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In diesem Kapitel wird untersucht, wie die baltischen Staaten - Estland, Lettland und Litauen - Innovation und Technologie nutzen, um Widerstandskraft gegen eine Reihe von Krisen aufzubauen, einschließlich wirtschaftlicher, ökologischer, sozialer, sicherheitspolitischer und gesundheitlicher Herausforderungen. Der Schwerpunkt liegt darauf, wie sich diese Länder an sich verändernde Bedingungen anpassen und durch technologischen Fortschritt eine nachhaltige Entwicklung sicherstellen. Zu den Schlüsselbereichen der Innovation gehören wirtschaftliche Neuausrichtung, digitale Gesundheitssysteme, Cybersicherheit und Klimaschutz. Das Kapitel hebt auch die strategischen Investitionen hervor, die von jedem Land getätigt werden, wie Litauens Hinwendung zu Fintech und Energieunabhängigkeit, Lettlands Fokus auf nachhaltige Technologien und Estlands Führungsrolle bei digitaler Governance und Cybersicherheit. Die Schlussfolgerung betont die Bedeutung maßgeschneiderter Resilienzstrategien und das Potenzial dieser Ansätze, als Modell für andere kleine, offene Volkswirtschaften zu dienen, die vor ähnlichen Herausforderungen stehen.
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Abstract
Innovation and technology are essential tools that can be widely used to ensure adequate resilience to the range of threats that small societies face. The Baltic States are often resource constrained and more vulnerable to a variety of threats, which makes innovation and technology a key factor in increasing their resilience. To strengthen their resilience, the Baltic States are innovating and deploying technologies across sectors to adapt to the changing threat landscape. This chapter analyses good practices in innovation and technology development in the Baltic States. Despite their shared history and regional cooperation, the three Baltic States have distinct strategic priorities. Estonia has positioned itself as a global leader in digital governance and cybersecurity. Lithuania has leveraged fintech and energy independence as key resilience strategies, while Latvia has focused on sustainable technologies and transportation innovations.
12.1 Introduction
The Baltic States face unique challenges in building their resilience to a range of economic, environmental, social, security, or health sector crises, often due to resource constraints. As a result, these countries are looking for ways to adapt to changing conditions and to ensure sustainable development and resilience, and are developing innovations and technologies in a wide range of fields. This allows for the development of resilience, which Holling (1973) described as a measure of the robustness of systems and their ability to absorb changes and disturbances and to maintain the same relationships between populations or state variables (Holling, 1973). A resilient state can remain stable when the threat is low, i.e. it is able to withstand the threat and thus avoid losses (Coutu, 2002; Bruneau et al., 2012; Wicker et al., 2013). When the threat is high, a resilient state is able to adapt to changes in the environment, to embrace and take advantage of opportunities, and to build or fundamentally change the existing system. Adaptation involves learning, experimenting, making non-standard decisions (Walker et al., 2002), innovating or deploying new technologies. Innovation and technologies are becoming powerful tools for the Baltic States to adapt to changing conditions and achieve sustainable growth and development. In this context, resilience is not only about withstanding and overcoming shocks but also about continuous adaptation, learning, and long-term transformation. This means that the Baltic States do not merely respond to crises but use them as a catalyst for innovation and long-term development. Resilience, as developed through technological innovation, is not only a mechanism for overcoming crises but also a fundamental pillar for strengthening democratic institutions, ensuring a pluralistic and independent political system. This chapter examines how innovation and technology are integrated into the economy, cybersecurity, healthcare, defence, and environmental sectors to ensure systemic resilience to future challenges. There is a growing body of international scientific evidence that countries which invest more in innovative and technological R&D tend to perform better in crises than those that do not, and are subject to better long-term survival and resilience (Coad, 2009; Roper & Xia, 2014). Innovation levels in a country are often assessed based on the number of patents granted in a given year (Ponta et al., 2021). Based on 2020 data, the number of EPO patent applications per 1 million inhabitants was 10 in Lithuania, 25 in Latvia, and 65 in Estonia (Strata, 2021). These figures indicate that Lithuania lags behind its neighbouring Baltic countries in terms of the number of patent applications per capita. Innovation is often risky and costly, but it is often a proven tool in times of crisis, so innovation and technologies are of great importance for the national resilience of the Baltic States to emerging threats and their effects. The following section will explore how these innovations are being applied through concrete examples that illustrate their role in addressing emerging economic, health, and security threats, as well as mitigating climate change to achieve long-term resilience.
