Why should business care about the European Commission's efforts to create a European Research Area? Let me try to explain.

When the Lisbon Strategy was agreed in 2000, political leaders publicly recognised that Europe's growth depended on competing in a global knowledge-based economy. Innovation became a key plank of Commission policy. A cascade of public-sector reforms followed, in an effort to make Europe a better place in which to innovate. Developing the European Research Area, a flexible environment built on effective public and private research, high-quality education and clear paths to market, is one of the key steps to enabling the innovation we need to drive our future economy.

The rapid emergence of Asian nations as technological and economic powers since 2000, and the growing evidence that we need to get involved in global actions to tackle societal issues such as climate change, has made these reforms more urgent. Europe needs to make better use of its strengths if it is to compete, and collaborate, effectively.

The recent Green Paper on the European Research Area explained many of the steps the Commission is already taking. We're trying to capitalise on the results generated by public investments in R&D, for example by making it easier for researchers to move between jobs, institutions and sectors, because so much of technology transfer is really about knowledge transfer. We're improving the quality of public research through better co-ordination: the launch of the European Research Council reflects a growing recognition that some public research is best organised at European level or should take on a greater European scale and scope.

I could mention many other actions. The point is that the Commission has probably never been more pro-business. The emphasis of our work is shifting away from regulation and towards enabling markets. We are dedicated to setting the context for a more innovative Europe. The Lisbon Strategy was instrumental in putting innovation centre stage, and focused attention on the need for more effective inputs. We now know that the key task for building an innovation-led economy is to ensure that the knowledge that we create is put to work more effectively.

For their part, some companies and other stakeholders have invested substantial amounts of time and effort in defining Europe's Technology Platforms, whose strategic research agendas will help channel public and private research efforts more effectively. In some compelling cases, Joint Technology Initiatives will provide this channel. The most recent European Council summit made it clear that Europe's political leaders now want the first four of these Initiatives, covering embedded systems, innovative medicines, aviation and nano-electronics, to be quickly crystallised into substantive plans.

The wider private sector needs to be convinced of the business case for engaging in the European Research Area. Otherwise Europe will be left with a well-designed chassis, but no engine to drive it. I understand that companies need solid business cases to justify the way they apply their resources. So, what is the business case for the European Research Area?

Surveys show that businesses invest in R&D where it can most easily be commercialised. This tends to be in places that offer a good supply of well-trained people, excellent connections between universities and industry, and favourable market conditions. Increasingly, companies thrive in such environments through Open Innovation, using connections with each other and with public research to explore ideas and develop products much more effectively than they could alone.

Europe offers an excellent environment for Open Innovation, thanks to the variety of outlooks and interests that thrive here, the dense network of public research institutions and the richness of our creative talent. But we will only capitalise on these strengths if we can remove national barriers to commercialisation, stop fragmenting efforts that should be consolidated, and make better links between private investments and public-sector initiatives. That's why we need the business community's backing for the European Research Area - half a plan is no plan at all.

By improving Europe's public research base, making it easier for researchers to move between roles, strengthening frontier research, and improving infrastructure, we hope that business will play its part to create the European Research Area. Actually, it won't happen without business. At this moment, two forces are determining Europe's future competitiveness: the globalisation of R&D, and Europe's limited growth in key future economic sectors. The large multinationals that fund so much of Europe's industrial R&D are spending more of their R&D budgets outside Europe, to be close to their customers and to reach new pools of talent. These are, of course, business decisions. So we must make clear that there is also a compelling business case for research at home.

Europe is a huge market. The 27 states that make up the Union are home to 450 million people, making Europe a much larger opportunity than the US or even the emerging middle classes of today's India and China. Europe's cultural diversity is an asset: if you can design a car or a washing powder that can be adapted to suit a Scot and a Slovenian, making variants for global markets should be a simple next step.

The changing pattern of European lives is creating opportunities. European society is shifting from traditional family structures towards single-person or single-parent households, changing patterns of consumption. Europeans increasingly live in dense urban centres that need excellent transport and utility infrastructures, and access to specialised goods and services, to work properly.

Many Europeans are affluent yet lack time, and so want time-saving services that draw on specialist technologies and infrastructure. Attitudes to healthcare are evolving, too, as our ageing population becomes an active group of consumers that expects personalised service - and will pay for it. What this adds up to is a sophisticated and challenging home market that may also provide an insight into how many other global markets will evolve.

Now that European leaders have drawn a line under the discussions about constitutional issues, we can refocus on enabling the knowledge-led economy we know is vital to maintaining the standards of living and social values that are so important to the European ideal. I've argued that the Commission has already taken significant steps to improve the environment for a knowledge-led economy, and that our home market offers opportunities that can re-ignite business growth. Now it's over to you, to promote these reforms (or to suggest others if you think we are on the wrong track), and to demonstrate to your boards and shareholders that they really are making Europe the best place to innovate.

Europe is benefiting from the four freedoms the EU Treaty has brought, namely the freedom of circulation of goods, services, people and capital. It is high time to realise the fifth freedom, that of knowledge, the new currency in the global knowledge society.