Building an Innovation Union Budva, 11 November 2010 Tania Friederichs DG Research European Commission tania.friederichs@ec.europa.eu

European Innovation Scoreboard 2009 The European Innovation Scoreboard tries to capture the capacity of our economies to generate innovative products and services by looking at 29 innovation-related indicators categorised in three groups: enablers, firm activities and outputs Only publicly available data is used, for the most recent year, in most cases 2008. This explains why the effect of the economic crisis is not captured yet.

Summary innovation performance for the EU27 Member States (2009 Summary Innovation Index) Note: The Summary Innovation Index (SII) is a composite of 29 indicators normalised to a lowest possible performance of 0 to a maximum possible performance of 1. The 2009 SII reflects performance in 2007/2008 due to a lag in data availability and therefore does not capture the effects of the recent economic and financial crises.

Where has performance improved at EU27 level? Public R&D expenditures Broadband access IT expenditures Knowledge intensive services employment Medium high and high-tech manufacturing products Sales of new-to-market products Where has performance worsened at EU27 level? Non-R&D innovation expenditure Firm renewal (SMEs entries plus exits) SMEs innovating in-house Resource efficiency innovators (labour cost, materials and energy)

Dynamic performance and convergence trends in innovation in the EU-27 and other countries EU27 average growth rate in 2005-09 Innovation leaders Denmark, Finland, Germany, Sweden, UK Innovation followers Austria, Belgium, Cyprus, Estonia, France, Iceland, Ireland, Luxembourg, Netherlands, Slovenia EU27 innovation performance in 2009 Moderate innovators Czech Republic, Greece, Hungary, Italy, Lithuania, Malta, Norway, Poland, Portugal, Slovakia and Spain Catching up Bulgaria, Croatia, Latvia, Romania, Serbia and Turkey Note : colour coding matches the groups of countries: green are the Innovation leaders, yellow are the Innovation followers, orange are the Moderate innovators, blue are the Catching-up countries. Average annual growth rates as calculated over a five-year period. The dotted lines show EU27 performance and growth.

EU27 Innovation gap with the USA and Japan The EU27 is still lagging behind both the USA and Japan The catching-up trend with the USA from previous years seems to have ceased. The remaining gap is primarily due to: Business R&D expenditure International patents Public-private linkages Number of researchers Figure 5 shows that the innovation performance of the US and Japan is well above that of the EU27. The EU27-US gap has dropped significantly up until 2007, but in the last 3 years the relative progress of the EU27 has slowed down. The EU27-Japan gap has remained stable between 2005 and 2009 although the gap has decreased up until 2008 but has increased again in 2009 . Due to the inclusion of the Private credit indicator the results reported here are not directly comparable to those reported in the EIS 2008 report. EU-US-Japan comparison based on 19 indicators. Performance for each reference year is measured using, on average, data with a two-year lag0 There is no clear trend in the innovation gap with Japan

Some conclusions Innovation Union Research and innovation to emerge stronger from the economic crisis Innovation leaders are biggest investors in R&D, not a coincidence! Knowledge and innovation are at the heart of the Europe 2020 strategy Innovation Union

What is Innovation Union? Highlights European Innovation Partnerships European Research Area framework Streamlined EU programmes New financial instruments Reform of standardisation system Public procurement of innovation Social innovation pilot Stronger monitoring Innovation Convention  A distinctive European approach to innovation

Societal challenges New needs  new ideas  new markets Powerful drivers of change in economy and society Major global market opportunities Requiring EU-scale approaches From research to market Climate change Health and ageing Use of natural resources Energy security Clean transport Land use …. New needs  new ideas  new markets

Excellence in education and skills Issues Universities need reform to specialise/diversify and attract top talents EU needs at least one million more researchers to reach its R&D targets Education & training should better match business needs Actions 1. National strategies to boost training and careers of researchers (2011) 2. Independent multidimensional university ranking system and launch of business-education « knowledge alliances » (2011) 3. Commission to promote e-skills for innovation (2011)

Delivering the European Research Area Issues Costly fragmentation and overlaps between national research and innovation systems Need for a unified European Research Area where all actors move and operate as easily as within national borders Complex funding landscape creating administrative burden for researchers and business Urgent need for world-class research infrastructures Actions 4. Commission to propose a European Research Area framework (2012) to remove obstacles to mobility and cross-border cooperation by 2014 5. EU and Member States to complete or launch 60% of priority European research infrastructures by 2015.

