The state of formation of innovative economy in the regions of Georgia and existing economic difficulties

DOI : 10.52340/ekonomisti.2025.03.01 Annotation. The article presents some elements of the classification of types of innovations, as well as mechanisms for coordinating the dissemination of innovations. Some main directions of implementing innovations in the modern period are considered. Further, the state of coordination of the formation of an innovative economy by the Agency of Innovation and Technology of Georgia, as well as the state of dissemination of basic innovative technologies in the regions of Georgia are considered, some difficulties are identified and ways to overcome them are outlined. The regional components of the formation of the innovative economy of Georgia are systematized and the state of their use in the regions is shown. The last section examines the existing economic difficulties in the formation of the innovative economy and some ways to overcome them. Key words: diffusion of innovations, basic, improving and pseudo-innovations, innovation cluster, technology park, start-ups. Introduction In order to determine the state of formation of an innovative economy in the regions of Georgia, it is necessary first of all to study modern views on the classification of types of innovations and the systematization of methods, mechanisms and instruments for coordinating their dissemination, which I have done in the first section of the article. It is taken into account that the coordination of the formation of an innovative economy in the regions is carried out primarily through national components (institutions, mechanisms, instruments), although some of them have regional divisions (for example, technology parks of the Agency for Innovation and Technology). The main directions of innovation implementation in the modern period are also reflected here, namely: information and communication technologies (or in a broader sense – digital economy technologies), green economy technologies (up to 40% of innovations implemented in the world), circular economy and technologies for the production of composite materials and products made from them. The second section examines the state of coordination of the formation of an innovative economy by the Georgian Innovation and Technology Agency (GITA). The third section examines the state of dissemination of basic innovative technologies in the regions of Georgia, identifies some difficulties and outlines ways to overcome them. Then, the regional components of the formation of Georgia`s innovative economy are systematized and the state of their use in the regions is highlighted. The final section examines the existing economic difficulties in the formation of an innovative economy and some ways to overcome them. In particular, the factors that hinder the implementation of innovative technologies (in the form of the creation of new enterprises or technological modernization of existing enterprises) and some ways to overcome them are considered. It is taken into account that the overwhelming majority of both basic and improving innovations in Georgia, as in other medium and small countries, are imported either through the purchase of production technologies or through the organization of joint ventures with foreign partners. 1. Classification of innovations and methods of their dissemination Classification of innovations. There are many variants of innovation classification in economic literature. Пригожин А., 1998; Гонаренко О., 2011; Виды инноваций ...; Мухамедъяров А.; Классификация и виды ...; Классификация инноваций ..., 2016; Тема 3. .... Based on their study and on modern ideas about the nature of innovation, I have compiled a more modern classification in Burduli V., 2020. Here we will present only some of the classification components that will be needed in this work. Depending on the significance (or degree of impact on the economy), a distinction is made between basic (radical), improving and pseudo-innovations. Basic (radical) innovations may be new or fundamentally improved products or services, as well as new or fundamentally improved production technologies. Improving innovations are innovations that provide a significant improvement to existing technologies or products. Pseudo-innovations (some sources call them modification innovations), which are the most common, allow achieving maximum efficiency of existing technologies or products due to their minor improvements.. Depending on the subject and the area of its application, a distinction is made between product innovations (new products, including tools and materials) and process innovations (technologies, organizational production processes, management processes), that is, innovations in the form of a product and innovations in the form of an operation. The same new technology in one case or another can be both a product and a process innovation. For example, the release of a new (innovative) machine by an enterprise is a product innovation, and the introduction of such a machine into the production process at another enterprise is a process innovation. According to the criterion of prevalence (scale), a distinction is made between single and diffuse innovations, in other words, those implemented at one site, and repetitive ones, spread across many sites. And most importantly, those used only in one specific industry and spread