A paper from the London School of Economics questions the EU's chances of catching up with the USA on innovation and productivity.
It costs five times as much to take out a patent in Europe compared with the USA. A 'Community patent' would help. But Europe will have to do something more if they want to reverse the brain drain to the USA.
These are points from a new paper from Centre for Economic Performance, an interdisciplinary research centre at the London School of Economics (LSE). Its latest briefing, The Lisbon Agenda : The hope - and the Realities, says that the ‘Barcelona target’ of increasing research and development (R&D) to 3% of GDP by 2010, says that "makes little economic sense" but "the emphasis on
innovation as a route to growth is sensible".
innovation as a route to growth is sensible".
The paper looks at the reasons why, they say, the EU doesn't have a cat in hell's chance of reaching its targets. For example, it describes "two kinds of market failure that underlie a lack of investment in innovation". One is that " the returns to investment in knowledge and innovation cannot be fully appropriated by innovating firms as knowledge is a public good that can ‘spill over’ to others. This leads firms to ‘under-invest’ in innovation and a general level of investment below what would be the socially optimal level. To solve this problem, policy-makers can adopt various measures, such as a system of intellectual property rights, subsidies and R&D tax credits."
It doesn't, though, seem to explain why the situation here is any different from that in the USA, which seems to be incapable of doing any wrong from this account.
When it comes to improving the science base, the paper warns that "One of the biggest threats to Europe’s leadership as a knowledge-based economy is the anticipated shortage of highly qualified R&D staff."
One way in which the EU could respond would be to: "The EU could follow a similar strategy to spur both immigration from non-EU scientist and return migration of EU scientists by developing centres of excellence for scientific research; improving the amount and use of research funding in the EU and foster the creation of networks between centres of excellence and between centres of excellence and industry."
The bottom line for the LSE's analysts is that "Europe needs to increase the amount and quality of the research funding it sponsors, possibly by modifying the priorities of its current EU budget to reflect the Lisbon vision and spurring competition and best practice among research institutions in EU members."
Receive the Funding Newswire each Tuesday, our Policy Bulletin each Thursday, and news about bridging Europe’s east-west innovation gap twice a month in The Widening. 
A unique international forum for public research organisations and companies to connect their external engagement with strategic interests around their R&D system.