1. Henriette van Eijl, DG ENTR, Unit D1 (innovation policy)
Current highlights in EU innovation policy Rotterdam School of Management Overview: 1. EU innovation policy - what is it? - who does what? results of the European Innovation Scoreboard and Trendchart 3. Funding for EU innovation policy 4. Some ideas about future directions… 5. If you would have been the Minister of Economic Affairs
Henriette van Eijl,
DG ENTR, Unit D1 (innovation policy)

2. 1. Which EU policies are relevant for innovation? Innovation
Capital
Private & public sources
For enterprises of all sizes and
development stages
Market regulations Env. & Health protection, public procurement, Standards, WTO, etc.
State Aid, financial instruments,
Cohesion policy
taxation, investor readiness, etc.
Innovation
Enterprises: Product innovation,
organisational, marketing, design,
Processes,
Etc.
Knowledge
Technologies, methods,
Know-how, maret knowledge
Patents copy right,
etc.
Markets
EU & global,
consumers, industry
& public sector
Innovation is not a linear process where new research results lead to developing new products / services that then are taken up in the market
Innovation is a systemic process with many factors that influence its emergence and success.
Innovation is often triggered by a new demand in the market, e.g. a demand for integrating things like a phone, Internet access and TV into one gadget – provided that gadget will be small and light.
Enterprises are at the heart of the innovation process, as they can combine the different innovation factors (knowledge, capital, HR, market knowledge) and drive the process with entrepreneurial initiative (risk-taking is a vital element of this).
Although policy-makers / public authorities are not at the heart of innovation, they can influence it (in the good and in the bad sense)
Education and training prgs,
Labour & social law
immigration, etc.
Human Capital
Skills, creativity,
Mobility, Flexibility,
etc.
Research funding, IPR support, Technology transfer, Networking, cluster, research infrastructure, etc.

3. EU Innovation policy = Broad Based Innovation Strategy (from 2006)
9 priorities
Intellectual Property Rights
Standardisation
Public procurement
Joint Technology Initiatives
Lead markets
European Institute of Technology
Clusters
Innovation in services
Risk capital markets
Examples of good progress
Joint Technology Initiatives launched
European Institute of Technology on track
Communication and implementation of Lead Market Initiative

4. Lead Market Initiative - a policy mix to achieve maximum impact
Demand-side measures
- regulation
standardisation
- procurement
clusters?
Package
= LMI
- Fiscal measures
- Equity support
- R&D funding …
Supply-side measures
The Aho-report, followed by a Communication
“Putting knowledge into practice: a broad-based
innovation strategy for Europe” of 2006

5. Activities already started in 2008:
Policy tools
Standardisation
Labelling
Certification
Legislation
Public Procurement
Complementary Actions
Lead Market Areas
e-Health
EU Recommendation for interoperability
Introduce the Electronic Health Insurance Card
Network to be set up by DG INFSO
EU Patient Smart Open Services large scale pilot funded
Sustainable construction
2nd generation of Eurocodes
Screening of national building regulations
Networks of European Contracting Authorities to foster demand for innovation
SMEs guide on collaborative working schemes in construction
Protective textiles
Inventory of all relevant standards
Training platform for buyers and users
Bio-based products
Product performance standards
Inventory of legislation affecting bio-based products
FP7 call on bio-refinery pilot plants
Recycling
CEN Packaging Standards
Waste Framework Directive
Financial support (CIP) for market replication projects
Renewable energies
Mandatory national targets for 2020
Guide on funding available for RE demonstration and pilot projects

6. Innovation policy in Europe: who does what?
Member States
National governments, including standardisation, public procurement and regulatory organisations
Regional governments, cities etc
Innovation and regional agencies
European Commission initiatives
Complementing national initiatives
CIP: Competitiveness and Innovation Program
Broad based innovation strategy (2006)
Lead Market Initiative
Monitoring EU innovation performance and policy
European Innovation Scoreboard
Trendchart policy monitoring
EU legislation
Council of Ministers + European Parliament (based on proposals from the Commission)

