1. 2013 EDITION Mr. Pierre Vigier Head of Unit Economic Analysis and Indicators

2. Tougher world competition in research and innovation But the EU defends its world share of knowledge better than the United States

3. The EU remains competitive but China, Brazil and India are rising FDI inflows to the EUGlobal Value Chain income Source: DG Research and Innovation – Economic Analysis Unit Innovation Union Competitiveness report 2013 Data: Eurostat, OECD; WIOD database The EU is the world region attracting most FDI and reaping largest income from Global Value Chains

4. The EU must seize now tomorrow's markets Source: DG Research and Innovation Data: OECD patent database 4 Technology strengths of Europe, North America and Asia Europe leads in transport, aeronautics, waste management and renewable energy

5. Leaders in smart fiscal consolidation Protecting direct R&D investment Notes: (1) Real growth was calculated from values in PPS€ at constant 2005 prices and exchange rates. (2) Data for 2012 are provisional. Source: DG Research and Innovation - Economic Analysis Unit Data: Eurostat + Indirect support (tax incentives), 2010 Smart fiscal consolidation 1 Smart fiscal consolidation 2

6. Leaders in Research excellence and Innovation Sweden, Denmark, Finland, the United Kingdom, the Netherlands and Belgium have achieved both research excellence and high innovation output

7. Leaders in structural change: Structural change 2Structural change 1

8. Lessons for innovation-driven growth The report relates the performance presented in the previous slides with the characteristics of policies in the various countries. This provides hints for supporting innovation-driven growth in Europe. Some of these policy conclusions are highlighted in background to this presentation. In order to limit the time of the presentation, they will not be presented but distributed for your convenient use Thank you for your attention!

9. Lessons for innovation-driven growth: 1) Build on People In highly innovative economies, people are skilled, incentivized, enabled and demanding. Skilled labour, combining generic and sector-specific knowledge, is the engine for service innovation and for quality manufacturing. Efficient public research organisations with performance-based institutional funding complemented with effective project-based funding provide staff with strong incentives to excel in education, research and technology transfer.  Research and innovation policies preparing the future should therefore consider a strong emphasis on incentives for researchers and inventors alongside skills uptake.

10. Lessons for innovation-driven growth: 2) Focus on the markets of the future Top innovation performers in the EU are characterised by open and very knowledge intensive manufacturing or services sectors, often coupled with strong firm dynamics in transformative technologies addressing global societal challenges.  The confluence of different but related technologies is facilitated by Horizon 2020 and smart specialisation strategies at regional level. Further policy integration between R&I and industrial policies would help in seizing this opportunity.

11. Lessons for innovation-driven growth: 3) Believe in High-growth firms and solution-driven clusters Europe’s firm structure is older and less knowledge-intensive than that in the USA. The R&D intensity gap is linked to the growth of firms in ICT and biotechnology in the USA over the last decade. However, several European countries show high dynamics of high- growth enterprises in innovative sectors which generate new jobs. Entrepreneurship is particularly strong in innovation-driven clusters.  Focus on framework conditions that generate high-growth innovative enterprises, stimulated by solution-driven clusters and by a culture of demanding customers leading to higher standards and lead markets.

12. Lessons for innovation-driven growth: 4) Build alliances and networks Innovation is increasingly global. The ability of a country to grow is enhanced through knowledge alliances. Cooperation with international partners is positively correlated with research quality and there is a positive correlation between success in FP participation and scientific strengths.  Progress towards a European Research Area, improving transnational access to research infrastructure and a digital ERA are therefore essential. Integrated innovation/industrial policies for upgrading manufacturing industries must be differentiated by sector and adapt to the globalisation of production by focusing on vertical specialisation in manufacturing and service segments of global value chains.

13. Lessons for innovation-driven growth: 5) Think Single Market While there is increasing knowledge circulation in Europe, Member States with lower absorptive capacity still have access to fewer knowledge channels. Lifting barriers such as high patent and licensing costs, information asymmetries and non-compete agreements and other barriers blocking the mobility of skilled labour would further stimulate knowledge circulation and enhance economic impact. Science and technology can also be better matched with industry needs, both at national and European level.  Increasing the intensity and speed of the circulation of knowledge is therefore a key measurable objective of effective R&I policies.