12.2 Applying Innovation and Technology to Build Resilience
12.2.1 Applying Innovation and Technology to Counter Economic Threats in the Baltics
To adapt to the new economic reality and become competitive in the global market, the Baltic countries have adopted various technological tools and strategies. The sanctions imposed on Russia in 2008 and 2022 have affected Baltic exports, and more importantly, oil price hikes have reduced Russian imports. Exports from Lithuania and other Baltic countries to Russia have halved, while oil prices have had a negative impact on the Baltic economies. The Baltic countries therefore had to shift from East to West, which led to an increase in exports to Scandinavia, the UK, and Poland. These countries are expected to remain the most important export partners of the Baltic States in the near future. As the sanctions reduced the availability of raw materials from Russia and Belarus, Lithuanian Railways invested in infrastructure in Poland. More and more customers were looking for ways to reorient their supply chains from East to West. This rather rapid reorientation of the Baltic States has been influenced by the introduction of technology. The shift was particularly significant when the Baltic countries faced the economic crisis of 2008–2009 which forced them to reorient their focus from East to West.
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Technology deployment provides a competitive advantage, boosts exports, and creates new jobs, thus contributing to economic growth. The Baltic States have been able to seize the opportunities offered by innovation to withstand economic volatility and recover faster from crises. As economic threats tend to be recurrent, there is a consensus among scholars that a region’s economic resilience should be defined as the ability of a regional or local economy to withstand, recover, and restructure the market and competitive environment in the face of shocks and to increase development growth (Bristow & Healy, 2014, 2018; Boschma, 2015; Martin & Sunley, 2015). It is widely accepted that resilience is a complex, multidimensional property of regional economic systems, encompassing resistance, recovery, reorientation, and renewal (Martin & Sunley, 2015; Martin, 2012). A region may experience a rapid recovery in output and income after a shock, but its recovery is usually based on existing technologies, and it may not have the capacity to adapt or upgrade its industrial technological structure to the future challenges faced by a country in an economic crisis (Simmie & Martin, 2010).
The Baltic countries have invested in high-quality broadband Internet networks and IT infrastructure enabling businesses and citizens to benefit from digital services, e-commerce, and teleworking, thus increasing their resilience and adaptability to new challenges. One notable example is Lithuania’s strategic pivot towards financial technology (fintech) after the economic shocks of 2008 and 2014. Recognising the need to diversify its economy, the country introduced a favourable regulatory environment that attracted major fintech players such as Revolut and Paysera. Today, Lithuania is one of Europe’s top fintech hubs, reducing its dependency on traditional banking and strengthening economic resilience. Estonia, for example, has become one of the world’s leading countries in the digital economy with the launch of the e-Estonia initiative which promoted the widespread use of digital services. The Baltic countries have also developed modern e-government services that allow citizens and businesses to manage their affairs online. Lithuania, Latvia, and Estonia have introduced e-signature systems which have enabled them to sign documents, submit applications, and carry out other bureaucratic procedures quickly and securely at a distance. This has reduced the administrative burden and increased the efficiency of public authorities. The application of advanced financial technology solutions has enabled banks and financial institutions to provide modern services. For example, the services of TransferWise (now known as Wise) in Estonia made international money transfers fast and cheap. Modern payment solutions have also been adopted in Lithuania and Latvia, which boosts the growth of e-commerce. Although it is difficult to precisely quantify the impact of investments in digital infrastructure on resilience, several indicators demonstrate a positive effect: The DESI Index shows that the Baltic countries have made significant progress in the digital sector, reflecting the effectiveness of these investments.
The Baltic countries have invested heavily in cybersecurity infrastructure to protect their digital systems from cyber threats. Estonia has become one of the pioneers in cybersecurity after a major cyber-attack in 2007, when a large-scale cyber-attack was launched against the country’s government and financial institutions. This attack highlighted the dangers of cyber threats and prompted Estonia to invest in protecting its digital infrastructure. In response to the incident, Estonia established the Cyber Security Centre which has become the NATO Cyber Security Centre of Excellence. The Centre has become an important international source of cybersecurity expertise that coordinates cooperation between the NATO members through training, research, and exercises. The Centre also organises the annual cyber defence exercise ‘Locked Shields’, one of the largest in the world, to test cyber resilience strategies against a wide range of countries and organisations. Estonia has become a global example of how small countries can become leaders in cybersecurity, especially in protecting themselves from potential threats and in strengthening the reliability of their digital services. These technological and strategic solutions have helped the Baltic States not only to overcome the economic crisis, but also to become competitive and innovative economies that are integrated into the Western world. This adds to the understanding that resilient Baltic countries have an adaptive capacity that is crucial for the long-term transformation of the Baltics, i.e. the ability to develop new pathways for growth and to demonstrate adaptability (Boschma, 2015).
