive systems −
the IIS and the SME Skills Support System (SIQPME). So far, the funds assigned to SII
projects significantly exceeded those allocated to SIQPME projects. The most relevant
measure seems to be the one on 'Innovation projects' (PT 76), which so far has concentrated
almost 50% of the amount of incentives granted under Axis 2.
3. Axis 3: Financial engineering Instruments for Innovation Funding and Risk-sharing with a
FEDER budget of EUR 360 million. This axis comes in the vein of earlier measures on
financial innovation included in the previous CSFs. These instruments played an important
role in the response to the credit crunch. So far, the main policy measure under this Axis is the
Innovation Financing Support Fund (FINOVA, PT 98), a fund of funds endowed with a capital
of EUR 100 million.
23
This is also due to the reporting strategy followed, since the programmes under the Human Potential
Operational Programme have not been considered for the TrendChart database on Portugal.
24
Two other Axes (Public Administration Effectiveness and Collective Business Development Actions) have also
a bearing on innovation policy, but were not considered since they have a broader scope.
21
With such a diversified set of policy support measures, it is not easy to choose the five most important
ones (including non-financial measures). The selection below accounts for the following criteria: (1)
consider only measures which are into force at present; (2) have potential impact in changing the
innovation system; (3) show relevance for upgrading firm capabilities; (4) illustrate innovative
approaches; and (5) boast a high level of take up by target players. This led to eliminate some
measures from the list that, while responding specific issues, and in spite of their potential to induce
change, have a limited impact in terms of the number of companies covered. For these reasons, the
measures on NITEC (PT 75), Innovation scoring (PT 84), Innovation Voucher (PT 80) and RTD
Voucher (PT 94) were not considered.
In light of the above, the suggested ranking of measures is the following:
1. Competitiveness and Technology Poles – CTP (PT 82). This is a long-awaited measure, with
significant potential to induce change, since it represents the first experience in implementing
a clustering approach. Although not relevant budget-wise, it corresponds to a 'label' that
facilitates access to other measures for organisations and projects included in clusters. The
proper implementation of the CTPs is a challenge for innovation policy as a whole.
2. Innovation projects (PT 76). This is a wide scope, large-budget type of measure addressed to
relatively large projects, including FDI projects. It may contribute to introducing structural
change in the company fabric. Provided that selectivity is ensured, it may also be an important
instrument to encourage innovation in existing firms. This is the measure with the highest take
up by companies.
3. FINOVA (PT 98). The choice of this measure is due to its wide-ranging influence on the
development of the innovation financing system. It is also aimed at improving financial
framework conditions for strengthening the capacity of SMEs to finance innovation as well as
at the support to entrepreneurship. It has a very important budget, which demands proper
implementation, particularly having in mind that successive initiatives on financial engineering,
since the first Specific Industrial Development Programme for Portugal (PEDIP), have not
been enough to achieve a full qualitative change in the innovation financing system.
4. CITEC (PT 96). This measure corresponds to the upgrading of the NITEC measure. It is a
good example of building upon earlier achievements in the design of a new programming
cycle. CITEC goes further than NITEC in strengthening the R&D efforts of companies already
carrying out R&D activities as well as in improving R&D management. It also epitomises the
increased concern with the support to company R&D activities. Although this might be
expressed by other important measures, such as SIFIDE (PT 74) or Individual Company RTD
projects (PT 89), CITEC was selected to represent a new breed of measures aimed at
improving and sustaining in-house R&D capabilities.
5. SME Skills Collective Projects (PT 79). This is another example of a new breed of support
measures addressed to SMEs, being the most relevant support measure so far, in terms of
incentives granted, in the SIQPME. Collective projects are undertaken by public agencies,
business associations or S&T organisations, and are aimed at improving the capabilities or
responding the needs of a group of companies, mostly SMEs. This measure has two
interesting characteristics: is not addressed to single companies, but rather covers groups of
companies; and is likely to have an important demonstration effect, enticing other companies
to become engaged in similar projects.
2.3.2 New or modified support measures

The Portuguese innovation policy support system underwent thorough revision with the launch of the
NSRF 2007-13. This entailed major changes in the set of innovation policy measures, which were
undertaken in 2007 and early 2008 and already presented in the previous report (Simões, 2008a).
Note that many of the 'old' measures under the Community Support Framework 2000-06, were
abandoned, while a few were subject to revision, as was the case of NITECs (PT 75, formerly PT 36).
22
The main feature of the new innovation policy support system was the introduction of an incentive
system to support 'collective efficiency strategies'. These are formally defined, in Decree No 287/2007
of 17 August, as 'strategies aimed at innovation, capability upgrading or modernisation of a group of
companies located in a given territory or in a given pole, cluster, collaborative network or filière of
inter-related activities, encouraging, whenever relevant, the cooperation and networking among
companies as well as among these and knowledge and training centres'. From the innovation policy
standpoint, the key measures in this regard concern CTPs (PT 82) and other clusters (PT 83). Another
important feature was the assignment to regional authorities of some responsibilities for managing
some innovation support measures, namely those addressed to small firms as well as to scientific and
technological infrastructures. Taking a broad perspective, six groups of support mechanisms with a
bearing on innovation were created:
1. Innovation incentive system (IIS),

