THE DEVELOPMENT OF THE INNOVATIVE CAPACITY OF LATVIA

In this article problems of development of innovative activity in Latvia are considered. The main emphasis will be made on the main directions of creation of an institutional basis for the innovative capacity of Latvia, definition of a role of the state as organizer, the catalyst, and partner of these interactions. Strengthening of this role has to help reduce the existing significant gap between entrepreneurial and research spheres. The economic basis of the society which is based on knowledge is made by national innovative system. Therefore for further development of economy of Latvia in innovative system effective relationship between science, production and society has to be adjusted. Innovations must form a basis of development of economy and society, and requirements of innovative development, in turn, in many respects must define and stimulate the most important directions of development of scientific activity in Latvia. The mechanisms allowing adjusting large-scale processes of effective interaction of science, productions and society in general in Latvia are absent today as there is no institutional basis for significant motivation of economic agents in production to innovations, and in the research sphere – to the applied activity focused on creation of innovative potential for the country. The European Commission's Innovation Union Scoreboard 2015 reveals that the EU's overall level of innovation has remained stable. However, the crisis has left an impact on the private sector's innovative activity: the number of innovative firms is in decline, as are venture capital investment, SMEs' innovations, patent applications, exports of high-tech products and sales of innovative products. While there have been improvements in human resources, business investments in research and development and the quality of science, these are not enough to result in a stronger innovation performance. Therefore, the effective role of the state in this area in many respects depends on the solution of the following tasks: 1. Creation of incentives to innovations for the enterprises. To achieve this competitive environment must be created. 2. Organization of the process of the knowledge production for which reason more adequate system of salary payment to scientists depending on quality of the scientific result received by them has to be created. 3. Formation of infrastructure of innovative interaction between science, business and state. First of all, development of institutional instruments of this interaction is required. 4. Support of a transfer of technologies which requires setting of an accurate and purposeful regulation of the corresponding procedures and mutual financial settlements. 5. Creation of motivation and infrastructure for emergence of effective relationship in research and development between the private sector (production) and the public scientific and technical sector. It is the most important task for ensuring technological development of the country in the long term.