Patent reform and new sources of finance are at the heart of the EU's new innovation strategy, published today (6 October) by the European Commission. The EU has also announced the first 'Innovation Partnership', which will begin next year and is dedicated to healthy ageing.
Brussels says too few of Europe's ideas make the journey from "research to retail" and global competition, particularly from Asia, means the EU must up its game or risk falling into unchecked decline.
The EU has now committed to steering structural funds and public procurement towards innovation, as well as removing bottlenecks that make it difficult for Europeans to turn knowledge into marketable products.
A new cross-border venture capital regime and an expansion of the European Investment Bank's Risk-Sharing Finance Facility will be part of a concerted effort to match innovative firms with investors, according to Máire Geoghegan-Quinn, EU commissioner for research, innovation and science, and Commission Vice- President Antonio Tajani, responsible for industry and entrepreneurship.
The long-awaited plan proposes that governments set aside dedicated budgets for buying innovative products and services, a move that could create a procurement market worth at least €10 billion a year.
The Commission will now review structural funding and state aid frameworks while helping member states to tap into the €86 billion of structural funds earmarked for research and innovation.
One million new researchers needed
The Commission has also published a new study showing that increasing R&D investment to 3% of GDP – as outlined in the 'Europe 2020' growth strategy – could create 3.7 million jobs and boost annual GDP in Europe by €795 billion by 2025.
However, experts say one million extra researchers will be needed and Europe's fragmented infrastructure must be streamlined. This, says Geoghegan-Quinn, means Europe must reverse the "brain drain" and strive to attract and keep the world's best researchers.
In line with the Lisbon Treaty and previous commitments made by the EU executive, the new plan pledges to make it easier for scientists to move within Europe by allowing them to bring their pensions with them when they move jobs.
Brussels also wants member states to pool resources to provide Europe with world-class infrastructure, pledging to have "completed or launched the construction of 60% of the priority European research infrastructures currently identified by the European Strategy Forum for Research Infrastructures (ESFRI).
New 'partnerships' to address grand challenges
The EU executive also unveiled what it calls the European Innovation Partnerships, the first of which will be a pilot project dedicated to healthy ageing. The project aims to expand healthy life years by two years by 2020.
Future initiatives in energy, smart cities, water efficiency, agriculture and raw materials are expected to follow.
The Partnerships will step up R&D, coordinate investment, speed up standards and mobilise demand, the Commission said. Brussels will provide "seed corn" funds to attract investment.
The Innovation Union flagship stresses the need to develop new curricula to address the skills gaps and to deepen business-academia collaborations. Brussels is also committing to support the development of an independent ranking system for universities.
EU Commissioner for Research, Innovation and Science Máire Geoghegan-Quinn said Europe is facing "an innovation emergency" but the new strategy will help "get people back to work and keep them there".
She said research is a big part of the innovation agenda and that the new Innovation Partnerships would have concrete and measurable goals and be "different from anything that went before".
Geoghegan-Quinn said the Commission would also use an Innovation Scoreboard to help member states monitor progress, and expects a new innovation output measurement tool to be developed over the next two years.
European Commission Vice-President Antonio Tajani said his work on industrial policy overlapped significantly with the new innovation strategy. He said SMEs have a key role to play in making Europe more innovative and make finance available to small firms will be central to whether they can invest in R&D.
Tajani also called on the European Council to back the Commission's proposals on breaking the patent deadlock and said more would be done to help SMEs access EU research funds.
Jonathan Zuck, president of the Association for Competitive Technology, described the Innovation Union as "a significant and decisive step for EU's recovery, jobs and competitiveness". He said swift implementation will be essential, adding that "the EU-wide patent system would be a quick win and the right place to start".
"We welcome today's call for a holistic approach to boost Europe's research and innovation performance. To succeed, we have to look at the entire innovation chain. Innovation, unlike basic research, is an organic phenomenon that must include access to markets and to risk capital as well as more flexible labour and tax policies, in addition to R&D and public funding," said Zuck.
On Innovation Partnerships, he said ICT is at the core of all the grand challenges identified by the Innovation Union and will give Europe the tools to find solutions. "Innovative entrepreneurs are essential to improving partnerships aimed at e-health, obtaining greener societies and improving people's lives," he said.
However, the European Venture Capital Association (EVCA) warned that other elements of EU policy threatened to kill off the sources of finance for innovative companies before the Innovation Union could even be implemented.
Uli Fricke, chairwoman of EVCA, said there is "a huge amount of good sense in the European Commission's Innovation Flagship, such as measures around public procurement, removing 'all remaining barriers to venture capital funds operating cross-border', the pooling of resources in trans-national projects, and to ensure VCs have the critical scale to specialise".
"So much of this will be undone if SMEs' life-line to venture capital is cut by a Hedge Fund Directive, as currently drafted," she said.
"Amid the many excellent proposals to promote innovation through venture capital, this initiative aims to allow venture capital to function and invest freely in the EU - 'if necessary, by a new legislative regime'. Surely it is better to save the patient before the AIFMD is passed than attempt a restoration years later, by which time most VCs would have been starved of institutional funds. The knock-on impact to finance for innovation would be devastating to the Flagship's goals," Fricke said.
EuropaBio, a lobby group representing the bioscience industries, welcomed the Innovation Union and the choice of healthy ageing as the first Innovation Partnership.
"Europe's biotech industry is at the forefront of innovation helping to provide solutions for longer, healthier and greener lives. Global competition is fierce and Europe needs collective commitments towards fostering innovation through decisive political moves such as the Innovation Union. Europe also needs supportive and coherent policies that foster the growth of key innovative sectors such as biotechnology and that allow us to take the lead on the international scene," said EuropaBio Chairman Andrea Rappagliosi.