The analysis of economic (GDP) developments in Lithuania, Latvia, and Estonia from 2000 to 2023 captures both economic booms and busts (Fig. 12.1). This period includes various crises and periods of innovation that have had a significant impact on their economies. After joining the European Union in 2004, the Baltic countries have embarked on a period of rapid economic growth, fuelled by investment and innovation, especially in the technology and innovation sectors. During this period, from 2004 to 2007, GDP growth was very strong and technological and infrastructure development became a key economic driver. However, the global financial crisis that started in 2008 had a major negative impact on all three countries. Lithuania, Latvia, and Estonia experienced large GDP contractions during the 2008–2010 crisis, with 2009 being the critical period when these contractions were at their worst. Latvia, which suffered a particularly severe economic downturn during this period, was forced to turn to international financial assistance. Estonia also suffered a large drop in GDP, although it was better prepared to withstand the blows of the crisis thanks to its tight fiscal policy. After a period of crisis, from 2012 to 2015, the Baltic countries started to recover by focusing on innovation and technology deployment. This period was marked by slower but stabilised GDP growth. Lithuania and Estonia were subject to a steady economic recovery, while Latvia also started to recover from the deep recession caused by the crisis.
Fig. 12.1
GDP annual change (%) in Lithuania, Latvia, and Estonia during crisis and innovation periods (Eurostat)
Between 2017 and 2020, the Baltic countries experienced strong economic growth driven by technological innovation, in particular the development of the digital technology and fintech sectors. We can see that this period has been the most influential for innovation and technology adoption in the Baltic States and is characterised by strong economic growth, especially after 2015, when economies stabilised and started to grow again after the global financial crisis. This period has been one of the most important stages of innovation and economic development in the Baltic States, especially in Estonia, which has become known for its advanced digital infrastructure and strong start-up ecosystem. However, the COVID-19 pandemic, which started in 2020, triggered a new economic slowdown, although the downturn was not as pronounced as during the 2008 crisis. Lithuania, Latvia, and Estonia experienced recessions due to pandemic restrictions, business shutdowns, the downturn in the tourism and transport sectors, and the global economic situation. However, the Baltic countries managed to recover relatively quickly. In the period of 2022–2023, the war between Russia and Ukraine created additional challenges affecting trade flows, energy price spikes, and investment. Russia was an important market for the Baltics until 2014, and its economic downturn, due to sanctions or other reasons, has had a negative impact on Baltic exports. Although the immediate fall in GDP was not as large as in previous crises, the long-term impact of the conflict could be significant. These periods show how the Baltic countries experienced both recessions triggered by the crisis and periods of innovation and technology deployment that have fostered economic growth. Periods of innovation were particularly important in helping the Baltic countries recover from crises and become competitive in the global market. Technological innovation is one of the main drivers of adaptation and resilience. Technological innovation is said to act as a key driver of recovery in times of crisis (Schumpeter, 1939, 1942). The ability to produce new products, the reorientation of processes, together with their diffusion and widespread use, are considered crucial for the economic dynamism of any territory (Crescenzi, 2011). The example of the Baltic States shows that in the face of economic threats, the reorientation of industrial structures from East to West provides not only short-term but also long-term capacity to withstand economic crises.
Investments in digital infrastructure and technological innovations in the Baltic States are more proactive than reactive. This is not merely a replacement of ageing infrastructure—it is a strategic move aimed at enhancing competitiveness, strengthening economic resilience, and adapting to global digital trends. The Baltic countries have consciously invested in digital infrastructure, financial technologies, and IT development even before facing major economic or technological disruptions. This was not just a response to ageing infrastructure but a forward-looking strategy to build a strong digital economy. While some investments may have involved upgrading outdated technologies (e.g. broadband Internet networks), the majority of projects go beyond basic infrastructure maintenance and focus on growth, innovation, and modernisation. These investments mark a shift from post-Soviet industrial infrastructure to a Western-style, technology-driven economy. This is a proactive, future-oriented investment, rather than mere infrastructure maintenance. Its goal is to strengthen resilience, enhance competitiveness, and drive digital transformation, rather than simply replacing old systems with new ones.