7. 2008 results of the European Innovation Scoreboard and Trendchart

8. What is the European Innovation Scoreboard (EIS)?
Annual benchmarking of innovation performance across EU27
Identifying strengths & weaknesses, trends, patterns in innovation performance under the Lisbon Strategy
Methodology further improved for 2008:
More emphasis on services, non-technological innovation, outputs
Measuring trends over time
ENABLERS (external drivers):
Human resources – the availability of high-skilled and educated people.
Finance and support – the availability of finance for innovation projects and the support of governments for innovation activities
FIRM ACTIVITIES:
Firm investments – covers a range of different investments firms make in order to generate innovations.
Linkages & entrepreneurship – captures entrepreneurial efforts and collaboration efforts among innovating firms and also with the public sector.
Throughputs – Intellectual Property Rights generated as a throughput in the innovation process and Technology Balance of Payments flows.
OUTPUTS of firm activities as:
Innovators – the number of firms that have introduced innovations onto the market or within their organisations, covering technological and non-technological innovations.
Economic effects – captures the economic success of innovation in employment, exports and sales due to innovation activities.

9. Overall innovation performance summary innovation index of 29 indicators (2007 & 2006 data)
Summary innovation performance EU Member States (2008 SII)
Innovation leaders: Switzerland, Sweden, Finland, Germany, Denmark, UK
Innovation followers: Austria, Ireland, Luxembourg, Belgium, France, Netherlands
Moderate innovators: Cyprus, Iceland, Estonia, Slovenia, Czech Republic, Norway, Spain, Portugal, Greece, Italy
Catching up countries: Malta, Hungary, Slovakia, Poland, Lithuania, Croatia, Romania, Latvia, Bulgaria, Turkey

10. Innovation performance based on 2006-2007 data for Netherlands (Innovation follower)
Netherlands is one of the Innovation followers.
Its innovation performance is just above the EU27 average but the rate of improvement is below that of the EU27.
Relative strengths, compared to the country’s average performance, are in Finance and support and Linkages & entrepreneurship while relative weaknesses are in Firm investments and Innovators.
Over the past 5 years, Human resources and Finance and support have been the main drivers of the improvement in innovation performance,
in particular as a result from strong growth in S&E and SSH graduates (11.3%), S&E and SSH doctorate graduates (6.8%) and Broadband access by firms (23.8%).
Performance in Firm investments and Linkages & entrepreneurship has worsened, in particular due to a decrease in Non-R&D innovation expenditures (-1.5%) and the Firm renewal rate (-4.4%).
Weaknesses:
NL slower growth in innovation-performance than EU27
Performance in Firm investments and Linkages & entrepreneurship is worse by lower Non-R&D innovation expenditures (-1.5%) and the Firm renewal rate (-4.4%).
Strengths:
+ Finance and support and Linkages & entrepreneurship
+ Human resources, broadband access and Finance were main drivers for improvement in innovation performance

11. Policy trends in Europe : annual Trendchart report Aim: to track innovation policy developments in all 27 EU Member States, plus Iceland, Norway, Switzerland, Croatia, Turkey, Israel, Brazil, Canada, China, Japan, USA and India. See

12. Failures addressed in the overall EU innovation policy mix
Apart from the market perspective, analysis of innovation process has to take into account also key deficiencies of companies and failures in systems (Smith 2000, Arnold 2004). Arnold (2004) differentiates four systemic failures:
capability failures - inadequacies in companies’ ability to act in their own best interests, for example through managerial deficits, lack of technological understanding, learning ability or ‘absorptive capacity’;
failure in institutions – inadequacies in other relevant NIS actors such as universities, research institutes, patent offices and so on. Rigid disciplinary orientation in universities and consequent inability to adapt to changes in environment is an example of such a failure;
network failures - problems in the interaction among actors in the innovation system such as inadequate amounts and quality of links, ‘transition failures’ and ‘lock-in’ failures (Smith 2000) as well as problems in industry structure such as too intense competition or monopoly;
framework failures – gaps and shortcomings of regulatory frameworks, intellectual property rights, health and safety rules, etc. as well as other background conditions, such as the consumer demand, culture and social values (Smith 2000).
The support measures database includes also measures focused on improving policy making capacity including activities such as policy advisory services or establishing consultative fora. It is argued that activities to enhance the policy process and to induce policy learning are a response to actual or potential policy failures. Hence, this analysis recognises policy failure as a systemic shortcoming in its own right.
Capability failures remains the most prevalent category addressed by measures
Innovation leaders and followers (ie Netherlands) tend to address more network and policy failures
Moderate innovators and catching-up tend to address more capability failures, followed by market failures