across many industries (for example, information and communication innovations). According to the place in the system of an enterprise, firm or organization, a distinction is made between innovations at the input of the enterprise (changes in the selection and use of raw materials, materials, machinery and equipment, information, etc.), innovations at the output of the enterprise (products, services, technologies, information, etc.), innovations of the systemic structure of the enterprise (managerial, production, technological), i.e. innovations of the structure of the enterprise as a system that includes individual elements and the mutual connections between them. Methods of disseminating innovations. Even in the case of internal (within an enterprise or organization) development of innovations (basic, improving, modifying), the conditions for their distribution often require the purchase of patent licenses, technological documentation, etc.). Financing in this case is independent, but state support is also possible. TNCs and other large corporations independently implement their innovation strategy, although they sometimes do not shy away from government support or attracting specialized partners (especially when implementing process innovations). However, which is quite natural, in the majority of medium and small enterprises and organizations (with the exception of specialized innovative enterprises) the dissemination of innovations occurs through the purchase of basic (including in the form of "turnkey contracts") and in various forms (equipment, documentation, licenses, consulting services, etc.) improving and modifying innovations, often with the involvement of specialists who facilitate their implementation. Naturally, the main way of promoting innovations in production (spreading innovations in production) is borrowing (most often importing) both basic and improving innovations, product and process ones at each stage of their promotion (special scientific research, direct development, implementation). Let us list the main modern mechanisms existing in developed countries for the promotion (dissemination) of innovations in production Абесадзе Р., Бурдули В., 2017; Abesadze R, Burduli V., 2019; Abesadze R., Burduli V., 2018 Ensuring the state`s innovation policy: a) government organizations that determine the state`s innovation policy, ministries, departments, agencies, funds and other regulatory and financing agencies; in Georgia, following the example of developed countries, issues of innovation policy are primarily handled by the government as a whole Government of Geogia, 2018, Ministry of Economy and Sustainable Development, Ministry of Regional Development and Infrastructure, Ministry of Agriculture, Georgian Agency of Innovation and Technology has been established and is actively operating For the rapid ..., Rural Development Agency; The Produce in Georgia Agency unites all state programs aimed at supporting the entrepreneurial sector and economic development of the country. The program is aimed at developing micro and small businesses, forming a modern culture of entrepreneurship and creating new jobs Турнава Натия, 2021; b) strategy and programs of innovation policy; in this aspect, in the process of dissemination of innovations in developed countries, various programs, in the financing of which the state also participates, play a major role, for example, programs for organizing innovative start-ups; c) the regulatory framework in the area of development and stimulation of innovation activities, including provisions regulating the relationship between science, business and the state; in this regard, the "Law of Georgia on Innovations" was adopted in Georgia, but other laws also contain provisions regulating this activity. Technology transfer organizations and other elements of innovation infrastructure (technology parks, business incubators, business accelerators, centers for commercialization and technology transfer, innovation laboratories, etc.) should facilitate the identification and implementation in production of both domestic (of which there are few in a small country) and, especially, imported new production technologies. In fact, in addition to the "technology transfer center", other elements of the innovation infrastructure also directly or indirectly participate in the transfer. For example, the task of business accelerators is usually to support the development of technologies (including investment) by innovative start-ups, which can also be considered as an element of the technology transfer process. Innovative clusters. Unlike traditional industrial clusters, innovative clusters represent a system of close relationships not only between firms, their suppliers and clients, but also knowledge institutions, including large research centers and universities, innovation divisions of large corporations, innovative enterprises, etc. Through the system of relationships between these objects, the developed innovations are distributed not only within the cluster, but also beyond its borders.. Innovative clusters can be at the national level and at the regional level. It is necessary to take into account that clusters, regardless of their territorial size, are formed mainly within a certain industry specialization. Even innovative enterprises of the famous Californian Silicon Valley mostly specialize in the field of information and