2. SME skills support system (SIQPME),
3. Research and technological development support system (RTDSS),
4. support system for the bodies of the scientific and technological system (SAESCTN),
5. collective efficiency strategies,
6. collective actions support system (SIAC) to respond to market or system failures, encourage
projects and initiatives dealing inter alia with technological and strategic foresight, technology
analyses, and promotion of technological, marketing and organisational innovation.
Therefore, since the basic frame for innovation policy support had been recently revised, in the period
under analysis no major additions to the set of policy measures were made. There are three initiatives,
of different nature, worth a reference here.
The first was already mentioned in sub-section 1.1.1: the publication of the Decree No 65/2009 of 20
March, introducing several changes to Decree No 287/2007 of 17 August, regarding the national
framework for company investment support systems. The changes were intended to introduce more
flexibility in these incentive systems 'in order to adjust them to the present international economic
context' using the systems 'as instruments to stimulate investment and job creation, especially in the
fields of innovation, internationalisation and R&D'. Note that the changes should be 'envisaged in the
frame of the present world economic conditions, without putting at stake the global innovation strategy'
behind the incentive systems already established. However, the main thrust of the changes is to
increase flexibility, enlarging the scope of what is considered to be 'productive innovation'. This also
includes now the setup of business units or production lines with a significant impact on product,
exports or employment as well as technological improvements. Therefore, the selectivity of support
suffers.
The second is the revision of the industrial property Code (Law No 16/2008 of 1 April and Decree No
143/2008, of 25 July). According to the national institute for Industrial property, the changes introduced
were aimed at making the access and the utilisation of the industrial property system easier as well as
at ensuring more efficiency and speed in granting the protection.
The third initiative corresponds in fact to a new measure, as indicated in Exhibit 6 below. It is the
launch of FINOVA (PT 98), the Innovation Financing Support Fund.
Exhibit 6: New Innovation Policy Support Measures

IPM N° Title Innovation policy framework Organisation responsible
category
PT_98 FINOVA – Innovation Financing 4.3.1, 4.3.2, 1.3.2 PME Investimentos, S.A.
Support Fund
FINOVA is aimed at developing SME financing mechanisms to strengthen the financial soundness,
competitiveness and innovating potential of the Portuguese company fabric. It builds upon already
existing instruments, namely public venture capital, credit enhancement securitisation funds and
venture capital syndication funds. The decision to create an autonomous fund, endowed with EUR 100
million, was justified by the objective to have the critical mass needed to influence Portuguese
financial markets. FINOVA seems to be in line with the vision behind the creation of the INOFIN
23
Programme. Although nothing is said about this, it is likely that the experience with the launch of
special credit lines as part of the anti-crisis policy might have played a role in the decision to create
this Fund, and to place it under the responsibility of financial the organisation PME Investimentos,
S.A., and not under the IAPMEI as it was usual ( 25 ).
FINOVA is expected to participate in a wide range of instruments to strengthen SMEs' own capital as
well as to improve their access to financing. In the first field FINOVA is expected to provide financing
to seed-capital investors as well as to dynamise the venture capital market. In the second, FINOVA is
expected to become involved in the increase of the Mutual Counter-guarantee Fund, in the Credit
Enhancement Securitisation Fund (previously PT 32), and in providing financing guarantees or
launching special credit lines.
2.3.3 Strengths and weaknesses in the innovation policy support system
As mentioned in the previous PROINNO – TrendChart Country Report on Portugal (Simões, 2008a),
the present set of innovation policy measures is very wide and may be generally considered as
appropriate. It provides a whole range of support, ranging from company investments in innovation
and in R&D to the support to the scientific and technological system and to clustering. An increasing
concern has been put in the development of living labs and creativity, linking creativity to innovation.
Company financing has been another focus area, particularly with the launch of the INOFIN
programme, which encompasses FINICIA (PT 56) and FINCRESCE (PT 57), as well as the creation of
FINOVA (PT 98). This is aimed at improving the working of financial markets. The long-awaited
measures on clustering, namely CTPs (PT 82) and Other Clusters (PT 83), respond to one of the
traditional weaknesses of the innovation system. The NSRF 2007-13 includes demand-driven
measures to stimulate the relationships between companies and R&D organisations: the Innovation
Voucher (PT 80) and RTD Voucher (PT 94). These help improve the demand-driven type of measures
initiated under the NITEC initiative. The encompassing nature of the Technological Plan may also be
envisaged as a strength, insofar as it enables to fight both network failures and institutional failures.
In spite of the improvements introduced in the innovation policy support system in the last couple of
years, a number of weaknesses do exist. In the present set of implemented policy measures, the main
weakness concerns measures to counter capability failures, both in public administration (where much
has to be done in the field of strategic thinking) and in companies, particularly in SMEs. The creation
of an Academy of SMEs was pointed out in the NRP 2008-10, but it is still making its first steps.
The key weaknesses, however, are not so much related to the need for more policy measures, but
rather to coordination, delivery and evaluation issues. These are the critical weaknesses that need to
be addressed in the near future. With regard to coordination there is a two-pronged problem: the
insufficient inter-ministerial coordination in policy design; and the weak systemic perspective, leading
to focus more on the 'trees' (i.e. individual measures) rather than on the 'ecology of the forest' (i.e. the
relationships among the measures), particularly from the target players' standpoint. Delivery has long
been a weakness, but it seems to have grown stronger in recent times, when the gap between
announcement and delivery appears to have increased. This is a field where action is needed to
increase target players' awareness of relevant measures, adhere to timetables as promised and
streamline contracts and payments. Finally, there is an evaluation failure. Portuguese authorities and
policymakers still lack an evaluation culture. Independent evaluation may play a key role in following
up the implementation of policies and in assessing their results in order to make adjustments so as to
improve innovation policy efficiency and effectiveness.
25
Note, however, that IAPMEI holds a significant share in PME Investimentos. IAPMEI nominates the Chairman
of PME Investimentos Managing Board and the president of IAPMEI chairs the general assembly of the company.
24
3. Innovation policy and competitiveness: an appraisal
3.1 The ability of policy to address challenges

National innovation policies set priorities based on perceived challenges, and are often motivated by
international agreements and commitments, such as the Lisbon agenda. Therefore national policies
act and react in a complex set of overall policy priorities and commitments. Building on the analysis in
the previous chapters, this section investigates how well national innovation policies identify and
respond to systemic challenges, which may or may not be common in other EU Member States or
even other countries outside the EU.
3.1.1 How well does policy respond to innovation challenges?

