Innovation and Innovation Policy in Cyprus 

Overview of Innovation Policy

The EIS (European Innovation Scoreboard) 2008 classifies Cyprus in the group of 'moderate innovators'. Combining a close to the EU27 average level of performance with a high growth rate Cyprus is a growth leader among the group of ‘moderate innovator’ countries. Finance and support, Linkages & entrepreneurship and Innovators are relatively strong dimensions of the country’s overall performance.

The innovation system of Cyprus has developed in the last decade, the accession to the EU being the driving force behind an increased emphasis on R&D and innovation. The main features of the national innovation system have been shaped in 2005, following a Regional Innovation Strategy and the first NRP 2005-2008.

While traditional technology, specialisation in services and small firms continue to dominate the productive sector there is a visibly increasing interest and government effort to nurture the technology and innovation system. R&D support has been organised and improved significantly over the last five years and has made some timid steps towards sensitising the business sector and raising BERD. The main agency implementing research policy (the Research Promotion Foundation -RPF) is constantly improving its performance and increasing its budget, whereas the Planning Bureau, responsible for policy design, is also increasing its emphasis on R&D.

Innovation policies in Cyprus target mostly the utilisation of broader R&D results and incorporation of innovative processes and products, as well as new technology in the business activities. They rely almost exclusively on direct support; fiscal incentives would not be effective since tax rates are very low anyway. Support to entrepreneurship is designed and managed by the Ministry of Commerce, Industry and Tourism in the form of state grants for investment (including technological upgrading as a target) and incentives for youth and female entrepreneurship. After the Technology Promotion Foundation has been resolved and incorporated to the RPF, there are more recent measures shifting towards innovation in the context of the RPFs set of policies show an increasing trend into support of research commercialisation. Such measures are the innovation vouchers and patenting support. These measures were included in the “Innovation” programme of the current RPF’s Framework Programme for Research, Technological Development and Innovation (DESMI) 2008-2010. Two new measures, such as “Research and Technology Mediation System” and "Thematic Innovation Networks" will be included in the new DESMI 2009 and the respective calls will be announced during 2009. The creation of the “Research and Technology Mediation System” targets the design of the intermediation mechanism between SMEs and research organisations, while "Thematic Innovation Networks" aims directly at the creation of the cooperation networks between enterprises, research institutions and intermediate bodies.

The main instrument through which the Government is expected to better stimulate investment in R&D and innovation is the substantial increase in the budget of the RPF’s DESMI. For 2008 the budget is €70m, compared to €17m in 2006. The design and launch of the current DESMI that for the first time links R&D and innovation implies for more coherent approach towards research and technological development, which is the key element in the context of the Cyprus competitiveness strategy.

Despite progress there are still major challenges before attaining a globally competitive innovative economy. Policy support is composed of research grants and basic infrastructure with limited support to non-R&D innovation, such as industrial design, cluster policy and quality control. Earlier initiatives for incubators and a technology park are lingering and running out of steam. So overall more effort is still needed; this includes in particular better coordination and a higher degree of involvement from the side of the Ministry of Commerce, Industry and Tourism.

Based on this mixed situation of improving R&D and lingering innovation policy the main innovation policy challenges that Cyprus faces are as follows:

·       Increase inputs and efficiency of business innovation

The low level of involvement of business sectors in Research and Technological Development and Innovation (RTDI) activities is the main challenge. BERD as a share of GDP is among the lowest of all countries benchmarked and may be explained by the structure of the business sector in Cyprus, dominated by very small or small enterprises and the service sector. This may change by encouraging the very small and small companies, especially from the services sector to innovate, making it clear that non-R&D innovation is an integral part of all business strategies. Public policy is well aware of the limited inputs for R&D and innovation and is addressing the problem with a large number of measures ranging from traditional support (company creation / investment modernisation support) to incentives for companies to undertake research in-house or in cooperation with research organisations and other companies. A more active role of the Ministry of Commerce, Industry and Tourism is crucial for such a turning point in strategy.

·       Increase the number of S&E graduates

Despite the high education levels among young people and improving efforts in life-long learning, the composition of the workforce is not favourable to innovation. Since more incremental innovation and new to firm rather than new to market innovation is realistically expected in the country, scientists and engineers will act as the main carrier for technology. However, the level of the S&E graduates is still very low. National policy has addressed the problem firstly with the creation of the University of Cyprus about a decade ago, and now with a technical university (TEPAK), which was created in 2004, with the first students entering in 2007.

·       Make innovation policy and support to innovation more effective

The effectiveness of support is a matter of better governance. At that stage innovation policy does not have a clear governance or focus. The increasing public budget and number of support measures were as yet insufficient to mobilise research commercialisation and non-R&D innovation.

The observed lack of broader coordination led to a decision to create two new coordination mechanisms: The National Council for Research and Innovation (NCRI), which will be the highest-level organisation with exclusive responsibility for the adoption of long-term strategies in research and innovation, and the Cypriot Science Council (CSC), which will be an advisory scientific board composed of 10-15 members of qualified scientists. The new, more effective governance has been decided by the Council of Ministers at the end of 2007 but is still not operational.

Who Is Who

Senior Official(s) for Cyprus
Spyros Zavros
Spyros Zavros
Correspondents for Cyprus
Maria Kolomitsini
Daria Rubliova




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Innovation Performance

 Performance in Innovation Scoreboard 2008

Find Out More

 List of relevant websites