Who’s up, who’s down in the European innovation stakes

The innovation gap between the US and the EU has decreased, according to the latest European Innovation Scoreboard, published last week.

While the US and Japan are still ahead of the EU25 in terms of innovation performance, the innovation gap between the EU25 and Japan, and in particular with the US, is narrowing.

The EU25 has improved its relative performance compared to the US in the number of science and engineering graduates, tertiary education, business R&D, early-stage venture capital, medium-high and high-tech manufacturing employment, European and US patents, and Community trademarks.

The EU has improved its performance relative to Japan, mostly in science and engineering graduates and broadband penetration rate. But for business R&D, the share of medium/high-tech R&D and the employment share in medium/high-tech manufacturing, the EU has experienced a decline of its relative performance.

The overall the picture for European innovation is very mixed, with significant national differences still in the innovation capacity of the EU member states. Countries fall into five groups.

Sweden, Switzerland, Finland, Denmark and Germany are the innovation leaders. However, with the exception of Denmark their lead has been declining compared with the average of the EU25.

Next come the innovation followers: the US, UK, Iceland, France, Netherlands, Belgium, Austria and Ireland. But the gap between the innovation followers and the innovation leaders has increased slightly.

The group of catching-up countries comprises Slovenia, Czech Republic, Lithuania, Portugal, Poland, Latvia, Greece and Bulgaria. They are below the EU25 average but are improving their innovation performance faster than the average.

Estonia, Spain, Italy, Malta, Hungary, Croatia and Slovakia are trailing, with scores well below average.

Cyprus and Romania form a separate cluster of fast-growing, catching-up countries, with Cyprus being one of the smallest EU countries and Romania starting from very low levels of innovation performance.

At the time of writing the report, Bulgaria and Romania were not members of the European Union.

Trends in innovation, as shown by the Summary Innovation Index (SII)

Here’s a potted summary of how each member state fared in 2006.

Austria

Overall performance

The innovation performance of Austria is slightly above the EU average. Innovation drivers including, broadband penetration rate (11.6 lines per 100 population), participation in life-long learning (13.8 per cent of active population) and attainment level of youth education (86 per cent of young people have completed at least upper secondary education) are all above the EU25 average.

In intellectual property, the number of new Community trademarks and new Community industrial designs, were both well above the EU25 average.

On the other hand, investment in early-stage venture capital leaves room for improvement, standing at at one-third of the EU25 level.

There is potential to increase the number of new graduates in science and engineering, with only 8.7 graduates per thousand population aged 20–29, and the proportion of people with tertiary education at 17.8% per hundred population aged 25–64), both below the EU25 level.

Trend

Since 1999 Austria has improved its innovation performance in several areas especially in knowledge creation and intellectual property. Corporate R&D expenditure has increased from 1.12 per cent of GDP in 1998 to 1.51 per cent in 2004 and there has been an increase new applications to the European Patent Office from 134.3 new applications per million population in 1998 to 195.1 in 2003, corresponding to an annual average growth rate of 7.8 per cent.

On the other hand, public funding for enterprises and sales of novel products have declined in the last four years, so that while Austria performed better than other countries on these metrics in 2000 and it is now more or less aligned with the EU25.

Tertiary education has grown relatively rapidly in relation to other countries from 14.1 persons in age class 25–64 with some form of post-secondary education in year 2000, to 17.8 in 2005. At the same time the number of new graduates in Science and Engineering has increased at the same pace as the European average.

Belgium

Overall performance

With several indicators above EU average and a couple below, the overall performance of Belgium is slightly above the EU average.

In 2005 there was increase in participation in tertiary education and a high level of broadband penetration.

Innovation and entrepreneurship indicators show that a high percentages of SMEs are innovating in-house or cooperating on innovation, while a significant share of enterprises receive public funding for innovation.

High-tech exports and new-to-market product sales are areas that offer room for improvement.

Trend

While Belgium does not display the same rate of growth as the EU25 average since 1998 the trend of innovation performance has remained positive.

Areas of particular improvement are in innovation and entrepreneurship. On the other hand, the indicators for business R&D expenditures and new community trademarks have shown no sign of improvement in the medium term.

One exception here is in early stage venture capital, which started to gain ground in the years 2004–2005.