The Technological Plan, launched in late 2005, provided a useful framework for the development of a
more consistent innovation policy. Although having three main drivers (Knowledge, technology and
Innovation), which defined a broad structure for action, the coherence among many of the measures
included in the Plan was limited. In fact, as pointed out above, the Plan addressed seven main areas:
(1) Networked society, (2) Upgrading of human resources, (3) Science & Technology infrastructure,
(4) Entrepreneurship, (5) Financing system, (6) Framework conditions for economic activity, and (7)
Company capabilities (Caraça & Simões, 2008). To a large extent, it was the work of the Office of the
National Coordinator for the Lisbon Strategy and the Technological Plan (GCNELPT) that provided ex
post coherence to a set of dispersed ideas and intentions, which exhibited limited ex ante coherence.
The Technological Plan established a set of quantified objectives, broadly presented under Section
2.1 above. These objectives are clearly influenced by the EIS, but show also a bias toward higher
education and S&T policy. The definition of specific targets for enterprise policy objectives seems to
be more difficult, as shown not just by the Technological Plan but also by the recent revision of the
NRP for 2008-10. The Technological Plan provided the basic frame for the design of the NSRF 2007-
13, and especially for the CFOP Compete, the programme on competitiveness factors.
The process of selecting priority areas is not based on a consistent strategic intelligence approach. As
policy tends to be designed en petit comité, the mechanisms for collecting and analysing information
as well as for eliciting the contribution and listening to stakeholders are very limited. There have been
no foresight exercises to provide a sounder basis for policy. At the other hand of the spectrum, policy
evaluation has been limited and, in spite of a few evaluation exercises mostly to comply with EU
requirements, there is not an evaluation culture. The design of the NSRF 2007-13 has to some extent
taken into account the findings of earlier evaluation exercises. However, the contribution of evaluation
exercises as strategic intelligence mechanisms remains limited.
ssessing the strengths and weaknesses in the Portuguese innovation policy support system reveals
that the present set of measures may generally be considered appropriate. This is intended to respond
to both market and systemic (namely capability and network) failures. The launch of the 'collective
efficiency strategies' measure, promoting the establishment of CTPs and other clusters introduced a
new and important feature for innovation policy in Portugal: the response to network failures. The
expectations in this regard are high, but it is still too early to assess the outcome of the policy
initiatives. The first group of CTPs and other clusters was selected. The acid test of the policy will take
place now: the inner dynamics of each cooperative arrangement will play a key role. However, having
in mind the pioneering nature of the initiative, public administration should not take a 'hands-off'
approach. The capacity to follow up on implementation and to ensure selectivity appears to be very
important. This experience will be critical for future policies aimed at addressing network failures.
Either the promises turn into reality and a new cooperative drive is established leading to emulation
and to a gradual behavioural change, or the frustration with failed cooperation and distrust may lead to
a retreat to individualistic stances. This is at the heart of one of the policy challenges identified in
Section 1.3: 'transforming the cluster policy initiative into an effective opportunity for change and for
increasing the systemic density of the NIS'.
25
The set of instruments to address capability failures has improved with regard to the past. In earlier
reports the lack of instruments to support the enhancement of SMEs in-house capabilities was
mentioned. The creation of NITECs in the previous round of Community Support Framework was
much welcomed, and has proven in practice to be a helpful measure to promote the establishment of
SMEs' in-house R&D capabilities. This initiative has been continued and extended in the CFOP
Compete Programme. Currently, besides the support to NITECs (PT 75), a new scheme − the CITEC
programme (PT 96) − was launched to enable companies, which already have a NITEC to go further
in the R&D capabilities 'ladder'. The launching of the RTD Voucher (PT 94) and the Innovation
Voucher (PT 80) are also positive moves to fight capability failures, while addressing systemic failures
as well. The announced creation of the SME Academy might further contribute to respond to capability
failures. In particular, it seems likely to address one important issue mentioned in section 1.3 in the
context of the strengthening of human resources capabilities − the training of SME managers.
Unfortunately, available information is so far too limited regarding the extent of how this might help in
enhancing SMEs' in-house capabilities. A final caveat should be mentioned: the capacity for policy to
respond to systemic challenges demands also a systemic approach in managing and implementing
the different measures.
The responses to institutional failures and framework failures are to a large extent outside the purview
of innovation policy stricto sensu, although measures have been taken to improve the regulation on
universities (by raising very high budget constraints to current activities) as well as on industrial
property rights. However, the key institutional and framework failures of the capabilities of Public
26
Administration ( ) and the working of the system of Justice are still to be solved.
3.2 Effectiveness of policy design
As a result of the growing awareness of what was mentioned as the 'divide' between science and
enterprise policies (Simões, 2006), which had been encouraged by the structuring of the successive
Community Support Frameworks into specific, 'ministry-captured' operational programmes, the new
NSRF 2007-13 provided for a new organisation of programmes as well as for an improved (though not
still ideal) governance structure. Another positive move in the same direction had been the
Technological Plan, which was intended as an integrated programme, overcoming ministerial
segmentation. The assignment of the responsibility for managing the Technological Plan and the
Lisbon Strategy to the same Coordinator, directly dependent on the Prime Minister has also helped to
bridge the 'divide'. Therefore, the situation is now much better than it was ten years ago, when the
Third Community Support Framework was about to start.
This said, the misalignments, rivalries and cultural differences among the Ministries have not been
completely overcome. Coordination has improved, but differences of perspectives and tensions still
exist. The perspective of the MCTES seems to be that an increased investment in Science, and
namely in high-skilled scientific human resources, will almost ipso facto entail pressure on the
industrial fabric, thereby leading to its change. In a nutshell, more investment in science will lead to a
change in economic structure. This perspective is very much based on a linear model, and is not
27
shared by the Ministry for Economy and Innovation ( ), where a more nuanced view seems to prevail.
In spite of the assignment to CFOP Compete of the main incentive systems addressed to innovation
policy as a whole, there are still support systems which are to some extent specific to a given Ministry.
It is the case, for instance, of the support system for the bodies of the scientific and technological
system (SAESCTN) which, although included with other support systems in Axis 1 of CFOP Compete,
is managed by the MCTES. In other systems, however, there is not such a division of responsibilities,
as happens in RTDSS.
26
A lot has been done in the field of e-government to cut red tape and streamline the relationships between
Public Administration, citizens and businesses, such as the Company Now and Trademark Now measures.
27
As mentioned above, since the resignation of the former Minister for the Economy and innovation, the Minister
for Finance and Public Administration now handles both Ministries. These remain, however, independent. So, it
was thought more appropriate to refer to the Ministry, since the role of the secretaries of State has been
strengthened, and not to the Minister.
26
To sum up the above analysis, according to the division of labour as well as of responsibilities in the
innovation governance system in Portugal, MCTES is responsible for higher education and science
policy while MEcI is more focused on the development of business framework conditions and
enterprise policy. While the fields still remain separate, a few 'integration devices' have been
established to promote ( 28 ) increased dialogue and coordination between MCTES and MEcI. The
launch of the technological Plan and the structuring and governance system of the NSRF 2007-2013
have played an important role in this regard.
A further issue in this regard concerns the coordination between national and regional authorities. With
the exception of the autonomous regions of Madeira and Azores, Portugal is not a regionalised
country. Traditionally, incentive systems were almost exclusively managed on a national basis. The
NSRF 2007-13 provided more room for the regional authorities to manage incentive systems. This is
clearly a very positive move, insofar as it enables increases in subsidiarity as well as closer
relationships with economic players. However, for its pioneering nature at the country level, it requires
the definition of a new balance between regional and national domains, thereby increasing the
complexity of policy design and implementation. Since regional authorities do not have legitimacy on
their own, the national government is still in the driving seat and defines the basic rules. So far, this
regionalisation policy seems to be working, providing room for more regionalised policy approaches.
In section 2.2 the main agencies in charge of innovation policy were presented. They cover a wide
spectrum of issues, and have several areas of overlap. Three are under the purview of MCTES: FCT,
UMIC, and AdI. Some analysts of science policy have argued that more dispersion in the assignment
of funds to science would be desirable, since the dominant role of FCT is not conducive to promoting
diversity in the science system. However, in spite of these criticisms, science policy has been
successful in bringing about a more consistent and mature scientific system. Although having also a
funding role, UMIC's mission is mainly focused on the development of the information society. While
being a joint-venture between MCTES and MEcI, AdI has in fact behaved as an agency under
MCTES. AdI is the main interface organisation between MCTES and the economic fabric as well as
between MCTES and MEcI. Although there is a clear definition of responsibilities between AdI and
IAPMEI, there appears to be room for improving the dialogue between these organisations.
IAPMEI, the Institute for Small and Medium Sized Enterprises and Innovation, is the main agency in
charge of innovation policy under MEcI. IAPMEI has gained more responsibility under the CFOP
Compete. However, the need to respond to the crisis, together with a change in the Board, led IAPMEI
to focus more on financial framework conditions and financial engineering than on implementing
innovation policy. However, in our opinion, IAPMEI has a key role to play in this regard, not just in
managing policy measures but also in having a more proactive stance to strengthen SME capabilities.
The assignment of FINOVA to PME Investimentos S.A. (and not to IAPMEI itself) and the announced
SME Academy seem to suggest that IAPMEI might go in that direction. A still unsolved issue in the
innovation policy governance system is the relationship between IAPMEI and AICEP. The present
solution, with AICEP being responsible for large companies and for internationalisation (inward and
outward) policy, does not seem fully satisfactory. It establishes an artificial separation between SMEs
and larger companies on the one hand, and between general SME policy and internationalisation
policy on the other. There appears to be a need to establish a new definition of the responsibilities of
these agencies.
A key body in innovation policy is the CFOP Compete manager office, along with Technological Plan.
There is, however, a major difference among them: while the Technological Plan does not manage a
wealth of funds, the CFOP is endowed with a very significant budget. The main incentive systems with
a bearing on innovation policy are under the CFOP Compete 'roof'. The CFOP Manager, who reports
directly to the MEcI, plays a pivotal role on innovation policy, including in managing the 'Collective
Efficiency Strategies' and in granting support to other public agencies under SIAC, the Collective
Actions Support System.
To conclude, more important than the number of agencies are the relationships between them and the
level of strategic capacities they have. The Technological Plan and the structure of the NSRF 2007-13
28
This does not mean however that such collaboration will be ensured as a matter of fact.
27
contributed to providing further room for inter-agency dialogue in policy design and delivery. However,
different traditions, cultures, administrative heritages ( 29 ) and even leaderships have contributed to
limit the extent of inter-agency cooperation in policy design and delivery. Such cooperation is
particularly important from the target company standpoint. With respect to policy design, public
administration has a lack of competences, especially regarding strategic thinking (Godinho & Simões,
2005). This is the result of a process that started about two decades ago. The need to manage the
funds coming from the EU led most agencies to focus on project selection and evaluation,
downgrading the relevance assigned to policy thinking ( 30 ). This was further compounded with
budgetary restrictions, which limited the rejuvenating of Public Administration skills and competences.
This trend led either to the creation of new agencies or to the 'pulling' of such tasks by ministries.
Although the first move has not been very significant in the field of innovation policy, the second has
played an important role. While there are some exceptions, the capability of agencies to develop
policy strategic thinking and design has been declining. This has affected not just the quality of policy
design, but also the quality of policy implementation.
3.2.1 Process of delivery

