EU innovation strategy too complicated

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24 mei 2012 | Much EU funding has been allocated to research, the impact is meager. The big 4 advisory firm Ernst & Young scrutinized the EU innovation strategy and recommends greater stream-lining and investments into IT infrastructure. Inspiration can be found in South-Korea, Japan and the US.

Ernst & Young, one of the big 4 financial advisory firmscreated a critical report over the current EU innovationstrategy. The report authors urge EU officials and member stategovernments to rethink their current policy. Currently, too muchfunding dwindles away due to overly complicated funding mechanisms.Inspiration can be found in tech-nations like South-Korea, Japanand the US.

Increase in funding, little impact

“In the aftermath of the financial crisis and aware that the EUis facing increasing competition from the world’s rapid-growthmarkets, recent years have seen a massive increase in publicfunding, a proliferation of lines of action, the creation ofcommunities , platforms, infrastructures and even a dedicatedinitiative – Innovation Union.”

“However, this wide array of action – all of which have beencreated with best intentions – have not generated the expectedlevel of success. Europe will again miss its goal of achieving alevel of R&D of 3% of GDP by 2020. And the EuropeanCommission’s projections to 2050 show that the EU Member States'(EU27) share of global patents is set to fall from 40% toapproximately 20%. This is all despite the fact that the EU27 formsthe world’s largest single market. Why is this the case?”

Five challenges for an Innovation Union

Ernst & Young identifies five areas where the EU faceschallenges.

1. Innovation Policy is too complicated

Overlapping programs and inefficient decision-making processeshave created a situation where much of the EU funding has littleimpact on outcomes.

2. R&D gap

While public R&D spending increased significantly, privatespending 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 atechnology intensive economy.

4. Inadequate infrastructure

Both broadband reach and computing infrastructures in the EU arelimited.

5. Limited financing options

A lack of financial market harmonization hampers cross-borderjoint ventures and the creation of funds where they are needed mosturgently.

Three layers to success

Having analyzed these five weaknesses, the E&Y reportcontinues with three recommendations. Firstly, “governments shouldact as leaders and innovators by creating the main building blocksof an innovative environment – world-class infrastructure, ahigh-performing education system and research andinnovation-friendly legal rules.” Secondly, “governments shouldcreate funding and facilitating initiatives to strengthen linksbetween researchers, entrepreneurs and private investors, possiblywith 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 policygoals. This should mostly occur through the strategic use of publicprocurement and launching a limited number of partnerships thataddress key long-term market failures.”

To read the full report, click here.