Bulgaria

Overall performance

With the exception of educational attainment, innovation performance in Bulgaria is well below the EU average. Just two indicators, ICT expenditures and new-to-market product sale are significantly above average, the majority of the other indicators are below the EU25 average.

Trend

Bulgaria has experienced improvements in a number of areas, but far more effort is still needed for the country to rise to the EU25 average. The most positive trend is sales of novel products and employment in high-tech services. On the other hand, both medium/high-tech manufacturing employment and exports of high-tech products are stagnant.

While there was an increase in ICT expenditures and more SMEs reported organisational innovation, business R&D and skills are not yet showing positive trends.

Cyprus

Overall performance

Innovation performance in Cyprus is below the EU average, but at the same time, youth education attainment and the percentage of the population with tertiary education are pushing up overall performance.

The number of community trademarks and the volume of high-tech exports are two further strengths. R&D expenditures and patent registration need to be improved.

Trend

Despite the fact that the country’s performance is still well below the EU25 average, the trend from 1998 to 2005 was positive.

Czech Republic

Overall performance

The Czech innovation performance is slightly below the EU average, but ahead of a number of former EU15 countries. Innovation indicators are strong, while intellectual property is an area of poor performance. Some indicators ,such as youth education and high-tech manufacturing, are quickly approaching the EU25 average level.

Trend

Above all, the trend has been positive for innovative SMEs cooperating with others and for innovation expenditures, which have increased significantly.

Education offers substantial room for improvement, though while, in recent years, the knowledge creation group has seen a slight increase in public and business R&D expenditures it is still below the EU average.

Denmark

Overall performance

Denmark is among the top performing EU countries with an innovation performance well above the EU average. All five innovation dimensions show high scores. The only weaker indicator is that of high-tech exports. Particularly high scores are obtained for early stage venture capital, lifelong learning and community designs.

Trend

Denmark had positive trends from 1998 to 2005 and despite the high level achieved, the country continued to improve its score in several indicators, giving signs of sustained innovation activity. For example, broadband penetration and early stage venture capital had very high scores in 2004, and they showed continued growth in 2006.

Estonia

Overall performance

Estonia’s innovation performance is below the EU average, but in general above that of most new Member States. The country shows strength in tertiary education, SMEs collaborating with others and ICT expenditures. The indicators on intellectual property and knowledge creation are weaker and, in particular, public funding for innovation and business R&D needs to improve.

Trend

Innovation and entrepreneurship show a positive trend, with the majority of indicators experiencing a consistent increase. Areas for improvement include the low levels of investments in R&D and the scarcity of resources allocated to increasing the supply of skilled labour.

Finland

Overall performance

Finland is among the top-performing EU countries with an innovation performance well above the EU average. The situation is very positive overall; the only exception is intellectual property, where new community trademarks and new community industrial designs are below the level of the rest of the indicators.

Trend

The trend in Finland broadly follows the general trend in the EU25. However, science and engineering graduates, the population with tertiary education, participation in lifelong learning and new Community trademarks are growing less quickly than the EU average. Sales of new-to-firm products and enterprises receiving public funding have a negative growth and deserve attention.

France

Overall performance

The level of innovation performance in France is slightly below the EU average. Several indicators, including participation in lifelong learning, public funding of innovation, Community trademarks and designs are under the EU25 average, while one indicator, the number of science and engineering graduates, is particularly high.

Trend

The trend is positive in innovation and entrepreneurship, where ICT expenditures and organisational innovation have increased. Other areas of positive growth include science and engineering graduates and sales of new-to-market products.

Broad penetration, youth education attainment level and early stage venture capital all increased in 2006. On the other hand, business R&D expenditures remained stagnant and tertiary education and participation in lifelong learning are not improving.

Germany

Overall performance

Germany is among the top performing EU countries with an innovation performance well above the EU average.

The country shows a relative weakness in innovation drivers including the number of science and engineering graduates and lifelong learning and in innovation and entrepreneurship, where a low percentage of SMEs are collaborating on innovation and the early-stage venture capital industry is underdeveloped.

Trend

The overall trend from 1998 to 2005 is slightly positive, with indicators for participation in lifelong learning and of business R&D expenditures showing particularly good growth.

The percentage of the population with tertiary education has improved but at a lower pace than the EU25. The indicator for youth education attainment level has fallen consistently since 2000.