13. Groups targeted by the support measures
SMEs!
STI policies are concerned above all with companies and research performers.
Nearly 65% of measures target companies (31% only target SMEs).
More than 42% of all support measures has as a target higher education institutions (HEI) performing research.
Individual scientists and researchers are targeted by 25% of measures
The recently introduced measures target much more strongly SMEs (31% as compared to 21% in an overall policy mix).
This is consistent with other findings presented previously on the increasing focus of the measures supporting innovative start-ups.
Less than one third of the recent measures target HEI performing research, which also reflects the previously discussed trend.
This does not, however, influence substantially the overall policy mix in which more than 40% of active measures target research performers.
Highest relative increase in: measures supporting innovative start-ups and technology transfer between firms
Together with a slight increase in measures supporting risk capital…
…suggest an increased focus of innovation policy on supporting fast growing innovative SMEs, especially start-ups and spin-offs (particularly in catching-up countries)
Certain slowdown in measures addressing R&D cooperation
Jump in number of policy measures from 2004 clearly due to new Member States using Structural Funds

14. 3. Funding for EU innovation policy

15. Joint Programming (TBC)
On-going funding actions – the menu…
EU-led
MS-led FP
themes
Infrastructure
RSFF, ERC
CRAFT - People …
JTI (5x)
169/ERA-NET
EDCTP, AAL
ERA CAs
National R&D
programmes …
Supply-led
Joint Programming (TBC)
EUREKA
ETP +/- 38
Structural Funds
Res infrastructures …
EIT – KIC (2-3)
from 2010
(Pre-commercial) public procurement
Lead Market Initiative
6 x, demand side policy
CIP
3 pillars
EIF
Structural Funds
Regulatory frameworks:
legislation, standardisation, IPR
Demand-led

16. EU innovation & research funding instruments
€ 50 billion
Research projects
(Mainly multi-country)
& joint actions (JTI, 169)
Scholarships
Policy coordination
Capacity building
€ 3.6 billlion
Multi-country
Innovation networks
Cluster, Monitoring
Support services
Policy development
Financial instruments
€ 86 billion (of the €347 billion)
Nat / regional programmes
Research, capacity, SME, Cluster, TT, services ...
Entrepreneurship
Innovative ICT
Human Capital
€ 6.2 billion
Erasmus &
Erasmus Mundus:
Univ.Educ:Scholarships
e-learning Programme: ICT in schools
Leonardo vocational training
Practical Guide to EU funding for research and innovation
Life Long Learning:
LIFE environment
European Fisheries Fund
European Agricultural Fund for Rural Development
EUREKA: a non-EU-dependent pan-European network for market-oriented, industrial R&D created as an intergovernmental initiative. It supports businesses, research centres and universities who carry out pan-European projects to develop innovative products, processes and services. (
COST (European Cooperation in the field of Scientific and Technical Research) has 34 European member countries and enables scientists to collaborate in a wide spectrum of activities grouped under nine key scientific domains. It also aims to maximise European Synergy and added value in non-competitive and pre-normative research. (
€ 450 million
Intermodal transport and freight logistics
Fisheries &
Aquaculture
€2.1 billion
Environment:
Policy monitoring & develop.
Projects on:
Air, Energy, Climate,
Industry, Urban env., Soil
Waste, Water
Rural
development
Trans-European Networks (TEN)
Transport
Energy
Telecommunications
Not EU research initiatives:

17. CIP objectives 2007-2013; pillars
Facilitate access to finance for SMEs
€ 1129 million
Support services for enterprises (especially SMEs)
€ 338 million
Promotion of innovation and particularly eco-innovation
€ 585 million
ICT interoperability and up-take
€ 728 million
Energy issues (e.g. efficiency, renewable)
€ 727 million

18. Innovation Support Policy Initiatives
Support policy analysis, learning and coordination
Innovation policy makers design and test new support programmes and policy methods
Sector-oriented analysis, develop and test new or better support tools, promote their wide adoption
Innovation support providers in public-private partnerships with companies
Serving complementary policy objectives

19. Knowledge-intensive services Eco-innovation
Focus of 2009 calls:
Clusters
Knowledge-intensive services
Eco-innovation
Networks of public procurers in support of lead markets
Deadline 12 Feb

