When the history of the Great Recession is written, there will be at least a chapter about an innovation in public policy that developed during this period: innovation policy, itself.

Clusters are the motive force of the Knowledge Economy. The question is: How to make them happen?

Entrepreneurs are important to creating jobs and prosperity in Europe; most politicians recognise that nowadays. But what’s less obvious is that when it comes to creating new businesses, sheer numbers don’t make for a dynamic economy.

A fundamental shift in European innovation policy is under discussion in Brussels – a shift that could improve the climate for technology businesses and enhance the continent’s economic performance.

In April 2007 Janez Potocnik, EU Science and Research Commissioner, launched a grass roots campaign to reform Europe’s research structures. The overall aim: to push for better planning, more money and greater flexibility in scientific research.

In the 1980s, it was fashionable for European politicians to fret about the “technology gap” between the old and new worlds: the United States dominated trade in computers, software, airplanes and missiles. To redress the balance, Europe mustered billions in government subsidies for its failing tech industries. A generation later, only the aerospace industry has really responded – yet once again, the European Union is planning a new round of tech subsidies, in its €54.5 billion, seven-year “Framework 7” programme. Will it do any good?

Clusters are acknowledged as one of the most important sources of innovation. But the question is, How to make them happen?