Focusing EU funding instruments Issues Need to support the whole innovation chain, from research to market Further simplify access for beneficiaries, including SMEs Develop scientific evidence to support policy-making Promote the European Institute of Innovation & Technology Actions 6. Focus future EU R&I programmes on EU2020 and Innovation Union: societal challenges, with streamlining/ simplification (2014) 7. Ensure strong involvement of SMEs with high growth potential (2014) 8. Develop the Joint Research Centre’s role to support the science base for policy making through forward-looking activities 9. European Institute of Innovation & Technology to set out a strategic innovation agenda (2011)

Access to finance Issues Lack of finance is main constraint on innovative companies Few European SMEs grow into major companies Specific market gaps for start ups, for high growth companies, and for financing major research and innovation projects RSFF, CIP Financial Instruments cannot meet demand. Actions 10. New generation of Financial instruments with EIB (by 2014) 11. Regime for cross border Venture Capital funds (2012) 12. Stronger brokerage between innovative SMEs and investors 13. Review State Aid framework, to enable support to all forms of innovation (2011)

A Single Innovation Market Issues Costly EU patent system Lack of harmonised regulations for innovations EU standard setting too slow Public procurers lack incentives, knowledge or scale to benefit from innovation Importance of eco-innovation Actions 14. Rapid agreement on EU patent 15. Screen regulatory frameworks linked to Partnerships (2011) 16. Reform EU standard setting & link to R&D projects (2011) 17. Member States to set aside procurement budgets for innovation, with EC technical/ financial support (2011) 18. Commission to present an eco-innovation action plan (20110

Openness and creative potential Issues Many different forms of innovation (open, user driven, systemic etc.) EU strengths in design and creativity not recognised in policy Much IPR is dormant, as it is difficult to find a user. Actions 19. Establish Design Leadership Board & Creative Industries Alliance (2011) 20. Open access to FP research publications 21. Model agreements for collaborative research and knowledge transfer 22. Develop EU knowledge markets to trade & invest in patents (2011) 23. Examine the role of Competition Policy

Social and territorial cohesion Issues Innovation needed everywhere Need to avoid an “innovation divide” Make best use of € 86 Bn Structural Funds earmarked for research and innovation until 2013 Actions 24. Improve use of Structural Funds by Member States with Commission supported « smart specialisation » platform 25. Preparations on future Structural Funds to support innovation 26. Launch social innovation pilot and mainstream in European Social Funds 27. Research programme on social and public sector innovation 28. Innovation all occupations, starting with caring sector

European Innovation Partnerships Key issues Major societal challenges require joint responses across policies and across EU Numerous sub-critical, uncoordinated initiatives: between EU / Member States / Regions R&D / Market-side actions (public procurement, standards, regulation) European Innovation Partnerships are: Frameworks bringing together main actors and actions - At EU and national levels - From research to market - Around common objectives and targets

European Innovation Partnerships 2010 Pilot on active and healthy ageing Aim: two additional healthy life years by 2020 Council, Parliament to discuss the concept Member States and stakeholders invited to join 2011 Others to follow pending discussions and building on pilot experience Topics considered: smart cities, water, raw materials, mobility, agriculture,

International cooperation Key issues Third countries see 27+1 small/medium parties, not one major partner Europe’s openness is not always reciprocated Global challenges require a global response Actions 30. Attract high skilled third country nationals 31. Joint EU / national priorities for cooperation with third countries (2012) 32. Agree international infrastructures with world partners (2012)

Making it happen! A priority for EU Institutions European Council dedicated discussion in December Council invited to meet as “Innovation Council” European Parliament discussions Innovation Group of Commissioners Accelerating national reforms Self assessments of R&I systems under Europe 2020 Tracking progress EU target of 3% of GDP on R&D and national targets New indicator on fast-growing innovative firms New Scoreboard of 25 indicators Annual Innovation Convention

Next steps Nov. 26: Competitiveness Council conclusions Dec. 16: European Council European Parliament debate Implementation Launch of European Innovation Partnerships, … Proposals for future EU programmes, European Research Area, .. Implementation in Member States, regions…

Innovation Union website http://ec.europa.eu/innovation-union/ Innovation Facebook page http://www.facebook.com/Innovation.Union Innovation unlimited blog http://blogs.ec.europa.eu/innovationunlimited