RIO Country Report Estonia 2014

The RIO Country Reports, co-authored by JRC policy analysts and independent experts, give an update on the performance of the national research and innovation systems, and examine policies to address key R&I challenges, assessing their effectiveness. They serve as a tool to inform EU and national policy-makers, and support policy learning in Member States (MS).

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The annual RIO Country Report analyses and assesses the development and performance of the Estonian national research and innovation system and related policies in the perspective of EU strategy and goals.

The report highlights recent national policy and system developments occurring and assesses the match between national policy priorities and the structural challenges of the research and innovation system. It addresses among others:

  • The progress of Estonia towards achieving the Innovation Union, focusing on areas where action is needed.
  • Progress in responding to the ERA actions, particularly in light of the ERA progress report findings published in September 2014.
  • Country specific R&D and innovation recommendations as indicated in COM(2014) 400 final '2014 European Semester: Country specific recommendations, Building Growth' adopted by the Commission on 2 June 2014 and endorsed by the Council on 27 June 2014.
  • Progress in tackling research and innovation system challenges beyond those outlined above.
  • Areas highlighted by the Commission's Communication on 'Research and innovation as sources of renewed growth' (COM(2014) 339 final) and its accompanying Staff Working Document 'State of the Innovation Union, taking stock 2010-2014' (SWD(2014 181 final).

The RIO Country Report 2014 builds on the experience of the ERAWATCH project. The ERAWATCH Country Reports from previous years are also available for download on this page.

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RIO Country Report 2014_Estonia.pdf
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National economic and political context

Economic growth was rapid between 2000 and 2008 but went into a decline from 2008 onwards. The GDP growth rate was -4.2% in 2008 and -14.1% in 2009. The growth was restored in 2010 (3.3%), stood at 8.7% in 2011 due to increased exports, but slid back to 4.5% in 2012 and to 2.2% in 2013 as foreign demand fell. The R&D project in shale oil refining industry boosted the GERD intensity (2.34% in 2011), but as the project ended, the GERD slid back below EU-28 average in 2013 with 1.74%.

the Estonian strategic objectives for R&D, innovation and enterprise policy have been relatively stable over the last decade (at least since 2004). The structural weakness of the national economy remains, with a relatively low share of high technology and knowledge-intensive companies.

ERA priority 2: Optimal transnational co-operation and competition

Increasing the participation and visibility of Estonia in international RDI cooperation is one of the key objectives in the new RD&I Strategy for 2014-2020, which also focuses on the three growth areas of smart specialisation.

Involving foreign experts is a common rule in evaluating R&D institutions since 1995 and is applied also in personal research funding and institutional research funding.

The Estonian Research Infrastructures Roadmap (2014) itemises national interest in specific ESFRI projects, but does not deal with rules on access to facilities.

International co-operation projects are funded by the Estonian Research Council in the framework of either bilateral or pan-European initiatives. There are agreements in place with Baltic and Nordic partners as well as several exchange programmes.

National R&I strategies and policies

The innovation governance system is simple with a rather clear division of responsibilities and a firm connection with the political leadership. RD&I strategic objectives and principles of management and financing are set in the RD&I strategy “Knowledge Based Estonia 2014-2020” and in the “Entrepreneurship Growth Strategy 2014-2020”. The RD&I strategy focuses more on research and higher education, the “Entrepreneurship Growth Strategy” encompasses innovation and relevant educational aspects. The main funding instruments are the state budget and EU structural funds (SF accounting for 60% of R&D budget in 2013).

National Reform Programmes 2013 and 2014

The National Reform Programme “Estonia 2020” (updated in May 2014) sets two central objectives for “Estonia 2020” – increasing productivity and employment in Estonia. The main focus in the coming years is on education and employment and the main objectives include integrating long-term and young unemployed people in the labour market and developing their skills.

ERA priority 3: An open labour market for researchers


Estonian universities and other R&D institutions are relatively independent on forming their HR policies. The basic rules are set in the Organisation of Research and Development Act and the Universities Act, as teaching and research positions in R&D institutions are, in general, subject to public competition.

The new RD&I strategy for 2014-2020 includes measures to further improve the migration policy with the aim to increase researcher mobility and to ensure integrated financing of the research groups led by top researchers. Researchers in Estonia still do not have competitive salaries compared to other European countries (average earnings in Estonia are in general almost three times smaller than EU27 average).

Open, transparent and merit-based recruitment of researchers:

The system for open, transparent and merit based recruitment of researchers has been in place since the beginning of the last decade. There are no barriers to the application of open, transparent and merit based recruitment of researchers and such principles are applied in the recruitment of researchers of the higher education sector and R&D institutions.

