Innovation on the agenda

Esko Aho

What can we do in Europe to promote innovation? We have the ability and resources; Europe is roughly at the same level as the US in knowledge creation. We need four elements: better financial markets, more risk-takers and entrepreneurs, mobility of resources, and market creation – an early market for innovation. Twenty years ago roughly half of pharmaceutical R&D was conducted in Europe; today it’s a third or less. The reason isn’t lack of knowledge in Europe. The reason is in the market.

We have to have market creation. Look at what happened with the GSM mobile-phone standard: if Europeans are able to operate together, we can reach a world-class result. The next step should be the healthcare sector: we need a common architecture for electronic patient records across Europe. The impact on the economy and society would be great. When you have electronic records you have facts on the basis of which governments and individuals can decide what pharmaceuticals they will buy and what they will not buy. We have started in Finland by passing a law giving authority to a single institution to create an architecture for patient records – but it has to be Europewide, as soon as possible. There are other examples of sectors in which we can create markets: for instance, in environmental technologies, renewable energy, digital security and logistics.

We also have to promote mobility of resources. We have to move our human resources from the old to the new, from the resource-based economy to the knowledge-based economy. That is extremely difficult in democratic societies. We have countries where the pension system, for instance, makes it impossible to move from a declining sector to a growth sector, because you risk your pension scheme. But we must create incentives for mobility of people. We also need mobility of capital. We need rapid efforts to create European-wide venture capital markets – because without them, you cannot really finance innovation.

These are among the issues we raised in our report. At first, when we published it in the beginning of January 2006 the reaction was rather mild. But since then the situation has changed. Innovation is on the agenda for the EU presidencies – starting with the Finnish presidency in 2006, and continuing with the German and Portuguese presidencies in 2007. It has been agreed to revisit the issue of innovation regularly.

But it’s easy to produce papers and make recommendations. Now we need practical results.