12.2.2 Applying Innovation and Technology to Address Health Sector Threats in the Baltic States
Responding to a crisis, whether it is an economic crisis, an outbreak of disease, or any other disorder that increases the need for health care, requires a strong public health response and a proactive and efficient health system (Kruk et al., 2015). Maximum system resilience is essential to ensure that the country and its health system can successfully meet the challenges ahead and continue to function smoothly. Resilience in the context of a health system refers to the ability of health actors, institutions, and populations to prepare for and respond effectively to crises, to maintain core functions in times of crisis, and to restructure the system based on the lessons learned from the crisis, if the circumstances so require (Kruk et al., 2015). The literature emphasises that efforts should focus not only on mitigating unforeseen shocks caused by emerging health care needs, but also on continuity of health improvement, enhancement of the functioning of systems, and being people-centred, while ensuring high quality care (Haldane et al., 2021). If a health system is well equipped and resilient in non-crisis times, it is likely to be better prepared to respond in the face of unexpected events such as pandemics, encountering fewer challenges in delivering routine services and maintaining normal access to healthcare. Therefore, resilience has been highlighted as one of the most important objectives in the Baltic countries, both in health system protection and in other key areas of governance and economy. When the pandemic broke out in 2021 and the lack of resilience in Lithuania’s health system became apparent, resilience building was included in strategic documents and in the Government Programme which prioritised the transformation of the healthcare system and resilience as one of the key areas. The European Union’s subsequent aid package for Member States also focused on building resilience in addition to economic recovery. The biggest pandemic wave in Lithuania was the period from January to April 2022, when the number of cases was several times higher than in other pandemic periods reaching 14,000 new cases per day. About 1.3 million cases were registered in Lithuania, 1 million in Latvia, and 0.6 million in Estonia. These data show that Lithuania had the highest number of cases and Estonia the lowest, which is in line with the total population in these countries. Around 21,000 people died from COVID-19 in Lithuania, 17,000 in Latvia, and 3500 in Estonia. The number of deaths shows that, while Estonia had the lowest number of cases, Lithuania had the highest mortality rate, possibly due to a higher number of cases or other health care factors.
Investments in technology, including healthcare technology, digitalisation, and teleworking tools, cost Lithuania around EUR 425 million, around EUR 255 million for Latvia, and around EUR 170 million for Estonia (Fig. 12.2). Lithuania has been a leader in investing more in technology, perhaps because of its larger population and greater needs for digitalisation in various areas, including healthcare and teleworking. Estonia, although with a smaller population, has also made significant contributions, which is in line with its efforts to become a digital leader in the region. The high number of reported cases and deaths, especially in Lithuania, is a reflection of the scale of the pandemic, and the investment in technology reflects the desire of these countries to tackle the pandemic by modernising and digitising their economies and health systems. The COVID-19 pandemic became a real challenge for the health system because of its scale and speed of spread. However, Estonia’s pre-existing investment in digital health infrastructure proved to be a key resilience factor. The country’s E-Health System enabled remote medical consultations, digital prescriptions, and automated vaccination scheduling, reducing hospital congestion. This proactive approach not only ensured continued healthcare access during the crisis but also strengthened long-term resilience in Estonia’s medical sector, positioning it as a leader in digital healthcare. The role of the health sector in deploying technology in the face of a pandemic was essential to protect lives and stop the virus from spreading further.
