The Twelfth International Conference: "Innovative Responses for Growth and Competitiveness" 1 SMART SPECIALISATION STRATEGY- THE CASE OF SMALL COUNTRY Maja Bučar Centre of International Relations, Faculty of Social Sciences University of Ljubljana Kardeljeva ploščad 5, 1000 Ljubljana, Slovenia Phone: + 386 1- 5805 195; Fax: + 386 1 5805 109 E-mail: maja.bucar@fdv.uni-lj.si Boštjan Udovič Centre of International Relations, Faculty of Social Sciences University of Ljubljana Kardeljeva ploščad 5, 1000 Ljubljana, Slovenia Phone: + 386 1- 5805 188; Fax: + 386 1 5805 109 bostjan.udovic@fdv.uni-lj.si Jana Arbeiter Centre of International Relations, Faculty of Social Sciences University of Ljubljana Kardeljeva ploščad 5, 1000 Ljubljana, Slovenia Phone: + 386 1- 5805 188; Fax: + 386 1 5805 109 jana.arbeiter@fdv.uni-lj.si Key words: smart specialisation, EU, structural funds, innovation, Slovenia. JEL codes: O30, O32, O38, O52 ABSTRACT The key objective of the strategy of smart specialisation, as defined by the EU, is to set priorities at national and regional level to build competitive advantage by developing and matching research and innovation own strengths with business needs. This paper explores the concept of the first Lisbon Strategy, which was launched in 2000 as a response to the challenges of globalization, the growing gap in innovation capability between the USA and the EU and transition to knowledge based society and economy. Furthermore, it explains the logic of smart specialisation strategy and it analyses the complexity of designing RIS3 and the risks, associated with selection of priority areas and concentration of development funding on the selection, on the case of Slovenia, as a small, R&D less intensive country. The main claim of this article is that while there are potentially important benefits to be derived from RIS3, the process of adopting of smart specialisation strategy in a small member state carries a much higher level of risk than in the case of more developed regions in a bigger country.