Access to and portability of grants:

The Estonian Research Council (founded in 2012) awards institutional and personal research funding (relevant amendments to the Organisation of Research and Development Act in force since 2012). Grant competitions are open to all permanent residents of the Republic of Estonia and to all citizens of a foreign country, if they have full-time job in Estonian R&D institution (residency is not required). Grants should be applied for through an Estonian R&D institution. Researchers affiliated in foreign institutions can not yet apply for Estonian grants.


EURAXESS Estonia has 7 members and has service centres in the biggest Estonian R&D institutions. Estonian Research Council acts as coordinator and web page administrator of EURAXESS Estonia network.

Doctoral training:

Estonian universities are very autonomous in developing doctoral training curricula. Doctoral study programmes usually include training in transferable skills to improve researchers’ employment skills and competencies (based on the Standard of Higher Education; introduced in 2008, last amended in 2014).

HR strategy for researchers (HRS4R) incorporating the Charter and Code:

The Rectors’ Conference, representing all public universities in Estonia and one private university, signed the Quality Agreement of Estonian Universities in 2011, which specifies quality standards for doctoral studies. Point 10 of the Agreement refers to the implementation of the Charter & Code.

Education and training systems:

The Estonian Lifelong Learning Strategy 2020 aims to achieve a ratio of 60/40 as regards general upper-secondary education and vocational education respectively by 2020. In 2013, a new structure for vocational education and training programmes was introduced by the Vocational Educational Institutions Act.

Policy developments related to Council Country Specific Recommendations

The EC country specific recommendation on R&D for Estonia is to “further intensify prioritisation and specialisation in the research and innovation systems and enhance cooperation between businesses, higher education and research institutions to contribute to international competitiveness”.

Estonia has made some progress in addressing the recommendation to identify potential measures to prioritise and internationalise its research and innovation system and improve cooperation between businesses, higher education and research institutions. Estonia has identified knowledge-intensive sectors – growth areas of Smart Specialisation - that could move the country’s economy up the value chain and thus allow it to become competitive at global level. The innovation vouchers programme has proved successful in increasing the number of contracts between research providers and companies.

ERA priority 5: Optimal circulation and access to scientific knowledge

e-Infrastructures and researchers electronic identity:

Electronic identification is widely applied in Estonia, both by the Estonian R&D organisations and the Estonian Research Portal. Remotely accessible services are also widely available and secure. The Programme of Electronic Scientific Information (in Estonian „E-teadusinfo“) aims to supply Estonian R&D institutions with scientific information. The Estonian e-repository is an integrated e-environment created for long-term preservation and availability of digitised resources. The Estonian Research Information System can be used as an open repository, so that results of research that received public funding are easily identifiable. In 2011, Estonian Higher Education Information and Communications Technology and Research and Development Activities State Programme 2011-2015 was adopted with the aim to increase the quality of ICT and develop cooperation between different partners.

Open Access to publications and data:

Access to scientific information is facilitated by the Consortium of Estonian Libraries Network and the research libraries that have created very good conditions and easy access to scientific journals and electronic databases for national researchers. The free access to the results of publicly funded research is stated by amendments (adopted in 2012) of the Organisation of Research and Development Act and measures have been taken to develop a variety of R&D e-infrastructures. According to the EC report (2014) “State-of-art analysis of OA strategies to peer-review publications”, Estonia has a majority (over 70%) of papers available in OA.


Framework conditions

In general, the rules for starting up and running a business are simple and the legal framework is transparent and up-to-date. The only tax incentive for innovation is the special feature of corporate income tax in Estonia - only dividends are taxed. Estonia has a system of intellectual property rights that is well developed from a legal perspective. Estonia is also in the process of renewing its patent and intellectual property rights system. Demand-side innovation policy has so far not been actively pursued and implemented in Estonia. The MEAC has set the “Development of Demand-side Policies” as one of three major policy instruments in the “Entrepreneurship Growth Strategy 2014-2020”.


Science-based entrepreneurship

A number of measures to facilitate knowledge transfer and the creation of university spin-offs have been under implementation since 2008-2009. The following measures are funded by MEAC and implemented by Enterprise Estonia Foundation: Cluster Development Programme;  Technological Development Centres (for 2014-2020); Programme ”Start-up Estonia”; Entrepreneurship competition “Ajujaht”; Investments into test- and semi-industrial laboratories.

Funding trends

The overall level of R&D investments as a percentage of GDP almost doubled between 2008 and 2011 (from 1.26% to 2.34%), but slid back to 2.16% in 2012 and dropped again below EU-28 average in 2013 (EU-28: 2.02%; EE: 1.74%) as the effect of the investments into the shale oil refinery ended. Business sector investment (BERD) as a percentage of GDP follows the same trend (as the cause is the same): it tripled in 2008-2011, slid back in 2012 and dropped further about 50% in 2013. The share of government sector investments (GBOARD) as percentage of GDP has been growing steadily for the last five years (from 0.69% to 0.86%). No tax incentives have been given to R&D and innovation investments except that companies’ income is free of tax to the extent that they reinvest their profit.