Fig. 12.2
COVID-19 cases, deaths, and technology investments in the fight against the pandemic (National health statistics agencies and Eurostat)
Faced with the challenges of the COVID-19 pandemic, Lithuania took innovative measures, including the deployment of digital technologies, to manage the impact of the pandemic and build resilience. For example, Lithuania’s digital COVID certificate enabled individuals to safely and reliably prove that they had been vaccinated, tested, or already had COVID-19. This technological innovation helped to control the spread of the virus, provide a safe environment for public places, and opened up the economy while sustaining social life. In addition, Lithuania was active in introducing other technological tools, such as teleworking tools, digital health service delivery methods, and digital training methods. ‘Korona Stop LT’ was one of the main initiatives of the Lithuanian Ministry of Health and other institutions to stop the spread of COVID-19. The app used Bluetooth technology to record close contacts between users. When a user was identified as infected with COVID-19, the app sent a notification to other users who may have had close contact with the infected person. This allowed people to take self-isolation measures to reduce the risk of spreading the virus. The app also provided information on symptoms, steps to take in case of infection, and health services. Overall, Lithuanian health authorities used advanced data analytics and visualisation tools to monitor the spread of COVID-19 and predict future waves of infection. The National Public Health Centre (NPHC) collected data on new cases, test results, hospitalisations, and deaths. This data was analysed using statistical and machine learning techniques to identify virus spread trends and risk areas. Data was made available to the public through interactive websites and reports, which allowed people to follow the situation in real time. Resilience in this context refers to the healthcare system’s ability to withstand crises, adapt to challenges, and recover quickly. These investments are not just reactive measures but also long-term solutions for flexibility, adaptation, and resilience. The technologies, data systems, and infrastructure that have been developed can be reused in future crises.
To ensure an effective vaccination campaign, a dedicated vaccination registration platform was developed and implemented in Lithuania. People were able to register for vaccination online and choose the place and time of vaccination. The system allowed health facilities to efficiently manage the vaccination process, keep track of how many people were vaccinated, and plan the supply of vaccines. The vaccination data were used to monitor vaccination progress and plan future vaccination campaigns. Lithuania’s eHealth system was heavily adapted and developed during the pandemic. eHealth allowed doctors and healthcare professionals to issue electronic prescriptions that patients could receive and submit to pharmacies without visiting the healthcare facilities. The system also enabled remote access to laboratory test results, medical records, and other medical certificates. Patients were able to access their health records to track the progress of their treatment and plan future visits to their doctors. These innovations helped to adapt to the new conditions brought about by the pandemic and to ensure uninterrupted service delivery and communication. Lithuania’s creative use and deployment of digital technologies during the COVID-19 pandemic demonstrates the ability of the Baltic States to adapt to challenges and quickly implement innovative measures to increase security, efficiency, and resilience in society. This reflects the commitment of the Baltic countries to using innovation and technology to address crisis situations and ensure sustainable development in the future. These solutions helped reduce the burden on traditional healthcare systems, contributing to a stronger healthcare system in the future. At the same time, they enhance preparedness for future crises and create a more resilient foundation for the future.
12.2.3 Applying Innovation and Technology to Counter Security Threats in the Baltic States
Innovation and deployment of technologies in defence is becoming a key factor in ensuring national security and preparedness to deal with various threats. The Baltic States face a range of security threats, including cyber-attacks, which threaten not only national security, but also the economy and public welfare. This is why the concept of resilience is gaining increasing attention in contemporary security policy. The Common Foreign and Security Policy (CFSP) of the European Union shifts from the promotion of stability and democracy to the concept of resilience which is defined as the ability of states and societies to reform, remain strong, and recover from internal and external crises (Sălăjan, 2018). The objectives of the CFSP are to preserve peace, prevent conflict, and strengthen international security (Albertavičienė, 2021). The Facility aims at strengthening the ability of partner countries to prevent and respond to crises, and contribute to their resilience, in order to enable them to protect their populations better, as well as supporting regional and international organisations (Council Decision (CFSP) 2021/509). The EU is committed to strengthening its capacity to act as a security provider through its operational commitments, to increasing its resilience and preparedness to respond effectively to a wide range of security threats and challenges, and to accelerating the development of the necessary infrastructure.
In the modern world, where the geopolitical situation is constantly changing, the states face defence threats ranging from traditional military attacks to cyber-attacks and information warfare. Building a strong cybersecurity infrastructure was therefore a key step in tackling these threats. Estonia, Lithuania, and Latvia have established their own National Cyber Security Centres to coordinate cybersecurity policy and provide research and assistance to public authorities and the private sector. These centres organise regular cybersecurity exercises, such as ‘Locked Shields’, which help identify vulnerabilities and improve incident response procedures. The Baltic countries have developed platforms to quickly and securely share information on cyber threats and incidents. A defining moment in the region’s cybersecurity evolution was the 2007 cyber-attack on Estonia, which disrupted government services, banks, and media outlets. Rather than just recovering from the attack, Estonia took decisive action by establishing the NATO Cooperative Cyber Defence Centre of Excellence and implementing world-leading cybersecurity policies. This transformation turned a crisis into an opportunity, making Estonia a global leader in digital resilience and cyber defence. Such information exchange allows public authorities and businesses to react quickly to new threats and to cooperate on cybersecurity issues. Artificial Intelligence (AI) has been applied in the field of cybersecurity by allowing automatic detection and analysis of threats. It enables users to quickly detect anomalies in networks, identify potential attacks, and predict their development. Situational awareness and perception, intelligence processing, cyberspace operations, military logistics, command and control, command decision making, autonomous unmanned systems, unmanned aerial vehicles, swarm technology, and tactics are all areas that require AI support (Mori, 2018). The experience of the war in Ukraine has shown that unmanned aerial vehicles have become another area of new technology in which many countries around the world are now investing, not least Lithuania. Unmanned aerial vehicles are considered to be a revolutionary technology that has fundamentally transformed the nature and character of warfare (Rossiter, 2023).
