EU innovation “a little bit stalled” as the private sector drops back

The EU’s innovation performance has slowed down in the past year according to the 2015 Innovation Union Scoreboard, with 13 member states in decline and an improving performance in only 15.

This is in contrast to the 2014 edition of the report which painted a more positive picture. Back then innovation performance was improving and less innovative countries were finally catching up with the rest of the pack.

“Unfortunately things are a little bit stalled, said EU Commissioner for Research, Carlos Moedas, launching the report.  This year’s poor results are to blame on private sector. “Venture capital as a percentage of the GDP is going down,” he said. Also, the share of SMEs with in-house innovation is decreasing and sales of innovative products falling. These areas are “not doing very well,” said Moedas.

The report suggests the crisis has left an impact on the private sector's ability to innovate. Both the number of SMEs introducing product or process innovation and the share of sales due to new innovative products has declined in 21 member states. Also, the share of SMEs introducing marketing or organisational innovation has declined in 20 member states, while venture capital investment has decreased for 16 member states.

To solve this, Moedas urged member states to reform and “create the conditions for innovation,” and encourage “the private sector to do more.”

The Commissioner pointed out that venture capital investments are five times bigger in the US than in Europe. “We have to implement the capital markets union to diversify our sources of finance, to have better choices and lower barriers,” he said.

Global competition

Innovation-wise, the EU is still performing worse than its global competitors. The EU is outperformed by South Korea, the US, and Japan. China is also growing faster than the EU and it is closing the gap, the report says.

The full report is available for download on the Commission website.