Policy delivery is a very important topic for innovation policy in Portugal. The problems associated with
policy delivery are, in our opinion, of no less magnitude than those of policy design. In fact, the devil is
in the details, in the capacity to implement policy measures that, seen from an état majeur
perspective, are well designed. The history of Portuguese innovation policy is full of examples of
measures which looked interesting but were not able to generate a positive reaction and significant
take-up from the target players in the field: measures aimed at promoting inter-firm cooperation as well
as entrepreneurship are cases in point ( 31 ).
Some of the problems found in policy delivery have their roots in the very process of policy design and
evaluation. Three factors seem to be particularly important. The first is the dominant feature of policy
design en petit comité, with limited involvement from the stakeholders. This does not just raise
problems to the process of idea development and sharing; it also undermines the take-up process,
since measures were not disseminated well enough through business associations ( 32 ) and peer-to-
peer information, facilitating the 'capture' of the measures by only a small number of well informed,
proactive players. The second is the above-mentioned shortcomings on what regards strategic
thinking in many agencies. These are at a vantage point, since they are very close to the policy targets
and may closely follow policy implementation. However, daily routine work seems to be the main
concern. This fact, combined with the lack of analytical and strategic capabilities, jeopardises the
opportunities for policy analysis stemming from the above-mentioned vantage point. The third factor is
the insufficient policy evaluation activity. Again, this is a hindrance to both policy design and delivery.
These problems have been especially felt since the 1990s. In our opinion, their importance is stronger
now, when the policy set is generally appropriate. For this reason, policy delivery (together with policy
coordination and medium-term consistency) was identified, in section 1.3 above, as a key challenge
for innovation policy in Portugal. Delivery becomes then a critical factor influencing the success of the
policy mix, particularly on what concerns measures addressed to network failures. It is important to
ensure that 'Collective efficiency strategies' become in fact change instruments, overcoming endemic
network failures. The business companies, business associations, universities, local authorities,
research centres, and other actors involved in CTPs and clusters are learning to work together and to
develop the trust needed to engage into stronger commitments. The role of the public agencies in
29
The concept of ‘administrative heritage’ was taken from Bartlett & Ghoshal (1989).
30
The EC funds inflow was managed by those organisations which already had some policy design and
policymaking capabilities. However, the pressures to manage funds led to a ‘crowding-out’ of policy thinking and
policymaking. Managing funds became the main, if not the sole, concern, as the relevance (and power) of those
who were concerned with policy design significantly declined. While the older people retired, the majority of the
younger, either went ‘up’ to managing roles (becoming more concerned with ‘business-as-usual’ than with a
critical view of policymaking), or turned into politicians, or moved to the universities.
31
There are, of course, also cases where the very shortcomings of the measures were so evident at the
beginning that failure came as no surprise; a case well recorded in our reports is IDEIA (PT 33).
32
It should be noted that the quality, professionalism and representativeness of many business associations is
limited. This is an additional barrier to effective involvement in policymaking.
28
charge of managing those strategies becomes very important: they are facilitators, essential to create
a trustful atmosphere, but need simultaneously to identify and fight opportunistic behaviours. This is a
big challenge for public authorities, more so as the diversity of the issues raised by CTPs and other
clusters requires a coordinated approach by public agencies.
In policy delivery is the capacity it is important to look at policy instruments from target company
standpoint. The diversity of policy measures leads companies to face the decision on which path to
follow: given the wide range of measures available, which ones are more appropriate to respond to
innovation shortcomings? How may companies combine different measures? While this may raise no
major problems to large firms, it may become a conundrum for many SMEs. There is therefore a need
for public agencies to clarify the relationships among the various measures, and to stimulate
companies to understand these relationships. This would lead to increased company awareness about
the advantages of measure integration, taking them up, according to the characteristics and
capabilities of the company concerned. Some kind of 'market' segmentation and company advice,
often through reliable business associations, is needed. The success of policy measures depends to a
significant extent on the capacity to implement them, while making the appropriate adjustments.
3.3 Impact of public support for innovation

