System of Innovation in Wallonia [ Article 2009030202 - 02/03/2009]

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This Working Paper evaluates the performance of the system of innovation in Wallonia for the most recent available period. Like the previous paper, this paper is based on the analysis of indicators reflecting the six main components of a system of innovation: knowledge development, human resources, valorisation of R&D, absorption capacity of innovation, entrepreneurship and innovation financing. A country's performance depends not only on the relative strength of each individual element but also on how effectively the components interact. These six components are evaluated from a European perspective: Wallonia is compared with European countries and European regions with similar socio-economic characteristics.

The analysis confirms some strong and weak points highlighted in the last year's report and gives a new perspective on the valorisation and absorption capacity, with use at the regional level of the data from the Community Innovation Survey (CIS).

Compared with the previous year, the analysis shows a reinforcement of some strong points in four components of the innovation system: knowledge development, human resources, valorisation of R&D and absorption capacity. The knowledge development component is characterised by an increase in total R&D expenditure and in business R&D expenditure - in particular in high technology sectors - by the high level of financing by foreign businesses and by the beginning of an increase in public financing. The human resources pillar reveals a relatively high, and rising, level of skilled people (with tertiary education) in the population. The component valorisation capacity is consolidated by the progression - since the previous innovation survey - of the percentage of innovative companies in the manufacturing and services sector. This improvement is particularly visible for small businesses. Finally, the pillar absorption capacity shows that innovative Walloon companies, and in particular small businesses, are efficient at obtaining public funding, from European or regional authorities.

Next to these initially positive signs for the Walloon policies in favour of R&D and innovation, however, the diagnosis reveals that efforts have to be made in some areas of the innovation system, which have constituted the weak points of the Region for several years. These efforts are necessary to maintain the comparative advantages of the Walloon system of innovation.

In the human capital component, the proportion of new graduates in science and engineering remains too low, despite the growing demand. This weak point is intensified by an insufficient participation of adults in lifelong learning. The valorisation capacity is characterised by a weak, and diminishing, relative importance of high-tech manufacturing and services sectors in terms of nominal value added. R&D and innovation efforts have not yet led sufficiently to new activities that could assure the industrial restructuring of the Region and strengthen the resilience of the Walloon economy to the current shock. The pillar absorption capacity shows a weakness in knowledge diffusion between basic research and industrial research and in the collaboration between the different stakeholders in innovation. However, the available data covers the period before the effective implementation of the competitiveness poles promoting these transfers. The lack of regional data on innovation financing does not allow a diagnosis to be given for the Walloon Region concerning this component of the innovation system.