Greece

Overall performance

Innovation performance in Greece is well below the EU average. The least developed innovation dimension is intellectual property, where all indicators are very low. Broadband penetration is one of the weakest indicators, together with participation in lifelong learning, business R&D expenditures and early-stage venture capital. However, some indicators are slightly above the EU average: youth education attainment level, public funding for innovation and organisational innovation.

Trend

The country shows a positive trend in entrepreneurship and sales of new-to-market products and employment in high-tech services are increasing considerably. The indicator for youth education attainment level has grown above the EU average, as has the percentage of the population with tertiary education.

Business and public R&D expenditures remain stagnant at a low level; the same applies to intellectual property indicators.

Hungary

Overall performance

The innovation performance of Hungary is below the EU average. The better performing is in employment in medium-high and high-tech manufacturing, while there has been progress in the export of high-tech products, ICT expenditures and youth education attainment level. On the other hand, the level of S&E graduates and participation in lifelong learning is still low. These weaknesses, together with the low level of broadband penetration, expenditures in R&D by business and the very low level of venture capital in the early stage of businesses are holding back innovation.

Trend

Public expenditures in R&D, manufacturing in the medium/high-tech sectors and the number of US patents granted are growing above the EU average. In addition, new-to-market and new-to-firm product sales have a better trend than most of the other European countries, while triad and EPO patents are improving slightly, though at a lower rate than the EU average.

Ireland

Overall performance

While the innovation performance of Ireland is slightly above the EU average, the overall picture is mixed. In general the position as regards innovation drivers is good, though broadband penetration, at 4.4 per cent of the market, and participation in lifelong learning, at 8 per cent of population, are low. Performance in intellectual property is level with the EU25. High-tech products account for almost 30 per cent of total exports. There is a high level of youth education attainment, accompanied by high levels of science and engineering graduates and a high percentage of the population with tertiary education.

Trend

The performance of innovation and entrepreneurship has improved in the long term, from 1998 to 2005, and is improving faster than the EU average. In particular, innovation expenditures have increased considerably. However, exports of high-technology have declined considerably, from 39 per cent of total exports in 1999 to 29 per cent in 2004, and employment in high-tech services has slightly reduced – from 4 per cent of the total workforce in 2000 to 3.5 per cent in 2005.

Italy

Overall performance

Italy's innovation performance is somewhat below the EU average. However, recent indicators are missing, especially in the area of knowledge creation, and innovation and entrepreneurship. Indicators in the innovation drivers group are below the EU average. In particular, tertiary education, at 12 per cent of the population aged 25 to 64, is much lower than the European average of 23 per cent.

Among other indicators, 14 per cent of enterprises receive public funding for innovation. On output indicators, the new EU Community industrial design is doing particularly well, while patent applications and patents granted are relatively low. Early-stage venture capital is underdeveloped and there is little sign of innovative SMEs cooperating with others.

Trend

Italy shows a positive trend from 1998 to 2005, with the main improvement being in the number of new graduates in science and engineering, which almost doubled from 2000 to 2004.

ICT expenditures increased from 2000 to 2005, while they remained constant in Europe overall.

There is no convergence with the EU25 average in new Community trademarks, early stage venture capital, triad patents and employment in high-tech services (higgh-tech services decreased from 3.1 per cent to 2.9 per cent). These indicators point to possible roadblocks to improving the innovation performance of the country.

From 2004 to 2005, the indicators showing the most significant improvements are new community industrial designs, broadband penetration(up by 3.4 per cent), the population with tertiary education (up 0.6 per cent) and business expenditures in R&D.

Latvia

Overall performance

Latvia’s innovation performance is well below the EU average. All ten available indicators are below the EU25 average, with the sole exception of youth education attainment level – almost 82% of the young population have completed at least upper secondary education.

But the level of ICT expenditure is above EU25, and other indicators show an improvement: innovation expenditure (1.4 per cent of turnover in 2002); population with tertiary education (20.5 per cent); R&D expenditure in the medium/high-tech sector; and organisational innovation in SMEs.

All the other indicators reveal relative weaknesses in the national innovation system. In particular, intellectual property, R&D expenditures in the public (0.34 per cent of GDP) and business (0.23 per cent) of GDP, and high-tech exports (3.2 per cent) of GDP all have room for improvement.

Trend

Latvia has experienced some positive trends particularly in youth educational attainment. However, there has been a deterioration in participation in lifelong learning, while the number of new science and engineering graduates grown moderately, in line with the EU25 average.