To proceed to an analysis of the impact of public support to innovation in Portugal it is important to
bear in mind a number of facts. First, there may be a long time lag between the implementation of the
support measures and their economic impact. Second, the change of the policy support set as a
consequence of the successive rounds of Community Support Frameworks makes the establishment
of a clear connection between measures and economic impacts even more difficult. Third, impacts are
to a significant extent the consequence not of individual measures, but rather of sets of interrelated
measures. Fourth, economic performance is dependent of a wide set of factors, of both national and
international nature, of which innovation support measures are just a part; in other words, economic
performance is influenced by many factors, not just on innovation policy. Therefore, the drawing of a
chain-link from innovation policy measures to economic impacts is extremely difficult, not to say
impossible, as Arundel (2006) and Freeman and Soete (2007) remarked.
Besides these limitations, there is an additional difficulty in figuring out the economic impact of
innovation policy in the case of Portugal − the lack of sound research and evaluation studies aimed at
assessing the relationship between policy and economic performance. This has been evident in the
evaluations of the successive CSFs. The chain of impact of the programmes on overall
competitiveness is difficult to establish. Therefore, evaluations have been more concerned with the
'efficiency' of those programmes, as addressed by short-term metrics, than with their 'effectiveness' in
terms of competitiveness. Caraça & Simões (2008) who have undertaken, to our best knowledge, the
most recent analysis of innovation policy measures (those in the context of the Technological Plan)
have not delved into that matter; they have just proceeded to an appraisal of the likely impact of policy
measures following a logical impact method.
Therefore, there is no sound basis for the establishment of a clear relationship between policy
measures and the indicators included in the EIS. Having in mind the fact that a large share of the
measures under the NSRF 2007-2013 was launched less than two years ago, it is impossible to
assess the influence of those measures on performance. This hindrance is further compounded with
the effect of the financial and economic crises. Furthermore, an exclusive focus on EIS indicators
involves the risk of taking the proxy for the reality. Having all these considerations in mind, a simple
exercise was carried out to identify the effects of the main innovation policy measures on EIS
indicators. Two levels of effects were considered: (1) more direct effects, corresponding to the
influence on 'Enablers' and 'Firm activities'; and (2) indirect effects, aimed at assessing the influence
on the 'Output' group. It is important to remark that in this group two further levels may be identified:
on 'Innovators', whose impact chain is shorter and on 'Economic effects', which really translate the
impacts on economic performance. Having in mind the difficulties in establishing a clear chain link
from policy measures to economic performance, the influence of the support policy measures included
in the table on 'Economic effects' was always assessed as low. The results of the exercise undertaken
are presented on Exhibit 7.
29
Exhibit 7: Potential Effects of Innovation Policy Support Measures on EIS