The share of EU Structural funds has been growing remarkably from 2009 to 2013. In 2011 and 2012, 64% and in 2013 60% of all public sector RD&I funding was financed by Structural Funds (includes co-funding from the state). Support measures for enterprises to develop new products, services and technologies are financed from the Enterprise Estonia support scheme for R&D projects. The total budget of this measure was €60m for 2007-2013.

Two ministries are mainly responsible for RD&I funding. In 2013, the share of MER in the total R&D budget (€169m in absolute terms) was 80% (83% in 2012) and the share of MEAC was 14% (12% in 2012). The amount of funding of R&D through other ministries is small, e.g. in 2013 it was less than 6%. According to the ERAC Peer Review, the main R&D funding instruments in MER budget (70 %) and most of the funding from MEAC budget are competitive. The share of competitive versus institutional funding in the R&D national budget of MER was 69% and 31% respectively in 2011 or even 80% vs 20%.

Baseline funding, infrastructure expenses and institutional research funding are allocated to institutions whose research and development activities have received a regular positive evaluation in at least one field. Institutional research funding is funding allocated for high level research and development and related activities (research topics) of a research and development institution and for ensuring consistency of research and development in a research and development institution. Personal research funding is funding allocated for a high level research and development project of a person or a research group working in a research and development institution.             

Smart Specialisation

To date, there is no separate national or regional R&I strategy on smart specialisation and there is no plan to have one, as smart specialisation is incorporated in the RD&I Strategy 2014-2020 and in the Entrepreneurship Growth Strategy 2014-2020.

Smart specialisation growth areas are: ICT supporting other sectors (use of ICT in industry incl. automation and robotics, cyber security, software development); health technologies and services (biotechnology, e-health); resource efficiency (material science and industry, knowledge-based construction, health promoting food industry, chemical industry).

Knowledge markets

Estonia has a system of intellectual property rights that is well developed from a legal perspective. Compliance related activities in Estonia are closely interlinked with those of the European Union and the EU’s relationship with the WTO. The Agreement on a Unified Patent Court has been signed by the Government of Estonia in 2013, but not yet ratified by the Parliament. In January 2013, a new institution was started – the Estonian Intellectual Property and Technology Transfer Centre, which took over the activities of the Estonian Patent Information Centre. A non-profit society, Estonian National Group International Association for the Protection of Intellectual Property, was founded in 1992.

In 2004, the Republic of Estonia acceded to the protection systems of the Community trademarks and designs. The Estonian Patent Office takes part in several cooperation and convergence programme projects of the OHIM and has joined the European Trade Mark and Design Network.

Evaluations, consultations, foresight exercises

The Research and Innovation Policy Monitoring Programme for 2011-2015 (TIPS Programme) was launched in 2011 to thoroughly analyse the impact of 2007-2013 policy measures and give policy recommendations for implementation of the RDI Strategy "Knowledge-based Estonia 2007-2013" and to design the new Estonian RDI strategy (2014-2020). The programme activities are grouped into seven Work Packages and so far altogether 19 reports have been compiled.

MEAC, Enterprise Estonia and KredEx carried out evaluations of enterprise and innovation policy to assess the measures implemented and the impact, effectiveness and feasibility of those measures: the Interim evaluation of the cluster programme (2013) and the Mid-term evaluation of innovation and enterprise support policies (2014). The findings have been used to design Entrepreneurship Growth Strategy 2014-2020 and its implementation plan.

Knowledge transfer and open innovation

A number of measures to facilitate partnerships and productive interactions between research institutions and the private sector have been under implementation since 2008-2009. Enhancing national as well as international co-operation of Estonian R&D institutions and enterprises and reinforcing the framework for co-operation between the private and public sector are among the main aims of the RD&I strategy "Knowledge Based Estonia 2014-2020" and the "Entrepreneurship Growth Strategy 2014-2020".

The following measures are funded by MEAC and implemented by Enterprise Estonia Foundation: Cluster development Programme; Knowledge and technology transfer baseline funding (SPINNO Programme); Programme Start-up Estonia; Innovation voucher grant; Technological development centres for 2014-2020.

Performance of the National Research and Innovation system

Estonia is small compared to other EU countries, and this reflects on the size of its infrastructure and funding opportunities. Under the EU programming period 2007-2013, research infrastructure was developed quite extensively. Trends for patenting and for scientific publications are positive. On average, Estonia produced 16.65 publications per 10,000 inhabitants in 2012.

