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Money alone won’t make Europe innovative

14 February 2011
by Guest author

In today’s post, Andrew Wyckoff, Director of Science, Technology and Industry at the OECD, looks at the deep structural changes Europe needs to consider if it’s to keep up in innovation.

 “Innovation” is one of the buzzwords of the moment, as this blog noted last week. That makes sense: Post-recession economies need a kick-start, and bright new ideas in science and technology could give them just that. Indeed, compared to labour or monetary policy, innovation’s role as an economic driver is probably underappreciated.

But if we think of innovation as just a buzzword, nothing much will change. Simply setting targets for increased research and development (R&D) spending won’t achieve results unless they’re accompanied by deep structural changes in our economies. 

Take the European Union, which lags behind the United States in R&D  and is in danger of being overtaken by countries like China, India and Brazil. The EU has set a target of increasing R&D investment to 3% of GDP, and has devised its own innovation strategy, Innovation Union. But if Europe is to achieve its innovation goals it will need to take action in areas that people may not typically associate with R&D – the financial sector, labour markets, competition policy and so on.

For example, Europe will need to ensure high-risk capital is available to entrepreneurs. And – if it’s to engage significant numbers of scientists and engineers to do all that R&D – it will need to think about its approach to education, training and even migration policy. It will also need to go further achieve a real internal market: The competitive forces that would come with that would strengthen the innovation performance of all EU countries.

The size of its internal market – more than 300 million people – is one factor in the US’s strong track record in innovation. Another is the fact that much of its research is geographically concentrated. EU countries do, in fact, produce lots of good research, but too much of it is fragmented.

By contrast, in the US, seven states account for nearly half of all R&D performed: California alone conducts 21% of the national total, or about $77 billion (€57 billion) – more than Germany and about twice as much as the United Kingdom. As a consequence, innovators with good ideas frequently leave Europe for the US where they can perfect their ideas, translate them into innovations and launch their products into that huge, single US market.

Europe already has most of the right elements of a successful innovation system that will drive growth, but these need to be joined-up across the Union. This means accepting that in the short-term some parts of Europe will advance faster as hubs of innovation than others. There may also need to be a greater focus on joint research, which could create economies of scale and scope. Changes such as these need to come quickly – Europe cannot afford to waste any more time.

Useful links

OECD work on innovation

OECD Innovation Strategy

OECD Science, Technology and Industry Directorate

In this video, Andrew Wyckoff talks about innovation:

One Response
  1. Baye Kambui permalink
    February 14, 2011

    There is good innovation, meaningless innovation and dangerous innovation.

    How about that harmless practice of “financial innovation”?

    My fear is that as long as policy makers believe innovation only means “cool new products” or slick new apps for the tablet which can tell you the time of day in 12 languages, we may miss the big picture of what innovation really means.

    True innovation drives fundamental changes in the way society lives. For example, harnessing the energy of fire many years ago changed the way we produce, distribute and consume goods while addressing a number of practical challenges. We all benefited through improved living standards as a result.

    Concentrating billions of dollars of investment capital on social buying sites like Groupon will not get us to the promised land…

    song currently stuck in my head: “azure” – ella fitzgerald

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