Policy Measure Intermediate Effects I Innovation & Economic Effects
ENABLERS/FIRM ACTIVITIES OUTPUTS
FINCRESCE Private Credit*
(PT 57)
FINICIA High Firm Renewal Employment MH/HiTech Manufacturing
Innovation Content Employment Knowledge Intensive Services
Projects (PT 71)
SIFIDE (PT 74) Business R&D Expenditures* Product/Process Innovators
Resource efficiency Innovators
Employment MH/HiTech Manufacturing
Employment Knowledge Intensive Services
New-to-market/firm sales
NITEC (PT 75) Business R&D Expenditures Product/Process Innovators^
SME Innovating in-house* Resource efficiency Innovators^
Innovative SMEs collaboration with others New-to-firm sales
Innovation Projects Non-R&D Innovative Expenditures* Product/Process Innovators^
(PT 76) SME Innovating in-house* Resource efficiency Innovators^
EPO patents Employment MH/HiTech Manufacturing^
Community Trademark/design Employment Know. Intensive Services^
Manufacturing/Services Exports^
Entrepreneurship Firm Renewal Employment MH/HiTech Manufacturing
Projects (PT 77) Employment Knowledge Intensive Services
SME Skills Non-R&D Innovative Expenditures^ Product/Process Innovators^
Collective Projects SME Innovating in-house^ Resource efficiency Innovators^
(PT 79) Innovative SMEs collaboration with others^ Employment MH/HiTech Manufacturing
Manufacturing/Services Exports
Innovation Voucher Non-R&D Innovat. Expendit Product/Process Innovators
(PT 80) Innovative SMEs collaboration with others Resource efficiency Innovators
Competitiveness S&E and SSH graduates Product/Process Innovators^
and Technology S&E and SSH doctorate grad. Resource efficiency Innovators^
Poles - CTP Innovative SMEs collaboration with others* Employment MH/HiTech Manufacturing
(PT 82) EPO Patents Employment Knowledge Intensive Services
TBP flows Manufacturing/Services Exports^
Public-private co-publications^ New-to-market/firm sales
Other Clusters S&E and SSH graduates Product/Process Innovators^
(PT 83) S&E and SSH doctorate grad. Resource efficiency Innovators^
Innovative SMEs collaboration with others* Employment MH/HiTech Manufacturing
Innovation Scoring SME Innovating in-house* Product/Process Innovators^
(PT 84) Innovative SMEs collaboration with others Resource efficiency Innovators^
Individual Company Business R&D Expenditures* Product/Process Innovators^
RTD Projects SME Innovating in-house* Resource efficiency Innovators^
(PT 89) Employment MH/HiTech Manufacturing
RTD Voucher Business R&D Expenditures Product/Process Innovators
(PT 94) Innovative SMEs collaboration with others Resource efficiency Innovators
Co-promotion Business R&D Expenditures^ Product/Process Innovators^
projects (PT 95) SME Innovating in-house Resource efficiency Innovators^
Inter-'Innovative SMEs' collaboration* Employment MH/HiTech Manufacturing
Public-private co-publications Employment Knowledge Intensive Services
CITEC (PT 96) Business R&D Expenditures* Product/Process Innovators^
SME Innovating in-house* Resource efficiency Innovators^
Innovative SMEs collaboration with others New-to-firm/market sales
FINOVA (PT ) Venture capital, Private credit^
30
Key: (*) High effects on EIS, (^) Medium effects on EIS, all others: low effects on EIS
It is clear from Exhibit 7 that the set of policy measures includes different groups focused on different
issues. Two measures − FINCRESCE (PT 57) and FINOVA (PT 98) − although showing distinct
characteristics, are chiefly aimed at facilitating the access of companies to private credit. Their impact
on EIS Outputs is rather weak, since the chain link from them to economic performance is a very long
one. They are nevertheless very important to improve the framework for business activities,
particularly in a phase of credit restrictions.
Then come two measures to promote skilled entrepreneurship: FINICIA high-innovation content
projects (PT 71) and Entrepreneurship projects, under the IIS (PT 77). They have a direct impact on
the EIS indicator of Firm renewal, although the main rationale for launching them has been the
promotion of high-skilled employment in both manufacturing and services as well as the fostering of
knowledge-intensive exports. Effects, both direct and indirect, were assessed as low, since both
measures have not been so far able to change the size or the pattern of skilled entrepreneurship. The
experience of FINICIA platforms has not been able to deliver so far. Therefore, fighting this issue
requires a very strong effort, which goes much further than entrepreneurship promotion measures.
SIFIDE (PT 74) had a very significant effect on the increase in business enterprise R&D expenditures
for 2007. The take up of SIFIDE by firms was very high. This is due to a couple of factors: an
increased awareness about SIFIDE and the advantages offered by the system as a lawful tax evasion
device for firms in a year of high profits. Therefore, SIFIDE played an important role in increasing R&D
business expenditures. The question is, however, whether SIFIDE might contribute to sustained R&D
activity by firms. This question is key to assessing the economic effect of SIFIDE. An important feature
of CFOP Compete is the launch of a cohort of new measures aimed at promoting R&D by companies,
alone or through partnerships with other companies and S&T organisations. Two measures are aimed
at supporting the creation and development of in-house R&D units: NITEC (PT 75) and CITEC (PT
96). They have direct effects on 'SME innovating in-house' and 'Business R&D expenditures'. The size
of these effects depends on the level of take-up by firms, which according to available information is
low. The potential effect is, however, high and long-standing, since the measures follow an R&D
'ladder' perspective. The translation into Outputs may be important for Innovators indicators, since the
share of innovating firms is likely to increase, but the economic effects will be relatively weak.
The effect of the Innovation Scoring (PT 84) instrument will be felt particularly at the level of innovation
awareness and the development of a more consistent and broad strategic thinking about innovation in
companies. The challenge here is to extend the use of the instrument from COTEC members to
'ordinary' SMEs. If this is properly undertaken, the Innovation Scoring might have a very positive effect
on the 'SMEs innovating in-house' indicator.
SME skills collective projects (PT 79) are likely to have positive effects at the levels of Non-R&D
innovation expenditures, SMEs innovating in-house and Innovative SMEs collaborating with others.
The demonstration and collaborative effects may be particularly relevant. In terms of 'Outputs', the
main effects are likely to be felt in the share of innovating SMEs. The measure has some potential to
generate a 'dragging' effect, leading other firms to become involved in innovation projects. The new
measures on Innovation Vouchers (PT 80) and RTD Vouchers (PT 94) are likely to have not just an
effect of increasing R&D and non-R&D expenditures, but particularly of contributing to fostering
cooperation between SMEs and S&T organisations, thereby supporting the creation of cooperative
networks to share knowledge. Overall, their effects on EIS Outputs will remain very limited.
Last but not least, the analysis of the potential effects of the 'Collective Efficiency Strategies',
encompassing the measures on CTPs (PT 82) and Other Clusters (PT 83) is worth considering. While
the latter may have relevant effects, namely at the local level, the former are clearly more important
since they are aimed at introducing a qualitative leap in behaviour and in R&D and innovation
capabilities, with a view to compete at global level. For this reason, the implementation of the CTPs
was considered in this report as a major challenge in the NIS. However, the translation of the likely
effects of this measure in EIS is limited: the EIS does not fully capture the effects of clustering policies,
particularly due to the weaknesses of the collaboration and partnership indicators. Therefore, the only
EIS indicator on which this measure is expected to have a significant effect is the one on 'SMEs
collaborating with others'. Having in mind its ambitions, CTP is the support measure with the strongest
potential to influence Outputs, particularly product, process, organisation and resource-efficiency
31
innovators as well as exports. In fact, CTPs are expected to play an important role in upgrading
exports. Available evidence is, however, still too scarce to base prospects as to the economic impact
of CTP. Only after a few years of operation, a sound analysis may be carried out.
3.3.1 Conclusions: possible future actions and opportunities for innovation policy
Portugal has now a wide set of innovation policy measures addressing different perspectives of
innovation. More than new support measures what is needed is to improve coordination, delivery and
evaluation.
Coordination needs to be improved at three levels: policy design, inter-measure relationships, and
national-regional responsibilities. At policy design, progress has been made but there is still a need for
improving inter-ministerial coordination. The role of the National Coordinator of the Technological Plan
and the Lisbon Strategy in this regard might be strengthened to promote the development of common
perspectives and a more coherent innovation policy. At the level of inter-measure relationships, the
existence of a flexible budgetary approach at the level of each incentive support system is positive,
increasingly so as it encourages an encompassing view of the measures. Further integration should,
however, be developed also between support systems. In particular the links between IIS and RTDSS
need to be improved, since the separation between them to some extent replicates Ministerial
domains. It seems essential to take the customer perspective: Which path should be chosen when
faced with such a wide choice of support measures? With national-regional responsibilities, the NSRF
2007-13 went a step further in assigning responsibilities to regional authorities. This is a very positive
move. Being to a large extent a novel experience, it requires adjustments and a learning attitude from
both national and regional bodies. It would be desirable for regional authorities to have further
competencies to better carry out their tasks, including the tailoring of support to the specific needs of
the regional social and economic fabric.
With regard to delivery, six aspects should be pointed out. The first concerns the capacity to meet
deadlines and to quicken the process between approval and contracting. For the first time, decision
timetables were defined when the calls were launched. This is a very positive feature, and may
indicate a new attitude from public administration. Together with the online management of
applications, it has significantly contributed to increasing transparency. Unfortunately, however, not all
deadlines have been met. Additionally, several companies complained that the process of contracting
and transferring the funds to the promoters was too slow. The second aspect concerns selectivity.
This has been one of the key orientations for the NSRF 2007-13. Fighting the crisis has resulted in
less strictness on selectivity, namely in the ISS. This may be acceptable under current circumstances,
but higher selectivity needs to be reinstated once the crisis is over. Selectivity is essential for the
measures to have the expected effects on enhancing innovation and promoting change. Third, good
delivery requires dissemination of information and even a 'missionary' approach. The success of the
first round of NITEC is to a large extent due to this fact. The fourth aspect concerns inter-agency
coordination. There is clearly room for improvement in this regard. Fifth, good implementation means
that the proxy cannot be taken for reality. More relevant than short-term international comparisons is
the capability to induce sustainable change. The delivery challenges are particularly acute in the case
of 'Collective Efficiency Strategies', particularly on CTPs, where the novelty of the approach requires a
strong commitment from the players involved, including public bodies and agencies. Finally, it is very
important to ensure medium- to long-term consistency in policy design and implementation, making
this independent from electoral cycles.
The last action field is evaluation. Evaluation, and especially independent evaluation, is essential for
follow-up measures, in order to identify areas for improvement and to assess the results achieved, as
well as to provide feedback to adapt the measures to new challenges and to improve further rounds of
policy design. The pressure of the European Commission to carry out ex ante and ex post evaluations
of the successive CSFs has contributed to laying down the roots of an evaluation culture. Much needs
to be done, however, to develop it. Without proper, independent and systematic evaluation procedures
the improvement and modernisation of the innovation support system as well as the quality of the
policy delivering process will suffer. Therefore, a committed approach to using evaluation as a tool for
improving policy design and implementation is recommended.
32
Annexes
Annex 1: Innovation Policy Support Factsheet − Portugal
Policy priorities addressed by the support

