What is happening with innovations in Latvia?
The peculiarity of the modern stage of economic development is the transformation of the economic system and the transition to an innovative economy. Micro, small and medium-sized (MSMEs) innovative enterprises, which drive economic growth, technological development, employment and structural change, play a special role in this process, and serve as a significant source of knowledge in today's economy. The question arises why Latvia, where small and medium-sized enterprises (in the text, SMEs) play a more prominent role in the non-financial business economy than the EU average, is significantly behind the rest of the EU in terms of innovation activity?
For example, according to the results of the Global Innovation Index 2017, Latvia ranks 33rd among 127 countries, Lithuania - 40th, Estonia - 25th place. In turn, the European Innovation Scoreboard 2017 results show that Latvia is a moderate innovator, because the results are below the EU average, and in terms of innovative activities, Latvia is significantly behind Estonia and Lithuania. At the same time, Lithuania is one of the countries with the fastest growing pace of innovative activity.
Undoubtedly, small and medium-sized enterprises (SMEs) play an important role in any national economy as they contribute to economic growth, acceleration of scientific and technological progress, market saturation with good quality goods, solve economic, social and other problems in the country and fulfill several important functions, for example, create new jobs; self-employment; stimulate the growth of innovation in the economy; increase the competitiveness of enterprises; demonstrate the flexibility and diversity of business activities; mitigate the impact of the economic crisis; reduce dependency on raw materials.
SMEs in Latvia are of great socio-economic importance because they not only provide services or sell goods to consumers, but also help large, innovative enterprises operate more efficiently, as they serve as suppliers for large companies and sellers of products produced by large companies. According to the Eurostat, SMEs play a more significant role in the Latvian non-financial business economy than the EU average, for example, the share of value-added SMEs in Latvia is 69.8% (EU average 56.8%), SMEs in Latvia employ 79.0% (the EU average 66, 6%). In turn, micro-enterprises in Latvia employ almost a third of the population of the country, which is in line with the EU average.