Every military revolution has been fundamentally driven by a logistics revolution driven by new technologies and ways of warfare adapted to them (Serrano et al., 2023). Since 2015, the Ministry of National Defence (MoND) has been fulfilling its NATO commitments by allocating at least 20% of its budget to the acquisition and modernisation of military equipment and armaments (Ministry of National Defence of the Republic of Lithuania, 2023). The MoND has identified the most important modernisation projects of the Lithuanian Armed Forces until 2027, including armoured all-terrain vehicles, mine countermeasures and search and rescue vessel, multi-purpose helicopter platform, medium-range mobile radars, howitzers, medium-range air defence systems, infantry fighting vehicles, and unmanned aerial vehicle systems (Tamulevičius, 2024). The Lithuanian Armed Forces are pursuing the objectives of the National Security Strategy to strengthen military capabilities which include the introduction of innovative solutions in the field of logistics, the strengthening of military–civilian cooperation in the field of military innovation, and the provision of troops with modern weaponry and equipment compliant with the NATO standards (Seimas of the Republic of Lithuania, 2021). Apart from the great ambitions to modernise existing equipment and introduce new technologies in the defence sector, these are very difficult to achieve, as modernisation usually takes place only in response to strategic security threats. Researchers argue that military innovations are highly complex and often lead to rare and painful revolutionary transformations that significantly change the way the military is structured and operates (Neads et al., 2023). Russian invasion of Crimea in 2014 and Russia’s invasion of Ukraine in 2022 has prompted the Baltic countries to increase funding, introduce new technologies, and modernise the existing ones.
Although the Baltic States’ defence investments in cybersecurity, unmanned aerial vehicles (UAVs), artificial intelligence (AI), and military modernisation—may seem reactive in response to security threats, they are, in fact, building long-term resilience, ensuring adaptability, preparedness, and sustainability for future crises. Instead of merely reacting to cyber-attacks, AI-powered systems prevent security breaches before they occur. Instead of relying solely on traditional military forces, UAVs enable defence operations to remain active even under attack. Instead of waiting for NATO assistance or relying on outdated defence systems, the Baltic States are developing a self-sufficient, agile, and responsive military capable of rapid reaction to threats. Rather than rebuilding infrastructure after cyber-attacks, the Baltic States invest in preventive solutions that ensure the functionality of their state and economy even in worst-case scenarios. The Baltic States do not expect NATO to shield them from every crisis they are investing in long-term defence self-sufficiency.
All three countries have seen a steady increase in defence spending over the decade reflecting a growing commitment to building defence capabilities (Fig. 12.3). Lithuania’s defence budget has grown from around 0.75% of GDP in 2014 to more than 2.5% by 2023. Latvia’s defence budget has also seen a significant increase, from 0.6% to around 2.3% of GDP over the same period. In the case of Estonia, which started with a larger defence budget, the budget has grown steadily from 1.6% to almost 3% of GDP. Investment in innovative technologies has also grown, but at a slower pace than the overall defence budget. Lithuania has increased its investment from EUR 50 million in 2014 to around EUR 400 million in 2023. Latvia increased its investment from EUR 30 million to EUR 250 million and Estonia from EUR 60 million to EUR 220 million over the same period. All three countries have consistently increased their defence spending, which is particularly important given the geopolitical situation in the region and the growing need to strengthen their security capabilities. The increase in investment in innovative technologies reflects the drive to modernise the military’s capabilities by incorporating new technologies such as cyber defence, autonomous systems, artificial intelligence, and other advanced solutions. However, modernisation does not ensure resilience in itself, unless it is more broadly embedded in strategic planning, sustainability, flexibility, and integration with other alternative factors. The Baltic countries are actively modernising their defence, but the real challenge is to ensure that these investments translate into real resilience in the long term.
