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How to stay top of the innovation class

According to the new Innovation Union Scoreboard, the European Union is making progress in the innovation stakes but is losing ground to some of its rivals. This shows that EU Member States need to step up their efforts to boost their innovation potential so as to turn ideas into new jobs and sustainable growth. By joining forces under the umbrella of the Innovation Union flagship initiative, Europe should be able to achieve this.

Innovation is the engine which drives economies and pushes the boundaries of what is possible. It also creates jobs and opens new markets, especially vital in today’s tough economic climate. For these reasons, encouraging and promoting innovation is an EU priority. In October 2010, the European Commission unveiled the Innovation Union (IU), an ambitious strategy which aims to improve framework conditions and access to finance for research and innovation, while refocusing these policies on the key challenges of our times, such as climate change, energy efficiency and demographic evolution.

But how is Europe faring in the global innovation race so far? To assess performance in this domain, the European Commission recently presented the first-ever Innovation Union Scoreboard (IUS), which builds on and replaces the former European Innovation Scoreboard as a valuable tool to identify areas where further action may be needed.

The scoreboard indicates that, the economic crisis notwithstanding, most EU Member States are pursuing a promising upward trend in their innovation performance. This is particular the case for the EU’s ‘innovation leaders’, the top group made up of Denmark, Finland, Germany and Sweden, whose performance – 20% or more above that of the EU as a whole – would rival and even exceed that of any international player. “While there is not one single way to reach top innovation performance, most innovation leaders perform very well in Business R&D expenditures and other innovation indicators related to firm activities,” the report notes.

This leading group precedes the ‘innovation followers’ (Austria, Belgium, Cyprus, Estonia, France, Ireland, Luxembourg, Netherlands, Slovenia and the UK), the ‘moderate innovators’ (the Czech Republic, Greece, Hungary, Italy, Malta, Poland, Portugal, Slovakia and Spain) and the ‘modest innovators’ (Bulgaria, Latvia, Lithuania and Romania). Although the gap between the EU’s top and bottom innovation performance is wide, it is narrowing and there has been something of a convergence in recent years.

Areas for action

Nevertheless, despite these gains, the EU is losing ground to its major international competitors, the United States and Japan. There is, for example, a rapidly increasing EU lag in licence and patent revenues from abroad, suggesting that Europe is producing fewer high-impact patents than America and Japan. And while the EU still maintains a clear lead over emerging economies, such as India and Russia, Brazil is making steady progress, and China is catching up rapidly.

“The scoreboard shows that we need to step up our efforts in making Europe more innovative in order to catch up with our main competitors and recover the path of robust and sustainable growth” said European Commission Vice-President Antonio Tajani, who is responsible for Industry and Entrepreneurship.

According to the scoreboard, Europe’s research and innovation gap lies primarily in the private sector. This gap is particularly large in licence and patent revenues from abroad, an indicator of economic dynamism. The EU is producing fewer high impact patents – those that generate significant income from third countries – than either the USA or Japan, and is not positioning itself sufficiently well in high global growth sectors.

The protection of intellectual property is another key factor. At present in Europe, markets have become borderless but patents are still largely organised along national lines. Obtaining patent protection for all 27 EU Member States is currently at least 15 times more expensive than in the United States, largely due to translation and legal fees. This is effectively a tax on innovation. The priority for policy-makers should, therefore, be to create conditions to encourage more private sector investment and facilitate the exploitation of research results by the business sector, in particular through a more efficient patents system.

Profiling innovative countries

The Innovation Union Scoreboard is designed to monitor the implementation of the Innovation Union. It draws on 25 research and innovation-related indicators so as to provide a better picture of Europe’s overall situation, and make it easier for policy-makers to identify the relative strengths and weaknesses of the research and innovation sector.

The IUS has helped to identify the common characteristics of countries capable of fostering effective research and innovation, such as stable research and innovation policies, along with well-tested policy design and delivery mechanisms (see box).

Doing the right things

The IUS found that countries at the top tend to have in common a number of strengths in their national research and innovation systems. While there is no single way to attain top innovation performance, most innovation leaders perform very well in business R&D expenditure and other innovation indicators related to firm activities.

All the innovation leaders have higher than average scores in the public-private co-publications per million of population indicator, which points to good linkages between the science base and businesses. All Europe’s most innovative countries also excel in the commercialisation of their technological knowledge, as demonstrated by their good performance on the ‘Licence and patent revenues from abroad’ indicator.

The results show that successful countries have a consistently high performance across all or most of the indicators. There is no evidence that success can be achieved on the back of exceptional performance in a limited number of areas, compensating for other indicators scoring poorly.

Europe’s ideas engine

Europe has a reputation as a centre of innovative excellence, and the EU has funded some major innovations. For instance, Skype, which is currently the largest international voice carrier, is a clear demonstration of the innovative potential of European collaboration. Dutch physicist Andre Geim and his British partner Konstantin Novoselov won the Nobel Prize in Physics for their work on graphene, a new form of carbon material just one-atom thick. Their work was partly financed by the EU.

The EU has three key funding instruments to support research and innovation, with a total budget of around €140 billion for the period 2007-2013: the Structural Funds, the Seventh Framework Programme for Research (FP7) and the Competitiveness and Innovation Framework Programme (CIP). Furthermore, the ‘Europe 2020’ strategy stresses the need to strengthen efforts in the research and innovation domain through its Innovation Union flagship initiative (see main article).

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