communication technologies. Within a NUTS level 1 region, there may naturally be several clusters belonging to different sectors; for example, in Finland there are at least two national-level clusters. However, the majority of innovation clusters in EU countries (of which there are already more than 2 thousand) specializing in a certain type of activity are formed within the territorial units of a lower NUTS level (for details, see Abesadze R., Burduli V., 2018). Each country is characterized by its own approach to cluster development. Despite the differences, the cluster strategy is especially evident in Denmark, Holland, Belgium, Finland, France, and Italy. Finnish and Scandinavian industry is fully clustered. The EU countries have adopted the Scottish model, according to which the cluster center is one large enterprise, around which smaller firms are grouped. There is the so-called "Italian model" - more flexible and "equal" cooperation between small, medium and large businesses. Сепашвили Э., 2013. Today, there are several spontaneous clusters in Georgia that are in their infancy and very far from being real clusters (for example, the wine production cluster, the furniture cluster, tourism infrastructure and related industries). However, if their development potential is properly used, they can play an important role in the process of future economic growth of the country in the current conditions, when the domestic market of Georgia is very small, and the country occupies an insignificant place in the world market. Сепашвили Э., 2013. The main directions of innovation in the modern period f we judge from the point of view of the number of innovations (basic, improving and pseudo-innovations) currently spreading in many industries (according to the prevalence criterion), then the key factor innovations of the modern technological order are: innovations spreading in different industries along the line of IR technologies (currently mainly digital technologies) – about 40% of the total number of innovations; innovations spreading in different industries along the line of green economy – about 40% of the total number of innovations (however, innovations along the line of green economy partially overlap with innovations taken into account along the line of circular economy and ecology); innovations spreading in some industries along the line of composite materials and nanotechnology; innovations spreading in all industries along the line of circular economy and ecology; biotechnological innovations spreading in the field of healthcare (microbiology, molecular and cellular biology, biochemistry, embryology, genetic engineering, virology, etc.). Innovations spread through digital technologies. It is the speed and versatility that have made IC technologies so popular in modern science, manufacturing and everyday life. Computers, smartphones, digital television electronics, etc. are a unique phenomenon that has radically changed the lives of every person on the planet over the past decades. In the sphere of these already existing technologies, their modernization occurs through the implementation of mainly improving and pseudo-innovations. The transition to the possibilities of applying new forms of work organization using automated task distribution systems, enterprise management taking into account the effective distribution of resources, electronic accounting and document flow, as well as production monitoring systems, the environment and support for making management and technological decisions allows for a qualitative leap and more efficient use of the existing economic potential. This transition is already taking place through the implementation of relevant basic and improving innovations. At the same time, the volume of new innovative developments in this direction is growing throughout the world Modern researchers and experts identify ten main areas of development of digital technologies (in these areas, both basic and improving innovations are implemented, some of them are product-based, but mostly process-based, however, in the service sector, many of them can be interpreted as product-based): 1. Artificial Intelligence and Machine Learning. 2. Blockchain and Cryptocurrencies. 3. Big Data. 4. Telemedicine. 5. Augmented and Virtual Reality (AR/VR). 6. Chatbots and Virtual Assistants. 7. Mobile and Cybersecurity. 8. Internet of Things (IoT). 9. Computer Vision. 10. Artificial Neural Networks Чеботарев А., 2018. In most of these areas, the corresponding innovations can be spread across all sectors of the economy. Innovations disseminated through the green economy. All areas of development of the "green" economy require the introduction of innovations both in the form of the introduction of completely new technologies (basic innovations) and improving innovations, for example, to increase the energy efficiency of industrial equipment. I present innovations in the green economy in detail in the article Burduli V., 2019. Here we will systematically characterize "green" innovations in terms of types (basic, improving) and sectors of the economy where they are used. "Today, 40% of global innovations are in the green economy, and 50% of them are in energy conservation and energy efficiency, which are key factors in the green economy," it is noted in Что такое ..., 2017. In our opinion, the following key general areas of the "green" economy can be identified: 