Estonia’s position in the Innovation Union Scoreboard (2014) improved in 2013 compared to previous years. It ranked 13th (2 places below the EU28 average) and is the fastest growing Innovation follower. Estonia also maintained its position within the innovation followers group. The biggest problem is still the economic effect of innovation, where Estonia holds the 22nd position.

Structural challenges of the national R&I system

According to the ERAC Peer-Review of the Estonian R&D system (2012), the main challenges of the R&D system are as follows: Innovation system detached from a vast part of the economy and, as a consequence, delivers relatively little value for the average Estonian; Challenge to further develop RD&I system to make a difference in the economy & society at large; Upgrade the role of Estonian industry in the global value chains; Lack of trained personnel hinders growth and investments.

Meeting structural challenges

The RD&I Strategy for 2014-2020 has been compiled with the aim to respond to previously described challenges, and aims to ensure the high level and diversity of research; increase the social and economic benefit of R&D; significantly increase the share of employment and added value of entrepreneurship in the economy and exports with relation to the areas of Smart Specialisation (ICT horizontally through other sectors, health technologies and services and more effective use of resources); increase the participation and visibility of Estonia in international RDI cooperation.

Innovation framework for SMEs

In Estonia, 99.8% of non-financial business sector enterprises are SMEs and all start-ups are small, so most of support measures are targeting SMEs. To date, measures do not differentiate between SMEs and other enterprises. Support is mainly given via open calls and should be applied through an Estonian enterprise or R&D institution. The following measures are funded by MEAC and implemented by Enterprise Estonia Foundation: Business Incubation Programme;  Competence Centre Programme; Cluster development; R&D grants; Innovation Voucher grant; Investments into test- and semi-industrial laboratories; Involvement of innovation staff; Development Grants to Manufacturing Companies; Knowledge and technology transfer baseline funding (SPINNO Programme); Prototyping Centre grants; Programme “Start-up Estonia”.

Public-private venture capital investments through the Estonian Development Fund have given significant impetus for high-growth internationally oriented start-ups in Estonia.


Venture capital markets

No special tax incentives are given to the R&D and innovation investments or to venture capital funds except that companies’ income is free of tax to the extent that they reinvest their profit. Foundation KredEx is improving the availability of financing and managing credit risks by providing credit guarantees. The Development Fund (together with the private sector) performs risk capital investments into young and growth-oriented technology companies. The Baltic Innovation Fund (BIF) is a Fund-of-Fund initiative launched by the EIF in close co-operation with the governments of Lithuania, Latvia and Estonia in 2012 to boost equity investments made into Baltic SMEs with high growth potential. Business Angels Network (EstBAN) was founded in 2012. EstBAN is a full member of the European Trade Association for Business Angels, Seed Funds, and other Early Stage Market Players (EBAN) and the Estonian Venture Capital Association (EstVCA).

Innovative public procurement

Up to the date, no national target has been introduced on public procurement of innovative goods and services. The development of national procurement policy measures is addressed in the implementation plan for the “Entrepreneurship Growth Strategy 2014-2020”, starting with a survey and drafting the concept.

The country in the European R&I landscape

In 2014, Estonia’s population was about 1.3 million, GDP stood at €19.5b and GDP growth amounted to 2.1%. The input of shale oil refining industry helped to double total intramural R&D expenditure and GERD intensity reached 2.37% in 2011 but declined to 1.74% in 2013, as the impact of investments to the shale oil refining industry disappeared. Turnover from innovation as % of total turnover was 12.3% in 2010.

In the R&D strategy, the target towards total R&D investments (GERD) in 2020 is set at 3% of GDP and business sector R&D investments (BERD) at 2% of GDP.

Main features of the R&I system

RD&I strategic objectives and principles of management and financing are set out in two main strategies: the RD&I strategy "Knowledge Based Estonia 2014-2020" (implemented by MER) and the “Entrepreneurship growth strategy for 2014-2020” (implemented by MEAC).

In 2013, R&D financed by the business enterprise sector (% of GERD) was 41.3% and the share of government sector made up 48% of GERD in 2013.

Structure of the national research and innovation system and its governance

The Organisation of Research and Development Act provides the framework for the structure and financing of the Estonian research and development system. Policy design and evaluation is carried out mainly by the Ministry of Economic Affairs and Communications (MEAC) and the Ministry of Education and Research (MER).

MER is responsible for the funding of R&D at R&D institutions and MEAC for funding applied research, technology development and innovation. At the operational level, MER and MEAC have implementing agencies and intermediaries. The main implementing body of MER is the Estonian Research Council and the main implementing body of MEAC is the Enterprise Estonia Foundation.

The Research and Development Council is an expert consultative body that advises the government on R&D and innovation matters.

The main players in the Estonian research system are the six public universities (the only private university is focused mostly on education, not research). There are around 400 companies actively conducting R&D in Estonia and around 10% of them account for most of the RD&I investments.

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