Make innovation demand driven, says Finland

Finland wants to use its six months presiding over the EU to change innovation policy. It picks up the gauntlet at a meeting of competition ministers next week.

“During Finland’s EU presidency we will strive to bring Europe’s economy and entrepreneurship back on track,” says Mauri Pekkarinen, Finnish Minister of Trade and Industry, in his blog published last week.

Pekkarinen proposes a three pronged approach to do this: adopt a new approach to innovation policy, promote the competitiveness and energy policy vigorously and improve the EU’s operating procedures.

At the heart of a shift to demand-driven innovation would be a move to use public procurement to create high tech markets in e-health, energy, transport, logistics, security, and other sectors.

The debate begins

The debate will begin at an informal meeting of competition ministers to be held on 11 – 12 July in Jyaskyla, Finland. This will highlight topics including the promulgation of innovation-friendly legislation, the role of public sector procurement, the development of co-operation between the research community and businesses, and the strengthening of the entrepreneurship culture.

“In the past few years, our competitiveness has fallen further behind the US, “ writes Pekkarinen in his blog. “During the presidency, we will look for new remedies.”

Finland has other opportunities to make an impact on Europe’s competitive standing as three issues of major importance to innovation are due to come to a head in the next six months – finalising Framework Programme 7, the new EU chemicals legislation REACH, and the Services Directive.

“It is essential that we reach a decision on these issues by the end of the year, since all of these regulations will have a marked influence on [factors influencing] Europe’s competitiveness,” says Pekkarinen.

At the meeting next week the Science and Research Commissioner Janez Potocnik will give an update on where FP7 stands. The European Parliament is due to hold its second reading of FP7 on the autumn, and Finland has said the concluding negotiations on FP7 will be one of the priorities of its presidency.

The other priority will be shifting innovation policy. In particular Pekkarinen wants to pick up on the proposals outlined in ‘Creating an Innovative Europe’, a report written by an expert group led by former Finnish prime minister Esko Aho, published in January this year.

Use the euros

One of the main points made by the report was the need to switch from bottom up innovation policies, and use the vast billions of euros that are poured into public procurement each year to drive demand for advanced, high tech products.

The Finnish Ministry of Trade and Industry published an informal discussion note in advance of next week’s meeting, ‘Demand as a driver of innovation – towards a more effective European policy.’

Much of what it has to say on issues such as innovation friendly regulation, making the European intellectual property system work more efficiently, using standards to aggregate demand, generating closer relationships between research and industry and inspiring entrepreneurship is familiar and well worn territory.

But the push to use public services to generate innovation is a less-well rehearsed idea. The public sector across Europe accounts for a huge amount of production, especially in services. Lack of access to these markets has slowed development of the private sector. At the same time, the public sector is sheltered from competitive forces, weakening the incentive to innovate. Growth in productivity is therefore lower in the public than the private sector.

In many member states, the public sector both finances and produces services that account for a large share of the domestic market. Typical areas include health, social work, education, public transport and infrastructure. “A good part of these services could be outsourced to the market without abandoning the social responsibilities and objectives associated with them – by leaving their financing to the public sector,” says the briefing note.

'Intelligent customership'

It also introduces a clunky - but useful - concept “intelligent customership”, by which the note means that the public sector staff need to possess knowledge and expertise that will make them demanding customers and enable them to confidently procure products of high technical complexity.

The competition ministers meeting in Finland next week will be asked for their direct support in moving from a bottom up innovation policy to a demand led one. The Finnish presidency says it is determined to focus on concrete deliverables – by which it means suggestions for practical policy improvements – and will prepare its recommendations for the Competitiveness Council meeting in December.

Maybe the next – German - presidency will follow them up.