Published: 11/04/2025

Countries’ experiences in shaping their development and raising the technological level of their economies are highly unique. Close coordination and collaboration in implementing innovation strategies is of key importance. Increasing investment in R&D is also essential. At the same time, it is difficult to define a single, unequivocal strategy that guarantees success, as there are many diverse development paths. These depend not only on the initial economic situation of a country but also on geopolitical, socioeconomic, and structural factors within society. These are the main conclusions of the PEI report "Development Pathways: How Have Countries Raised the Level of Technological Advancement", which analyzes the development trajectories of selected countries—Germany, South Korea, China, Finland, Malaysia, and Estonia—that have successfully increased their economies’ technological advancement. These countries represent three groups at different stages of development. The report aims to identify key success factors in R&D, support for start-ups and SMEs, human capital development, and the creation of effective innovation ecosystems.

The State Should Foster an Innovation-Friendly Environment

The countries analyzed by PIE demonstrate a tendency to create innovation-friendly conditions at the institutional level. Depending on each country’s capabilities and situation, this support takes different forms. Estonia’s model of supporting the digitalization of public services and providing access to innovative technologies from an early age—through the “Tiger Leap” program that supplied all schools with computers— builds strong digital competencies and creates a society more oriented toward innovation. In contrast, the South Korean model illustrates how public policy and state intervention in large enterprises can lead to dominance in many high-tech sectors. South Korea began as a subcontracting country dependent on technology inflows from more advanced economies. Over decades, this path led to the creation of conglomerates that act as massive innovation hubs and invest heavily in R&D.

“Creating an environment that supports innovation requires a clear vision that defines the country’s goals and the means of achieving technological advantage. This approach should take into account a range of unique economic features, development trajectory, and local conditions. That vision often translates into strategy and concrete actions, while retaining flexibility to adapt to changing circumstances. As the analyzed cases show, even with the right assumptions, the realization of a vision carries a risk of failure. Therefore, bold decisions should be complemented by pragmatic experimentation, which allows for testing and refining solutions based on experience,” said Dominik Kopiński, Senior Advisor at the World Economy Team of PIE.

Public and Private Funding for Research and Development Is Crucial for Building an Innovative Economy

All of the countries discussed in the report demonstrate development paths that are specific to their own circumstances, with both state and private entities supporting the R&D sector. In countries like South Korea, Germany, and Finland, significant investments in R&D are evident—in support of cluster and innovation hub networks, promoting industry-academia collaboration, and funding research institutions. Developed countries such as Finland and Germany also offer special programs and financial support options for innovative firms—like Germany’s Forschungszulage (offering R&D-related tax breaks) or Finland’s Business Finland, which funds non-commercial research intended to be transferred to the private sector and foster national innovation.

Despite Estonia’s high education spending and positive educational outcomes, it has few research institutes and low academic-industry mobility, which can limit innovation transfer to the private sector. Malaysia, which recently launched a new multi-year economic plan emphasizing R&D, is a case that illustrates how tax incentives and government policies can influence development and research.

“The experiences of countries in shaping their development and raising their technological level are highly unique. Each country’s specific conditions—culture, geography, wealth, or political system—strongly influence how a given model functions. The effectiveness of a solution depends not only on its implementation and adaptation but also on unique contextual factors. Therefore, it’s difficult to speak of universal best practices or direct transfers of solutions. The analysis provides inspiration that must be adapted and grounded in the local context,” said Marek Wąsiński, Head of the World Economy Team at PIE.

Innovation Cannot Be Copied, but Domestic Innovation Must Be Built on Existing Experience

The countries discussed in the report serve as examples of how innovation environments can be developed depending on and influenced by their unique geopolitical situations and historical conditions. Over the years, these countries have undergone dramatic shifts in innovation trends, sometimes requiring complete overhauls of their original strategies.

“The uniqueness of each country’s development path does not obscure the common elements found in all successful innovative economies. The state can play an active role by creating safe and predictable conditions for the private sector, encouraging innovation through market incentives, and directly supporting riskier projects and scientific research. However, it is crucial to adequately value the private sector—its businesses, private capital, and the competitive market mechanisms that drive efficiency,” summarized Marcin Klucznik, Senior Advisor at the World Economy Team of PIE.

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The Polish Economic Institute is a public economic think tank with a history dating back to 1928. Its main research areas include macroeconomics, energy and climate, the global economy, economic foresight, digital economy, sustainable development, and behavioral economics. The Institute prepares reports, analyses, and policy recommendations on key areas of the Polish economy and society, taking into account the international context.

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