Economic Survey of the European Union 2009: Strengthening research and innovation

 

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The following OECD assessment and recommendations summarise chapter 2 of the Economic Survey of the European Union published on 21 September 2009.

 

Contents

 

The measurement of innovation and the evaluation of innovation policies need to be strengthened

In 2000, the Lisbon agenda included a commitment to make Europe the most dynamic and competitive knowledge–based economy in the world. Enhancing investment in knowledge and innovation is now one of the four priority areas of the renewed Lisbon Strategy. The Commission set out a broad–based innovation strategy in 2006 and member states have committed to achieving an integrated European Research Area by 2020. Increasing attention is now being given to the concept of ‘creativity’, although this concept has not yet been clearly defined or measured.

 

Despite the wide range of policy initiatives, progress to date has been slow, with research and innovation still lagging behind the United States and Japan. The target of raising research and development (R&D) expenditure to 3% of GDP by 2010 will not be met in the EU as a whole and appears unlikely to be achieved anytime soon. While the target is an aggregate level benchmark that has encouraged policy action during the past decade, it is less clear that it should be retained as such, because it depends largely on private sector actions, and tends to emphasize innovation inputs rather than outputs and the use of innovations. EU member states have already set themselves their own specific targets within the framework of the National Reform programmes. The understanding of the innovation process is also changing, with non–technological innovations and open innovations (such as open–source software) becoming more important and research efforts more likely to involve co–operation across national borders. These all change the link between national R&D efforts and innovation outcomes. The Commission is taking steps to improve the statistical information available about innovative and creative activities in order to make greater use of output–based measures, allowing innovation policies to be developed from a more appropriate knowledge base. Support for R&D by the EU member states should be at least maintained during the current recession.

 

Improvement in measurement would also be an important step towards better evaluation of the effectiveness of the innovation policies pursued by the Commission. The Commission has been commendably prompt in introducing policy support for innovation. The policy initiatives are tied together by the vision of the future European Research Area (ERA) and a broad–based innovation strategy. But there is a need for priority setting amongst the initiatives and better quantification of the importance of each in accounting for differences in innovation across countries. The policies adopted reflect the perceived need for favourable framework conditions such as well–functioning product and financial markets and an adequate supply of human resources for science and technology. Without these, the effectiveness of specific innovation–related initiatives and attempts to foster demand for innovations may be constrained. Better measurement of innovation outcomes would aid the evaluation of Commission–funded research programmes. The Commission should also take further steps to improve the development and use of common evaluation methodologies and techniques for all innovation programmes.

 

Developing an integrated labour market for researchers and an integrated intellectual property system should be priorities

Improvements in the framework conditions for innovation and progress towards an integrated research area will underpin the free movement of knowledge across national borders (the so–called ‘fifth freedom’). Achieving a fully integrated labour market for researchers, a Community patent and a Unified Patent Litigation System will be important. The Commission is already taking actions to improve education and training policies to raise the long–term supply of human resources for science and technology. But such resources remain smaller in the EU than elsewhere and a significant share of university graduates, doctorate recipients and postdoctoral students graduating in Europe migrate to work elsewhere. The international orientation of European researchers should, in principle, enhance knowledge flows to the EU economy. However, steps need to be taken to enhance the circulation of EU and non–EU researchers. The Commission has launched the European Partnership for Researchers and should ensure that the priority actions are implemented on schedule by end–2010. Some of these are a matter for member states, but the Commission can ensure that publicly–funded research positions and research grants are open to qualified nationals of all member states and that researchers have the freedom to take research grants across national borders when changing jobs. Obstacles to short–term mobility in national pension and social security schemes should be removed. A Blue Card scheme is also to be introduced to encourage inflows of highly–skilled migrants by simplifying application procedures, provided that they have sufficient experience and a job offer with a salary above a certain threshold. The scheme is a welcome step forward, but the immediate benefits of it may not be large, especially since the Card will not grant rights to permanent residency and member states retain the right to set quotas that limit the numbers of cards issued. It will be important to monitor the impact of the scheme and explore possible extensions to the rights granted to Card holders to further promote mobility.

 

The European patent system, and hence the cross–border markets for technology and knowledge, is currently fragmented. Patent protection can be obtained in multiple European countries by receiving a “European patent” from the European Patent Office. But such patents require validation by national patent offices, which often requires translation into another language. Furthermore, the 'European patent' is subject to litigation in the national courts. The costs of validating and maintaining a patent in many European countries are thus much higher than in either the United States or Japan, with the burden being especially high for small and medium–sized enterprises. Therefore, to reduce such costs, a simplified system, with a single ‘Community patent’ that would be valid automatically in all member states and a centralised Patent Litigation Court for both European and Community patents should be implemented.

 

Funding for innovation should be enhanced and research co–operation should be encouraged

The market for high–risk capital, such as private equity and venture capital, plays an important role in the financing of innovation, especially for young, innovative companies, but is underdeveloped in Europe. The Commission and other Community–level bodies have thus taken steps in the European Economic Recovery Plan to ensure that financing of such companies is supported during the ongoing recession. Further ahead, the Commission will need to follow through on plans to tackle obstacles to cross–border venture capital provision. It should enhance the effectiveness of innovation policy design and delivery by tackling overlaps between the numerous Community–level programmes that offer funding for innovation, by looking for unexploited synergies and by reducing the presently high cost of research grant applications.

 

Innovation activities increasingly involve co–operation between different groups. Yet European innovation surveys indicate that public research organisations are a key information source for only a relatively small number of companies. This could mean that there are only a few commercial applications of the basic research undertaken in Europe, but is more likely to indicate that there are obstacles preventing firms from either being aware of the work undertaken in publicly–funded research organisations or from accessing it. The Commission produced guidelines for universities and research institutions to improve their links with European companies in 2007 and is to upgrade the status of the EU Forum for University–Business Dialogue. In 2008 it adopted a Recommendation on the management of intellectual property in knowledge transfer activities and a Code of practice for universities and other public research organisations. The rules for participation in Community–level R&D funding programmes should be extended to ensure that all applicants have to submit plans for dissemination of research findings as part of their research projects. Consideration should also be given to ways in which the European Union might further strengthen research and innovation links with other regions.

How to obtain this publication

 

The complete edition of the Economic Survey of the European Union is available from:

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.

 

Additional information

For further information please contact the European Union Desk at the OECD Economics Department at eco.survey@oecd.org.

The OECD Secretariat’s report was prepared by Nigel Pain and Jeremy Lawson under the supervision of Peter Hoeller. Research assistance was provided by Isabelle Duong.

 

 

 

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