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					      Trends in innovation policy:
        the European perspective



European TrendChart on Innovation
         Policy workshop
       16 November 2005

alasdair.reid@technopolis-group.com



                                      1
            Some thoughts on a few myths:

• The myth that “The USA” is more
  innovative, richer and faster
  growing than the EU;
• The myth that US innovation
  performance is achieved without
  public intervention;
• The myth that policy makers
  across the EU are all committed to
  innovation;
• The myth that the most innovative
  EU regions/states are those
  following the anglo-saxon model;
• Finally, the myth that we don’t
  need a European level innovation
  policy.
                                        2
                        The myth that ”the USA” is more innovative,
                              richer and growing faster than the EU

                                    •   Innovation intensity (R&D
                                        spending/GSP) across the
                                        states is significantly different;
                                    •   Share of high-technology
                                        employment ranges from 2.4 to
                                        12.6 % amongst the states,
                                    •   Yet we talk as if « THE U.S.A »
                                        is homogenously beating us…




•   Growth rates vary markedly
    at state level;
•   The least well-off state has
    only 47% of the p.c. income
    of the most well-off state
    and social exclusion is rife.
•   Yet we never hear a word
    about cohesion policy…
                                                                             3
               The myth that public policy is non-
                       interventionist in the US.
•   Federal level:
     – A range of long-running Federal programmes:
       SBIR, MEP, ATP,….
     – Significant growth in Federal R&D budget -
       dominated by defence related R&D but recent
       non-defence R&D outlays are greater than the
       average over the past three decades;
•   State level:
     – A dynamic “Tech-based” economic development
       community exists;
     – “annually, (U.S.) states and localities across the
       country spend hundreds of millions of public
       dollars on a variety of tax incentives and
       spending programs (business subsidies) whose
       use has fuelled a virtual ‘incentives race’ among
       these jurisdictions”;
     – “It is clear that not only have R&D tax credits
       been offered by an increasing number of states
       over the last 25 years, but also the average
       generosity of the credits that these states offer
       has grown greatly”.

                                                            4
        The myth that all EU governments are
                     committed to innovation
• Recent trends suggest a mismatch
  between policy targets / hoped for results:
   – Most EU Member States/regions have
     signed up to 3% GERD/GDP “input target”,
     unrealistic and confused with “becoming
     more innovative/competitive”.
   – Plus side is increased analysis of what can
     be expected from raising R&D investment.
• Europeanisation of policy is also evident in
  terms of dominance of Structural Fund in
  total RTDI spend in certain Member
  States:
   – Policy options are often driven by what
     Member States/regions consider fits with
     EU rules and guidelines rather than what
     would would be optimal;
   – Plus side is imposition of programming and
     evaluation cycle !

                                                   5
        The myth that the anglo-saxon model
                                   rules ok…
• Need to avoid sirens of simplistic formula
  of de-regulation, flexible labour market,
  non-interventionist models allegedly based
  on the “US model”.
   – undermines long-run investments in
     innovation in favour of short-run profits.
• Ignores evidence of other models which
  suggest that innovation thrive in
  environments based on co-operation,
  trust, timely adaptation of ’social
  contracts’, sizeable public intervention
  (financial and non-financial), etc.
   – See EIS 2003 Technical paper n°5
• There is no single European model for
  innovation policy, however:
   – it is precisely the ability to identify trends
     and learn from richness of diversity of
     situations that is (or should be) our
     strength.

                                                      6
                             Key policy trends across EU25
•   A significant effort to increase the availability and
    competencies of skilled innovative people:
     –   strengthen linkages and knowledge flows both nationally and
         internationally;
•   A growing regional role in the implementation of many
    recent initiatives, fuelled by the Structural Funds in the new
    Member States
     –   corresponding need for coordination with national targets and
         initiatives;
•   A push to increase the overall intensity of innovation
    activity through stimulating private enterprises to invest
    more in R&D, specifically, and other forms of innovation
    more generally.
•   An emphasis on the role of regulations, public
    procurement and other ‘business ‘environment factors
    influencing the performance of the innovation systems of the
    Member States.
•   Partnership based initiatives to create linkages aimed at
    improving the functioning of innovation systems
     –   “triple-helix”, clusters, competitiveness poles, etc.
     –    new platforms for policy design and delivery.




                                                                         7
                Governance of innovation policy in the EU

• Argument 1: EU role in innovation policy
  has been primordial since mid-nineties:
   – From Green Paper to Lisbon to ‘a new
     (sectoral) industrial policy’…
   – EU promoted regional innovation strategies
     improved policy design and boosted
     regional funding for RTDI;
   – EU a catalyser in ‘integration’ of national
     agendas and transnational learning in face
     of ‘not invented here syndrome’.
• Argument 2: the respective roles of
  Member States and regions are becoming
  increasingly complex with a delicate trade-
  off between:
   – more effective policy design and delivery
     through stronger partnerships & increased
     proximity of agencies to innovation needs
     of enteprises;
   – versus
   – Risk of fragmentation of ‘national &
     European innovation systems’.
                                                        8
            Do we need a European innovation
                                     policy?
• US ‘model’ suggest there is not only room
  but necessity for EU level action:
   – Industrial policy options which create
     critical mass of technology and business
     punch at EU level to compete globally (did
     someone mention Airbus…);
   – Role of EU regulations/standards twinned
     with R&D excellence and major enterprises:
      • e.g. GSM standard which built up EU technology
        lead now continued with 3G, etc.;
   – Equally need to promote understanding on
     impact EU action has on innovation at
     sectoral/technology levels (REACH,
     Software patent directive, etc.)
   – Avoiding ‘policy competition’ while
     maximising learning from diversity of
     experience.
• EU policy benchmarking and inter-regional
  co-operation frameworks offer good
  practice elements for US states.                       9

				
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