1. General ecosystem management (waste management, combating water and air pollution, land restoration and rational use, restoration and planting of forests); 2. Introduction of renewable energy sources; 3. Reducing the energy intensity of GDP and increasing energy efficiency (construction of buildings and housing and communal services, industry, transport, agriculture); 4. Development of electric transport; 5. Organic farming in agriculture; 6. Development of ecotourism. Waste management. Currently, a circular economy is being formed in developed countries, the main task of which is to involve production and consumption waste in the secondary circulation. Thus, in Finland, which according to the EPI economic efficiency index for 2016 is the greenest country in the world, only 11% of waste goes to landfill, the rest is divided into the following categories: "sorted waste", "recycling", and "energy generation" Опыт Финляндии ..., 2017. Naturally, these subsystems require the implementation of modern innovative technologies, which is what is happening in developed countries. Implementation of renewable energy sources. Renewable energy sources include hydroelectric power plants, solar and wind power plants, biofuel installations, geothermal and some other types of power plants. Their implementation represents the implementation of basic innovations in the energy sector of the economy. Also, for these objects in developed countries, there is an intensive development of improving innovations with the aim of modernizing the components of their equipment to increase the efficiency of their work. For example, batteries for storing generated energy and other equipment for stable energy transmission to the grid need to be improved, since the volume of electricity generated during the day at solar and wind power plants is uneven - in solar power plants, electricity is naturally not generated at night, and in wind power plants, its volume depends on the strength of the wind. Reducing the energy intensity of GDP and increasing energy efficiency. In all countries, the overwhelming share of energy consumption falls on three sectors: industry, housing and communal services and transport (for details, see Burduli V., 2020). Innovations spreading through the composite materials line. This issue has been covered in detail by me in my work Burduli V., 2018. According to expert estimates, the main consumers of composite products are mechanical engineering (primarily transport) – about 28%, the construction industry (including pipes and tanks for housing and communal services) – about 24%, energy and electronics, including wind energy – about 23%, the oil and gas industry – about 10%, sports, medicine, and non-ferrous metallurgy. 2. The state of coordination of the formation of innovative economy by the Agency of Innovation and Technology of Georgia The Georgian Innovation and Technology Agency (GITA) has developed or created a number of effective mechanisms for the dissemination of innovations in the country: programs, financial mechanisms and elements of the infrastructure that supports the dissemination of innovations. In 2017, the agency became a member of the Startup Europe Regions Network (SERN). SERN is a European regional network aimed at supporting startups.. n accordance with the Law of Georgia on Innovations, the Innovation and Technology Agency of Georgia promotes the commercialization of innovations and encourages the use of innovations (Article 5). The first paragraph of Article 6 states that in order to stimulate innovative activities, a state body or other entity shall create the following infrastructure: a) a science and technology park; b) a business incubator; c) a business accelerator; d) a technology transfer center; d) an industrial innovation laboratory (FabLab) and an innovation laboratory (ILab); e) an innovation center; g) other infrastructure. Agency programs. The Georgian Innovation and Technology Agency focuses its activities on creating and developing tools that will contribute to the development of a sustainable and high-quality startup ecosystem in Georgia. To this end, the organization offers stakeholders and potential beneficiaries a set of products and services designed to help entrepreneurs and startups working in the field of innovation and technology smoothly move from an idea to operational revenue models. The Small Grants Program, Startup Friendly, Startup Beats, Bootcamp, Co-working Space, Incubator, Idea Registry, Learning Portal, and IT Support Registry are a set of products and services that are key tools for building a thriving startup ecosystem. These products help startups and entrepreneurs focused on innovation and technology move from idea to market with less risk and more confidence, and help organizations with an established revenue model gain knowledge, contacts, finance, and overall capabilities that can radically change the pace and direction of their growth GITA materials. The activities of the Georgian Innovation and Technology Agency (GITA) are becoming increasingly diverse and dynamic. In March 2024, the Agency celebrated its tenth anniversary. The anniversary event opened with speeches by Georgian Prime Minister Irakli Kobakhidze and First Deputy Prime Minister Levan Davitashvili. GITA Chairman Avtandil Kasradze summed up the ten-year history of the agency`s existence and development, and presented new initiatives