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Brussels, 12 October 2005
The European Commission has tabled an integrated innovation and research action plan, which calls for a major upgrade of the conditions for research and innovation in Europe (see IP/05/1252). It launches 19 ambitious initiatives to promote innovation and research, such as redeployment of state aid, improved efficiency of intellectual property protection, mobilisation of additional funds for research, creation of innovation poles, and improving university-industry partnerships. For the first time, the plan offers an integrated approach to EU research and innovation policies, and is particularly focused on improving the conditions for private sector investment in R&D and innovation.
Why should Europe do more to increase investment in research and innovation?
Economic studies show clearly that investing in research and innovation has a positive effect on economic growth. One recent study found that for each extra percent in public R&D, there is an extra 0.17% growth in productivity. To put this into context, average annual labour productivity growth in the Eurozone was 1.2% between 1995 and 2003. An increase in EU R&D spending, especially if accompanied by increases in spending at national level, could therefore have considerable impact on productivity. Another study has found that a 0.1% increase in R&D intensity boosts output per capita growth by 0.3-0.4%. (see MEMO/05/199 for more details).
Where does Europe currently stand?
Europe is lagging behind the US and Japan in both innovation and research.
Based on a set of comparable data for 16 indicators, the US and Japan are
still far ahead of the EU average and the vast majority of Member States.
The innovation gap between the EU and the US appears to be stable,
with a slight increase in the gap for the EU15 (Figure 1) largely explained by
three indicators: EPO, USPTO and triad patents (45% of the gap), population with
tertiary education (25%) and ICT expenditures (19%).
The 2005 key figures show that EU R&D intensity (investment as a % of GDP) is close to stagnation. Growth of R&D investment as a % of GDP has been slowing down since 2000 and only grew 0.2% between 2002 and 2003. Europe devotes a much lower share of its wealth to R&D than the US and Japan (1.93% of GDP in the EU in 2003, as compared to 2.59% in the US and 3.15% in Japan). The EU has set itself the target to invest 3% of its GDP in R&D by 2010.
Figure 1: Total R&D expenditure (as % of GDP), 2003
[Graphic in PDF & Word format]
Equally worrying is the fact that, while China has lower R&D intensity than the EU (1.31% of GDP in 2003), it grew at about 10% per year between 1997 and 2002. If these trends in the EU and China continue, China will be spending the same amount of GDP on research as the EU in 2010 – about 2.2%.
Are there significant differences between Member States?
The picture in research and innovation varies widely across the EU and
In terms of the catching up countries, none is expected to be at the EU25 average by 2010. At best Hungary, Slovenia and Italy will under the current conditions reach EU25 average by 2015. Under this scenario, for Malta, Slovakia and Poland the catching up process would take more than 50 years. Based on the current trends, it would also take more than 50 years for the EU25 to reach the US level of innovation performance.
Spending on research and development varies widely too. Sweden and Finland spend more than 3% of GDP. Denmark, Germany, Austria and France are spending more than the EU average of 1.93%. Other Member States vary from Netherlands and UK who are only just under the EU average, to less than 0.4% of GDP in Latvia and Cyprus.
What is the role of the private sector?
The EU’s target is that by 2010, two-thirds of total R&D spending should come from private financing. This figure is currently about 55%, compared with 63% in the US and 74.5% in Japan. There has been a slow-down in business funding of R&D. In 2002 business funding grew at a slower rate than GDP, and the business share of R&D spending is decreasing. Therefore the EU needs to consider the conditions within which businesses finance innovation and R&D spending, and see how these can be improved.
How does the EU monitor the situation in the Member States?
The European Commission has a number of tools to monitor the performance of Member States and the private sector in R&D and innovation spending.
The first is the European Innovation Scoreboard (EIS), which has been published since 2000 on an annual basis. The EIS is the instrument developed by the European Commission, under the Lisbon Strategy, to evaluate and compare the innovation performance of the Member States. The EIS 2005 (to be published in November 2005) will include innovation indicators and trend analyses for all 25 EU Member States, as well as for Bulgaria, Romania, Turkey, Iceland, Norway, Switzerland, the US and Japan. More information is available at http://trendchart.cordis.lu/
The Commission also regularly publishes Key Figures on R&D, an annual analysis of R&D statistics and trends. The latest report was issued in July 2005 and is available at http://www.cordis.lu/indicators.
Another useful tool is the EU Industrial R&D scoreboard, which measures, analyses and compares the R&D investment of the top 500 companies within and also outside the EU. The 2005 scorebaord will be made public in November.
What are the actions proposed in today’s Action Plan?
The various areas for future EU action are summarised in the table below: