The EU's innovation performance needs major improvements in many areas if the Europe 2020 strategy is to deliver smart sustainable growth, concludes the European Commission's 2011 Innovation Union Competitiveness Report.

Europe needs more and "smarter" investment in both public and private research and development – not only does this boost growth in the medium-term, it also has a counter-cyclical effect in times of crisis. More research cooperation within the EU and internationally is needed, along with better use of research results, including through a stronger intellectual property regime. Education systems need to be adapted to business innovation needs. Innovative and fast-growing SME's need more encouragement. A concerted effort is necessary to build on Europe's promising record in innovation tackling global challenges such as climate change. The gender gap in science and research must be closed.

"This Report underlines that the road to the Innovation Union is long and challenging, with big obstacles along the way. But it confirms that the EU has agreed the right policies to get to the end of that road. Putting the Innovation Union into practice at European and national levels is an economic 'must', as important for sustainable growth as sorting out public finances," said European Research, Innovation and Science Commissioner Máire Geoghegan-Quinn.

The Report analyses the strengths and weaknesses of national research and innovation systems and provides solid facts on which to base national policy choices. It builds on the Innovation Union Scoreboard. It includes a factsheet detailing each country's research and innovation performance.

Key findings from the report

      Europe needs to accelerate investment in research and innovation. The EU is slowly advancing towards its target of investing 3% of GDP in research and development (2.01% in 2009) but the gap with leading competitors is widening notably due to weaker business R&D investment. In 2008, 24% of the total world R&D expenditure was performed in the EU (29% in 1995). Relative to GDP, business invests twice as much in Japan or in South Korea as in Europe.

      In times of economic crisis, accumulated investment in research and innovation has a counter-cyclical effect. Countries that have increased their investments in research and innovation have better prospects of getting out of crisis. Seventeen Member States were able to maintain or increase their R&D budgets in 2009 and sixteen in 2010.

      Investments in innovation have to be "smarter". The most successful innovation performers have focused their investments in a smart specialisation strategy combining supply-side policies (such as public subsidies to higher education, business R&D, venture capital and scientific & technological infrastructures) and demand-side ones (such as public procurement of innovative products, performance-based standardisation and pro-competitive product market regulations).

      The development of highly-skilled people needs to be matched with the needs of business. Only 46% of EU researchers work in the business sector (80% in the US). Member States should adapt their education systems to keep increasing numbers while ensuring a better match with business needs.

      Integration and internationalisation of research increases returns on investments. Internationalisation and efficient production of scientific excellence are mutually reinforcing. Knowledge flows (i.e. of students, co-publications, co-patenting cooperation) inside Europe are a strong asset and will be further enhanced by the completion of the European Research Area. However, they are concentrated among a few Western European countries.

      Weak framework conditions prevent knowledge being transformed into marketable products and services. Europe is losing ground in the exploitation of research results. The EU is the first producer of peer-reviewed scientific publications in the world (29% in 2009) but the rate of growth of Patent Cooperation Treaty (PCT) patent applications in Japan and South Korea is almost double that of the EU. Half of the Member States do not produce high-tech European Patent Office (EPO) patents at all. Further steps are needed to offer more cost-efficient intellectual property protection and management. The EU patent currently being negotiated will be an important start.

      Europe has strong potential in technological inventions tackling societal challenges. In 2007, the EU accounted for 40% of patents related to climate change technologies. This shows that targeted research and demonstration investment in key areas combined with measures to support market development can lead to new technologies and innovations. This is the spirit of the European Innovation Partnerships launched by the Innovation Union.

      We need more innovative and fast-growing SMEs. The EU needs to catch up with the US in the research intensity of high-tech and medium high-tech industries. In other words, it needs structural change both within and between sectors. Some European countries such as Austria and Denmark have achieved a structural change to a more knowledge-intensive economy. Many of these countries have also recovered better from the economic crisis. Common features behind this success are innovative and fast-growing SMEs, benefitting from scientific excellence in public research and favourable framework conditions for bringing new knowledge to the market.

Source: European Commission