Progress check on innovation: much achieved; more to be done – especially on IP

Vice President Verheugen: "…the next decade should have innovation at its heart.”

Based on the findings, a European Innovation Act will be proposed by spring 2010.

“The lessons presented in this Communication will help us with the preparation of a modern EU reform agenda for the next decade which should have innovation at its heart,” said Vice President Günter Verheugen.

He added, “Innovation cannot be organised by decree. It comes from people, and only people – scientists, researchers, entrepreneurs and their employees, investors, consumers and public authorities – will make Europe more innovative. But they do not act in a vacuum.”

Shortcomings

Despite improvements, the EU innovation system continues to suffer from shortcomings. The much-vaunted single market remains far from complete, there is no single European patent, the venture capital market is fragmented and the level of equity funding low, the processes for setting standards are is not synchronised with research results and market needs, relationships between business, education and research need to be further strengthened, and the EU still lacks critical infrastructure to enable innovation.

It is self-evident that the lack of an adequate legal framework to protect intellectual property rights, especially the failure to introduce a Community patent, means the EU is still not providing favourable conditions for the development and diffusion of innovation. “It is high time to change this situation,” says the review.

Slow progress

Progress towards improving the international competitiveness and performance of the European venture capital sector has been slow. The structural deficiencies of the European early-stage finance market persist, including the absence of private investors, fragmentation of the market and low returns. Adding insult to injury, “the recession is making fund-raising and the exit environment even more difficult,” the review says.

While a number of initiatives have been undertaken by the Community, the needed synergies between policies and instruments at different levels have not yet been created across the European Union. The relatively slow take-off of the recently launched Lead Market Initiative is a good example of this.

“The coordination of policies to support innovation at regional, national and EU level has to improve significantly,” according to the report.

Modest funding

In addition, the level of funding to support innovation centrally at EU level has remained modest both in relation to the EU budget and compared to many national budgets, representing an even smaller share than the 5 per cent of public spending on research under the Research Framework Programme.

This is despite the fact that there is no lack of innovation support programmes in the EU in terms of numbers. “The problem is a lack of critical mass and coherence,” says the review, noting that innovation support involves seven different Commission services, various agencies and 20 committees with representatives from Member States.

No wonder then, that a recent public consultation on the effectiveness of public support for innovation suggests a gap between what companies expect and what – or how – innovation support schemes deliver. Seventy-five per cent of the companies surveyed expect simplified rules for participating in EU projects. Indeed, the complexity of Community funding programmes adds to the multitude of schemes existing at national and regional level and makes access to relevant funding difficult.

This calls for clear structures and substantial simplification of participation rules for all innovation funding, regardless of its origin. “This would strengthen the overall innovation system and enable a more efficient use of funds and instruments, ensuring better participation by SMEs,” concludes the review.

Based on this analysis of achievements so far and the lessons learnt the Commission is now moving ahead with formulating the European Innovation Act, with the aim of strengthening the partnership approach in innovation.