State regulation of the process of initiating innovative projects under conditions of limited funding

: pp. 79 - 90
Lviv Polytechnic National University, Department of Entrepreneurship and Environmental Examination of Goods, Sustainable Development Viacheslav Chornovil Institute

Abstract. This study focuses on evaluating the effectiveness of state regulation in initiating innovative projects under limited funding. The primary emphasis is on examining the mechanisms employed by the government to stimulate innovative activities among enterprises and foster the development of innovative ideas. The analysis encompasses the legal and financial landscape surrounding innovative projects, evaluating the impact of government programs and instruments on their initiation and development.

Specifically, the study delves into grant programs, tax benefits, state guarantees, and other financial support mechanisms. It examines instances of successful initiation of innovative projects under budget constraints and formulates recommendations for optimizing state support. The overarching goal of the study is to identify optimal strategies for ensuring sustainable growth in the innovation sector within the constraints of economic limitations.

The study recognizes investment as a pivotal element for fostering innovation, emphasizing the critical role of the financial outcome relative to the input investment in determining the success of innovation-focused projects. While every innovative project inherently functions as an investment with the primary aim of generating profit, the study acknowledges the challenges posed by the non-systematic nature and limited effectiveness of state policies in innovation and investment within Ukraine.

The inadequacies in the country's technological development, attributed to these challenges, result in a decline in the number of innovatively active enterprises and a slowdown in the progress of high-tech industries. Consequently, this hampers the competitiveness of the national economy. The study seeks to address these issues and pave the way for more effective and strategic state support in fostering innovation within the constraints of limited resources.

Problem Statement. Countries with developed economies highlight the vital role of investment support in fostering innovation, enhancing competitiveness, and expanding technological capabilities. However, Ukraine faces a significant challenge as there is inadequate attention given to the establishment and execution of investment programs that support innovative development. This stems from the inconsistent implementation and low effectiveness of the state's innovation and investment policies, resulting in technological stagnation. Consequently, there is a decline in the number of innovatively active enterprises, and the growth of high-tech industries is hampered, directly impacting the national economy's competitiveness.

Review of Last Research. Several researchers have made noteworthy contributions to the exploration of enterprise innovation. Scholars such as V.M. Hrynyova, Kozyreva O.V., Chikarenko I., Lopatynskyi Yu.M., L. D. Vodyanka, T. M. Vitrenko-Khrustalova, among others, have significantly contributed to this field. Their work has provided valuable insights into various aspects of innovative activities within enterprises.

Main Research Material. The efficacy of state innovation policies is executed through the strategic deployment of methods and tools by state administration bodies, shaping the landscape of investment and innovation.

Investing in innovation is a pivotal strategy for establishing a long-term internal market for both consumer and industrial goods. While traditionally utilized funds to stimulate consumer demand have often led to losses in investment potential, directing resources towards innovative projects signifies a deliberate shift with potential repercussions on consumption, production, and ongoing investments–particularly crucial during economic stagnation.

In response to Russia's military aggression and the imposition of martial law in Ukraine, legislative efforts, such as the "On State Support of Investment Projects with Significant Investments in Ukraine" law, have been enacted to revive the economy and assist local entrepreneurs. This law targets the stimulation of investments, enhancement of investment attractiveness, and the overall development of regions.

Industrial parks emerge as a strategic tool for investment attraction, offering potential relocation sites for companies seeking to diversify supply chains. These parks effectively address the Time-to-Market challenge, considering the time required for optimal location identification, construction commencement, and facility operation.

The "On Industrial Parks" law in Ukraine streamlines the process for land plot lease or ownership within industrial parks, ensuring durability and stability in economic relations within these zones. State incentives, funded from state and local budgets or other legitimate sources, are also incorporated. Accompanying investors through local and central authorities, specialized institutions, and organizations further supports the development of industrial parks.

Despite industry variations, investments may exhibit less impact if the potential return is perceived as sufficiently high to offset associated risks. Notably, conflict-affected countries experience a 50% higher return on investment compared to low-income countries, showcasing the relative stability of investments in the primary sector.

Beyond military conflict and ethnic tensions, political risks hinge on government stability, policy predictability, and the likelihood of fulfilling commitments to investors. Addressing these challenges is crucial for creating a conducive environment for foreign investments.

Summary. Previous instances of foreign investment in Ukraine were essentially a rechanneling of local and Russian capital, underscoring that the fundamental obstacles impeding genuine foreign investment existed prior to the conflict. These persisting challenges, as highlighted by the Organization for Economic Co-operation and Development, encompass enduring issues such as a subpar business environment, weak institutional frameworks, and pervasive corruption, requiring sustained attention despite the escalation in political and security concerns.

Beyond the context of military conflict or ethnic tensions, the landscape of political risks hinges on governmental stability, the predictability of policies, and the likelihood of fulfilling commitments to investors. Consequently, the primary hurdles lie not merely in creating specific conditions for foreign investments but in addressing the underlying and persistent challenges that have historically hindered a more substantial influx of genuine foreign investment into Ukraine.

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