Ernst & Young, one of the big 4 financial advisory firms
created a critical report over the current EU innovation
strategy. The report authors urge EU officials and member state
governments to rethink their current policy. Currently, too much
funding dwindles away due to overly complicated funding mechanisms.
Inspiration can be found in tech-nations like South-Korea, Japan
and the US.
Increase in funding, little impact
"In the aftermath of the financial crisis and aware that the EU
is facing increasing competition from the world's rapid-growth
markets, recent years have seen a massive increase in public
funding, a proliferation of lines of action, the creation of
communities , platforms, infrastructures and even a dedicated
initiative - Innovation Union."
"However, this wide array of action - all of which have been
created with best intentions - have not generated the expected
level of success. Europe will again miss its goal of achieving a
level of R&D of 3% of GDP by 2020. And the European
Commission's projections to 2050 show that the EU Member States'
(EU27) share of global patents is set to fall from 40% to
approximately 20%. This is all despite the fact that the EU27 forms
the world's largest single market. Why is this the case?"
Five challenges for an Innovation Union
Ernst & Young identifies five areas where the EU faces
1. Innovation Policy is too complicated
Overlapping programs and inefficient decision-making processes
have created a situation where much of the EU funding has little
impact on outcomes.
2. R&D gap
While public R&D spending increased significantly, private
spending is still too low compared to other leading nations (USA,
South Korea, Japan).
3. Sectoral competitiveness and IT issues
EU firms specialize too much on low-tech goods and services.
Japan (electric components, audiovisual electronics,
telecommunications) and the US (medical equipment) focus more on a
technology intensive economy.
4. Inadequate infrastructure
Both broadband reach and computing infrastructures in the EU are
5. Limited financing options
A lack of financial market harmonization hampers cross-border
joint ventures and the creation of funds where they are needed most
Three layers to success
Having analyzed these five weaknesses, the E&Y report
continues with three recommendations. Firstly, "governments should
act as leaders and innovators by creating the main building blocks
of an innovative environment - world-class infrastructure, a
high-performing education system and research and
innovation-friendly legal rules." Secondly, "governments should
create funding and facilitating initiatives to strengthen links
between researchers, entrepreneurs and private investors, possibly
with the help of public funds and tax credits."
Finally, E&Y states that "government has the key task of
'nudging' existing innovation efforts toward long-term policy
goals. This should mostly occur through the strategic use of public
procurement and launching a limited number of partnerships that
address key long-term market failures."
To read the full report, click here.