20. 4. Some ideas about future directions…

21. Innovation policies: into the 4th generation
1st generation innovation policy:
innovation follows from scientific research
2nd generation innovation policy
interactive nature of the innovation process
(e.g. innovation systems, clusters)
3rd generation innovation policy:
recognises the need to mainstream innovation
objectives in a broad range of policy areas
4th generation innovation policy (future)
puts society’s needs at its heart and translates this into opportunities for business
In parallel, the role of innovation policy has developed from the linear concept, i.e. that innovation follows from scientific research
(the first generation of innovation policy),
to recognition of the interactive nature of the innovation process (e.g. innovation systems, clusters – "the second generation"),
and more recently a "third generation" that recognises the need to mainstream innovation objectives in a broad range of policy areas
The objective is to make Europe the place for innovative people, companies and markets.
To achieve this, a fourth generation innovation policy is needed which puts society at its heart.
This means recognising that innovation depends crucially on societal acceptance and must address society concerns about change.
It also means showing that innovation provides answers to societal challenges such as those stemming from globalisation, climate change and demographic trends which are more attractive than a defensive, protectionist approach.
But how?

22. Development of a European Plan for Innovation
Commission Communication (June 2009)
Assessing progress under Broad Based Innovation Strategy
Reviews of:
lead markets initiative,
innovation support for services,
efficiency of innovation support,
financing innovation in SMEs
European Plan for Innovation (end 2009), linked to Post Lisbon strategy
Stakeholder consultations, workshops, supporting studies and analysis

23. Innovation and economic crisis
in the spirit of Darwin:
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

24. Impact of financial crisis and economic downturn does not yet show in indicators, but:
Countries with higher innovation capacity better placed to recover faster. Hence EU better placed than 5 years ago but still behind US.
EU firms under investment in research and innovation is a particular concern.

25. Example from Finland… innovating through the downturn….

26. Development of Tekes R&D funding in Finland
Million euros
Nominal funding
Finland’s financial crisis
Major bank sector difficulties
Exports down by >20%
GDP down by 13%
Unemployment from 3,5% to 18%
Real funding deflated by the cost-of- living index
Based on information at Statistics Finland about inflation.
The funding includes funding for purchase of research services and EU’s Structural Funds. The funding for 2007 does not include any EU funds, since funds from the new Structural Funding period were not allocated until 2008.
DM 26047
Copyright © Tekes 26 26

27. Innovative public services
New /
missing
Users’ tax incentives
Public procurement
Standards
Norms
Lead markets
Innovative public services
VC tax
incentives
Green
Procurement
TYKES
Living labs
User communities
Sourcing know-how
Pre-comp
procurem. (R&D)
YIC funding

28. Finland’s innovation strategy - Focal points
Mobility and attractiveness
Participation and contribution
WORLD WITHOUT BORDERS
Innovation communities & hubs
Lead markets
INNOVATIVE INDIVIDUALS AND
COMMUNITIES
DEMAND AND USER ORIENTATION
COMPETENCE BASE
Individuals and entrepreneurship
Co-innovation
SYSTEMIC APPROACH
Broad-based innovation
Leadership & change management

29. If you were the Minister of Economic Affairs, how would you answer these questions?
Which areas or topics are priorities for further development in innovation policy for Europe?
What is the relationship between future EU innovation policies and those at national and regional level?

30. Thank you for your attention
References:
Homepage DG enterprise:
Homepage European innovation policy:
Homepage Lead Market Initiative:
Contact address LMI/ Henriette van Eijl:

31. What next ? – Mapping what and for whom
Financial support: grants & loans for research and demonstration projects, market replication, commercial innovation activities, staff exchanges, mobility, industrial & research capacity …
Direct innovation support services: technology-transfer, innovation capacity audits, IPR advice, partner finding, mobility portals, global market access …
Capacity building of investors, innovation talents, innovation support bodies, cluster managers, other multipliers …
Help build critical mass: clusters, PPP, JTI, …
Improve interaction among innovation actors: improve partnerships at nat/reg level, RoK, open innovation systems, internationalisation, cluster management, LivingLabs …
Improve support by nat/reg bodies: networks among innovation agencies, teaming up for larger scope, partnering ….
Research institutes, researchers, enterprises, students …
Banks, business angels, entrepreneurs, researchers, consultants, public bodies, development agencies …
Reg/loc actors, public & private, triple helix (business, research, education, finance…
Innovation / development agencies, consultants, technology parks, cluster managers …