and plans for the future to the audience. The Georgian Innovation ..., 2024. Over 200 innovative startups with global potential received funding under the co-financing grant program of the Georgian Innovation and Technology Agency. The total grant funding amounted to 38 million GEL, resulting in half a billion GEL in private financial benefits for the funded startups and the creation of up to 3,000 new jobs The Georgian Innovation ..., 2024. At the initiative of the Georgian Innovation and Technology Agency, a powerful global venture platform .500 Global, one of the three largest accelerators in the world and implementing an acceleration program of international level, came to the country. Along with Georgian startups, foreign ones also participate in it, which emphasizes the role of Georgia as a regional innovation hub. In addition, the first venture fund in Georgia with a capital of 20 million dollars was created The Georgian Innovation ..., 2024. There are 9 technology parks across Georgia that provide a comprehensive solution for commercializing innovative ideas to Georgian citizens. 80 projects have been financed under the grant program "Innovation Grants up to 25,000 GEL for Regions". "As a result of the introduction of tax incentives for IT companies by the Georgian government, 120 international IT companies have come to Georgia, which, according to data for the first 12 months of 2023, paid one billion GEL in salaries, creating more than 10,000 jobs," GITA said The Georgian Innovation ..., 2024. GITA`s future plans are also aimed at further dynamization of economic development and increasing the efficiency of the economy. Let us note some of them. "In order to maximize the global competitiveness of the Georgian economy and the scientific potential of Georgia, three main technological areas of the country have been identified, which will allow local and international businesses to create world-class technological solutions in Georgia: Artificial Intelligence - A scientific group will be created in Georgia to work on the implementation of artificial intelligence in education, healthcare, agriculture and other areas. Phages. The demand for phages is growing worldwide due to the resistance of many infections and diseases to antibiotics. Georgia has almost a century of experience in phage research, so our country can export important technological products in the field of phages on an international scale. Agrotechnologies - a significant part of the population of Georgia is employed in this sector, so it is important to create new scientific and technological products that will further increase the productivity and competitiveness of Georgian farmers. A full-scale incubation project will be implemented, including a 12-month startup incubation program consisting of 3 stages" The Georgian Innovation ..., 2024. The incubation program will be implemented by four international and/or local incubators selected by GITA. The program will incubate 160 startups annually The Georgian Innovation ..., 2024. 3. Examples of the dissemination of basic innovative technologies in the regions of Georgia, some difficulties and ways to overcome them. Against the backdrop of depleting fossil fuel reserves, the use of wind, solar, geothermal and other environmentally friendly energy sources for generating electricity and other practical purposes is becoming relevant. The first wind and solar power plants equipped with innovative technologies have been built in Georgia. All these innovations belong to the class of basic innovations. Near Gori, about 90 km from Tbilisi, six wind farms have been generating electricity for ten years. The Kartli wind farm is the first wind farm built in Georgia, with a design capacity of 21.7 MW and a projected output of 84.1 million kWh. Its construction was made possible by the support of the European Bank for Reconstruction and Development, as well as other international donors through the Green Growth Fund. Gori Wind Power ..., 2018. During its first year of operation, the wind farm generated about 88 million kilowatt-hours of electricity, actually exceeding the projected figure by 3.8 million kilowatt-hours. Georgia also has its first solar power plant. In particular, ProCredit Bank has implemented another innovative green project. Solar panels located on an area of 500 square meters on the roof of the bank`s head office at 21 Alexander Kazbegi Street in the center of Tbilisi have already started generating electricity. As a result of the implemented green investments, it is planned to generate 130 thousand kWh of clean energy annually, thereby replacing 12% of the total energy consumed with alternative sources ProCredit Bank .... As we can see, the number of power plants based on the use of the main sources of renewable energy - wind and solar power plants - in Georgia is insignificant (with the exception of hydroelectric power plants). Neither business representatives nor the relevant government agencies dare to invest in the construction of such facilities. First of all, because they do not generate electricity stably - solar power plants generate electricity only during the day, and the amount of electricity generated depends on the intensity of solar radiation, while the amount of electricity generated by wind power plants depends on the strength of the wind. The problem of widespread deployment of solar and wind power plants i