EuropaBio welcomed the EU executive's commitment to tackled internal market fragmentation, eliminate restrictive interpretation of state aid for SMEs and to improve more general access to finance for small firms.
Microsoft described the Innovation Union as "indispensible for getting Europe out of its comfort zone and equipping it better for the economic challenges of the 21st century".
"Placing innovation at the heart of economic policy is a necessity if Europe wants to remain an area of prosperity, growth and global competitiveness," said John Vassallo, Microsoft vice-president for EU affairs.
"Europe's future economic success will depend on tomorrow's entrepreneurs and innovators. We support the EU in its efforts to remove bottlenecks and to create the right policy framework which will sustain Europe's knowledge base and skills, allowing talent to thrive and bringing the most innovative ideas from the lab to the market place," Vassallo added.
UEAPME, a lobby group representing small businesses, welcomed the thrust of the Innovation Union but said the blueprint must be turned into reality. It said policymakers must show a willingness to act by agreeing a community patent.
UEAPME criticised the lack of focus towards small businesses that are not fast-growing or high-tech based, which are "somewhat ignored in the Commission's text despite providing the vast majority of Europe's innovation activities and potential".
UEAPME Economic and Fiscal Policy Director Gerhard Huemer said: "The strategy rightly identifies the main barriers holding back our innovation potential and the key role of the public sector when it comes to removing these obstacles and stimulating the private sector. However, the possible benefits of this strategy will remain on paper unless the commitments taken today are turned into reality and followed by concrete progress in all policy areas. The Community Patent will be the first test in this respect. We hope that the Belgian Presidency will be able to strike a deal before its term comes to an end."
Eurochambres, which represents chambers of commerce across Europe, expressed concern about the disproportionate emphasis on research in the European Commission's 'Innovation Union'. Despite an apparent recognition of the many shapes, forms and sources of innovation by the new Commission in recent months, chambers interpret this communication as a return to a research-driven strategy, according to Eurochambres.
Arnaldo Abruzzini, secretary-general of Eurochambres, said: "Research undeniably remains a vital element of innovation, but it is only one of many important ingredients. Strengthening Europe's entrepreneurial eco-system and empowering more people to see themselves as innovators is equally important. Innovation is not just about scientific breakthroughs."
The group welcomed the focus on access to finance and industry-academia collaborations but expressed reservations about the "top-down" nature of the new Innovation Partnerships, claiming this approach will favour big industry at the expense of smaller enterprises.
"Entrepreneurs repeatedly tell us that they need to be able to pursue their innovative ideas freely and have quick and simple access to research institutes if and when required. A demand-driven approach to research would serve them better than a top-down, 'challenge-driven' process," Abruzzini said.
The European Trade Union Confederation (ETUC) welcomed the Commission's intention that workers have a role in innovation, along with industry leaders, universities and scientists.
"Innovation Europe will not come about without quality jobs, and recognising that all workers in all fields should be recognised as professionals capable of innovation and increased effectiveness and satisfaction. Raising the levels of skills and respect are crucial to this process," said John Monks, general-secretary of ETUC.
Cefic, which represents the chemicals industry, welcomed the healthy ageing innovation partnership, as it plays a major product role in the health sector – namely medical care and the development of innovative materials.
"The chemical sector stands out as a solution provider to major societal challenges. The industry’s unique position is a natural fit for a leadership role that frames the partnerships," said Gernot Klotz, head of research and innovation at Cefic.
Cefic said that through the European Technology Platform for Sustainable Chemistry, also known as SusChem, the chemical industry has already put on the table a number of concrete topics for innovation partnerships in areas that are essential to the EU 2020 Strategy: resource efficiency, sustainable mobility, construction and low carbon energy.
"It's high time to help build a strong, sustainable innovation framework in Europe, rather than try to patch up the individual-sector model of the past," said Klotz.
COCIR, the association representing the European healthcare industry, welcomed the ''coordinated policy approach'' of the Commission's innovation strategy and its focus on the EU's health challenges – particularly the innovation partnership on healthy ageing.
''We look forward to working with the Commission and all stakeholders on the Innovation Union's health strategy and believe that advanced medical technology and eHealth can help make this innovation vision a reality. We will be soon share our position paper on innovation,'' stated COCIR Secretary-General Nicole Denjoy.
General Electric (GE) believes innovation can be the catalyst for future growth in Europe but will require more public-private sector collaboration and a ''culture of tolerable risk'' instead of the risk-averse one that exists today.
''Europe needs to move beyond merely creating innovation. Innovation, in the public and private sectors, must be the building block to creating a strong and vibrant indigenous manufacturing base and services sector and creating sustainable employment," said Hugh Gillanders, GE's director of public affairs in Europe.
"31% of all patents emanate from the EU and 31.4% from the USA and yet, unlike the US, we fail to capitalise on them due in part to the prohibitive cost and complexity of patenting. Many great technologies have been invented in Europe but are commercialised in other regions,'' he added.
The Confederation of the Food and Drink Industries of the EU (CIAA) welcomed the Commission's strategy and called for an 'Innovation Union' for Europe's food and drink industry, as well as more R&D funding.
''Smart innovation driven by consumer needs, is vital to stimulate further growth and employment in the food and drink sector, and prevent Europe from falling behind other manufacturing regions, where there is already a competitiveness gap," said CIAA President Jesús Serafín Pérez.
"The Commission's new innovation strategy, combined with a broader industrial policy and recently established Food Chain Effectiveness Forum, represent a major step forward in tackling these issues and opening up real opportunities for an 'Innovation Union' for Europe's food and drink industry,'' he stated.
27 Oct. 2010: EU to publish Single Market Act.