measures in Portugal and EU27
4.2.2 Support to organisational innovation incl.

e-business. new forms of work organisations.
4.3.1 Support to innovative start-ups incl.
gazelles
4.2.1 Support to innovation management and
advisory services
2.2.3 R&D cooperation (joint projects. PPP with
research institutes)
4.3.2 Support to risk capital
3.1.1 Awareness creation and science
education
4.1.2 Support to innovation in services
4.1.1 Support to sectoral innovation in
manufacturing
3.3.2 Recruitment of skilled personel in
enterprises
2.3.1 Direct support of business R&D (grants
and loans)
1.3.2 Horizonal measures in support of
financing
5.3.2 Consultancy and financial incentives to
the use of IPR
5.1.1 Support to the creation of favourable
innovation climate (ex. roadshows. awareness
3.2.3 Mobility of researchers (e.g. brain-gain.
transferability of rights )
2.2.2 Knowledge Transfer (contract research.
licences. research and IPR issues in
1.3.1 Cluster framework policies
5.3.1 Measures to raise awareness and provide
general information on IPR
5.2.1 Fiscal incentives in support of the
diffusion of innovative technologies. products
3.2.1 Recruitment of researchers (e.g. fiscal
incentives)
2.3.2 Indirect support to business R&D (tax
incentives and guaranteees)
1.3.3 Other horizontal policies (ex. society-
driven innovation)
1.2.1 Strategic Research policies (long-term
research agendas)
0% 5% 10% 15% 20% 25% 30%
% of policy measures in EU27 % of policy measures in PT
33
Estimated annual budget spent on policy priority