Fig. 12.3
Lithuanian, Latvian, and Estonian defence budgets as a percentage of GDP and investment in innovative technologies in euro (EUR) (The Ministry of National Defence of Lithuania, the Ministry of Defence of Latvia, the Ministry of Defence of Estonia, and Eurostat)
The most significant technological advances in the future are likely to be in five areas known as BRINE: biotechnology and medicine; artificial intelligence and human enhancement; information and communication technologies; nanotechnology and advanced materials; and energy technologies (NATO Allied Command Transformation, 2018). The Baltic countries focus on different areas of BRINE, according to their strengths and strategic objectives. Lithuania invests most in ICT and biotechnology. The country aims to become a regional leader in the digital economy, particularly in cybersecurity and fintech, while the biotechnology sector is characterised by innovation in life sciences and health technologies. Latvia has a strong focus on energy technology and advanced materials. Estonia, considered one of the world’s digital leaders, focuses on artificial intelligence (AI), robotics, and information technology (ICT) development. Estonia is rapidly developing AI solutions for use in the public sector, industry, and security.
12.2.4 Applying Innovation and Technology to Mitigate Climate Change
Another area that will have an impact not only on future warfare, but also on the Anthropocene Epoch for the Baltic States is climate change. The Baltic countries face a range of climate change effects on their environment, economy, and society. The region is experiencing a rise in average temperatures, especially in winter, leading to longer and warmer summers and shorter and warmer winters. The higher frequency and intensity of heat waves can lead to adverse health effects, especially for the elderly and other vulnerable groups of population. More extreme weather such as severe storms and hurricanes are more likely to cause damage to infrastructure, housing, and the economy, and larger and more intense rainfall events are more likely to cause flooding, especially in cities where drainage systems may not be adequately prepared. Climate change is also leading to the loss of certain species and the spread of invasive species, altering natural ecosystems, affecting forest growth and agricultural productivity, requiring adaptation and new agricultural practices. Climate change is contributing to the increased distribution and risk of insect-transmitted diseases, such as those spread by ticks and mosquitoes, in the Baltic States.
Deploying technology to build resilience to climate change is a crucial step for the Baltic Sea region. The Baltic countries are developing renewable energy sources, as investments in wind and solar farms can reduce dependence on fossil fuels and generate fewer greenhouse gas emissions. Modern technologies help to optimise energy use in homes, businesses, and public institutions by reducing overall energy consumption and emissions. A prime example of resilience in energy security is Lithuania’s response to its dependency on Russian gas. Following the annexation of Crimea in 2014, Lithuania constructed the Klaipėda LNG terminal to diversify its energy supply. This strategic move not only ensured Lithuania’s energy independence but also positioned the country as a regional energy supplier, strengthening economic and geopolitical resilience. For example, the NordBalt wind farm connecting Lithuania and Sweden is a good example of how regional cooperation can contribute to energy independence. Old buildings in the Baltics consume a lot of energy and lack modern insulation. Renovations using advanced insulation materials significantly reduce heating and cooling costs, while smart meters and energy management platforms allow residents and businesses to monitor and optimise energy consumption in real time. In this context, Lithuania is implementing a renovation programme, the ‘Multi-Apartment House Renovation (Modernisation) Programme’, to modernise multi-apartment buildings to make them energy efficient. Smart agriculture uses sensors to measure soil moisture, temperature, and other important indicators. For example, AgroTech, a Latvian agricultural company, uses drones and sensors to monitor crops and optimise fertilisation. By means of advanced climate forecasting technology, farmers anticipate weather conditions and adapt their operations to reduce losses due to extreme weather conditions. The Estonian Climate Forecast Centre provides farmers with detailed weather forecasts to help them optimise their farming operations. Analysing large climate datasets with artificial intelligence can lead to more accurate forecasts and strategies to mitigate climate change, which is why the Baltic Sea Region has the ClimateAI platform that uses artificial intelligence to analyse climate data. Smart transport also contributes to climate resilience, while clean transport alternatives reduce air pollution and improve the health of city residents. Tallinn has an electric bus network and a bike-sharing system that promotes more sustainable urban mobility, while Vilnius has a smart traffic management system that optimises traffic lights based on real-time data to reduce congestion and emissions.
