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For innovation with impact, the next Framework Programme must fully engage industry

Large companies are essential for exploiting the results of EU-funded research and delivering the innovation that Europe so desperately needs. They should continue to be funded in FP9, says Jan van den Biesen

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Horizon 2020 is the first European Framework Programme to explicitly promote innovation. But what is innovation? The OECD defines it as, “The implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.”

From this, it seems that while science may be needed to come up with something new, industry must definitely be on hand to implement it.

Unfortunately, in spite of a modest increase compared to the Seventh Framework Programme, industry (including SMEs), is hugely under-represented in H2020. It received only 26.7 per cent of total EU funding in 2014 and 2015, far less than its 63.9 per cent share of total R&D expenditure in the EU in that same period.

Furthermore, there was only one company among the top 50 beneficiaries of H2020. That is in stark contrast to the top 50 applicants for European patents, which with the exception of two research institutes ranked at 31st and 42nd, consisted entirely of large companies. Overall, 94 per cent of patent applications were from the private sector.

Papers prepared for the interim evaluation of Horizon 2020 and the initial debate on the next Framework Programme (FP9), raise the question of whether FP9 should continue to provide financial support for large companies.

In her recent draft report on the H2020 interim evaluation and FP9, Soledad Cabezón Ruiz, rapporteur on ITER (Committee on Industry, Research and Energy) of the European Parliament, recommended larger or more mature industries should participate more at their own cost in FP9.

In my opinion, there are many reasons why FP9 should continue to provide EU funding for large firms. First of all, they play a pivotal role in innovation ecosystems and public-private partnerships, with many smaller companies flourishing in their slipstream.

Large firms are essential for exploiting the results from FP projects, as they have the critical mass and market access channels needed to ensure exploitation, standardisation and market uptake.

Indeed, an article in Harvard Business Review of last December, argued that large companies provide even better environments for entrepreneurship than start-ups.

Given that large companies account for about half of total R&D expenditure in the EU, FP9 cannot simply ignore them. Indeed, the fact that under-investment by industry is the main reason why the EU fails to meet its target of spending 3 per cent of GDP on R&D, underlines the need for FP9 to incentivise large companies to increase their research budgets.

Large companies have received no more than 13 per cent of H2020 funding to date. This relatively small amount would do little to address the oversubscription problem, which means there was only an 11 per cent overall success rate for grant applicants in 2015.

Cutting all funding to large companies would increase the average success rate for other applicants by less than 2 per cent. Cutting funding for large companies in half would increase average chances for other applicants by less than one per cent.

These small improvements would come at greater cost in terms of the impact of FP9 on economy and society, as large companies would be less likely to participate.       

From the perspective of innovation, impact and industry, my main recommendations for FP9 are:

  1. The current structure is widely appreciated and should be maintained, with a proper balance between the three pillars and ample attention to enabling and industrial technologies in the second pillar, next to the European Innovation Council.
  2. To reduce oversubscription, the budget for FP9 will have to be substantially larger than for H2020. At the same time, national R&D budgets for research and innovation have to be stepped up, so that FP9 is no longer the only, or the last resort for so many applicants.
  3. Large companies should continue to be funded in FP9, in order to preserve the valuable innovation ecosystem and collaboration nexus of large firms, SMEs, universities and research institutes that has been built up in 30-plus years of successive Framework Programmes. This will maintain Europe’s position as an attractive location for research and innovation, ensure there is an impact on economy and society, and effectively address societal challenges such as health, food security or climate change
  4. As unique platforms for fostering collaboration between public and private actors in research and innovation, and for leveraging the funds for large projects, the contractual Public-Private Partnerships and the Joint Technology Initiatives (JTIs) should continue.
  5. The contractual obligations placed on beneficiaries need to be tailored to research and innovation – rather than only to the specificities of research – and to take proper account of the needs and constraints of companies, for example, in the requirements relating to open access to research data, research integrity and the European Charter for Researchers and the Code of Conduct for their Recruitment.  
  6. To maximise the impact of FP9, there should be more vertical focus and integration. There are 17 major initiatives with dedicated actions on health in Horizon 2020 (one Societal Challenge, two JTIs, five PPPs, two Public-Public Partnerships, two Joint Programming Initiatives, two Large-Scale Pilots on Internet of Things, two Knowledge & Innovation Communities of the EIT and one European Innovation Partnership), each with its own strategic agenda, calls and projects, but without any coordination between them. As a consequence, it will be difficult to convincingly demonstrate the overall impact of H2020 on health, in spite of numerous excellent projects. Efforts in other areas are probably similarly fragmented. 
  7. To effectively address the societal challenges, consideration should be given to a US-style mission-oriented approach, with technological solutions being procured from industry.
Jan van den Biesen worked in Philips for three decades, for two of which he was promoting Philips' R&D interests with public authorities and other external stakeholders, mainly at European and Dutch levels. Having retired from Philips earlier this year he is now establishing himself as an independent adviser under the business name EUROPOLARIS – European Policy Advice and Research & Innovation Strategies. 
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Related subjects: Innovation, Horizon 2020, FP9