The European Commission is promoting a ‘smart specialisation’ strategy for innovation where regions focus efforts and spending on their strengths rather than spread investments too thinly. But the hardest part is what to drop, says Robert-Jan Smits.
Robert-Jan Smits is Director General for Research and Innovation at the European Commission.
He was speaking to EURACTIV’s Publisher and Editor, Frédéric Simon.
The EU’s Horizon 2020 foresees a big increase in funding for innovation. Is funding less of an issue now for entrepreneurs?
Although Horizon 2020 is growing substantially compared to the previous programme (FP7) – from €50 to 80 billion – it only represents 8% of the total EU budget and 8% of what member states are spending on science and innovation on a yearly basis. So we have to put this into perspective.
Looking at national governments, the fact that Spain has cut €600 million from its science budget is not good in the long run. We need to keep on investing at national, regional and European level on science and innovation to keep up with the level of spending for example in the United States. So we still have a long way to go.
I am very concerned about the fact that banks – because of recapitalisation and the Basel III requirements – are not giving enough loans to SMEs which are desperate for cash in order to grow. So there is a key role there for European programmes to try and fill that gap and address this market failure.
Is there a European strategy to deal with the erosion of national science and research budgets?
Each year the European Commission comes with country-specific recommendations as part of the EU budgetary oversight procedure. And there, we call for upholding spending in education, science and innovation because that is what will provide growth in the medium to long run.
Has this worked? These are only recommendations after all…
You’re right, these are only recommendations but we see that a mind-set is gradually developing in Europe to protect those investments because otherwise we would be killing our long term growth perspectives.
There is also a push on the Commission side for “smart specialisation”, meaning a regionalisation of research priorities. Are the member states really buying into this?
Oh yes, we see it big time. This is something we’ve developed as part of the structural funds where around €80 billion is reserved for science and innovation at regional level – capacity building, universities, incubators, science parks, etc.
But we want this money not to be just spent at random or because it is fancy to have a nanotechnology centre, it has to be based on a smart specialisation strategy. And we see that all countries and regions are now coming up with such a strategy based on a SWOT analysis.
That means dropping a number of research areas where some countries are weaker, which can be difficult to do for reasons of national pride. So is this going down so well?
Indeed, the biggest difficulty is what you’re going to drop. Recently I visited a country – not among the most developed in Europe – which says it has 42 centres of excellence. How can you maintain that? This is just not credible. So that means also reforming, strengthening the top ones and weaning out the weak ones. So yes, this requires choices and sometimes harsh measures.
So that means countries would specialise in certain types of goods – Germany in cars, France in nuclear, Italy in perfumes and luxury goods, and so on?
This sounds like central planning and we don’t want that of course, this is not what smart specialisation is all about. It is about what each country and region thinks are their traditional strengths and weaknesses so that they can build their future based on that. So it is very much based on SWOT analysis and avoiding doing research in a certain area because it is fashionable. So this is not a central planning effort but a bottom-up approach involving stakeholders.
When do you see this bearing fruit?
The countries are now sending in their partnership agreements and operational programmes. And there are now some first class examples of countries which have really developed a smart specialisation strategy, with smart choices based on the country’s strengths.
So this is a long-term process and you’re right, it also requires deciding what to close, what the negative priorities are. And no-one likes to do that but we have to go through it as well.
On tax breaks for research and innovation, a recent Commission report found that they represent 0.14% of EU GDP in 2009. Is this something that the Commission sees positively or are there also reasons to worry?
No, I think it is a positive development. It is a relatively new tool, although some countries already have some experience, and we still have to learn a lot from it. Are these more effective than tax breaks or grants? So from that point of view, we are looking at it, we are making inventories of best practices.
But we are not there yet in concluding that tax incentives are more efficient than grants. It may indeed be more advantageous for small companies because it may cut administrative burdens for them, with simplified tax forms.
So it is an interesting tool that we will monitor but I think governments should always have a portfolios of instruments – ranging from grants, tax incentives and tax breaks. You shouldn’t put all your eggs in one basket.
Are you worried that tax incentives have been used for tax evasion or dodging in some sectors?
Certainly for science and innovation, we don’t have a situation where those instruments have been used for tax evasion. I think countries are experimenting with what could be the most effective way of promoting innovation in the private sector.
Is it through grants, public procurement, tax incentives? I think all these instruments have their value as long as they are considered as part of a portfolio. Doing just one would be unwise and I would not advise any government to do it.