As seen in Fig. 12.4, Lithuania’s investment in climate technologies shows consistent growth, reaching EUR 450 million in 2024. 60% of this investment is directed towards the development of renewable energies, in particular wind and solar energy, which have become one of the key priorities in the fight against climate change. This priority is highlighted by Lithuania’s growing commitment to the European Union’s Green Agenda and to the energy transition to sustainable sources. Latvia’s investment has been also growing steadily, reaching around EUR 350 million in 2024. 50% of this investment is in energy efficiency improvements which include building renovation, upgrading heating systems, and innovative energy technologies. Improving energy efficiency is particularly important in Latvia’s strategy for energy security and meeting its international climate commitments. Estonia’s investment in 2024 reached EUR 400 million, with sustainable transport as a priority, accounting for around 55% of total investment, which includes the development of infrastructure for electric vehicles, electrification of public transport, and intelligent transport management systems. Estonia’s focus in this area reflects its ambition to reduce greenhouse gas emissions from the transport sector which serve as a significant contributor to climate change.
Fig. 12.4
Lithuanian, Latvian, and Estonian investments in technologies to mitigate climate change (Eurostat)
To build resilience to various crises, the Baltic countries are investing in innovation and technology as an important tool to tackle economic, environmental, social, security, and health challenges. While facing resource constraints, these countries are demonstrating their ability to effectively adapt to changing conditions and ensure sustainable development through innovative solutions. The Baltic experience shows that innovation is a key source of resilience and long-term sustainability helping to adapt to global challenges and strengthen the capacity of states to withstand crises. Innovation is not just a driver of technological development—it is essential to maintain national security, ensure economic stability, and respond to the challenges of climate change. The Baltic experience shows that innovation is not a luxury, but a necessity for small countries seeking to remain competitive and protect their citizens. However, despite their shared history and regional cooperation, the three Baltic States have distinct strategic priorities. Estonia has positioned itself as a global leader in digital governance and cybersecurity. Lithuania has leveraged fintech and energy independence as key resilience strategies, while Latvia has focused on sustainable technologies and transportation innovations. These differences highlight that while resilience-building principles are universal, their implementation must be tailored to each nation’s strengths and vulnerabilities. Investing in IT infrastructure, the digital economy, health and defence technologies helps both to withstand current crises and to prepare for future ones. The emphasis on sustainability and energy efficiency allows the Baltic countries to ensure their long-term prosperity and reduce their dependence on external energy suppliers, which further strengthens their independence. Even with limited resources, the Baltic States can use innovation and technology as a strategic advantage, not only to remain competitive but also to effectively manage risks ranging from economic to geopolitical risks. While the challenges faced by the Baltic States are significant, they are not unique. Many other small, open economies, such as Finland, Ireland, and Singapore, face similar pressures related to economic diversification, cybersecurity threats, and energy security. The strategies developed in the Baltic region—ranging from digital governance to energy independence—can serve as valuable models for other nations seeking to build resilience in an uncertain geopolitical environment. Technology, investment, and modernisation increase efficiency, but they do not ensure resilience in themselves. But when implemented strategically, modernisation becomes the basis for resilience, as it allows for continued performance, adaptation, and sustainability even in times of crisis. To further strengthen resilience, the Baltic States should prioritise several key areas. Economic diversification remains crucial, particularly in fostering high-value industries such as artificial intelligence, cybersecurity, and deep tech. Expanding digital healthcare and telemedicine services will enhance public health resilience, particularly in rural areas. In security, deeper cooperation with NATO in cyber defence and investment in autonomous military technologies will be critical for national security. Additionally, continued investment in renewable energy and smart city solutions will reduce dependency on external energy sources while supporting sustainable growth. The Baltic States’ strategy is not just about introducing new technologies, but about adapting them to strengthen long-term resilience.
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Tomas Vedlūga
is an Associate Professor at the Research Group on Security Institutions Management of the General Jonas Žemaitis Military Academy of Lithuania and at the Institute of Management and Political Science of Mykolas Romeris University. He has over 13 years of experience in university-level teaching. In addition, he possesses international experience, having completed academic internships in China, the United States, and the European Union. Tomas Vedlūga holds a PhD in Social Sciences. His primary research interests include decision-making in the context of national security threats, performance evaluation and management of security and defense institutions, resilience assessment, indicator selection, and measurement.
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