Employment in high-tech services grew from 2.2 per cent of the total workforce in 2001 to 2.7 per cent in 2005. Business R&D expenditures showed quite growth, from 0.09 per cent of GDP in 1998 to 0.23 per cent in 2005, although its level is still low.

Lithuania

Overall performance

Lithuania’s innovation performance is well below the EU average. The one bright spot is youth education attainment , where 85.2 per cent of young people have completed at least upper secondary education.

But there are some positive trends, for example in the number of science and engineering graduates, the percentage of innovative SMEs collaborating with others, and ICT expenditure. Meanwhile, high-technology products are only 2.7 per cent of total exports and all the intellectual property indicators are well below the European average.

Trend

The trend from 1998 to 2005 is positive for several indicators. Efforts have been made to improve cooperation between SMEs on innovation, to increase employment in high-tech services, sales of new-to-market products and US patents. In the short period coveriing 2003 and 2004 public expenditure on R&D increased considerably, and new community trademarks showed a sharp increase – though the levels still lag far behind the European average. On the other hand, participation n lifelong learning diminished, increasing the gap with Europe.

Luxembourg

Overall performance

Luxembourg's innovation performance is above the EU average, but the indicators are mixed, with some at very high levels and others weak. Intellectual property is a strength: Luxembourg leads in new community trademarks and industrial designs, having registered 783 trademarks and 377 designs per million of the population in 2005. The country has the highest proportion of enterprises receiving public funding for innovation in Europe – 39 per cent in 2004 – and its SMEs are active in promoting innovation.

The weakest indicators are the number of graduates in science and Engineering, public expenditure on R&D, and employment in medium/high-tech manufacturing.

Trend

Luxembourg’s trend is positive, especially in employment in high-tech services and for exports of high-technology, where most other European countries failed to make progress.

There were also positive trends in the number of enterprises receiving public funding for innovation, in the percentage of the population with tertiary education and in new community trademarks registered. But business expenditures in R&D and triad patents decreased in the last five years, while in most European countries the trend was the opposite.

Malta

Overall performance

Malta’s innovation performance is below the EU average. The best areas were for high-tech exports, at 56 per cent of total exports, and sales of new-to-market products.

ICT expenditure was also above the EU25 average.

The weakest performances were for patents and Community designs, followed by business expenditure on R&D, and SMEs innovating in-house.

Trend

The trend was positive for a number of indicators, in particular medium/high-tech manufacturing R&D, organisational innovation, and sales of novel products.

The level of science and engineering graduates and lifelong learning is still low, though these measures started to improve in 2002 and 2004 respectively. But tertiary education is weaker, with no growth since 2003.

And while the level of business R&D expenditure is very low, the trend is very positive over time.

The Netherlands

Overall performance

Netherlands's innovation performance is above the EU average. It is particularly good in innovation drivers and intellectual property, although other innovation and entrepreneurship measures may reveal some weaknesses in the innovation system.

The 2005 broadband penetration rate was 22 per cent, versus an EU25 average of 10.6 per cent. ICT expenditures were 7.6 per cent of GDP, versus 6.4 per cent in the EU25, and employment in high tech services was slightly higher than the EU25. Other strong indicators include lifelong learning participation and patents.

Some weaknesses in the Dutch innovation system may lie in early-stage venture capital and in employment in medium/high-tech manufacturing.

Trend

On the whole, the trend of the country is positive. In particular, levels of science and engineering graduates and youth education attainment showed positive trends. On the other hand, business R&D expenditure remains stagnant, while public expenditure on R&D only registered growth from 2003 onwards.

The weakest indicator is early-stage venture capital.

Poland

Overall performance

Poland’s innovation performance is well below the EU average, with only youth education level results above the EU25 average (90 per cent in Poland versus 77 per cent in the EU25).

Novel product sales are considerably higher than the EU average at 8 per cent (EU25 average, 6.2 per cent). There is also quite a high score for ICT expenditures and medium and high-tech manufacture R&D.

The weakest area for Poland is intellectual property, where all the indicators are very low. Other indicators such as high-tech exports, business R&D expenditure and broadband penetration also need to improve.

Trend

The country experienced some positive trends in indicators such as science and engineering graduates, youth education, ICT expenditures, innovative SMEs and US patents granted.

Other indicators, for example public expenditure on R&D and new Community trademarks, are at a low level – and stagnant.

