Issue 17 summer 09

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Peter Dröll graduated with a PhD in German constitutional law and European law. After two years working as a lawyer, he joined the European Commission in 1991, holding positions in financial control, environment (legal and internal market aspects) and enlargement (accession negotiations with Poland; cabinet of commissioner Verheugen; assistant to the director general). From 2004 to 2008 he was head of cabinet of the science and research commissioner Janez Potočnik. He now leads the innovation policy development unit of the Commission's DG Enterprise and Industry.

Has Europe really joined forces on innovation policy to address the global challenges the Union faces, in the current economic crisis and over the long term? It’s definitely trying to do so. The European Commission has two innovation strategies, which define 28 actions and nine priorities. These policies attempt to create framework conditions, as well as both supply-side and demand-side measures to stimulate Europe’s innovative capacity.

Framework conditions

Europe has opened up the conditions under which countries can fund innovative companies

On state aid, Europe has opened up the framework conditions under which member countries can fund innovative companies. But then the financial crisis came and all the efforts to try and reorient state aid towards the future and innovation have been undermined. Only two member states, Finland and Germany, are keeping their schemes for supporting innovative young companies in the current crisis. On tax incentives, there are guidelines on using tax schemes to help research and innovation but they haven’t really had an impact yet.

On intellectual property rights (IPR), discussions about the community patent have not progressed in 15 years, while on copyright, there’s room for greater harmonisation. On the positive side, there are a wide range of measures, such as guidelines and codes of conduct, to facilitate IPR exchange and knowledge transfer.

On education, the investment figures are less frustrating than in research. And the labour market code of conduct for recruiting researchers should also help find staff. On standardisation, though, Europe’s consensus-based approach moves too slowly for our innovation-led economies.

The supply side

Even more is being done on the supply side. Structural funds are being reoriented towards research and innovation, with 25% of the budget, or €86 billion, earmarked for this between 2007 and 2013. This is up from the 11% of budget that was set aside for research and innovation between 2000 and 2006. It’s more money than is being invested in the latest Framework Programme.

On SMEs’ access to finance, 400,000 companies have benefited from European financial instruments such as loan guarantees over the last 10 years, creating 600,000 jobs. But the venture-capital market is fragmented with little European involvement, and access to such capital is still a huge barrier for companies here. The crisis has only made these structural weaknesses more obvious.

Innovation support measures are still biased towards classical R&D

On knowledge transfer, we have FP7, Eureka and Eurostars, as well as the emerging European Institution of Innovation and Technology. Europe is also mapping its clusters of excellence, trying to bring them together and develop them into world-class regions. On services and non-technological innovation, there is still a lot more analysis than action: innovation support measures are still biased towards classical R&D.

There’s more to do on innovation performance, though. The EU has been catching up with the US and Japan on this, but the Union as a whole is not as strong as some of its member countries. And there’s consistent under-investment in innovation.

The demand side

Demand-side policy is recognised as a weakness in Europe's policy mix. Public procurement guidelines are encouraging some openness, but they’re not really removing many of the barriers that stop public authorities buying innovative products and services. The lead markets initiative, a combination of regulation, public procurement and standardisation policies, has some promise, but has yet to make a big impact.

Europe should be applauded for maintaining a united approach in the face of the crisis

Has Europe really reacted to the global financial crisis? The common wisdom is that Europe has failed to act. Global stimulus package spending is estimated to be $2.8 trillion, and the EU member states are spending what some see as a rather low €200 billion. But latest estimates suggest that the EU will spend 5% of GDP in 2009. Set in that context, perhaps the investment is stronger than some think. And Europe should also be applauded for maintaining a united approach in the face of the crisis, rolling back nationalism and finding ways to support weaker countries.

There are areas for improvement. Innovation policy needs to be broadened out. Venture capital is not really happening in Europe. Public procurement and other demand-side measures are still at an early stage in terms of stimulating Europe’s innovative ability. Links between European and national policies are weak, and in many areas we lack critical mass.

Crisis prompts new strategy

The Commission is now working on a new strategy, the European Innovation Plan, whose first phase, an assessment of what has gone before, will be launched this summer. A second phase, defining a new strategy, is due to be defined next year.

How can the EU further strengthen its innovative capacity? What’s going on at the moment is not bad, but it needs to be simpler, it needs more vision and it needs to go for scale. The EU also needs greater strategic focus: there are several strategies and many actions but it is not a challenge-oriented approach. Innovation should also be regarded as a much broader activity, not in the sense of being less focused, but one that applies as much to public services and social actions as to technological R&D.

Finally, who really runs innovation policy for Europe? Many people want the Commission to appoint an innovation commissioner to take charge. But I think we need a whole-of-government approach instead. Innovation was one of the top four priorities in the Commission’s Growth and Jobs strategy. It needs to be taken as seriously in any future strategies designed to assure Europe’s future prosperity.

Peter Dröll

head of the innovation policy development unit of DG Enterprise at the European Commission
Peter.Droell@ec.europa.eu

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