and number of support measures in Portugal
3.3.1 Job training (LLL) of researchers and other
personnel involved in innovation
3.3.2 Recruitment of skilled personel in
enterprises
1.3.2 Horizonal measures in support of financing
2.2.3 R&D cooperation (joint projects, PPP with

research institutes)
4.3.1 Support to innovative start-ups incl.
gazelles
0% 5% 10 15 20 25 30 35 40 45 50
% % % % % % % % %
% of budget per priority % measures per priority
34
Targeted R&T fields by support measures in

Portugal compared to EU27
Other
Government and social relations
Security and defence
Space
Environment (including climate change)
Transport
Services
Industrial production
Energy
Food, agriculture and fisheries
Health
Socio-economic sciences and humanities
Materials
Nanosciences and nanotechnologies
Biotechnology
ICT
0% 1% 2% 3% 4% 5% 6% 7% 8%
% of total number of measures PT % of total number of measures EU27
35
Target groups of support measures in Portugal

compared to EU27
All companies
Other
Technology and innovation centres (non-profit)
SMEs only
Other non-profit research organisations (not HEI)
Scientists / researchers (as individuals)

Business organisations (Chambers of
Commerce...)
Higher educations institutions research
units/centres
Consultancies and other private service providers
(non-profit)
Trade Unions
Higher education institutions (education function)

Private institutions for education / lifelong
learning
Other public education institutions
(secondary,etc...)
0% 5% 10 15 20 25 30 35 40 45 50
% % % % % % % % %
36
Aspects of innovation process targeted by

measures in Portugal compared to EU27
Innovation management tools (incl quality)
Awareness raising amongst firms on innovation
Industrial design
Diffusion of technologies in enterprises
Promotion of entrepreneurship/start up (including

incubators)
Commercialisation of innovation (including IPR)
Pre-competitive research
Co-operation promotion and clustering
Development/prototype creation
Improving the legal and regulatory environment
Applied industrial research
0% 5% 10% 15% 20% 25% 30% 35% 40%
37
Sources of co-financing of support measures in Portugal compared

to EU27
Co-financed by the
Structural funds (ERDF,
ESF,etc.)
Co-financed by the
private sector
Other co-financing
Co-financed by
foundations or charities
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
38
Forms of funding of support measures in Portugal

compared to EU27
Grants
Subsidized loans (including interest allowances)
Other
No direct funding provided
Venture capital (including subordinated loans)
Tax incentives (including reduction of social

charges)
Guarantees
0% 10% 20% 30% 40% 50% 60% 70% 80%
39
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EXECUTIVE SUMMARY: PUBLIC SUPPORT FOR INNOVATION – A SNAPSHOT .............................I

1. MAIN TRENDS AND CHALLENGES IN THE NATIONAL INNOVATION SYSTEM..................... 1

Exhibit 1: Comparable indicators of economic performance................................................................... 2

AdI – Agência de Inovação (Innovation agency)

Executive Summary: Public support for innovation – a snapshot

1. Main trends in the National Innovation System

3. Appraisal of national innovation policy

Coordination needs to be improved on policy design, inter-measure relationships, and national-

1. Main trends and challenges in the National Innovation

1.1 Recent economic trends and market developments

Exhibit 1: Comparable indicators of economic performance

1.1.1 The credit crisis and its effect on innovation activity

1. modernisation of schools, by accelerating the refurbishing and modernisation of public

1.2 Recent trends in the national innovation performance

Exhibit 3: Main innovation policy challenges

1. Strengthening human resources capabilities, particularly at undergraduate and graduate

5. Improving policy coordination, delivery and medium-term consistency. In previous reports it

No less important is the challenge of the medium-term consistency of innovation policy. To be

2. Public Support to Innovation

2.1 Main objectives for innovation policy

Exhibit 4: Main innovation policy documents

2007: National Strategic Reference Framework 2007-2013

2006: PRACE – Public Central Administration Restructuring Programme

2005: PNACE – Programa Nacional para o Crescimento e o Emprego 2005/2008 – Estratégia de

2005: Plano Tecnológico (Technological Plan)

Exhibit 5: Technological Plan quantified targets

Objective Target Ref. Year

• strengthening the S&T system,

2.2.1 Governmental bodies

2.2.2 Main bodies managing implementation of policies

2.3.1 Review of the current range of support measures for innovation

The overall weight of measures in priorities No 2 and No 3 in Portugal is similar to EU average.

In light of the above, the suggested ranking of measures is the following:

2.3.2 New or modified support measures

1. Innovation incentive system (IIS),

Exhibit 6: New Innovation Policy Support Measures

2.3.3 Strengths and weaknesses in the innovation policy support system

3. Innovation policy and competitiveness: an appraisal

3.1 The ability of policy to address challenges

3.1.1 How well does policy respond to innovation challenges?

3.2 Effectiveness of policy design

3.2.1 Process of delivery

3.3 Impact of public support for innovation

Exhibit 7: Potential Effects of Innovation Policy Support Measures on EIS

Policy priorities addressed by the support

4.2.2 Support to organisational innovation incl.

% of policy measures in EU27 % of policy measures in PT

Estimated annual budget spent on policy priority

2.2.3 R&D cooperation (joint projects, PPP with

Targeted R&T fields by support measures in

% of total number of measures PT % of total number of measures EU27

Target groups of support measures in Portugal

Technology and innovation centres (non-profit)

Other non-profit research organisations (not HEI)

Scientists / researchers (as individuals)

Higher education institutions (education function)

Aspects of innovation process targeted by

Innovation management tools (incl quality)

Awareness raising amongst firms on innovation

Diffusion of technologies in enterprises