Portugal

Overall performance

Portugal’s innovation performance is below the EU average, though early-stage venture capital, ICT expenditures and the number of SMEs using organisational innovation are above average.

The weakest performance is in intellectual property, with the indicators for lifelong learning, business R&D and high-tech exports also below the EU25 average.

Trend

However, there were some positive trends from 1998 to 2005, especially in innovation drivers and innovation and entrepreneurship. Science and engineering graduates and youth education increased significantly, as did ICT expenditures and early-stage venture capital.

On the other hand, there was little progress in any of the knowledge indicators, though there were positive trends in employment in high-tech services, exports of high-tech products and employment in medium/high-tech manufacturing.

Romania

Overall performance

Innovation performance in Romania is well below the EU average, though there are strengths in sales of novel products and employment in medium/high-tech manufacturing.

The indicators for intellectual property are low, as are those for lifelong learning and business R&D expenditures. There is very little early-stage venture capital.

Trend

However, there are positive trends, in particular in science and engineering graduates and sales of novel products, while public expenditure on R&D and on innovation have been increasing slightly.

Business expenditure on R&D failed to improve, and the number of new EPO patents and new Community trademarks showed no increase.

Slovakia

Overall performance

Slovakia’s innovation performance is well below the EU average, though some indicators are positive, including novel product sales and employment in medium/high-tech manufacturing. Youth education, innovation and ICT expenditures, and employment in high-tech sectors are in line with the EU25 average.

On the other hand, indicators such as broadband penetration, business expenditure on R&D and early-stage venture capital are weak.

Trend

There are positive trends in innovation and entrepreneurship, but business R&D expenditures are decreasing, while there is some slight fluctuation in public R&D.

Tertiary education and youth attainment level are static, but the number of science and engineering graduates has risen.

Slovenia

Overall performance

Performance is slightly below the EU average, although most of the indicators for Slovenia around the EU25 average. The best-performing indicators are lifelong learning participation and employment in medium/high-tech manufacturing.

Trend

While some indicators were strongly positive, the number of science and engineering graduates is not improving, which may be dragging down an otherwise strong group of innovation drivers.

Business expenditures on R&D are following a slow positive trend, while public ones were on a negative trend until 2003, when they started to improve.

ICT investment has slightly increased over time, although there are insufficient data to establish a trend in broadband penetration.

Spain

Overall performance

Spain is below the EU average, though two indicators are performing particularly well: novel product sales and community trademarks. The indicator for population with tertiary education is also higher than the EU25 average.

Weaknesses are revealed in each group of innovation indicators. Intellectual property is particularly weak in patents, while in innovation and entrepreneurship, early-stage venture capital and innovation expenditures are low.

Trend

The trend is positive for several indicators. Particular attention seems to have been given to innovation and entrepreneurship, where almost all the indicators improved – apart from spending on innovatio.

There was a positive trend in the percentage of the population with tertiary education and in the number of science and engineering graduates.

Triad and EPO patents are stationary, while the number of USPTO patents fluctuated. Employment in high-tech services increased from 1998 to 2005, while employment in medium/high-tech manufacturing services is falling slightly.

Sweden

Overall performance

Sweden is among the top performing EU countries with an innovation performance well above the EU average. All 12 indicators available for 2005 are above EU average. High-tech exports and sales of novel products are the only indicators below EU25 average. The strongest indicators are lifelong-learning participation and early-stage venture capital

Trend

There has not been a positive trend for several indicators, but this is probably due to the fact that the levels were already high and there was little margin for improvement. Numbers of new science and engineering graduates improved, together with those of innovative SMEs, while ICT expenditures fluctuated.

United Kingdom

Overall performance

This is considerably above the EU average, with only intellectual property below the EU25 average. The strongest indicator for the country is participation in lifelong learning, followed by early-stage venture capital. The weakest indicators are public funding for innovation, and Community designs

Trend

The indicators showing a positive trend from 1998 to 2005 are mainly in innovation and entrepreneurship, with innovative SMEs in particular moving from 7.2 per cent in 2000 to 12.6 per cent in 2004. Participation in lifelong learning and sales of novel products improved significantly as well.

The indicators showing less progress are the population with tertiary education, business expenditure on R&D, and high-tech exports, whose share of overall exports fell from 29.8 per cent in 2001 to 22.8 per cent in 2004.