Moving Europe forward: innovating for a prosperous future

Summary and recommendations

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Our latest Eurozone Forecast predicts a contraction of 0.5% in 2013, repeating the 0.5% fall witnessed in 2012. It is clear that the European economy is not yet out of the woods.

It is equally clear that only a revival of the capacity to innovate can bring Europe back on a track of global competitiveness.

Over the past year, the EU has advanced the Innovation Union agenda and the development of top-down industrial policy that is fit for globalization. Initiatives such as the Knowledge and Innovation Communities (KICs), coordinated by the European Institute of Innovation and Technology (EIT), have demonstrated a potential to mobilize innovation in Europe.

However, recent weeks have been dominated by the debate on the EU budget for the 2014–2020 multiannual financial framework. The tension between calls for austerity and the need for growth has produced an undesirable cut in the budget allocated to infrastructure and a reduction in the budget allocated to the Horizon 2020 program for research and innovation.

Public funding of research and development has remained the dominant way of funding innovation in the EU and this seems to be part of Europe’s innovation problem.

This report looks at ways to improve the value for money of public R&D funding and create a more favorable environment for the private funding of innovation.

Recommendations

We want to ensure that the EU’s programs resonate powerfully across the EU’s 27 Member States from the bottom-up, stimulating greater entrepreneurial activity in the market and driving forward economic growth.

We make three recommendations:

1. Increased technology transfer and partnerships to foster innovation and skills

Europe's universities have long enjoyed a worldwide reputation for excellence and they remain well positioned in a number of key sectors of social and natural sciences. Innovation policy should encourage a greater number of university and industry partnerships and technology transfer, a proposition widely supported by our survey respondents, with 95% of participants in agreement.

2. Priority deployment of world-class infrastructure

The availability of a robust, advanced, resilient infrastructure is central to innovation especially since innovation is increasingly becoming “open” and distributed around the world. The decision of companies on where to invest in R&D depends on the availability of good and affordable network infrastructure (both energy and ICT), growth-friendly legislation, and sound rule of law enforcement.

3. Empower large companies

Although governments have a key role in creating the right entrepreneurial environment necessary for economic growth, it is important not to neglect the role of the private sector. In many sectors, innovation takes place through cooperation between large companies and the smaller companies that perform R&D and realize potentially innovative solutions.