25 May 2016   |   Viewpoint   |   Update from KTH Royal Institute of Technology
These updates are republished press releases and communications from members of the Science|Business Network

Time to re-think public support for innovation in Europe

The EU still has not learned basic lessons about innovation from its US competition. Professors Gunnar Landgren and Ramon Wyss, both instrumental in the formation of EIT Knowledge and Innovation Communities, explain how to remedy the European innovation paradox

We recently received an approach from the US offering help to our university start-ups, by providing coaching, networks, venture capital and access to a truly unified market. The invitation started with an analysis of the European innovation system, pointing towards (well known) deficiencies of the regional perspective, shortage of early stage capital, risk adverse venture capital, limited access to global high tech companies, poor translation of scientific discoveries into innovative companies, and so on.

Unfortunately the invitation had a point. After being involved with academic-business collaboration for the past several decades, and more recently with the European Institute of Innovation and Technology (EIT), at different levels from open consultations in 2007 to its more mature programmes of today, we still do not see Europe learning the basic lessons from the much-envied overseas competition.

At this very moment, a consultation on the newly proposed European Innovation Council (EIC) has closed. In April the European Court of Auditors published a quite critical report on the EIT, and Tibor Navracsics, Commissioner for Education and Culture has said he agrees the EIT must change.

Right this time

After investing over €1 billion to date in the EIT and with the EIC consultation being digested, the question must be: What should the Commission do to get innovation right this time?

For a start, it is important to realise that supporting innovation with public funds is a very different undertaking from supporting education or basic research. The fundamental issue is that the overarching aims are incompatible - innovation is mostly about generating wealth through profitable private companies, which is not what public money should be used for. Even with all the necessary competence at hand, up-front cherry-picking of the next global success is extremely risky and is not a viable approach for a public institution.

We need to accept the realities of a bottom-up market economy, where a thousand seeds are sown, but only a few will grow to become the trees that make up the forest.

Public funds should be used to strengthen the innovation support system that enables seedlings to become trees, based on a very clear distinction of where the public support will end and the private sector has to take over. Given this, one must be very careful not to mix the various support instruments needed in different phases of innovation development.

Success in markets that are driven by technical innovation, digitisation and globalisation requires a relentless focus on technical and business excellence, speed of development and financial endurance.

In reality there is little, if any room for investing in the ‘nice to have’ elements that are typically compulsory in EU and many national support instruments, of collaboration, having a European/national dimension, open access, social responsibility, dissemination events, and so on.

Can you imagine a federal US agency awarding a joint grant to MIT and Stanford under the condition that they place some of their best researchers in a small Midwest town, sub-granting 10 per cent of the work through the local SME organisation? Yet this is how we too often do it in Europe.

Failed implementation

Having been directly engaged in setting up the Knowledge and Innovation Communities (KICs) of the EIT, we notice that despite starting from an excellent idea, the implementation has failed to establish sustainable incentives for partners to participate.  At this stage, the EIT and the KICs are confronted with incompatible demands that originate from entirely different cultures. We are afraid that this will prevent the EIT from achieving the original objective of developing a strategic partnership for creating cutting edge innovation ecosystems in Europe that can compete with Silicon Valley, the Boston area and the Asian hotspots.

To reach this goal Europe needs to:

  • Focus on scientific, technical and business excellence – nothing else will survive in the global marketplace
  • Ensure harmonised business incentives across Europe, including a minimum of legal and administrative hindrance for a truly integrated European market. This will be much more important than any direct support scheme and would enable fast growth in Europe for a global market
  • Accept that the timescale for evaluating innovation impact is decade long. Traceability of specific actions is hard, if  not impossible. Hence, evaluation must be on an indicative and statistical basis, rather than an auditable control basis
  • Allow a clear geographical focus in each project. The European dimension should be handled at the programme, not the project, level. Likewise, countries and regions must recognise a distribution where topical specialisation is taken into account
  • Apply sensible co-funding rules which incentivise partners to contribute in return for influence and possible commercial benefit
  • Apply an outcome-oriented rather than control-oriented philosophy in order to simplify procedures; move from financial to performance auditing, while still allowing best effort undertakings
  • Use well established call – grant procedures where appropriate for technology development and for supporting elements of the innovation ecosystem, such as incubators
  • Empower other bodies such as the European Investment Bank and European Investment Fund to support the commercial side of the innovation stream, acting as commercial investors and financers. Public innovation procurement can also be a key instrument, provided it enables small companies to enter a European market

The investment of approximately €3 billion into the EIT and the KICs undoubtedly has the potential to shift the global innovation landscape in Europe’s favour.  However, despite the fact that some positive results are coming out of the KICs, to have impact on the global innovation system many of the fundamentals of EIT and KIC implementations need to change.

In particular, imposing incompatible demands on long-term financial self-sustainability combined with tough requirements on co-funding without real partner influence, stiff funding rules and multiple audits, could not be further from the agile innovation support that is needed to remedy the European innovation paradox.

The present situation where the KICs have built and are still building yet another rather costly parallel - and often competing structure to existing innovation systems - instead of moving today’s excellent innovation systems to global leadership, is not sustainable. Nor will it move Europe forward on a global scale.

We agree with the overseas comment that, “There is no need for another big clumsy European initiative which will make no difference.” Europe must do better and we believe we can.

Gunnar Landgren, Advisor to the President KTH Royal Institute of Technology, Sweden, is Co-creator of EIT Digital  

Ramon Wyss, Vice President of International Affairs, KTH Royal Institute of Technology, Sweden, is Co-creator KIC Innoenergy and EIT Health KIC

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